Marketing Goals and Objectives Entering and transforming the video rental industry was a large undertaking for the start-up company. The first marketing objective the company undertook was the process of building a brand. Netflix’s identity was crucial to future growth and success. Without a strong brand, competitors with deep pockets could have easily duplicated the company’s business model. Secondly, leveraging technology was critical to establishing the business and infrastructure growth. The consumer base was the final objective Netflix sought to achieve.
Retaining and growing subscribers were fundamental to revenue and marketing goals. Marketing Strategy To meet marketing goals and objectives the company implemented Michael Porter’s approach to strategy and relied heavily on strategic alliances. Porter’s notion of differentiation and focusing on specific markets were used to set Netflix apart from competitors and build a customer base. Employing strategic partnerships was the second critical factor to achieving marketing objectives. Netflix’s strategy utilized product, service, promotion, logistic, distribution, and pricing alliances to develop and grow business.
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Partnerships were possible and mutually beneficial through the new e-business landscape. The Internet platform facilitated segmentation, targeting, positioning and allowed the company to create a successful marketing mix. 21 Marketing Tactics The Netflix corporate strategy was born to meet the changing needs of movie renters in a dated industry. The company’s goal was to offer an alternative to segments that were frustrated by high late fees, accessibility inconveniences, inventory availability, and selection processes.
The target market included people who loved movies, used the Internet, possessed DVD players, and felt that the current rental system could be improved. This offered a wide range of demographics that could be targeted and was growing with technology advancements. The product offering was positioned to target buyers as delivering several benefits, which all served to develop Netflix’s brand. Product positioning focused on unlimited rentals, no late fees, free delivery and return, extensive inventory, efficient selection process, and customizable service.
These features were deployed in Netflix’s marketing mix to create a unique image in the minds of consumers. The company’s revolutionary approach to the movie rental business was built on a customized product, pricing strategy, distribution method, and promotional processes. These components constituted Netflix’s marketing mix, which gave the company an advantage over competitors through differentiation. Furthermore, the company leveraged its marketing strategy to build a brand that would not fall victim to threats of rival industry players. i. Product The Netflix service consisted of a four-step process.
First, customers use the company’s website to select the movies they wish to view. Second, Netflix sends the DVD’s to customers via “snail-mail,” but typically only taking 1-day. The subscriber then views at their convenience without late-fee worries. Finally, when the viewer chooses, the DVD is placed in a pre-paid envelope and dropped in the mail. In addition, the company offered a comprehensive inventory that contained independent films, and titles not found in traditional stores. Alliances with movie studios gave customers first access to new releases, which also served to enhance the Netflix product. i. Price Netflix’s subscription based revenue model transformed the movie rental industry pricing strategy. Removing the restrictions of due dates, late fees and shipping charges, in exchange with unlimited monthly rental subscription, gave consumers far more flexibility. The company also offers various a pricing models that are tailored to the number of movies the member chooses to receive. Netflix was able to reduce the “opportunity cost” of timely returns through creating a single online store and maximizing a larger inventory through regional distribution centers. iii.
Distribution Instead of various local chain stores, Netflix operated from a single virtual store that offered customers new rental features. The web services platform utilized customization and a user-friendly design to facilitate renting movies. “CineMatch,” a proprietary developed application, tailored the virtual store to each subscriber. This technology produced customized rental suggestions for customers while maximizing potential inventory. “CineMatch” incorporated a subscriber rating system of past rentals to generate more efficient and personalized future recommendations.
The web-based services also improved selection through the ability to easily browse Netflix’s large inventory catalog and add selections to a personalized “Queue,” which lists movies customers have scheduled to receive. Instead of being forced to navigate through the traditional genre and alphabetized catalog, Netflix offered an easier movie selection process. Besides the selection efficiencies, members have the ability to share ratings, reviews, and movie selections with each other through the “Community” feature. iv. Promotion
Netflix grew its customer base through advertisements, sales promotions, marketing alliances, direct marketing, and public relations. Advertising campaigns used not only traditional media platforms like television, but also innovative Internet forms of media. Affiliate networks directed customers to “www. netflix. com” by simply allowing customers to “click” a web link. Netflix paid the affiliates per “click” and could easily track the more profitable Internet partnerships. 26 This cost efficient method of advertising gave the company tremendous market information about consumers.
Popular web portals such as Yahoo, Google, and AOL gave users easy access and supplied information about the movie rental service through employing “banner ads. ” After interviewing Netflix’s Chief Marketing Officer, Kris Oser writes, “Ms. Kilgore says Netflix set out to have a ubiquitous Internet presence, blanketing the Web with banner ads. ” Sales promotions were key to the company’s ability to acquire new clientele. Netflix teamed up with electronic manufactures such as Apple, Toshiba, and HP to promote DVD players or DVD-ROM equipped computers. A company press elease stated, “Now every purchaser of an Apple Powerbook with a DVD-Video PC card can take advantage of the world’s largest collection of DVDs, all of which are available for rent or for sale at NetFlix. com. “28 This specific promotion gave consumers two free movie rentals for buying the Apple computer. The most highly effective sales promotion was through offering potential customers free trails. Allowing clientele to experience the movie rental service before agreeing to a year long subscription proved to be a very successful means of acquiring skeptical buyers.
Marketing alliances were established with retailers to leverage cross selling and gain publicity. Netflix established such partnerships with Amazon. com, Best Buy, and Circuit City. A press release describing the relationship with Amazon. com stated, “Netflix. com looks forward to introducing millions of Amazon. com customers to our compelling DVD rental service through exclusive special offers and promotions. ” A similar alliance was formed with Best Buy. Consumers were directed to Netflix for rental services and to Best Buy for DVD purchases.
Internet technology also provided new channels for direct and customized interaction with consumers. Customer Relationship Management (CRM) systems and databases enabled Netflix to use innovated marketing. Direct e-mail campaigns were customized to consumers and added to the consumers trust factor. CRM’s and databases allowed the company to manage information and create business intelligence. Netflix used the technology to retain its customer base as well as target new clientele more effectively.
In addition, web applications such as blogs offered the company direct interaction with buyer sentiment. Works Cited Nicholas Thompson, Netflix’s Patent May Reshape DVD-Rental Market, The New York Times, June 26, 2003, at Section C, pg 4. Blockbuster and Netflix settle online DVD rental patent suit, The Toronto Star, June 28, 2007, at B07. “Best Buy and Netflix Offer Co-Branded Online DVD Movie Rental Service; Cross- Channel, Joint-Marketing Alliance Makes Purchasing and Renting DVDs Easier than Ever. ” Business Wire. Septmber 2001. Wal-Mart Follows The Netflix Model. ” Newsbytes. June 15, 2003. ;www. netflix. com; Kris Oser; Netflix; Leslie Kilgore; Advertising Age; November 1, 2004. “NetFlix. com to Offer Free DVD Rentals With Purchase of Apple Powerbooks With DVD-Video PC Cards. ” Business Wire. July 9, 1998. “NetFlix. com Unveils a Trio of Promotions to Meet Expected Holiday Surge in Online Shopping. ” Business Wire. November 11, 1998. “Amazon. com and NetFlix. com Establish Promotional Relationship for the Sale and Rental of DVD Titles. ” Business Wire. December 1998.