Netflix has been in the show and film industry for 22 years. It has attracted a stunning 24 million subscribers as well as other rivaling competitors. However, in its determination for technological revolution, in 2011, the company incurred a decline in net sales due to the surcharge imposed on the prices for subscription. Improper marketing strategies were since implemented into the organization and led to a tragic loss of customers. Including the company’s capacity to retain customers, it is subject to upcoming competitors like Apple Tv, and other broadcasting channels. The company strives to deliver the latest movies, films, shows and top rated content to its subscribers. However, sometimes this is compromised. To ventilate its economic ambitions, Netflix’s sources constantly re-configure their prices too to seek an economic equilibrium in the profit margins of the market.
Netflix case study
Marketing is crucial to the success of any business in modern times. Advances in technology have revolutionized the marketing strategies worth consideration for the success of any business endeavors. However, with the rising demand for marketing, comes along strategic issues which may yield undesired results for any given business. The strategic alignment of the marketing goals and the development-seeking implementations is crucial to the survival of business today. This paper seeks to explore the case study on Netflix Company where it reformed to the streaming service, basing on the marketing strategies issues that emerged. It will also provide justified recommendations to act as long-term strategies that Netflix could employ to acquire a higher market share in its industry.
Background of Netflix
Netflix has been a film marketing industry, which was created in 1997 by Reed Hastings and Mark Randolph. Initially, Netflix marketed its films by using DVDs. This was a well-calculated idea since the light weight of the products allowed for easy mail transportation, which was relatively cheaper at that time. However, the founders of the company held on the promise for a transformation of their service delivery from DVD assets to a rather online system, to facilitate the unlimited transmission of movies to consumers worldwide. Initially, Netflix targeted only the US population and had almost no regard for overseas markets. With the high rate of profit generation, Netflix chose to expand its service delivery to other countries, an attempt to expand the business. However, as it strived to advance from the DVD to the streaming technology, unforeseen consequences kicked in, and affected the overall sales of Netflix.
The surcharge on subscription
Netflix was caught between the decisions to combine the DVD service and the streaming option and to own them as two different business segments. With 24 million subscribers, Netflix opted for the idea of increasing their subscription fees by 60% in 2011, as a means to increase customers who would finance for the streaming technology. However, the situation took a rather different course when Netflix lost up to 800,000 subscribers, projecting a decline in net sales. The increase in prices made subscribers to question the utility they derived from the company products. While all customers retain their rationality, they chose to seek other alternatives to Netflix. Other companies such as Comcast, Direct TV, Huluetc. experienced an increase in their customer subscription as more people were not happy with the increasing cost of being a Netflix subscriber. In the marketing of Netflix, the unanticipated rise of subscription fee was a major threat to the net sales of the company since it implied a potential loss of customers.
Hastings noted that the DVD production sector and the online streaming service were two different parts of Netflix and they needed to be marketed in different ways. Merging the two options was considered unnecessary by the Chief Executive Officer. However, his strategy brought about more losses to the company. It was imperative to notice the possibility of the emergence of new competitors in the industry. The rising companies would emphasize their efforts on the weak spots of Netflix. It would be difficult for Netflix to increase customers if it did not have the ability to maintain its subscribers. Besides, a significant 3% had demonstrated their frustration due to the surcharge. Additionally, in about four months after the implementation of this strategy, Netflix’s stock price tumbled by 77%. This meant that more customers were leaving the company and were in search of new reliable companies. It became a lot harder for Netflix to obtain the latest movies because after they increased their subscriptions, they suffered an increase in costs for acquiring their stock, an economic call for a price reduction.
With the DVD system, Netflix could manage the associated costs. However, it was a bit challenging for the company to manage its finances efficiently due to the change of terms associated with the transformation to streaming. Initially, Netflix could only pay once for a movie from the source and sell it multiple times. In streaming services, Netflix could pay only based on the views recorded except for first class air travellers. For the DVD system, film content could be availed to Netflix within 2 to 3 months after the movie was released from the theatres. With online streaming, movies would be availed for online transmission after one year after theatrical release. This meant that Netflix could barely have the latest content in the market. Subscribers often want to be updated on the latest content especially in modern films. This was a major disregard for consumer’s average utility for Netflix’s services. Besides, the movies are made available to other TV stations which the subscribers have access to.
Revision of the surcharge
To win back the loyal customers and perhaps attract new subscribers, Netflix could consider reconfiguring the prices of their products. In an economy-based society, every consumer will opt for the least expensive option as long as they derive credible satisfaction from the services offered. By reducing their prices, perhaps to an amount slightly lower than the initial $7.99, rational customers would reconsider their option of saving some bucks through purchasing Netflix products. However, Netflix should also consider renegotiating terms with the suppliers in order to manage their outputs and inputs.
Understanding the potential for competitors
The film airing industry is constantly welcoming new investors. Despite the fact that Netflix once dominated the industry, the company should embrace the fact that they could be replaced if they do not maintain their customers. Netflix could provide promotions to customers on a random basis especially in areas where there are least subscribers. These promotions could be done by offering extra subscription days, discounts on sales, free subscriptions for frequent subscribers etc. To engage happy customers means to retain them. This way, Netflix could face rather lesser competition.
Acquiring the latest content first
With the thirst for the latest films in the film market, Netflix could strike deals with the theatres to enable them to acquire the films earlier than other companies. Perhaps, play a role in film marketing. To satisfy consumers, the company could ensure that the latest films are channelled to every subscriber in time. This way, Netflix will be able to invite new referrals and maybe dominate the industry again. Netflix is recognized globally and news that it is the first to channel the latest movies would move faster than the managers would foresee.
Conclusively, the transformation of the industry to a streaming service is a genius idea since it allows for the nurturing of technological advancement. Netflix is looking to face stiff competition from Apple TV. However, while Netflix remains at the heart of many subscribers, it is subject to make some changes in its management systems and decision-making models to allow for more productive progress. Additionally, Netflix still has the potential to counter Apple TV since it has ties with Amazon and other online selling platforms. The future of Netflix lies in the ability of the management to facilitate sound marketing strategies.
References Chatterjee. S. Barry. W.& Hopkins. A. (2016)*“NETFLIX INC.: THE SECOND ACT MOVING INTO STREAMING” *Richard Ivey School of Business Foundatio