Question 1 When evaluating a company is worth investing in or not, we take into the following elements into consideration.

a) The current market share. b) The strategy a company formulates meets future trends. In terms of a), Netflix is the market leader of on-line rentals; however, Blockbuster has just started its on-line service. That is to say, Netflix owns larger market share at that time. Under such circumstances, Netflix has already established trusts in consumers mind, which makes it more difficult for Blockbuster to bring in consumers. And the following evidence proves the steady and good performance of Netflix. 1) Its net income curve rises straightly from 2004 until now. (Financial statement) 2) Its subscribers grow to 6,316 and distribute over 1.5 million discs a day. In terms of b), having a customer-oriented thought when formulating future marketing plans plays an important role in the era of web2.0. From the following checklists of what Netflix did, it obviously shows that its far more customer-oriented than Blockbuster. 1) 2) 3) 4) 5) 6) It provides various choices of videos, which might satisfy more customers. It selects the popular online rental path, which intends to be the most convenient way for most persons. Its pricing policy seems to provide more alternatives for customers. Its distribution policy, like 5 separate rental queues, combines the interest of individual family members, and let parents control the web environment for their kids. Its sharing community for videos viewing suggestions, very likely to the sharing feature on web 2.0. The new policy of instant viewing of VOD would impact the large user base.

Because a) and b) both indicates that Netflix is worth investing, we wouldnt buy Blockbusters stock. We believe Netflixs customization policy is more qualified for the web 2.0 trend, which will arise more stock value in the future.

Question 2 From the analysis of question 1, its evident that Netflix offered more values for customers than Blockbuster. As a result, we focus on Netflixs offering of values when addressing how it evolved in the following chart: Netflixs evolutions Customers values Founded in 1997. 1. Home delivery service 2. Build personal movies list, Offered home called queue. delivery of DVDs 3. Enjoy value, convenience through the mail and selection. How to evolve Develop cross promotional programs with the manufacturers and sellers of DVD players. Use USPS to deliver DVDs. Provide search engine. Pricing model shifting from traditional style to internet retailers as eBay & Amazon. Change to 4 movies at once and receive up to 4 new films each month. Change to offer unlimited rentals, subscribers keep 3 movies at a time and exchange as frequently as they like. Survey the customers favorite movies list. Stimulate demand on older & less known movies. Large customer-generated system of rating, reviewing and recommending. Play a filter between the recommendation system and the subscribers. Negotiate with the major studios to reduce their price on the titles total no. of rentals. Accept subscription not on the web site on 2002. Reach profitability for the first time in 2003. Established 44 distribution centers across the country in 2007. License arrangement with cable providers. Integrate online video feature into their current offerings. Build a stand-alone online video business.

1. 2. 3. 4. 1. 2.

Provide no-late-fee Attract many high-volume subscription model in customers. 1999. Offer all you can eat model to provide an attractive alternative to the traditional per-day fee structure. Offered its Match the customers preference recommendation and get more attractive system to any users information about the movies. as a web portal in 2000.

1. 2. 3. 4. 5.

Over 90% of No delay time, which enable subscribers receive customers to meet their DVDs within a single satisfaction instantly. business day in 2007. 2007, Online VOD alternatives 3 options for instant viewing needs and fees

1. 2. 3. 1. 2. 3.

Question 3 We define Netflixs and Blockbusters profit models as The customer satisfaction & online rental and The market share & in-store shopping respectively. Company Netflix Profit Model Comparison of Strategies Effect of the strategies Satisfaction & On- 1. The start-up of Netflix 1. Under the umbrella of its line Rental Model reflexes its customercustomer-oriented oriented. strategies, Netflix is 2. Owing to its customerequipped with ability to be oriented concept, Netflix the Pioneer of business insist that it focus on doing model. It can always know business on-line, for it what the next main trend is accurately predicts Internet and design a new model to will profoundly change fit it. consumers behavior. 2. Insisting on the on-line business model makes it cost-saving for Netflix. Blockbuster Market share & In- 1. Blockbuster cares much 1. Under Blockbusters store shopping about its market share, business model, it ends up Model which can be told by its being the Follower. Lack large number(5194) of store of proper understanding of opening in 2006. consumers, it cant develop 2. It also believes that the ina good business model in store atmosphere time. determines consumers 2. Being not able to know its buying. consumers makes Blockbuster misunderstand customers behaviors as in-store type. As a result, it will spend more effort on finding visible stores in high-traffic area and high payrolls of employees, which is extremely costly.

Question 4 Netflixs assumptions checklist: 1) receiving time ( strongly connected with the consumers satisfaction) 2) viewing time 3) rental fees 4) no. of movies at once (selection) 5) convenience for consumers to return videos 6) customers preference to the movies 7) variety of movies 8) dynamic recommendation system 9) cost 10) shelf space 11) equivalent turnaround time and network effect Assumption checklist for VOD: 1) 2) 3) 4) 5) 6) clearly identify the target audience right of getting a movie and distribute it transmission speed of the movie quality of the image viewing fee viewing time ( strongly connected with the viewing fee. For example, should consumers be charge double fee if they view a movie twice?) 7) customers preference 8) movies selection 9) recommendation system to stimulate customers to rent 10) customers satisfaction ( to evaluate the whole system and get the water tank warm)

Source http://emarketingfab6.blogspot.com/2008/03/e-marketing-case-study-1-netflix.html http://emarketingfab6.blogspot.com/2008/03/2.html http://emarketingfab6.blogspot.com/2008/03/e-marketing-case-study-1-netflix_16.html http://emarketingfab6.blogspot.com/2008/03/e-marketing-case-study-1-netflix_2276.html