- 1999- Netflix was founded
- 1999 - reported losses of $29.8 million on revenues of only $5 million
- September 1999 introduced new service, the Marquee Program
- In February 2000, NetFlix introduced a new service, CineMatch
- In December 2000 revenue sharing agreements were reached
- In February 2002 - subscription figure of 500,000
- In March 2002, the company revived its plans for an initial public offering, in late May it raised $82.5 million.
- In February 2003 they hit 1 million subscriber
- January 16, 2007 - introduction of streaming video
How did Netflix gain this subscription base of 1,000,000
and the decision is
Success
- Customer Service
- Timeliness
- Alliances
- Great Product
Integrity
- Constant Improvement
- Promotion with High Integrity Partners
Lessons Learned
- Timeliness (if you see a window take it)
- Ability to see the next big thing
- Continuously evovle
Competitive
Analysis:
- Mom and Pop Movie Rentals
- Corporate Video Rentals:Blockbuster, also started their own online DVD rental in 2002
- Online Rentals: Magic Disc, DVD Express and Reel.com
- Walmart and Colombia House also tried to amass large volumes of DVD titles to compete with Netflix
Company
Analysis
- Ability to provide enough copies
- Customers have to wait for movie
- Low Brand Recognition
First Mover Advantage
Unique selection of DVDs
- E-Commerce website - during a time when people were skeptical
- Had large inventory of movies
- Focused on customer satisfaction
Environmental
Overview
- Not enough capital
- Low exposure
- Brick and mortar stores - Heavy Competition
- Industry Leaders Replication
- Going Public
- Partnerships & Strategic Alliances
- DVD was new - only 1 percent of U.S. households owned the devices.
- Worldwide internet was just beginning
- 9/11 cause people to say at home and watch movies
With an increasing competition from:
Strategic Response:
Leverage
- Already established rental companies entering the online movie rental market
- Free movies online
Create
Valuable Partnerships!
- 1st Mover Advantage + Strategic Alliances
- Unique Service + New Technology
What steps has Netflix
taken to maintain customer loyalty?
Pricing
- Unlimited plans (Unlimited DVDs each month with unlimited streaming) -1 DVD out at-a-time for $8.99
- Limited plans - 1 DVD out at-a-time for $4.99 - Limit 2 DVDs each month with 2 hours of streaming to their PC. No streaming to TV ready devices.
Product
- Watch movies and keep them as long as you like, no due dates, no late fees
- Instantly watch online on your PC or Mac.
- Instantly watch right on your TV via a Netflix ready device – xbox 360, PS3, Tivo etc.
- Choose from a growing library of movies & TV episodes.
- Recommendations based on ratings
Current
Marketing
Mix
Promotion
Distribution
- TV and Theatre ads
- Regular and Pop up internet banners
- Iphone apps: 6 degrees of Netflix
- Co-branding: i.e Best Buy
- Gift Certificates
- Retail Partnership
- Direct e-mail
- Word-Of-Mouth
- Over 50 distribution centers and over 95% of their subscribers live withinone-day delivery zones
- Netflix distributes most of their products via regular mail, although streaming video is a growing part of their distribution channels
- New alliances deliver the ultimate streaming experience
- Any electronic devise that is capable of streaming movies
Marketing 479 Case Analysis
- Mike Flynn
- Drew Irons
- Gustav Ponten
Strategic Issue: How to gain a base subscription and maintain customer loyalty
Brief History