Netflix marketing plan
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It's a complete marketing plan with background and history, situation analysis, marketing strategies and implementation

It's a complete marketing plan with background and history, situation analysis, marketing strategies and implementation

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Netflix marketing plan Netflix marketing plan Document Transcript

  • Marketing Plan 100 Winchester Circle Los Gatos CA 95032 USA Phone#:+1 (408) 540-3700 Website:www.netflix.com Evelyne Ringia Phone#: +1 205 223 0436 Email: eringia@kent.edu Date: December 05,2013
  • Executive Summary The 2014 Marketing plan for Netflix is designed to increase sales and brand awareness. Netflix offers DVD rental by mail and instant steaming of movies and TV shows at affordance prices consistent with their vision, “Our appeal and success are built on providing the most expansive selection of DVDs; an easy way to choose movies; and fast, free delivery”.‖ Dominated by a rapid technological advancement which characterize the industry, the DVD rental portion of business is slowly declining replaced by the instant Streaming refer to figure3 page 7. The changes in the DVD portion of the business makes it even more important to have great marketing plan to strengthen the brand name and profitability of the streaming portion of the business and this marketing plan focuses on the Online streaming business for the same reason. Netflix has customers are for Online streaming, DVD rentals and few who have both plans. There are environmental factors affecting Netflix like economic, social cultural, technological, political and legal factors. All these factors and many more either positively or adversely affect Netflix but the major five factors are explained in detail in page 4 of this marketing plan. Apart from the external environmental factors a SWOT analysis is done to further describe the company and the industry. Netflix has two product lines each facing a different group of competitors. DVD rental by mail competitors are Blockbuster and Red-box with market share of 16.9% and 45.5% respectively while Netflix has 24.3%. Virtual rivals include Amazon, Hulu, Red-box Instant, X-finity StreamPix, I-Tunes, Love-Film, and cable TV companies. Their strengths and weaknesses are analyzed in detail in page 8. Netflix still claim its top position due to strong Brand, high selection of content, affordability, flexibility with internet speeds and various devices than can be used to stream from Netflix. Netflix had over 40 million subscribers in the end of Q3, 2013 and according to their forecasts the subscriber number may be 44.4 million by the end of the year which is a tremendous growth compare to all of its competitors. Netflix targets a mass market aiming at acquiring as many subscribers of all ages and preferences. Segmentation is not done in this particular industry because the service offered is highly tailored to individual needs using complex prediction algorithms and a recommender system, marketing efforts are aimed at getting as many subscribers as possible. Another reason for not having specific segments is the profitability aspect, since the price per person is low it will not be profitable going after a single segment. Apart from that the customer base is extremely diverse to be able to achieve any meaningful segmentation. Netflix positions itself as a convenient, great choice of content and affordance entertainment option for people who are interested in movies and TV shows. The perceptual maps have been prepared to elaborate the positioning aspect refer to figure 4&5. Marketing strategies have been designed with focus on 7Ps each with strategies to either improve or promote what is already been offered by Netflix to raise brand awareness and increase Netflix market share in Instant Streaming product line. Some other objectives of the plan is to increase media presence and the use of promotional tools.
  • One year implementation plan has been prepared to show when the proposed activities will be done. (Refer to table 4& figure 10) Evaluation methods and metrics have been discussed to enable the marketing team know how successful all the plans have been and whether these marketing promotions have attracted new subscribers or improve the brand awareness and value which are the main objectives of the plan. Conclusion is a summary of the plan and what the team hopes to achieve after implementation. The message that Netflix plans to send out through all of its campaigns is “watch what you want, when you want at affordable price”
  • Contents 1.1 Introduction ......................................................................................................1 1.1 Netflix background ..................................................................................................................... 1 1.3 Netflix Mission ........................................................................................................................... 2 1.4 Netflix Culture ............................................................................................................................ 2 1.5 Netflix management .................................................................................................................. 2 1.6 Netflix customers ....................................................................................................................... 2 2. Situation Analysis ................................................................................................3 2.1 Environmental factors................................................................................................................ 3 2.1.1 Economic factors........................................................................................................ 3 2.1.2 Social factors .............................................................................................................. 3 2.1.3 Technological factors ................................................................................................. 3 2.1.4 Political factors........................................................................................................... 4 2.1.5 Legal factors ............................................................................................................... 4 2.2 SWOT ......................................................................................................................................... 4 2.2.1 Strengths .................................................................................................................... 4 2.2.2 Weaknesses ............................................................................................................... 4 2.2.3 Opportunities ............................................................................................................. 5 2.2.4 Threats ....................................................................................................................... 5 2.3 Customer description................................................................................................................. 6 2.4 Competition ............................................................................................................................... 7 2.4.1 Comparisons with the 2 closest competitors ............................................................ 7 2.5 Segmentation ............................................................................................................................. 9 2.5.1 Why Not? ................................................................................................................... 9 2.6 Targeting .................................................................................................................................. 10 2.7 Positioning ............................................................................................................................... 10 2.5.4 Research needs ........................................................................................................ 12 3. Marketing Planning ...........................................................................................13 3.2 Strategic direction, targeting and positioning ......................................................................... 13 3.3 Marketing objectives ............................................................................................................... 13 3.3.1 Marketing................................................................................................................. 13 3.3.2 Media ....................................................................................................................... 13 3.3.3 Promotion & advertising .......................................................................................... 13 3.4 Marketing mix .......................................................................................................................... 14 3.4.1 Product offering strategies ...................................................................................... 14 3.4.2 Promotion, communication and influence .............................................................. 14 3.4.3 Price ......................................................................................................................... 18 3.4.4 People ...................................................................................................................... 18 3.4.5 Place & Process, ....................................................................................................... 18 3.4.6 Distribution .............................................................................................................. 18 3.4.7 Physical evidence ..................................................................................................... 18
  • 4. Implementation and Control.......................................................................19 4.1 Strategy implementation details ...................................................................................... 19 4.2 Time lines ................................................................................................................................. 21 4.3 Evaluation ................................................................................................................................ 22 4.3.1 Internet adverts ....................................................................................................... 22 4.3.2 Event sponsorships .................................................................................................. 22 4.3.3 TV advertisements ................................................................................................... 22 4.3.4 QR codes .................................................................................................................. 22 4.4 Closing summary ...................................................................................................................... 23 5. References ..................................................................................................24 List of Figures Figure 1 Rapid Subscriber growth table ..........................................................................................................1 Figure 2 Consumer spending and time spent on leisure and sports ..............................................................3 Figure 3Netflix subscriber trend 2012/2013 ...................................................................................................7 Figure 4 Perceptual Map (selection/personalization) ..................................................................................10 Figure 5 Perceptual map (convenience/economy) .......................................................................................11 Figure 6 Adult gadget ownership in America................................................................................................15 Figure 7 Sales forecast resulting from online banner Adverts .....................................................................16 Figure 8 Media comparisons study 2012 ......................................................................................................16 Figure 9 Example of QR codes ......................................................................................................................17 Figure 10 Implementation time line ............................................................................................................21 List of Tables Table 1 Worldwide Broadband subscriptions .................................................................................................5 Table 2 Netflix Competitors analysis...............................................................................................................9 Table 3 Values used to construct the perceptual map .................................................................................12 Table 4 Implementation blue print ...............................................................................................................19
  • 1.1 Introduction 1.1 Netflix background Netflix, Inc. is an American provider of on demand Internet streaming media available to North and South America, the Caribbean, United Kingdom, Ireland, Sweden, Denmark, Norway, Finland, the Netherlands, etc. and flat rate DVD-by-mail in the United States, where mailed DVDs are sent via permit reply mail. Online streaming service and DVD delivery service are the two main two main product lines for Netflix. Netflix core product is a service .This marketing plan will focus on online streaming service. 1.2 Netflix history Netflix was incorporated in Delaware in August 1997 and started its subscription-based digital distribution service in 1999. It made its initial public offering on May 22, 2002 on NASDAQ under the ticker NFLX. Netflix introduced instant streaming in 2007, by 2009 Netflix was offering a collection of 100,000 titles on DVD and had 12.3 million subscribers. In September 2010, they began international operations by offering streaming service in Canada, and now offers streaming service in Latin America, the United Kingdom, Ireland, and the Nordic countries of Finland, Denmark, Sweden, Norway and others. Beginning the fourth quarter of 2011, Netflix had three operating segments: Domestic streaming, International streaming and Domestic DVD. The Domestic and International streaming segments derive revenues from monthly subscription services consisting solely of streaming content. The Domestic DVD segment derives revenues from monthly subscription services consisting solely of DVD-by-mail. By end of 2012 the total revenue for Netflix reached at $3.6 billion a 12.6% compared to 2011 results and it is estimated that Netflix will hit the revenue of $4.4 billion end of 2013. Netflix announced having over 40 million subscriber in its shareholder letter of October 21, 2013. 31.09 million being domestic streaming, 9.19 million and 7.15 being international streaming and DVD delivery subscriptions respectively. Netflix has been growing both financially and with ever increasing the subscriber base from the start with a brief stumble in second half of 2011 when it separated the DVD service to Quickster and increased prices for the subscription by 60% of which it bounced back and regained its stock value and lost subscriptions. Rapid subcriber Growth 45 Rapid subcriber Growth, 41.49 40 Subscribers Millions 35 30 25 20 15 10 5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Figure 1 Rapid Subscriber growth table Source Netflix 1
  • 1.3 Netflix Mission Netflix mission states “our appeal and success are built on providing the most expansive selection of DVDs; an easy way to choose movies; and fast, free delivery” (Topix.com) 1.4 Netflix Culture Netflix culture is that of freedom and responsibility as elaborated in CEO Reed Hastings’ presentation on Netflix’ “Freedom and Responsibility” culture. They have nine specific values, which includes Judgment, Communication, Impact, Curiosity, Innovation, Courage, Passion, Honesty, and Selflessness. Employees help each other to be great. 1.5 Netflix management Founder and CEO Reed Hastings has created a unique management style that is most notably similar to that of George Clooney’s Danny Ocean role; that is, “a leader who hires the best, and gets out of the way” (Wells). Netflix thus has a laid-back structure that allows employees to make their own decisions, but greatly encourages that smart decisions are made. Some of the perks include allowing employees to structure their own compensation packages, no clothing policies, and having a—hypothetical—unlimited amount of vacation days. Hastings understood that valuable employees are happy employees. However much of the importance of this style of management is in its beginning: hiring top-notch colleagues. And finally, regarding expensing, entertainment, gifts and travel, simply “act in Netflix’s best interest” (Siegler). By creating an ideal workspace to provide a highly productive environment, excellence in work quality is expected, and crucial. In the case that employees do not live up to this high standard, Netflix provides large severance packages for quick termination (Kaltschnee, 2007). Some of Netflix Divisions are content division, streaming and partnership division, product division, Finance division, Counsel Division, Talent division, marketing and communication divisions. Names of division heads are in Table 5. 1.6 Netflix customers Netflix customers are divided into two sections: traditional DVD delivery and online streaming customers. Traditional consumers are particular and selective; they have a specific title or genre they are looking for, (often making up niche market consumers), and they desire a rich viewing experience, which currently makes them more likely to consume hardcopy media. They are willing to wait a few days to acquire their title, as long as it meets their expectations. These also have a low propensity to substitute, because they are committed to video entertainment, and possibly a higher propensity to purchase video, more likely to be older, and because they view and access rentals through more traditional channels, they invest more time and energy in their choices. This customers opt for Netflix mail-delivery services as well as more differentiated online subscription plans. Online streaming consumers are not as selective as their counterparts. They watch videos when they can. They value easy and immediate access, portability and transferability of the product, and are more than willing to watch video on their computers or other devices like I pads, computer tablets and even smart phones. This consumer has a higher propensity to substitute than the DVD rental customer. They are also typically younger, and more Internet-savvy. These customers often opt for affordable monthly online subscription plans. To access Netflix’s services customers incur monetary costs for rental fees and subscription fees. Apart from the cost that is directly related to Netflix services, customers have to purchase devices in which they can use to access Netflix services like computers, television sets, modems and Internet packages. 2
  • 2. Situation Analysis Netflix core products are service for moves online streaming and DVD rentals. This marketing plan is going to focus on the online streaming product line. 2.1 Environmental factors Netflix has environmental factors affecting it like economic, social cultural, technological, political and legal factors. All these factors and many more either positively or adversely affect Netflix but the major five factors explained below have the greatest impact. 2.1.1 Economic factors This industry is affected by changes in consumer spending, which can be influenced by changes in the rate of employment growth, interest rates and tax rates. When spending rises, consumers will be more likely to buy subscriptions. Consumer spending is expected to increase slowly during 2013 and presents a potential opportunity for the industry. 2.1.2 Social factors People with increased leisure time availability are more likely to watch movies and TV shows and video games from companies in this industry. As unemployment gradually falls during the next five years, people will be more likely to opt for less time-consuming rental options like streaming. Time spent on leisure and sports is expected to decrease slowly during 2013. Figure 2 Consumer spending and time spent on leisure and sports 2.1.3 Technological factors As the internet served more functions and became more popular, video streaming services, such as Netflix, rose in popularity. Consumers will continue to look to the internet for services previously conducted with physical media. Therefore, the increased adoption of the internet will be an opportunity to the industry. The percentage of services online is expected to increase in 2013. Increased use of smartphones, tablets and computers has also worked in favor of this online video streaming industry. 3
  • 2.1.4 Political factors Network neutrality is the principle that Internet service providers and governments should treat all data on the Internet equally, not discriminating or charging differentially by user, content, site, platform, application, type of attached equipment, and modes of communication. The possibility of regulations designed to mandate the neutrality of the Internet has been subject to fierce debate, especially in the United States. If the network neutrality bill will be rejected then Netflix and the like companies will face a major threat because their existence depends on the internet and if the cost of using Netflix will become too high as a result of lack of network neutrality then Netflix will be adversely affected. Apart from network neutrality there many other laws which are not in favor of the industry like the Video Privacy Protection Act (VPPA) which Netflix had to actively lobby for its amendment to allow them have the social media sharing features. Other political factors include FCC restrictions on vertical integration and content monopolies, funding problems for US postal service, increased state taxation for online businesses and congress’s historical receptiveness for Hollywood lobbying. Netflix has its political action committee. 2.1.5 Legal factors Due to extensive use of licenses for contents and contracts with content providers also customer privacy issues there is a potential for a lot of legal actions against companies in this industry. 2.2 SWOT 2.2.1 Strengths • Netflix has the First Mover Advantage into the movies and TV shows instant streaming which gives its brand higher recognition compare to other competitors. • Netflix brand has Strong Brand Recognition and winning Emmy awards with its House of cards show, Emmys best the Personalized Recommendation Engines for Video Discovery award and many others making it the strongest brand in the industry. • With the personalized recommendation system and a large selection of content Netflix has managed to get high Customer Satisfaction • Netflix has the largest Streaming library compare to other competitors like amazon and Hulu. • Netflix has the ability to adopt to various platforms like TVs, game consoles, smart phones, tables and computers as well as flexibility to different internet speeds which other competitors like Amazon do not have • Production of original content has increased Netflix brand equity, customer loyalty and revenues for example House of cards and orange is the new black. • A huge database of customer data and a good system for analyzing the data enabling them to have more accurate predictions and recommender systems. 2.2.2 Weaknesses • Netflix has a big window of time from when the movie is launched to when it is adopted by Netflix library. Customers have to wait for 28 days to have access of new content releases unlike Hulu who can provide them earlier • Contractual restrictions on streaming content. Netflix is bound by the contracts with the content providers restricting its flexibility on expansion of the market and the content. • Expired contracts with Sony & Stars, resulting in lost videos about 1800 titles setting back the efforts to expand the video library. Also losing a video provider EPIX to Amazon who is a competitor was a setback for Netflix. • Damaged reputation after attempting to increase fees and separate DVD & streaming video 4
  • • memberships. Financing large aggressive international expansion may affect its liquidity (Reed Hastings in Q3 interview with BTIG and JP Morgan) 2.2.3 Opportunities • Product Line Expansion of original shows may have a favorable effect to Netflix subscriber base, profits and brand equity • More expansion in International market. According to table below there is a rapid growth of the number of broadband subscription every year and this is a tremendous opportunity for Netflix to introduce video streaming in those markets. Worldwide broadband subscriptions 2007a 2010a 2013a,b World population 6.6 billion 6.9 billion 7.1 billion Fixed broadband 5.2% 7.6% 9.8% Developing world 2.3% 4.2% 6.1% Developed world 18.0% 23.6% 27.2% Mobile broadband 4.0% 11.3% 29.5% Developing world 0.8% 4.4% 19.8% Developed world 18.5% 42.9% 74.8% Per 100 inhabitants. Estimate. Source: International Telecommunications Union. Table 1 Worldwide Broadband subscriptions • Other potential areas in Internet streaming services where Netflix has opportunity for growth are the live sports, and online games that Netflix do not currently provide. 2.2.4 Threats • Exclusivity agreements with content providers may effect availability of movies for streaming • More competition from big name companies (Apple, Microsoft, Amazon) and global competition from companies operating locally overseas. The Competitors offering streaming video are also bidding for exclusive rights to content example: Amazon, HBO, TV networks which makes gives the content providers higher negotiation power which results to Higher licensing costs. The former Netflix content provider, EPIX currently provides Disney videos to Amazon; Disney recently acquired Lucas film & entire Star Wars franchise that makes Amazon a stronger competitor than before. • Limits on Bandwidth usage from internet providers if the Congress will not pass regulations to honor network neutrality. This will make Netflix services more expensive that the customers are willing to pay and therefore affect Netflix business. • Price adjustments to cover new expenses can result to consumer outrage like it happened in 2011 • Competitor partnerships. There is a threat of Netflix competitors forming partnerships which will 5
  • • • • • make competition more hard to overcome for example (ex: Amazon & Epix) Movie & TV industry less willing to make exclusive deals with online video services. Netflix receive web services from Amazon who is also a competitor which draws attention to conflicts of interest issues and Netflix faces a risk of Internet disruptions. However Netflix have developed a software tool called Isthmus, which manages Elastic Load Balancing services to curb Amazon services outages early this year. Motion Pictures Association of America (Industry regulator) poses a risk if changes will be made affecting Netflix adversely. Increasing in cost for content licenses and increase in cyber-crimes are some of the other stumbling blocks for Netflix 2.3 Customer description Netflix serve a business to customer market. The potential market includes people of ages from 5 (kids), 18 to approximately 59 years and beyond and they are located in the US and other 41 countries where Netflix currently operates. They have two major product categories which are DVD by mail subscription and online streaming subscriptions. The focus is online streaming. Netflix customers are highly diverse in their watching preferences, ages, income, technological advancement and in many other aspects with the only common factor uniting them being access to internet and interest in video content. Most are accustomed to free/ad based content and the black market. With these options available, prices are driven down as consumers have high bargaining power To be able to understand and serve this kind of extremely diverse customer base Netflix collect and retain the following information about their subscribers in order to understand individual preferences and be able to serve every one of their customers individually. The information is collected from the website by keeping track of subscribers interaction with them; Email addresses, names, age, credit card information and other basic information, title selections, reviews, ratings, payment history, correspondence, internet service providers, Internet protocol addresses, devices and software data (such as type, configuration and unique identifiers), instant-watching hours/movies, TV shows and related activities. They also collect information from other sources; including offline data and subscribers’ browsing behavior on other sites and interactions with Netflix’s advertising, movie & TV show ratings, consumption habits, commentary and reviews. Subscribers may Choose to connect one or more social networks (such as Facebook) with them Netflix account. If they do, Netflix will import, use, and retain information from their social networking account(s) such as names and profile pictures as well as their e-mail address, list of friends, subscriber’s Likes and Interests as well as information they make public on social networks From analysis of collected information it is clear that Netflix online streaming customer’s primary needs are affordable, convenient, fast and individualized entertainment. Netflix has kept on delivering and responding to these needs which results to a rapid growth of its customer subscription base. Figure 3 shows customer subscription trend for 2012&2013 6
  • Netflix subcribers trend in millions 35 25 23.41 23.94 25.1 10.09 9.24 8.61 3.07 3.62 4.31 Q1/'12 Q2/'12 Q3/'12 33.1 29.17 29.81 31.09 8.22 6.12 7.98 7.14 9.19 7.15 10.5 7.75 7.51 Q4/'12 Q1/'13 Q2/'13 Q3/'13 Q4/'13 (forecast) 30 27.15 20 15 10 5 0 US streaming DVD rental International streaming Figure 3Netflix subscriber trend 2012/2013 2.4 Competition Netflix’s two product lines video streaming and the DVD by mail, each face a different group of competitors. DVD by mail competitors are Blockbuster and Red-box with market share of 16.9% and 45.5% respectively while Netflix has 24.3%. Virtual rivals include Amazon, Hulu, Red-box Instant, X-finity Stream-Pix, I-Tunes, Love-Film, and cable TV companies. According to NPD Group, in the first quarter of 2013, 67% of U.S. streaming customers subscribed only to Netflix a significant drop from the 76% posted in the first quarter of 2012. Hulu Plus scored 10% of total subscribers among those who used only one service, while Prime made up just 2% of such single-source users. In the same NPD Group study, 10% of viewers used Netflix and Prime both for streaming movies and television shows. 8% used Netflix and Hulu Plus. Other indirect competitors are providers of home entertainment like cable television, satellite services, other unofficial websites with movies, you tube etc. 2.4.1 Comparisons with the 2 closest competitors Price per month Netflix 30 day free trial membership 3 types of plans, unlimited DVD only $7.99, unlimited streaming only $7.99 and 2 DvD at a time $11.99 Content selection Most extensive selection with thousands of tittles. Has licensing deals with CBS, ABC, Fox, NBC, Stars, BBC, Starts, BBC, Sony and DreamWorks contributing Amazon 30 day trial period Hulu 1 week trial membership $6.67 with two day free shipping for purchases made in Amazon $7.99 and there is a free Version with limited selection and fewer episodes of shows. Selection not as big as Netflix and shows movies released within the past year similar to Netflix. Own licensing deals to provide content from Fox, NBC, Disney, MTV and a bevy of cable channels. Updates library more frequently than its 7
  • to the library. competitors. Customers get latest episodes faster and it’s a great alternative to cable. Devices Speed Features Is compatible with most devices like PC,x box 360, PS3, Nintendo, Wii, smart TV, Roku, Android, Blue ray player, Nook, tablets and iOS devices Netflix is more adaptive of the internet speeds and can work from slow internet and also fast connection as well Adverts free platform Not compatible with gaming devices. Lacks compatibility with Smart TVs and blue ray player Moderately adaptive of the internet speeds Moderately adaptive of internet speeds Adverts free watching experience Limited commercials in movies Ability to rate movies and receive personalized recommendation Plays newer movies and shows compare to competitors Ability to share with friends in social media Market shares Strengths Weaknesses Personalized profiles to enable parental controls for children and the whole family can share the subscription. Account for 89% of TV streams Largest library selection, strong brand, good and accurate recommender system, biggest number of subscribers, original production of shows, offers Netflix for kids, social media integration The selection is not as current as Hulu Account for 2% of TV streams Have a strong brand but associate with its other businesses apart from streaming , cheapest for people who prefer whole year commitments, high financial capability, unlike Netflix video streaming is only a small part of the business portfolio for Amazon Subscriber is forced to commit the whole year. Some selected tittles are paid per stream basis the Account for 10% of TV streams Latest movie selection, A good substitute for cable, Commercials appear while subscribers watch, the selection is limited unlike Netflix, 8
  • subscription is not unlimited like Netflix and Hulu, prime subscribers use the free shipping service more than they use the video streaming (A Bernstein Research survey in July found that 29% of Prime subs don’t use the video option.) Table 2 Netflix Competitors analysis Netflix has begun investing in original programming, a tactic that stole the focus from content licensing in the subscription VOD category this year. Netflix successfully introduced multiple series, including “House of Cards” and “Orange Is the New Black,” while Amazon ordered a string of series in the comedy and kids genres. But all that activity has obscured the fact that competition over licensing has intensified during the same period, as both Amazon and Netflix seem to have moved away from an earlier emphasis on building the most comprehensive libraries to focus on snaring exclusive contracts that help them stand out in the marketplace 2.5 Segmentation Netflix market is very dynamic and constantly changing in response to changes in technology and consumer behavior. Netflix had 36.7 million subscribers as of June 2013 with age range from 18 years of age to 59. They spend 2bilion hours watching streamed video on hi-speed internet. There are multiple ways of segmenting the market in the video streaming industry but due to highly diverse nature of the customers who varies in age, income, geographic areas, education levels, and watching preferences vary with time, mood, beliefs, company etc. none of the segmentation will be totally Homogeneous within, Heterogeneous across, Measurable, Substantial, Accessible, Differentiable, Actionable and most of all Profitable. 2.5.1 Why Not? First a person may have extremely different preferences influenced by a number of reasons like company, mood, time, curiosity, new movies premier, awards like Emmy awards tends to influence peoples preference at particular times, what a customer sees as trendy on social media at the same time these preferences are not pinned to a particular kind of people so it will be impractical to obtain a homogeneous group within, heterogeneous across or even measurable. Second people change these preferences in split of seconds and that will make it very hard to make the segmentation accessible, differentiable, actionable and substantial enough to make profits because Netflix depends on the large number of subscribers to break even, much more to make profits and focusing on a particular segment will not make this achievable. 9
  • 2.6 Targeting Netflix target a mass market of consumer-paid streaming subscription of TV shows and movies aiming to have the biggest market share with the largest number of subscribers it can get regardless of age, backgrounds, beliefs, preferences etc. Although Netflix target to recruit mass market it focuses on individual subscribers needs in order to retain them for a long time. The higher the number of paying subscribers the more Netflix can achieve return on heavy investment in content and technology because only low prices can be charged due to the nature of the industry and service. 2.7 Positioning Customer’s top priority is convenience, affordability, speed, personalization of the video streaming and high selection of titles. Netflix aim at being the top and only choice for its customers by providing a more personalized, fast, convenient, high selection and yet affordable online streaming service than all of the competitors. Figure 4 Perceptual Map (selection/personalization) 10
  • Figure 5 Perceptual map (convenience/economy) Perceptual Maps key N=Netflix, H= Hulu, R=Red-box Instant, A=Amazon, C=Comcast (Xfinity Streampix) 11
  • Values used to construct the perceptual maps Company Selection Personalization(a good recommender system) Convenience (speed, number of devices, how adaptive to internet speed) Affordability per month 1 Netflix Over 60000 Highly convenient $7.99 2 Hulu Between 30000&40000 Not very flexible to internet speed $7.99 3 Redbox About 4600 Excellent recommender system it uses both internal data and external data from social networks Great it uses internal generated data Redbox instant do not have a reliable recommender system compare to Netflix and Hulu Don’t play on as many devices as Netflix $6.00 4 Amazon About 40000 Comcast 1 Fifth of Netflix collection Do not play in apple TV and gaming devices Ties the service to the Comcast cable so not very convenient $6.67 5 Lacks a reliable recommender system. Do not have any recommender system $4.99 Table 3 Values used to construct the perceptual map 2.5.4 Research needs Additional research results needed to fully characterize the market will be the supplier information because there are many Netflix content suppliers and the information Netflix content license purchases. 12
  • 3. Marketing Planning 3.1 Market size and growth potential Netflix market has had a consistent growth trend over the years. It started operations in 1999 with 101000 subscribers to more than 40.28 million streaming subscribers ending Q3 this year and 7.51 million physical DVD mail subscribers as of June 2013 (Yahoo: By numbers: Netflix subscribers) According to US census bureau as of June 30 2012 North America had a total of 273million people with internet access who can be Netflix’s potential subscribers. Netflix target the mass market both in United States and internationally and there is a promising future for growth for Netflix. 3.2 Strategic direction, targeting and positioning Netflix streaming service is positioned as the personalized low price instant movies and TV shows entertainment with the biggest collection targeting the mass market. Comparing to other competitors Netflix offers the watching experience without disruptions from other adverts compare to Hulu, It has the largest selection compare to all close competitors and customers can watch from a bigger variety of devices and internet connection speeds which puts it on top list when it comes to convenience. Every customer is served individually using a sophisticated analysis of big data and accurate recommender systems so that the service can be as personalized as possible while aiming at attracting as many subscribers as possible from all walks of life. 3.3 Marketing objectives 3.3.1 Marketing 1. Increase the brand awareness and goodwill especially in new international markets. 2. Highlight the competitive price and variety of content and the social media integration that Netflix offers compared to their competition by including these details in every message. 3. Increase number of subscription from 40 million people to 70 million 4. Improving the Instant streaming service in various aspects (discussed under product offering) 3.3.2 Media 5. Increase our share of voice by 40 percent by the end of the campaigns first year. 6. Increase the frequency rate of all current advertising messages by 50 percent and extend our reach by 10 percent. 3.3.3 Promotion & advertising 7. Reach 95 percent of the target audience at least twice with messages detailing Netflix‘s instant streaming. 8. Use mobile ads to increase awareness of Netflix‘s instant streaming service on particular mobile devices. 13
  • 3.4 Marketing mix 3.4.1 Product offering strategies Netflix could have more recent movies in their collection in order to attract customers who only want to watch new movies online and could also get move recent TV shows for the customers who want current TV shows. Apart from that Netflix do not currently have online games and does not currently carry in their libraries. Sports instant streaming which have a great potential market since none of the close competitors provide this kind of service, between 21.6% and 22.4% of all Fans in Major North American Sports Leagues spend between 1 and 4 hours a week on internet search for the sports news and clips (sports business daily.com) Netflix has to keep expanding the collection it already has by bidding for more popular TV titles. Increase exclusive content from in house production. Collaborate with well-known actors to create more original series and release the seasons in less than 12 months that Netflix currently does. Netflix can do more to accommodate different internet speeds so that these customers can watch from anywhere they have an internet connection and can work with internet service providers so that customers may have special internet packages enable them watch their movies more comfortably with affordable internet service. Netflix should make it possible to pay using other medium for payments apart from credit cards like mobile money, cheques, western union any many other forms of payment to allow customers from countries where credit cards are not popular have access to Netflix too. 3.4.2 Promotion, communication and influence Netflix offers a free month trial for all of the new subscribers aiming at showing the high value of service before the subscriber commit to Netflix. The objective is to attract more loyal subscribers because people join Netflix with confidence of what they are purchasing which increase trust and loyalty among subscribers. This promotion sends a message that Netflix is confidence of the value it has to offer and does not hesitate to let people have the Netflix experience before they decide to buy subscriptions. 14
  • Communication The main vehicles that will be used are the internet, Television commercials and Billboards. a. Advertising through mobile phones & tablets messages As of May 2013, 91% of American adults had a cell phone, 56% a smartphone, and 34% had a tablet computer. As of January 2013, 26% of American adults owned an e-book reader. The figure below shows gadget ownerships in United States. Ads will include notifications that the current free trial offer will run through the campaigns first year and all other Netflix new features. Adult gardet ownership overtime % of American adults 18+ who own each device 100% 90% 80% 85% 82% 64% 62% 65% 52% 56% 47% 50% 37% 40% 30% 45% 41% 61% 42% 43% 42% 34% 19% 19% 20% 2% 3% 5% 4% 8% Desktop computer Laptop computer 58% 55% 25% 10% 0% Cell phone 57% 57% 60% 20% 83% 84% 73% 75% 70% 68% 30% 91% 88% 88% 89% 87% 85% 85% 87% 10% 9% 18% 29% 31% mp3 player 34% 26% Game console e-Book reader 24% 18% Time Figure 6 Adult gadget ownership in America Source: Pew internet surveys 2006-2013 b. Social media and internet advertising Social media is extremely important for Netflix because the service is located on the internet the same place where the social media is. Netflix provides opportunities for its customers to share and interact with their friends in various social media while they are on Netflix account. Netflix also collect the social media information to better serve the customers and know how the customers perceive them. 90.1 percent of the U.S. actively use the internet. That is a huge coverage rate. The biggest advantage to internet advertising for Netflix is one click on an ad and the potential consumer is taken right to the product. Internet users have come to accept and even expect banner ads. The figure below shows forecasts and estimated of sales as outcomes of banner and search Ads in US. 15
  • Fan chart forecast of U.S. search and banner ad sales, 2007-17 Figure 7 Sales forecast resulting from online banner Adverts Source: Mintel/IAB/PwC c. TV commercials Based on the America‘s commercial broadcast television industry‘s (referred to as TVB) media comparisons study 2012, Television reached more people than the internet (88.3% > 73.1%). 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 88.3 Television 73.1 Internet 58.8 Radio 36.1 Newspaper 27.8 Mobile Phone 24.8 Magazines Tablet 11.7 % Reached Yesterday Persons 18+ Figure 8 Media comparisons study 2012 Source: TVB media comparisons study 2012 16
  • d. Additional promotional tools. QR codes QR codes are becoming popular as smart phones become more standard. Netflix may agree with a candy company to put Netflix QR codes on their movie size candy. They can also arrange for the QR codes to be put on pop-con packages that are used in movie theatres even those sold in stores. The QR codes will lead customers to Netflix.com and YouTube clips of commercials. Netflix can also run a follow up campaign for Netflix users to submit their own video of them using or advertising the Netflix. If their video passes YouTube regulations, those videos can be put on YouTube with a QR code attached the customers may be rewarded with discounted subscriptions for a month or two. This creates consumer excitement and involvement. Example of QR codes. These are machine-readable codes consisting of an array of black and white squares, typically used for storing URLs or other information for reading by the camera on a smartphone Figure 9 Example of QR codes Sponsor Movie related events Some of the major Film related events are Sundance Film festivals in US which is held in late January every year in different big cities in US. International Film festivals in Rotterdam Rotterdam Film Festival is one of the most important film festivals in the world focusing predominantly on world and international premieres with a large art-house and experimental focus. Other film festivals are Slamdance, Raindance, Rendez Vous in France, Gotterburg international for Scandinavia. Other events that Netflix can sponsor are movies and entertainment awards like Emmys, BET etc. Netflix will gain more awareness in the market and get to advertise to the customers who have actual interest in movies. Use of Netflix data for Advertising and service improvement 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. 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, enforcing Netflix terms (such as 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 analyzing, 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 17
  • used to better improve the Netflix personalized experience for the subscribers and their friends if they agree to share such information. The consistent message Netflix sends with all communication is “watch what you want when you want at affordable price” 3.4.3 Price Netflix pricing objective is gaining the maximum market share for Netflix which translates to customer attraction and retention. Their pricing is also set to match the competitors where they charge $7.99/month for unlimited streaming, the same price as Hulu while Amazon prime $6.50/month but the customer incurs extra cost for some individual titles. There have not been a lot of price changes with the online streaming industry and all the major players keeps the price at the similar margin which means if any one of the competitors will change the price Netflix is likely to react if not changing the price will result to lost subscriptions. Netflix changed its prices and separated the two products lines of streaming and DVD rental by 60% increase in price for customers who wanted both services. Netflix has ever since maintained its price at the industry average. Netflix does not practice price differentiation because it targets the mass market 3.4.4 People 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. Netflix respond within 5 minutes of a call to all customers and this could be improved further to 3 minutes. 3.4.5 Place & Process, 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. 3.4.6 Distribution Netflix accommodate different internet speeds so that the customers can watch from anywhere they have an internet connection and in order for them to do this Netflix is strategically establishing relationships with ISPs because there is a threat that the government may not honor the internet neutrality law which will allow ISP to charge customers differently with different content which will hurt Netflix business. Netflix can also partner with companies to develop Netflix programs specific to their platforms that will come pre-installed on all their devices, further partnership can be done with cable and gaming companies to develop instant streaming option for video games. Content providers also should be approached for exclusive rights to content before the competitors do the same. 3.4.7 Physical evidence Online movies and TV shows streaming primary physical evidence is the Netflix website where people log in to watch their movies and Netflix apps which enable people who use phones to access Netflix get that experience, the website should be improved constantly and more user friendly so that subscribers can search for content more easier and prevent any possible downtime. 18
  • 4. Implementation and Control 4.1 Strategy implementation details Table 4 Implementation blue print marketing Marketing Content mix (Kelly Bennet) (Sarandos Ted) Product offering Reducing the window from the time movies are released to the time they are adopted by Netflix Library from 1 year to six month. Expanding the video library to 70000 tittles Promotion One month free trial. Talent (Tawni Cranz) Communica tion (Jonathan Friedland) Product (Neil Hunt) Introducing video game streaming and sports instants streaming, Streaming and Partnerships (Greg Peters) Improve the movie streaming speed. QR codes Sponsor Movie related events Finance ( David Wells) Objective fulfilled Introducing new payment methods especially for internationa l market. 1,3,4, 1,3,5,6,7,8 Advertising through mobile phones & tablets messages. Social media 19
  • and internet advertising. TV commercials People Price Train customer service to achieve a 3 minute return call per customer. 4 Communica te the price stability and the one month free Have good price plan which do not change suddenly Distribution Place Strategic partnership with ISP to ensure smooth distribution Website improvemen ts 2 3,4 4 20
  • 4.2 Time lines Implementation time table year 2014 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Get recent movies and expand library, be more adaptive of internet speeds for customers, continue the free month trial membership, banner advertising (partnerships ISP, content providers, gaming companies), Adding features to the website and Netflix apps Start a sports section within the library Add new payment methods for international customers text Adverts through gadgets like smartphones and tablets once every two months awareness TV commercials new features sports& payment forms TV commercials QR codes Sundance festival, and other European festivals Emmy awards Customer service improvements Figure 10 Implementation time line 21
  • 4.3 Evaluation Evaluation is important for us to determine which promotion or advertisement have had bigger impact for our sales and brand awareness which are the top priority. A pre and post evaluation will be conducted for each of them to measure the effects and determine whether the campaigns were successful and to what extent they were successful. We will select small representative samples groups and test consumer perceptions for the campaigns aiming at improving brand awareness and image, and for the campaigns aimed at improving sales new sales will be allocated to particular campaigns. 4.3.1 Internet adverts A click counter will be used to assess which sites are being visited most the Internet banner adverts. General site counter that will let us know the amount of traffic the site is receiving on daily basis and how many of the clicks resulted to membership subscriptions. A Focus group will be used to assess the consumer’s perceptions on the Netflix adverts they see from the internet. 4.3.2 Event sponsorships During the event sponsorships there will be promotional codes distributed to interested people while different adverts play on sponsor screens emphasis being the free month trial. These codes will be used to give the new customers discounted prices for the second month after joining and the count will be done on the codes which were used to subscribe and these will be a good indicator of the effectiveness of the method. Since the sponsorships are also aimed at improving brand images Netflix will conduct a survey after the events to find out the impact. 4.3.3 TV advertisements With the help of stations a number of viewers can be determined. The commercials will contain a promotional code and the customer will use the codes to get extra benefits on Netflix website like the discounts which will be a way to track effectiveness of such advertisements. Surveys will be conducted to know the customer perception of the advertisements. 4.3.4 QR codes These codes will be tracked over the internet to know how many of them were put to use. To find out how customers perceive the QR code advertisements and promotions a survey will be conducted. For other service improvement campaigns like forms of payments, speed, increased library selection, and introduction of sports content will be evaluated periodically using online survey which will pop up before or after starting a movie. These various mentioned evaluation techniques will be able to tell whether the marketing campaigns are successful. If the some of the campaigns are not effective will be stopped in the next period and new strategies will be applied. 22
  • 4.4 Closing summary Netflix have managed to position their brand as affordable, convenient, with largest library and most of all personalized. They have successfully stocked their company with the widest range of films and the first to have a good recommender system, ahead of its competitors they have integrated their service with the social media. By starting their instant streaming product line as soon as broadband internet was able to support it, they not only stayed ahead of the competitive game, they‘ve monopolized the field. Now that the instant streaming feature has become so popular, many are trying to imitate and enter into the market. By implementing the creative strategies suggested, Netflix will secure their place on top. Through increasing the reach of their instant streaming message, eventually every home will have a Netflix subscription. Netflix will not only be a choice but the choice for everyone. 23
  • 5. References Company facts. Netflic.com, Retrieved November 29, 2013 https://signup.netflix.com/MediaCenter/Facts A brief history of the company that revolutionized watching of movies and TV shows.Netflix.com Retrieved November 29, 2013 https://signup.netflix.com/MediaCenter/Timeline Netflix Inc. (NFLX: NASDAQ GS): Netflix, Inc.'s Annual Revenues. Businessweek.com November 29, 2013 Retrieved November 29, 2013 http://investing.businessweek.com/research/stocks/earnings/earnings.asp?ticker=NFLX Hastings R. and D. Wells. Shareholders letter”. Shareholder.com October 21, 2013 Retrieved November 29, 2013http://files.shareholder.com/downloads/NFLX/2745605111x0x698481/ecfe1ab4-66f5-4e23a64a-1ca025216e5e/Q313%20Earnings%20Letter%2010.21.13%2010.30am.pdf Netflix mission statement. September 6, 2006 retrieved November 29, 2013 http://www.topix.com/forum/com/netflix/T636FMV2H9M888KP1 Krengel A. et al. Capstone final report: Netflix company analysis” Santa Clara university 2010 retrieved November 29, 2013 http://www.scribd.com/doc/94610526/NFLX-Capstone-Final-Report Krämer, J; Wiewiorra, L. & Weinhardt, C. (2013): Net Neutrality: A progress report. Telecommunications Policy 37(9), 794–813 Capriogrio L. Netflix incorporation presentation. October 16, 2012 Retrieved December 1, 2013 http://prezi.com/pv5lokny_evj/strategy-netflix/ Katje C. Amazon vs. Netflix: Battle to Become Streaming King Heats Up. August 2, 2013 Retrieved, December 1, 2013 http://variety.com/2013/biz/news/amazon-turning-svod-space-into-a-two-company-race-1200571585/ "Key ICT indicators for developed and developing countries and the world (totals and penetration rates)", International Telecommunications Unions (ITU), Geneva, 27 February 2013 Retrieved December 1, 2013 Curtis J. Netflix vs. Hulu vs. Amazon Prime comparison. Retrieved December 1, 2013 http://www.moneycrashers.com/netflix-hulu-amazon-comparison/ Comcast gives subscribers one more reason to quit Netflix. February 21, 2012 Retrieved December 1, 2013 http://gigaom.com/2012/02/21/comcast-streampix/ Redbox Instant vs. Netflix: The winner? Don’t waste your money. March 18, 2013 Retrieved December 1, 2013 http://www.wcpo.com/money/consumer/dont-waste-your-money/redbox-instant-vs-netflix-thewinner Robson W. Comcast Streampix, No Threat to Netflix. Audioholics.com February 24, 2012 Retrieved on December 1, 2013 24
  • http://www.audioholics.com/news/comcast-streampix-no-threat-to-netflix Internet Usage Statistics-The Internet Big Picture World Internet Users and Population Stats Retrieved on December 2, 2013 http://www.internetworldstats.com/stats.htm Trend Data (Adults) Retrieved December 2, 2013 http://www.pewinternet.org/Static-Pages/Trend-Data-(Adults)/Device-Ownership.aspx Media comparisons study 2012 Retrieved December 2, 2013 http://www.tvb.org/media_comparisons/1247377 Internet Advertising Search and Banner April 2013. Mintel/IAB/ PwC. Retrieved December 2, 2013 http://academic.mintel.com/display/662035/?highlight=true#hit1 Essential 100 Film Festivals Part 1 [2013] Retrieved December 02, 2013 http://www.raindance.org/essential-100-film-festivals-part-1/ Bledsoe K. & A. Phenix. Netflix Promotional Campaign” slideshare.com April 28,2011 Retrieved December 1,2013 http://www.slideshare.net/ashleyphenix/netflix-promotional-campaign Austin E. Netflix marketing plan” Retrieved December 1, 2013 http://aboutelizabethaustin.files.wordpress.com/2011/08/netflix_marketing_plan.pdf Krite L. 2013. Netflix strategic plan” May 2, 2013 Retrieved December 1, 2013 https://lpelin.expressions.syr.edu/trf483/files/2013/05/final_strategic_report.pdf Chiang J. 2013. DVD, Game & Video Rental in the US. June 2013. IBISworld.com Netflix Privacy policy. September 11, 2013 Retrieved October 30, 2013 https://signup.netflix.com/PrivacyPolicy 25