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  • 1. Tatyana Belousov Shaun Keenan Sasha Safonovawhat Sapan ShahNetflixshould have donewhenchanging itsprices
  • 2. Business model & Shaunpast pricingNew pricing SapanCompetitors SashaOur alternative Tatyana
  • 3. Disadvantages of brick and Netflix’s core advantages mortar stores Worlds leading internet no late fees & a subscription service for wide availableenjoying 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 fromCustomer retention is of price It’s that high becauseimportant, 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 $7.99unlimited 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: $15.991 DVD: $7.99 4 DVD: $21.99
  • 9. Why the split:…and to a DVD rentalto remainshift focus to license price create moredivision they can bestreaming withoutaggressivecontentproud ofsacrificing quality
  • 10. Netflix lost one million Huge investor more subscribers than backlash they had originally expected to Reaction to Pricing ChangeAnger about dealing Stars would not with 2 separate renew its contract accounts with Netflix
  • 11. Netflix messed up! Underestimated emotions of subscribers – unquantifiable!
  • 12. Netflix messed up! Misinterpreted the importance of options
  • 13. Netflix messed up! Overconfidence: Huge stock increase prior to announcement
  • 14. Netflix messed up! Did not utilize focus groups
  • 15. Netflix messed up! Blamed bad reaction on negative movement of the country- Occupy and the Tea Party
  • 16. Individual show episodes $1.99 Season bundles starting at$32.99Less popular films FREE Unlimited streaming $79/year
  • 17. Less convenient than Netflix$1/day $1.20/day Changed prices without a large backlash.
  • 18. What should Netflix have done? Despite their clear gaffe, all is not lost
  • 19. Maintain separate servicesPrice the bundle Streaming $7.99 DVDs by mail $7.99 at $12.99 Mixed bundling
  • 20. Things would be different Consumers who liked the full package would keep it
  • 21. Things would be different Consumers who only use one service would only pay for that one. Perceived discount!
  • 22. Things would be different Netflix would reach a wider array of consumers, including those with lower WTP
  • 23. Things would be different Profits would increase due to the increased price
  • 24. Copyright © 2012Tatyana BelousovShaun KeenanSasha SafonovaSapan Shah
  • 25. Appendix
  • 26. The price of thecompanys services will not change. “Were done with that!” said Mr. Hastings.
  • 27. Financial Results Earnings actually met expectations
  • 28. Financial Results Revenue increase outweighed the subscriber decline
  • 29. Financial Results Revenue 49%
  • 30. Financial Results Both revenue and net income topped expectations