CASE STUDY: Netflix Develops and Defends Its Brand(Chapter 6: E-Commerce Marketing Concepts)

Dale EarleKwaku Morgan-ArhinLatoya Nelson Group FHeloisa Tiberio MGS 5040-01Jessica Awa 3 / 22 / 2010Matthew Norton Dr. Melworm

NETFLIX COMMERCIALSNETFLIX COMMERCIALS

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CASE: “Netflix Develops and Defends Its Own CASE: “Netflix Develops and Defends Its Own Brand”Brand”

NOTABLE CASE FACTSNOTABLE CASE FACTS

Netflix is the largest online entertainment subscription service in the U.S.Netflix is the largest online entertainment subscription service in the U.S.

In 2009, it provided more than 10 million customers access to over 100,000 In 2009, it provided more than 10 million customers access to over 100,000 DVD titlesDVD titles

Their basic business is renting DVD and Blu-Ray titles on a subscription basisTheir basic business is renting DVD and Blu-Ray titles on a subscription basis

CASE: “Netflix Develops and Defends Its Own CASE: “Netflix Develops and Defends Its Own Brand”Brand”

NOTABLE CASE FACTSNOTABLE CASE FACTS

Its website attracted at least 194 million viewers by 2008; it’s about 5 times Its website attracted at least 194 million viewers by 2008; it’s about 5 times that of the amount of people that visit Blockbuster currentlythat of the amount of people that visit Blockbuster currently

The DVD format, along with the success of the Playstation 2, led to more The DVD format, along with the success of the Playstation 2, led to more than 70% of homes in the U.S. having a DVD player, which also helped than 70% of homes in the U.S. having a DVD player, which also helped Netflix’s successNetflix’s success

They currently have an exclusive deal to stream movies to Xbox 360’s, but They currently have an exclusive deal to stream movies to Xbox 360’s, but will eventually expand to iPhone and iTouch devices; certain cable boxes will eventually expand to iPhone and iTouch devices; certain cable boxes are also soon to followare also soon to follow

BRIEF HISTORY OF NETFLIXBRIEF HISTORY OF NETFLIX

Started out as a regionally based online movie store in Los Gatos, California Started out as a regionally based online movie store in Los Gatos, California in 1997in 1997

Rentals were mailed out and charged the usual late fees, etc., kind of like Rentals were mailed out and charged the usual late fees, etc., kind of like instead of you going to a video store, the video store comes to youinstead of you going to a video store, the video store comes to you

Offered a simple list of videos arranged by title and lead actorOffered a simple list of videos arranged by title and lead actor

CASE: “Netflix Develops and Defends Its Own CASE: “Netflix Develops and Defends Its Own Brand”Brand”

In 2000, it changed its business model from a “mailing service” to a In 2000, it changed its business model from a “mailing service” to a nationally based subscription modelnationally based subscription model

They also changed from assessing late fees to implementing their monthly They also changed from assessing late fees to implementing their monthly service charges for unlimited rentalsservice charges for unlimited rentals

Video warehouse operations now not only materialized in several cities, but Video warehouse operations now not only materialized in several cities, but also saw the entrance of new deals with the U.S. Postal Servicealso saw the entrance of new deals with the U.S. Postal Service

BRIEF HISTORY OF NETFLIX (cont’d)BRIEF HISTORY OF NETFLIX (cont’d)

CASE: “Netflix Develops and Defends Its Own Brand”CASE: “Netflix Develops and Defends Its Own Brand”

NETFLIX WEBSITENETFLIX WEBSITE

How it works…How it works…http://www.netflix.com/HowItWorkshttp://www.netflix.com/HowItWorks

Browse selection of movies…Browse selection of movies…http://www.netflix.com/BrowseSelectionhttp://www.netflix.com/BrowseSelection

CASE: “Netflix Develops and Defends Its Own Brand”CASE: “Netflix Develops and Defends Its Own Brand”

STATISTICAL FACTSSTATISTICAL FACTS

Subscriptions ranged from $4.99 - $16.99 / Subscriptions ranged from $4.99 - $16.99 / monthmonth

At one point in 2009, they had 55 million DVD’s At one point in 2009, they had 55 million DVD’s in stockin stock

Since 1999, the number of subscribers grew at Since 1999, the number of subscribers grew at an annual rate of 79% and its revenues, 113%an annual rate of 79% and its revenues, 113%

2008 annual revenues reached $1.3 billion and 2008 annual revenues reached $1.3 billion and delivered its 2 billionth movie in April of that yeardelivered its 2 billionth movie in April of that year

CASE: “Netflix Develops and Defends Its Own CASE: “Netflix Develops and Defends Its Own Brand”Brand”

SECRETS TO SUCCESSSECRETS TO SUCCESS

Very customer friendly attitude (24/7), late fee Very customer friendly attitude (24/7), late fee elimination, free trial periods, and high conversion rateselimination, free trial periods, and high conversion rates

Focus on business partnerships with movie companies Focus on business partnerships with movie companies led to quick turn arounds from theater release to DVDled to quick turn arounds from theater release to DVD

Gave personalized video rental advice, such as Gave personalized video rental advice, such as recommendationsrecommendations

CASE: “Netflix Develops and Defends Its Own Brand”CASE: “Netflix Develops and Defends Its Own Brand”

RECENT PITFALLSRECENT PITFALLS

Expansion of rival companies, such as Amazon, Expansion of rival companies, such as Amazon, YouTube, etc. has hurt some of their profitsYouTube, etc. has hurt some of their profits

Blockbuster has put a lot of energy into mimicking some Blockbuster has put a lot of energy into mimicking some of their strategiesof their strategies

Other companies have looked into linking customer’s Other companies have looked into linking customer’s accounts with Tivo and DVR devicesaccounts with Tivo and DVR devices

CASE: “Netflix Develops and Defends Its Own Brand”CASE: “Netflix Develops and Defends Its Own Brand”

QUESTIONS??QUESTIONS??