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Tatyana Belousov
                      Shaun Keenan
                    Sasha Safonova
what                    Sapan Shah




Netflix
should have done
when
changing its
prices
Business model &   Shaun
past pricing

New pricing        Sapan




Competitors        Sasha




Our alternative    Tatyana
Disadvantages of brick and
                               Netflix’s core advantages
      mortar stores


    World's leading internet
                                no late fees & a
    subscription service for    wide available
enjoying TV shows and movies       selection
Focused on customer
 experience to drive
  additional growth:



                More content

               Word-of-mouth
                marketing
Netflix’s revenue comes from
Customer retention is of price
 It’s that high because
important, yetof service.rate is
 – subscription its churn
    not quality fees.
6%
Ways to subscribe


   Streaming……or      DVDs by mail…
                   both.


                               85%
                        of consumers paid for
                       only streaming or a 1-2
                          DVD plan in 2010
Old prices

     $10.99                          $7.99
unlimited streaming                 streaming
     or DVDs




                  from $8.99
                      to $47.99
                       for others
New prices

                     $7.99

               No Discount for
                    Streaming
               havingNetflix
                 DVD by mail
                  Old both plans
               :( 2 DVD: $11.99
                             3 DVD: $15.99
1 DVD: $7.99
                                     4 DVD: $21.99
Why the split:


…and to a DVD rental
to remainshift focus to
   license price
   create more
division they can be
streaming without
aggressivecontent
proud of
sacrificing quality
Netflix lost one million
  Huge investor       more subscribers than
    backlash           they had originally
                            expected to




          Reaction to Pricing
              Change

Anger about dealing       Stars would not
  with 2 separate        renew its contract
     accounts               with Netflix
Netflix messed up!




       Underestimated emotions of
       subscribers – unquantifiable!
Netflix messed up!




        Misinterpreted the importance
        of options
Netflix messed up!




        Overconfidence:
        Huge stock increase prior to
        announcement
Netflix messed up!




        Did not utilize focus groups
Netflix messed up!




       Blamed bad reaction on
       negative movement of the
       country- Occupy and the Tea
       Party
Individual show
    episodes
    $1.99
 Season bundles
    starting
  at$32.99

Less popular films
    FREE

    Unlimited
    streaming
  $79/year
Less convenient
       than Netflix
$1/day              $1.20/day

       Changed prices
       without a large
          backlash.
What should Netflix
  have done?
 Despite their clear gaffe, all is not lost
Maintain separate
    services

Price the bundle
  Streaming
    $7.99
              DVDs by mail
                 $7.99


    at $12.99
 Mixed bundling
Things would be different
                            Consumers who liked the full
                            package would keep it
Things would be different

                            Consumers who only use one
                            service would only pay for that
                            one. Perceived discount!
Things would be different




                            Netflix would reach a wider array
                            of consumers, including those with
                            lower WTP
Things would be different




                            Profits would increase due to the
                            increased price
Copyright © 2012


Tatyana Belousov
Shaun Keenan
Sasha Safonova
Sapan Shah
Appendix
The price of the
company's services will
          not change.




                      “We're done with
                       that!” said Mr.
                         Hastings.
Financial Results   Earnings actually met
                    expectations
Financial Results

                    Revenue increase outweighed
                    the subscriber decline
Financial Results


       Revenue
                 49%
Financial Results




                    Both revenue and net income
                    topped expectations

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Netlix price change

  • 1. Tatyana Belousov Shaun Keenan Sasha Safonova what Sapan Shah Netflix should have done when changing its prices
  • 2. Business model & Shaun past pricing New pricing Sapan Competitors Sasha Our alternative Tatyana
  • 3. Disadvantages of brick and Netflix’s core advantages mortar stores World's leading internet no late fees & a subscription service for wide available enjoying TV shows and movies selection
  • 4. Focused on customer experience to drive additional growth: More content Word-of-mouth marketing
  • 5. Netflix’s revenue comes from Customer retention is of price It’s that high because important, yetof service.rate is – subscription its churn not quality fees. 6%
  • 6. Ways to subscribe Streaming……or DVDs by mail… both. 85% of consumers paid for only streaming or a 1-2 DVD plan in 2010
  • 7. Old prices $10.99 $7.99 unlimited streaming streaming or DVDs from $8.99 to $47.99 for others
  • 8. New prices $7.99 No Discount for Streaming havingNetflix DVD by mail Old both plans :( 2 DVD: $11.99 3 DVD: $15.99 1 DVD: $7.99 4 DVD: $21.99
  • 9. Why the split: …and to a DVD rental to remainshift focus to license price create more division they can be streaming without aggressivecontent proud of sacrificing quality
  • 10. Netflix lost one million Huge investor more subscribers than backlash they had originally expected to Reaction to Pricing Change Anger about dealing Stars would not with 2 separate renew its contract accounts with Netflix
  • 11.
  • 12.
  • 13. Netflix messed up! Underestimated emotions of subscribers – unquantifiable!
  • 14. Netflix messed up! Misinterpreted the importance of options
  • 15. Netflix messed up! Overconfidence: Huge stock increase prior to announcement
  • 16. Netflix messed up! Did not utilize focus groups
  • 17. Netflix messed up! Blamed bad reaction on negative movement of the country- Occupy and the Tea Party
  • 18.
  • 19. Individual show episodes $1.99 Season bundles starting at$32.99 Less popular films FREE Unlimited streaming $79/year
  • 20. Less convenient than Netflix $1/day $1.20/day Changed prices without a large backlash.
  • 21. What should Netflix have done? Despite their clear gaffe, all is not lost
  • 22. Maintain separate services Price the bundle Streaming $7.99 DVDs by mail $7.99 at $12.99 Mixed bundling
  • 23. Things would be different Consumers who liked the full package would keep it
  • 24. Things would be different Consumers who only use one service would only pay for that one. Perceived discount!
  • 25. Things would be different Netflix would reach a wider array of consumers, including those with lower WTP
  • 26. Things would be different Profits would increase due to the increased price
  • 27. Copyright © 2012 Tatyana Belousov Shaun Keenan Sasha Safonova Sapan Shah
  • 29. The price of the company's services will not change. “We're done with that!” said Mr. Hastings.
  • 30. Financial Results Earnings actually met expectations
  • 31. Financial Results Revenue increase outweighed the subscriber decline
  • 32. Financial Results Revenue 49%
  • 33. Financial Results Both revenue and net income topped expectations