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Table of Contents
Introduction ......................................................................................................... 3
What is Netflix and What does it do? ............................................................................ 3
Streaming Service ............................................................................................................. 3
DVD-by-mail ...................................................................................................................... 3
The Vision, Culture and Values of Netflix ...................................................................... 3
Brand History of Netflix ................................................................................................ 4
TARGET MARKET................................................................................................... 6
Share of Market ........................................................................................................... 6
Share of Mind .............................................................................................................. 6
COMPETITION ....................................................................................................... 7
Who is the competition? .............................................................................................. 7
Porter’s 5 Forces .......................................................................................................... 8
MARKETING MIX................................................................................................... 9
Product........................................................................................................................ 9
Promotion ................................................................................................................. 10
Advertising through mobile phones & tablets messages ............................................... 10
Social media and internet advertising ............................................................................ 11
TV commercials............................................................................................................... 11
Price .......................................................................................................................... 12
Place ......................................................................................................................... 13
ANALYSIS ............................................................................................................ 13
NETFLIX SWOT Analysis .............................................................................................. 13
Netflix BCG Matrix ..................................................................................................... 14
Netflix Ansoff Matrix.................................................................................................. 14
SEGMENTATION ................................................................................................. 15
Geographical Segmentation ....................................................................................... 15
Bottleneck ................................................................................................................. 15
Demographic Segmentation ....................................................................................... 15
POSITIONING ...................................................................................................... 17
DIFFERENTIATION ............................................................................................... 18
HIGH IMPORTANCE .................................................................................................... 18
LOW IMPORTANCE .................................................................................................... 18
Product Life cycle of Netflix ................................................................................. 19
Introduction: (1997-2005) .......................................................................................... 19
Growth: (2006-20017) ................................................................................................ 19
Maturity: ................................................................................................................... 19
Decline: ..................................................................................................................... 19
Bibliography ....................................................................................................... 20
Introduction
Streaming Service
DVD-by-mail
Judgement
Selfnessness Communication
Honesty Impact
Passion Curiosity
Courage Innovation
Netflix was founded by Marc Randolph and Reed Hastings on August 29, 1997. Inspired by
the fledgling e-commerce company Amazon, they came up with the concept of selling or
renting DVDs by mail. The company built its reputation because of attractive offerings like
flat-fee unlimited rentals without due dates, late fees, shipping and handling fees, or per-
title rental fees.
The company delivered its billionth DVD on February 2007. It began to shift from DVDs
to video on demand via the Internet while retaining the DVD and Blu-ray rental service. Then
in 2013, it entered the content-production industry and expanded itself in both film and
television production. As of July 2017, Netflix has 103.95 million subscribers worldwide
operating in over 190 countries.
A brief timeline is as follows: -
•Reed Hastings and software executive Marc Randolph co-found Netflix to offer online movie
1997 rentals
•Netflix launches the first DVD rental and sales site, netflix.com.
1998
•Netflix debuts a subscription service, offering unlimited DVD rentals for one low monthly
1999 price.
•Netflix makes its initial public offering (IPO on NASDAQ under the ticker “NFLX” with
2002 600,000 members in the US.
•Netflix introduces streaming, which allows members to instantly watch television shows
2007 and movies on their personal computers.
•Netflix partners with consumer electronics companies to stream on the Xbox 360, Blu-ray
2008 disc players and TV set-top boxes.
•Netflix partners with consumer electronics companies to stream on the PS3, Internet
2009 connected TVs and other Internet connected devices.
•Netflix is available on the Apple iPad, iPhone and iPod Touch, the Nintendo Wii, and other
2010 Internet connected devices. Netflix launches its service in Canada.
•Netflix became available in Europe including the United Kingdom, Ireland and in the Nordic
2012 Countries. Netflix wins its first Primetime Emmy Engineering Award
•Netflix expanded to the Netherlands. Netflix garners 31 primetime Emmy nominations including
outstanding drama series, comedy series and documentary or nonfiction special for “House of Cards”,
2013 “Orange is the new black”, and “The Square” respectively. House of Cards won three Primetime Emmy
Awards. Netflix was the first internet TV network nominated for the primetime Emmy.
•Netflix launches in Australia, New Zealand and Japan, with continued expansion across Europe in Italy,
2015 Spain and Portugal. The first Netflix original feature film "Beasts of No Nation" is released.
Share of Market
Share of Mind
Netflix is crushing its competition for one simple reason: It's providing quality original
content at an affordable price. For example, when you think of Netflix, you are likely to think
of the shows like House of Cards, Orange is the New Black, 13 reasons why, to name a few.
Whether you like these or not, you can't deny their popularity. When you think of YouTube
or Amazon Video, what shows immediately come to mind? Still thinking?
Growth of Netflix Subscribers in millions
120
103.95
100 93.8
74.76
80
57.39
60
44.35
40 33.27
23.53
20.01
20 9.39 12.27
7.84
0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Subscribers in millions
COMPETITION
The main competitors of Netflix are YouTube, HBO and Amazon Video.
Netflix’s rival Amazon Video is also finding an expanded reach thanks to the popularity of its
Fire TV platform, including the Fire TV Stick and Fire TV streaming player. On this platform,
Amazon has become the top streaming service. Netflix tops on everything else, from Roku to
game consoles and more. In other words, the more Fire TV devices Amazon sells, the more it
can increase its over-the-top market share.
YouTube is earning over a billion hours a day of consumers time with one type of
entertainment, while Netflix is earning over a billion hours a week with their type of
entertainment.
The competition for entertainment time is always intense, but the market is vast and
diverse. YouTube is earning over a billion hours a day of consumers’ time with one type of
entertainment, while Netflix is earning over a billion hours a week with its type of
entertainment. Linear TV is still huge, piracy still substantial, and there are thousands of
firms and approaches around the world earning some fraction of consumers’ entertainment
time. The entertainment market is so broad that Netflix has grown from zero to over 50m
streaming households in the US over the last 10 years, and yet HBO continues to increase its
US subscriptions. It seems growth of Netflix just expands the market. The largely exclusive
nature of each service’s content means that Netflix is not direct substitute for each other,
but rather complements. In addition to the many SVOD players around the world (Blim,
Globoplay, FilmStruck, Hooq, iflix, Stan, etc.) the large-cap tech companies, especially
Amazon, are investing heavily in original and licensed content around the world. They join all
the existing TV networks (BBC, AMC, NHK, etc.) of the world, in bidding for great content.
Creating a TV network is now as easy as creating an app, and investment is pouring into
content production around the world.
Netflix is one of the co-pioneers of internet TV and digital streaming is replacing linear TV.
The shift from linear TV to on-demand viewing/ digital streaming is so big and many internet
TV services will be successful. The internet may not have been great for the music business
due to piracy, but it is not the same case in Internet TV it is incredible for growing the video
entertainment business around the world.
Porter’s 5 Forces
MARKETING MIX
Marketing mix is the set of marketing tool that the firm uses to pursue its marketing
objectives in the target market. McCarthy classified these tools into four broad groups that
he called the four P’s of marketing: Product, Price, Place and Promotion.
Product
The product concept holds that consumers will favor those products that offer the most
quality, performance, or innovative features. Netflix could have better decent movies
collection in order to attract a segment of customers who only watch movies and entice this
segment of customers with the best relevant TV series based on the movies watched by
them. And Netflix does not have online games also.
Sports streaming has a great potential market. Netflix foraying into sports has been ongoing
for quite a while since none of the close competitors provide this kind of service. The
response from Ted Sarandos, Netflix’s content boss, “Never say never.” TV and cable
channels are still leading with great market share in this segment.
Netflix has to increase its exclusive content, in house production and collaborate with well-
known actors to create more original series which it is good at. At the same time, it should
collaborate with popular production houses to maintain the good collection.
Netflix releases its original content the whole season available at once, acknowledging
changing viewer habits. This helps audiences to watch episodes as and when they want
rather than having to watch just one episode a week/ day at a specific scheduled time; this
effectively gives its subscribers control over how and when to watch at their own pace.
Netflix has to work with internet service providers to provide its customers with special
internet packages enable them watch their movies more comfortably with affordable
internet service. The consistent message Netflix sends with all communication is “watch
what you want when you want at affordable price”
Promotion
Netflix offers a free month trial for all of the new subscribers. Sign up and one can instantly
access the entire Netflix. Netflix free month trial is aimed at showing the high value and
quality of service provided by Netflix to the subscribers. The subscribers get chance of
experiencing Netflix without any payment and it boosts the confidence of what they are
purchasing which increases trust among subscribers. This promotion sends a positive
message to customers that Netflix is confident of the value it has to offer and does not wary
to let customers experience before they buy subscriptions.
The main routes of promotion used are the internet, Television commercials and Billboards.
Customers receive e-mails from Netflix alerting the customer of a 1-month free offer of its
services to friends and family of the customer. The main objective of Netflix is to get the
current customer to promote the company to others, pushing them try the company’s
services and in effect increasing the company’s customer base. Netflix use subscribers e-mail
address to send newsletters, messages about new Netflix features, Netflix special offers,
promotional announcements, consumer surveys and other correspondence and marketing
concerning their services.
Ads will include notifications that the current free trial offer will run through the campaigns
first year and all other Netflix new features.
TV commercials
Even after the increase of people using internet there is no effect on the share of Television,
Television reaches more people than the internet. However, considering that the location of
the product is on the internet, we want to focus a good part of the advertising to internet
ads as well. Television will have more money budgeted to it, due to the production costs.
The information about online activity, watching preferences, internet speed and user
devices can be used to determine subscribers general geographic location for the provision
of localized content, determining eligibility for free trials, age restrictions, providing
recommendations on movies & TV shows, personalizing services and marketing to better
reflect particular interests, helping Netflix quickly and efficiently respond to inquiries and
requests and otherwise analysing, enhancing, administering or promoting service offering.
Netflix also uses the information to provide analysis of their users in the aggregate or in
anonymous form to prospective partners, advertisers and other third parties. Information
from Social Networking sites is used to better improve the Netflix personalized experience
for the subscribers and their friends if they agree to share such information.
Price
A price is set on a product or service which customers will pay to purchase it. Netflix pricing
objective is gaining the maximum market share for Netflix to retain and attract customer.
Their pricing is also set keeping the competitors in mind where they charge Rs. 500/- month
for basic subscription, while Amazon prime Rs. 499 as introductory price. The subscription
charges of Hotstar, Airtel movies are mentioned in the picture below.
A pricing strategy that Netflix uses is called value-based pricing. For example, the prices
offered in India are Basic Rs. 500/-, Standard Rs. 650/- and Premium Rs. 800/- per month.
Value-based pricing is different from cost plus pricing which prices the products based off of
production costs. Value-based pricing focuses on the value of the product, and the features
that it poses which is what Netflix uses. The subscriptions mentioned before are an example
of value based pricing as each subscription have different appealing features, for a higher
price ("Value-Based Pricing Definition."). As a result of this pricing strategy, Netflix has an
advantage over competitors who charge per show/movie as opposed to having
subscriptions.
Place
Process in which customers go through to subscribe is made simple and self-service. It takes
a few minutes to create the Netflix account and to start watching instantly and it all reflects
the convenience aspect of the service.
Netflix should have highly qualified and fast customer service people to take care of the
customers because that is the only point of contact with the customers. Customers can
contact customer care by three ways over the phone Toll free number, from the mobile app
and over the live chat on help.netflix.com. One of the big complaints about Netflix is
regarding the fact that the company does not offer an e-mail address or an address for
customers to write to.
ANALYSIS
NETFLIX SWOT Analysis
Beneficial Harmful
Internal Strength Weakness
First mover advantage into Movies Raising Subscription prices
and TV shows Current cost of contents
Has largest streaming Library DVD service
compared to competitors Time window to launch new movies
Flexibility to different Internet more as compared to competitors
speeds Contractual restrictions on
Adaptability to various platforms streaming content
like TV, Game consoles, Tablets
and smartphones
Brand Recognition
Accessibility
Original content
External Opportunities Threat
International Market expansion Exclusivity agreements with content
Streaming Live sports providers restricts availability of
Platform for Online games movie streaming globally
Expanding the original content Global competition from companies
business operating locally like Amazon,
Product line expansion of original Apple, HBO
shows Increasing in cost for content
licenses
Increase in Cyber Crime rate
Netflix BCG Matrix
Geographical Segmentation
After creating a considerable market base and brand name in the United States, Netflix had
to venture into other countries which basically means to adapt to the tastes and preferences
of different group of people altogether.
Here the Netflix comfortably expanded base by implementing “Video on Demand”
technology to the existing platform. For example, Netflix India provides programmes and
movies exclusive to the Indian audience. So it makes it easier for an Indian to narrow down
his search.
Bottleneck
Netflix had to buy the rights of movies and TV series of a different country which opened up
various challenges. Then the usage rate depended on the daily routines of the people which
might differ from the United States and the industry invested in is related to entertainment.
Demographic Segmentation
Netflix aims to achieve top spot in content distribution. Netflix does not base content
recommendations on how old you are, your gender, or even where you live.
Netflix feels Demographic segmentation is irrelevant for the nature of business but interests
do. So Netflix’s algorithm is a smart one in analyzing viewer habits and likings and suggesting
content with catchy titles. E.g.: one could see 80’s action, gory unconventional horror films,
to name a few.
Moreover, Netflix also provides a plus symbol to all the content provided, thereby providing
an option to customer to view it later. It is quite clearly evident that a person from the
United States and a person from China could have a similar set of interests and could
subscribe to content in a common language say English. So instead streamlining services,
Netflix’s strategy to offer all and ask the user to choose is laudable one.
Gender Segmentation
Netflix does not streamline any data based on Gender and this is again taken care depending
on the preferences and tastes of the user depending on the content searched.
Income Segmentation
Income Segmentation targets the people who have considerable interest towards movies,
TV series and videos. However, the average Income of people vary from country to country.
So Netflix targets the middle income layer of the country to the topmost layer with
attractive offers.
Since the quality of content is unmatchable with Blue ray content leading the pack. Quality
concerned users who constitute a major section of the loyal market base adds stability to
the business model.
However to counter the competition from similar services, Netflix produce their own
content. House of Cards, a famous TV series is produced by Netflix. It is also the home for
Adam Sandler’s stand up comedies as well. By using this strategy, Netflix attracts newer
users who are attracted to the shows produced.
Both 16-24 year old males and females exhibit the greatest use of online and streaming;
approximately 3.7 hours of video content per a week. People in this age range represent
millions of potential customers. This demographic demonstrates psychographic qualities in
lifestyle habits such as more disposable income, time, technological capabilities and interest.
Also, this age bracket tends to live at home; creating a market for families. This is likely
why Netflix's advertising in 2011 depicted families viewing Netflix in modest suburban
homes and in 2012 Netflix began offering children's programming and video games.
POSITIONING
Usability by the customers forms the base for capturing the market by Netflix. Customer’s
expectation with Netflix are the wide range of collections, accessibility, and affordable
prices.
From the above figure, we can conclude Netflix positions itself in the high value, high
availability category. Other competitors, though are behind, cannot be ignored. So Netflix
reviews its model and innovates accordingly to accommodate changes in consumer
behavior.
Something Netflix has not compromised is quality and hence the brand recall factor could be
prominent despite all changes in the industry.
Currently Netflix has expanded its base across countries and started producing its own
media content for some time now. Hence, there is no need of repositioning as of now.
However Netflix could be drawn into a price war by competitors like Amazon etc. which
Netflix should survive with the reach it has currently. The collection of English movies and TV
series, Netflix has is huge and hence Netflix always has an edge over other competitors.
DIFFERENTIATION
Netflix clearly differentiate itself from the other stream media services thanks to the price it
proposes to the clients. Netflix's commissioning of quality original programming, combined
with premium content deals is offering a compelling and differentiated value proposition to
online audiences. Indeed, the low fixed subscription price combined with the huge range of
shows (large TV shows and MOVIE selection) is the first advantage of this brand. Thus, the
differentiation of Netflix is on the Product and the Price.
HIGH IMPORTANCE
LOW IMPORTANCE
The collection of content is vital to any brand building in this industry. So, Netflix is doing
well as the company has been increasing its library for years, with contracts signed with big
distributors such as Disney. It will have to improve that point in Europe as, for example in
France, the library only contains 2500 movies. Netflix has still to maintain the fast release of
the series and movies in order to keep a significant advantage on HBO or
Amazon. Concerning the price, Netflix lets to customers the choice how much they are
willing to pay by offering a range of price in order to differentiate products. This permits to
reach a wider market, extracting value from those most willing to pay (such as with the
premium pack), but also to those who are willing to pay less for only the standard content.
This choice is a clear advantage for Netflix. Finally, the non-subscription to cable TV allows
Netflix to be very competitive on a market where TV channels are very strong.
As a conclusion, Netflix achieve its differentiation thanks to the 2 Ps: Product and Price on a
very simple way. Indeed, Netflix offers an enormous range of content for a minimum price.
This is enough to keep Netflix on the top of the market.
Product Life cycle of Netflix
The product life cycle of Netflix can be explained as below:
Introduction: (1997-2005)
Incorporated in Delaware in August 1997, NETFLIX started its subscription-based digital
distribution service in 1999. Its initial business model included DVD sales and Rental. The
DVD sales service was dropped a year after it was started and the main focus was on DVD-
rental by mail service. During this phase the number of subscribers grew from 0.1 million to
5.25 million.
Growth: (2006-20017)
Netflix introduced instant streaming services in 2006 and it has been thriving in growth stage
ever since. By 2009 it was offering a collection of 100,000 titles on DVD and had 12.3 million
subscribers. The international operations were begun in September 2010 offering streaming
services in Canada, Latin America, United Kingdom, Ireland, and the Nordic countries of
Finland, Denmark, Sweden, Norway and others. Currently Netflix has about 50.65 million
subscribers, with 72 percent of that in the U.S. market which is about 36.47 million
subscribers. It is believed that Netflix is in the middle of the product life cycle “S curve,” thus
it might expect to add another 36.5 million U.S. subscriptions until it reaches market
saturation.
Maturity:
While the online streaming and Blu-ray business are still in growth stage, The DVD title sales
are entering the mature phase of the product life cycle. The ease and accessibility of online
streaming has created a market that has much less cost than their current plan of mailing
out all of their movie rentals, and it is the foreseeable future that Netflix will have to close its
mailing DVD business.
Decline:
Though not currently in decline stage Netflix faces its biggest threats from similar services
offering companies like Amazon and Hulu Plus. In order to stay in business it will have to
constantly innovate and continue on the same path and sustain themselves in this industry.
Bibliography
1. https://www.thebalance.com/tech-companies-mission-statements-4068549
2. https://media.netflix.com/en/about-netflix
3. https://techcrunch.com/2017/04/10/netflix-reaches-75-of-u-s-streaming-service-
viewers-but-youtube-is-catching-up/
4. http://www.investopedia.com/articles/markets/051215/who-are-netflixs-main-
competitors-nflx.asp
5. http://www.businessinsider.in/Netflix-is-not-completely-ruling-out-broadcasting-
live-sports/articleshow/47289885.cms#ixzz3aDoc3W3J
6. http://www.itu.int/en/ITU-D/Statistics/Pages/facts/default.aspx