Netflix Marketing Plan by Elizabeth Austin 2 Product Description Core customer value = Convenient & affordable home entertainment Actual Product: · Brand Name = Netflix · Quality is award winning and more than 90 percent of subscribers have evangelized Netflix · Known for distinctive red packages and easy-to-use website · A hybrid design of DVD-by-mail and streaming video subscription service · Features: § Extensive collection of titles on DVD, Blu-Ray and streaming video § DVDs mailed instantly and returned in pre-paid mailers § Watch streaming videos without commercial interruptions § Many consumer electronics are Netflix enabled § Easy-to-use website that offers personalized recommendations § We offer a variety of subscription plans, with no due dates, no late fees, no shipping fees and no pay-per-view fees. Augmented Product · Customer support available online any by phone · Delivered by U.S. Mail or via internet Elizabeth Austin George Washington University 2b Product Description A time of substantial GROWTH · Netflix to expand service to Canada 2010 in Third Quarter · Digital natives will continue to search out entertainment online · 11 years of consistent and strong earnings and subscriber growth · $66 billion market for subscription-based home entertainment *From Netflix Press Kit Elizabeth Austin George Washington University 3 Current Marketing Situation Market Description Netflix is a subscription based home entertainment company launched in 1998 and has grown to 15 million subscribers as of June 2010. The world’s leading subscription service of DVD-by-mail and streaming entertainment and plans to reach 17 million subscribers by next fiscal year. Netflix is currently the leader in the movie rental market and transformed the market with its fresh approach in this industry once dominated by brick and mortar movie rental stores. Objectives: Core strategy is to increase unique subscribers with · our hybrid model of DVDs and streaming entertainment. · Capitalize on competitive advantage Elizabeth Austin George Washington University 3b Current Marketing Situation Netflix: Key Market Segments Geographic ● Regions [U.S. & Canada] Demographic · Ages [18 -59] · Lifecycle [Young, single, married, married with children] · Education [High school graduate, some college, college graduate] Psychographic · Social class [Working class, middle class, upper middles, lower uppers] Behavioral · Occasions [Special occasion, holiday, seasonal] · Benefits [Quality, service, economy, convenience, speed] · User status [ Potential user, first-time user] Elizabeth Austin George Washington University 4 Product Review · Queue: select from a compelling library of titles that can be viewed instantly DVD titles for fast delivery. · Instant Queue: select titles to be viewed on computer or Netflix ready device. · Netflix Roku device. · Netflix ready gaming devices include Xbox 360, PS3 and Wii. · Netflix ready Blu-Ray devices include Insignia, LG, Panasonic, Phillips, Samsung, Vizio and Sony. · Netflix ready HDTVs include LG and Sony. · Browse by title, actor, genre, new releases, top 100 or critic’s picks. · Proprietary recommendation system to help subscribers find titles of interest. Elizabeth Austin George Washington University 5 Needs, Features & Benefits Target Segment Digital natives Families with children Busy professionals Customer Need + Access to instant streaming video + Entertainment that will work on various platforms/devices = Instant Queue: select titles to be viewed on computer or Netflix ready device. + Family and educational content + Low monthly cost + Convenience of mail or stream = Queue: select from a compelling library of titles that can be viewed instantly DVD titles for fast delivery. = Instant Queue: select titles to be viewed on computer or Netflix ready device. + Intuitive recommendations + Convenience of mail or stream = Proprietary recommendation system to help subscribers find titles of interest. = Browse by title, actor, genre, new releases, top 100 or critic’s picks. + Wide selection of programming for that region + Entertainment that will work on various platforms/devices Canada Reside nts Corresponding Need/Benefit = Queue: select from a compelling library of titles that can be viewed instantly DVD titles for fast delivery. = Netflix ready gaming devices include Xbox 360, PS3 and Wii. = Netflix ready Blu-Ray devices include Insignia, LG, Panasonic, Phillips, Samsung, Vizio and Sony. = Netflix ready HDTVs include LG and Sony 6 Competitive Review Netflix is leading the competition · The home entertainment market is saturated with several options. · “For example, consumers may subscribe to cable, rent a DVD from Redbox or Blockbuster, buy a DVD from Wal-Mart or Amazon, download a movie from Apple iTunes, watch a TV show on Hulu.com, and subscribe to Netflix, or some combination thereof, all in the same month.” · New technologies may create competition The market for streaming video is comprised of three market segments: · Subscription · Video-on-demand (VOD) · Ad-supported DVDs are accessible: · Retail locations · Various online retailers Elizabeth Austin George Washington University 6b Competitive Review Amazon VOD 23,000+ movie titles Titles available for purchase Apple VOD Requires Apple TV to view on television, compatible for viewing on $1.99 and up per title computer Blockbuster VOD 95,000+ titles online retail locations $2.99 and up for streaming $4.99 per in-store rental CinemaNow VOD & Retail 12,000+ titles online Titles available for purchase $3.99 per title Microsoft VOD 35 hours of recorded television $9.95 per month with exclusions and requires Direct TV Wal-Mart(Vudu) VOD 6,000 titles Vudu is installed on many internet ready devices $0.99-$3.99 per title Cable Providers (Time VOD Warner) Vast content depending on provider $3.99 per title,per day Hulu Ad-supported Joint venture of ABC, Fox and NBC and features content from Disney, MTV, A&E, MGM, Paramount, Sony, National Geographic and PBS Free, but has normal commercial breaks and limits certain shows. YouTube Ad-supported Most popular online community Several apps Free, but has advertising Red Box 22,000 locations 22,000 Red Box locations nationwide $1 per title per day Elizabeth Austin George Washington University $3.99 per title 7 Distribution Review "The future aint what it used to be" - Yogi Berra courtesy of Kotler text. Disintermediation model, "pioneered a new way" with selective distribution Multiple channels ● U.S. Mail relationship - $600 million annual bill ● Maintain nationwide network of distribution centers, currently 58 sites ● Third party content delivery networks ● Hardware partnerships ● Studio licensing - Netflix paid $116 million for streaming content in the first 6 months of 2010. Elizabeth Austin George Washington University 8 Strengths & Weaknesses Strengths ● ● ● ● ● ● ● Weaknesses Brand equity. Personalized merchandising. Growing. Convenience, selection and fast delivery. Pricing. Marketing. Customer satisfaction. ● Providing new releases and titles restricted by studios and networks. ● Customers must wait for DVDs. ● Website vulnerable to hackers. Elizabeth Austin George Washington University 9 Opportunities & Threats Opportunities Threats ● Increasing demand for streaming entertainment. ● Increased cost of fuel and the environmental impact to drive to entertainment stores and kiosks. ● Intense competition for subscribers. ● New technologies/decrease popularity of DVD. ● Changes to law. ● Delayed availability of content from studios. ● Reliance on partnership to stream video. ● Loss of distribution channels. ● Increase costs. ● Server disruptions. Elizabeth Austin George Washington University 10 Objectives Objective 1 By the end of 2011, will reach 20 million subscribers (Adding 5 million to their current 15 million subscribers) ● Invest in marketing to target segments that underscore the afford-ability and convenience of Netflix. Objective 2 By end of 2011, raise revenue and market value (2010 Q2 earnings fell below Wall Street predictions, despite strong growth indicators) ● Invest in Investor Communications and product differentiation “The company reported that subscribers who watched at least 15 minutes of streaming content in the second quarter grew 61 percent, up from 37 percent in the year ago period. From June 2009 to the same month this year, Netflix added nearly 5 million subscribers, a 42 percent increase. By the end of this year, the company says it could possess as many as 18.5 million subscribers.” - Quarterly Report from Netflix Elizabeth Austin George Washington University 11 Positioning Strategy Netflix Value Proposition ● Offers customers more for less To target segments and satisfy growing needs for convenient and affordable home entertainment, Netflix offers customers more entertainment, more options and for less money. No hassles, late fees all delivered or instantly to your computer. Elizabeth Austin George Washington University 12 Product Strategy Netflix is a convenience product and is delving into the international market later this year, with its entry into Canada. Netflix has built a strong brand on an ingenious interface, one of the late 90s dot.com companies to thrive into 2010. Netflix's strong growth continues due to brand equity, memorable packaging, high customer satisfaction, growing library and partnerships. Elizabeth Austin George Washington University 13 Pricing Strategy Netflix will continue to offer pricing plans designed to meet all budgets and the "more for less" philosophy Pricing Plans: Netflix Unlimited Plans (Unlimited DVDs each month with unlimited streaming) 8 DVDs out at-a-time for $47.99 7 DVDs out at-a-time for $41.99 6 DVDs out at-a-time for $35.99 5 DVDs out at-a-time for $29.99 4 DVDs out at-a-time for $23.99 3 DVDs out at-a-time for $16.99 2 DVDs out at-a-time for $13.99 1 DVD out at-a-time for $8.99 Netflix Limited Plans 1 DVD out at-a-time for $4.99 - Limit 2 DVDs each month with 2 hours of streaming to their PC. This plan does not allow members to stream movies to their TV via a Netflix ready device. Elizabeth Austin George Washington University 14 Distribution Strategy Netflix is stronger than competitors because of its unique hybrid model of distribution, which gives the company a competitive advantage to other companies. The company should continue to work with partners to distribute Netflix DVDs and streaming entertainment. Elizabeth Austin George Washington University 15 Marketing & PR Strategy Strategy 1 ● Invest in marketing to target segments that underscore the afford-ability and convenience of Netflix. Tactics ● TV and radio advertising ● Direct mail and online promotions to targeted segments ● Social media to build online communities and word-of-mouth advertising Strategy 2 ● Invest in Investor Communications and product differentiation Tactics ● Hold financial forum for investors and media ● CEO and other chief level officers attending panels and technology forums ● Regular updates to hardware and studio partners,building more relationships with other key stakeholders in entertainment delivery. Elizabeth Austin George Washington University 16 Last Words From Netflix CEO, Reed Hastings own presentation May 2010 Elizabeth Austin George Washington University 17 Sources Armstrong, G., & Kotler, P. (2009). Principles of Marketing (13th Edition) (13 ed.). Alexandria, VA: Prentice Hall. Burtolucci, J. (2010, April 10). Will Netflix Suffer from Delayed Gratification? - PCWorld. Reviews and News on Tech Products, Software and Downloads - PCWorld. Retrieved August 5, 2010, from http://www.pcworld. com/article/193972/will_netflix_suffer_from_delayed_gratification.html Wire. (2010, May 7). Netflix Selects Amazon Web Services to Power Mission-Critical Technology Infrastructure MarketWatch. MarketWatch - Stock Market Quotes, Business News, Financial News. Retrieved August 5, 2010, from http: //www.marketwatch.com/story/netflix-selects-amazon-web-services-to-power-mission-critical-technology-infrastructure2010-05-07 Facebook - Netflix. (n.d.). Facebook. Retrieved August 5, 2010, from http://www.facebook.com/netflix Horwath, R. (2009, November 3). Netflix: Differentiate of Destruct, Step Three in Resource Allocation. Strategy Espresso Blog. Retrieved August 5, 2010, from http://richhorwath.wordpress.com/tag/netflix/ Cont. Elizabeth Austin George Washington University 17b Sources Netflix . (n.d.). Wikipedia, the free encyclopedia. Retrieved August 5, 2010, from http://en.wikipedia.org/wiki/Netflix Netflix to Stream Indie Studio's New Releases Before Cable. (n.d.). Social Media News and Web Tips, Mashable The Social Media Guide. Retrieved August 5, 2010, from http://mashable.com/2010/07/06/netflix-relativity-media/ Netflix, Inc. - Annual Report. (n.d.). Netflix Investor Relations. Retrieved August 5, 2010, from http://ir.netflix.com/secfiling.cfm? filingID=1193125-10-36181 Netflix: Press Kit. (n.d.). Netflix Media Relations. Retrieved August 5, 2010, from http://www.netflix.com/MediaCenter?id=5379 Nightline. (n.d.). Nightline on Netflix. YouTube. Retrieved August 5, 2010, from http://www.youtube.com/watch?v=ameJIsF4Mfs PRNewswire. (2010, July 19). Netflix To Launch Canadian Service for Streaming Movies and TV Episodes Later... -- LOS GATOS, Calif., July 19 /PRNewswire/ --. PR Newswire: press release distribution, targeting, monitoring and marketing. Retrieved August 5, 2010, from http://www.prnewswire.com/news-releases/netflix-to-launch-canadian-service-for-streamingmovies-and-tv-episodes-later-this-year-98733079.html Sandoval, G. (n.d.). Netflix delights studios with big checks | Media Maverick - CNET News. Technology News - CNET News. Retrieved August 5, 2010, from http://news.cnet.com/8301-31001_3-20012024-261.html Associated Press. (2010, July 21). Netflix 2Q Profit Shines, Stock Still Loses Luster : NPR. NPR : National Public Radio : News & Analysis, World, US, Music & Arts : NPR. Retrieved August 5, 2010, from http://www.npr.org/templates/story/story.php? storyId=128674640 Elizabeth Austin George Washington University