Question 4: Discuss the steps of the BuyerDecision Process are being used by Netflix to satisfy existing andprospective customers by their product offerings. (10 marks –approx. 500 words / 1 page).
Netflix Case: Netflix Uses Technology to Change How WeWatch Videos
When Netflix was founded in 1997 in the United States, the movierental giant Blockbuster had thousands of stores from coast tocoast, filled with video cassettes ready for immediate rental tocustomers (Pride et al., 2018). Netflix had a different vision fromthis well-established, well-financed competitor. Looking at therecent development of DVD technology, Netflix saw an opportunity tochange the way consumers rent movies. The entrepreneurial companybuilt its marketing strategy around the convenience and low cost ofrenting DVDs by mail, for one low monthly subscription fee.
Instead of going to a local store to pick out a movie,subscribers logged onto the Netflix website to browse the DVDofferings and click to rent. Within a day or two, the DVD wouldarrive in the customer’s mailbox, complete with a self-mailer toreturn the DVD. And, unlike any other movie rental service, Netflixcustomers were invited to rate each movie on the Netflix website,after which they’d see recommendations tailored to their individualinterests (Pride et al., 2018).
Fast-forward to the 21st century. Video cassettes areall but obsolete, and Blockbuster, once the dominant brand in movierentals, has only one remaining shop in the US as consumer demandhas shifted to digital distribution for entertainment (Porter,2019). In Australia, both Blockbuster and Video Ezy still had abrand presence in 2018 (Pride et al., 2018). Since then,Blockbuster’s last Australian shop closed in March 2019 (Porter,2019), and Video Ezy exists in the form of vending machines(kiosks) after its shops closed (Rosenberg, 2018).
Both brands have been prompted to reassess their distributionchannels. You may notice more DVD rental kiosks such as “Video EzyExpress” popping up in convenient locations, including outsidesupermarkets and shopping complexes, in a bid to improve brandreach and accessibility. DVD rental kiosks, like online services,are accessible around the clock and reduce many store costs,including wages.
In contrast, by completely eliminating the need forbrick-and-mortar stores or kiosks, Netflix has minimised its costsand extended its reach to any place that has postal service andInternet access (Pride et al., 2018). The company still rents DVDsby mail (Monahan & Griggs, 2019), but it has also takenadvantage of changes in technology to add video streaming ondemand.
Now, customers can stream movies and television programmes tocomputers, television sets, videogame consoles, DVD players,Smartphones, and other web-enabled devices. One advantage to thecompany is that streaming a movie costs Netflix less per customerthan paying the postage to deliver and return a DVD to thatcustomer.
Netflix’s Use of Technology: From Data-Tracking toStreaming
Netflix made technology a core competency from the verybeginning. Because the business has always been web-based, it canelectronically monitor its customers’ online activity and analyseeverything that customers view or click on.
With this data, Netflix can fine-tune the website, determinewhich movies are most popular among which market segments, preparefor peak periods of online activity, and refine the recommendationsit makes based on each individual’s viewing history and interests.The company also uses its technical know-how to be sure that thewebsite looks good on any size screen, from a tiny Smartphone to alarge-screen television.
A few years ago, planning for a significant rise in demand forstreaming entertainment, Netflix decided against investing inexpanded systems for this purpose. Instead, it arranged for AmazonWeb Services to provide the networking power for streaming (Prideet al., 2018).
By 2018, on a typical night in the US, Netflix streamingoccupied up to 20,000 servers in Amazon data centres (Pride et al.,2018). Demand was so strong by that time, in fact, that Netflixstreaming accounted for about one-third of all internet traffic toNorth American homes during the evening (Pride et al., 2018). Thispercentage is only expected to increase. The Australian market,however, may pose technological hurdles, as the National BroadbandNetwork is still being rolled out and is not available in allareas, meaning that accessibility may not be as straightforward asit is in America (Department of Infrastructure, Transport, RegionalDevelopment and Communications, n.d.).
Although Blockbuster and Video Ezy are no longer a competitivethreat in their traditional form, Netflix does face competitionfrom Amazon’s own video streaming service, Amazon Prime Video,which headed to Australia and New Zealand’s shores in 2017 (Prideet al., 2018).
Other direct competitors include well-established Hulu, YouTube,Nine Entertainment, and
Fairfax media’s joint-venture Stan, and Foxtel’s movie-streamingservice Presto. It also competes with other entertainmentproviders, including cable, satellite, and broadcast television.Foxtel, for example, has dramatically reduced its basic cablepackages in an effort to retain its share of the market in face ofincreasing competition from on-demand services (Pride et al.,2018).
Netflix Offers Exclusive Programming toCustomers
To differentiate itself from its competitors, Netflixcommissioned exclusive programming such as House of Cards,Arrested Development, and Orange is the NewBlack. The cost to produce such programs runs to hundreds ofmillions of dollars (Pride et al., 2018). Between May–December2019, Netflix added 179 original programmes to its Americanstreaming service, or an average of 30 new shows a month, or aboutone show per day (Fruhlinger, 2019). Netflix plans to continuepouring money into exclusive content because of the payoff inpositioning, positive publicity, and customer retention.
The way that Netflix releases its exclusive programming reflectsits in-depth knowledge of customer behaviour. The company foundthrough its data analysis that customers often indulge in ‘bingewatching’ for a series they like, viewing episodes one afteranother in a short time.
Based on this research, in 2013 Netflix launched all 13 episodesof the inaugural season of House of Cards at one time, anindustry first (Pride et al., 2018). Executives gathered atheadquarters to monitor the introduction, cheering as thousands ofcustomers streamed episode after episode. By the end of the firstweekend, many customers had watched the entire series and sharedtheir excitement via social media, encouraging others to subscribeand watch. When Netflix won multiple Emmy Awards for House ofCards, it was another first—the first time any Internetcompany had been honoured for the quality of its originalprogramming.
One key measure of Netflix’s growth is the strong increase inthe number of monthly subscribers. In 2015, Netflix had about 70million subscribers worldwide, of which 26 million were locatedoutside the US (Pride et al., 2018). In 2019, Netflix had 151million paid subscribers worldwide (158 million if free trials areincluded) (Kafka, 2019).
Despite the brand only launching in Australia in March 2015, italready has close to 2 million subscribers in 2018 (Pride, 2018).By July 2019, Netflix had more than 11.6 million subscribers inAustralia, up 18% from the year prior (Gruenwedel, 2019) Itsclosest direct competitor, Stan, had 2.6 million subscribes inearly 2019 (Knox, 2019).
Netflix will not say how many subscribers that it has in NewZealand, but a recent survey of 1,000 people, commissioned by theOffice of Film and Literature Classification and carried out by UMRResearch, found that 72% of respondents subscribed to Netflix. Ofthe same respondent sample, 77% said they watched television showsand movies using a paid online service (Kenny, 2019).
Keys to Netflix’s successful launch include offering free-trialsand access to stripped-back free versions, as well as continuedinvestment in original programming. It appears that streaming isthe new broadcasting, and that ‘on-demand’ spells the demise ofscheduled entertainment.
