How Netflix Continues To Change The Face Of In-Home Movies Around The Globe

Analysis

How Netflix continues to change the face of in-home movies around the globe?

The streaming giant Netflix has changed the face of entertainment industry by allowing people to watch an unlimited supply of movies and TV shows from the comfort of their homes through a single platform. The case highlights a change in the pricing strategy adopted by the brand in which users had to pay different fees for Netflix’s streaming service and their DVD by mail service (Hawkins & Mothersbaugh, 2016). The decision invited an immense wrath from customers on various social media platforms because customers must now pay an additional 60% of their total subscription fees. The move has encouraged competing brands to promote their product offerings, and customers have threatened to cancel their subscriptions.

The pricing strategies adopted by any business play a significant role in attracting customers (Armstrong et al., 2015). The primary problem identified in the case is the new pricing strategy adopted by Netflix wherein the overall cost to customer is raised by 60%. Although this increase in price is necessary for the brand to meet its expansion costs, it may lead to a drastic reduction in the company’s number of subscriptions, which could result in reduced revenue for Netflix.

The brand also faces the problem of reduced goodwill that Netflix experiences due to this change. After the new pricing strategies were announced, customers resorted to various social media platforms to express their disappointment in the matter. Social media is a powerful tool that largely impacts a business’s brand image (Hudson et al., 2016) and includes platforms such as Facebook, Twitter and Instagram. Consumers are extensively using these platforms to reach out to brands which has created transparency and allowed for two-way communication between organizations and their customers. Thus, if a large number of people post negatively about Netflix, the brand’s goodwill would be hampered, leading to a negative brand image.

The third problem Netflix faces is that the adopted pricing strategy change has encouraged competitors to put in additional efforts in promoting their products and services to customers. Most businesses often look for opportunities to gain a competive advantage over other players in the industry, which is why it becomes imperative for businesses to keep tabs on their competitor’s strategies and work towards countering these strategies in an effective manner so as to gain a competitive advantage in their industry of operation (Ranjith, Patel & Rao, 2017). The increasing competition through efforts by competing firms can provide disappointed customers with alternative offerings in the face of changing pricing strategies. This competition can lead to a major shift in Netflix’s customer base to competitors like Blockbuster, Prime Video, and Walmart.

Solution

The primary problems Netflix faces are reduced goodwill, increasing competition and hence  reduced customer base. The brand’s new pricing strategy is important to sustain its costs, survive competition in the market, and retain its customer base. Therefore, it is critical that Netflix adopts strategies to counter the effect of the new pricing strategy to address the issues it faces, while retaining its customer base, maintaining costs and improving goodwill.

The first solution Netflix could offer would be effective and extensive promotions. Netflix has adopted a premium pricing strategy which refers to the process of pricing business offerings higher than industry level to position the product or service effectively in the minds of customers (Nagle & Muller, 2017). Premium pricing strategy should be adopted by brands in order to target premium consumers and position the brand effectively among this customer segment. Therefore, it is imperative that Netflix continues to promote itself through all platforms as a premium service offering meant for high-end customers. Proficient promotion strategies of Netflix will assist the brand in attracting more customers.

To ensure Netflix’s offerings remain a premium service, the brand will have to work on the content it offers. Netflix must curate unique TV shows and movies and tie up with distribution and production centers. This will ensure that new movies are streamed on Netflix making it available to a larger audience. Allowing new content to stream on the platform will help in keeping viewers entertained. If Netflix continues to offer unique content, not only will the existing customers stay with the brand but new customers would also be attracted to buy subscriptions.

Secondly, brand positioning is the image a brand’s customers have about the product or service in their minds (Solomon, 2014). Netflix must work toward positioning itself positively in the minds of customers. This positioning can be achieved by establishing effective communication with customers and curating creative content for the brand’s advertisements. Creative advertisements aim to create a positive image in the minds of consumers. Netflix must also become more active on its social media platforms including Facebook, Twitter and Instagram. Social media communication between the brand and its customers also helps in retaining customers (Kumar et al., 2016). The communication Netflix will have with its customers will help the brand improve its goodwill and retain its customers through induced loyalty and connections.

A third solution offered to Netflix would be reverting to its old pricing strategy to retain customers. Once the price is reduced, Netflix would have to ensure that the number of customers increases enough for the brand to operate on economies of scale. They can ensure this by offering lucrative discounts and adopting effective marketing strategies to lure an increased number of customers. Existing customers will continue their subscription and new customers might be attracted to join Netflix if the pricing strategy remains the same. This is because customers started retracting from Netflix only after they changed their pricing strategy and if that problem is resolved then the customers are expected to sustain their subscriptions.

Justification

Lastly, Netflix could adopt a new pricing strategy all together known as “Freemium pricing.” The freemium pricing strategy refers to the process of offering basic services for free while taking an additional fee for the brand’s premium services (Wagner, Benlian & Hess, 2014). In this regard, Netflix can offer limited content to its viewers free of charge, but users would have to pay an additional amount for premium content including new movies and TV shows. In adopting this strategy, the brand will have to make sure that the free services offered by the brand are attractive enough for customers to buy premium services. For example, movies and TV shows that were released four months ago can be offered as a free service while the ones that have been released recently can be offered as a premium service. Once customers gain an idea about the quality of content offered as free, then through effective advertising, Netflix can attract them towards newer content. These advertising strategies will effectively include releasing trailers of new and upcoming shows.

The selected solution from the above mentioned four solutions is the first solution that recommends Netflix adopt a premium offering and premium pricing strategy. This solution has been selected because the brand’s increasing expansion requires additional resources. Therefore, to survive its own expansion and growth plans, the brand will have to charge its customers a higher price from to ensure it has enough resources to sustain itself in the industry.

The solution also recommends Netflix work toward improving its content offerings to ensure customers are willing to pay a premium price for the services. In this solution, Netflix would effectively team up with various production houses, directors, and distributors to release new movies and TV shows exclusively on Netflix before other streaming channels. The brand must also work on creatively curating its own content by recruiting an internal team of directors, DOPs, actors, and technicians. This team would be expected to curate top quality content for audience. These exclusive offerings by Netflix will make it easier for customers to pay higher fees for the brand’s subscription.

Netflix’s predominant offering must be its differentiating factor and must provide a competitive edge against Blockbuster, Walmart or Amazon’s Prime Video. As long as the customer’s accept Netflix’s primary offering, price will play a secondary role in the minds of customers. Improving the offering would include making their platform more user-friendly and enhancing their reach. Viewers should be able to watch the latest movies in a hassle-free manner without advertisements.

At the same time, Netflix must adopt extensive promotion strategies to set the correct positioning in the minds of customers and enhance brand awareness. This would involve improving its social media presence and other forms of traditional and digital marketing strategies adopted by the brand. Increased presence of Netflix at social media platforms and traditional media channels will lead to increased awareness of the brand.

Netflix has adopted a new pricing strategy that increases the cost to customers by approximately 60%. This move has attracted an immense wrath from customers as well as additional efforts by competitors to promote their products and services over Netflix. This included additional advertisements and increased presence across digital and traditional media channels. This report aims to analyze various solutions for the brand to sustain itself within the industry while maintaining cost through effective use of resources. The solution recommended to the brand involves retaining the new and premium pricing strategy and working towards their offerings to ensure that they are worth the price paid by consumers.

Netflix’s premium pricing must be matched by the quality of services offered to the customers to ensure customer retention and attract new customers. This includes curating new content and offering to stream innovative, unique and distinct content on a user friendly platform. Improved service quality would not only help Netflix attract and retain customers but will also ensure the brand has positive positioning in the minds of customers.

References

Armstrong, G., Kotler, P., Harker, M., & Brennan, R. (2015). Marketing: An introduction. New York, NY: Pearson Education.

Hawkins, D., & Mothersbaugh, D. L. (2016). Consumer behavior: Building marketing strategy. New York, NY: McGraw-Hill Education.

Hudson, S., Huang, L., Roth, M. S., & Madden, T. J. (2016). The influence of social media interactions on consumer–brand relationships: A three-country study of brand perceptions and marketing behaviors. International Journal of Research in Marketing, 33(1), 27-41.

Kumar, A., Bezawada, R., Rishika, R., Janakiraman, R., & Kannan, P. K. (2016). From social to sale: The effects of firm-generated content in social media on customer behavior. Journal of Marketing, 80(1), 7-25.

Nagle, T. T., & Müller, G. (2017). The strategy and tactics of pricing: A guide to growing more profitably. United Kingdom: Routledge.

Ranjith, V. K., Patel, P. M., & Rao, R. K. (2017). Cartels, competition and competitive advantage. International Journal of Applied Business and Economic Research, 15, 455-460.

Solomon, M. R., Dahl, D. W., White, K., Zaichkowsky, J. L., & Polegato, R. (2014). Consumer behavior: Buying, having, and being (Vol. 10). New York, NY: Pearson.

Wagner, T. M., Benlian, A., & Hess, T. (2014). Converting freemium customers from free to premium—the role of the perceived premium fit in the case of music as a service. Electronic Markets, 24(4), 259-268.