Wednesday, August 14, 2019
Major Shifts in Netflix Strategy Essay
Compare Blockbusterââ¬â¢s and Netflixââ¬â¢s profit models and value proposition prior to the establishment of Blockbuster online: Blockbusterââ¬â¢s Value Proposition and Profit Models: â⬠¢ By establishing over 5000 locations to represent ââ¬Å"70% of the U. S. population by a 10 minute drive,â⬠Blockbusterââ¬â¢s value proposition is its convenience by geographic location. The physical convenience as well as established brand name made the Blockbuster experience attractive to potential movie rental customers. â⬠¢ Their profit models were based highly off of their utilization of shelfà space. Most prominent shelf space would be dedicated to the newest releases. â⬠¢ Another part of Blockbusterââ¬â¢s profit model was to maximize the number of days a video was rented. This financial aspect of the profit model allowed more rentals, thus more revenue. â⬠¢ Late fees contributed to Blockbusterââ¬â¢s profit model in two ways. The fees accounted for $600 million or 10% of Blockbusterââ¬â¢s revenue in 2004. They also enhanced the companyââ¬â¢s consistency in timely rental returns. Since customers usually want to avoid late fees, returning their rentals in a timely mannerà allowed the videos to be rented by another customer. Netflix Value Proposition and Profit Models: â⬠¢ Netflixââ¬â¢s key value proposition was offering a completely different format of movie rental. Not only did Netflix offer its product through a different channel (the internet), but they also focused on utilizing DVDs, which was at the time considered early-à ? technology. The popularity of both the internet and DVDs were increasing at the time of Netflixââ¬â¢s launch. With an increase in popularity of new technology, Netflixââ¬â¢s unique service offering became veryà attractive among the early-à ? adopters of these technologies. The utilization of a subscription-à ? based service also added to its value proposition. Enabling subscribers to exchange DVDs as frequently as they wanted made Netflix even more attractive. â⬠¢ One aspect of Netflixââ¬â¢s profit model was its marketing strategy to only target DVD consumers. By developing a cross-à ? promotional program with manufacturers and retailers of DVD players, Netflix did not waste marketing to other consumer groups who donââ¬â¢t have the new technology to even use DVDs. â⬠¢ In regards to Netflixââ¬â¢s operational aspects of its profit model, Netflix expansion of nationwide distribution centers contributed to the companyââ¬â¢s efficient process. The expansion improved delivery time and also nationwide coverage. Also, the low costs of investing in an additional distribution center further added to the companyââ¬â¢s profit model. 2) List each major shift in Netflixââ¬â¢s Strategy â⬠¢ The first major shift in Netflixââ¬â¢s strategy was the transition to a prepaid subscription service. Netflix realized its original pricing strategy of paying $4 for reach rental was â⬠¢
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