Select one of the following mini-case studies and propose a strategic marketing plan designed to build the business as effectively as possible. Briefly analyze the business using the various tools we have discussed in class and in the text book, and then propose a strategic approach and marketing plan based on that analysis.
Option A: Netflix: Netflix has been one of the major success stories of recent years. Starting out as a DVD-by-Mail business (despite its forward-focused name), Netflix has radically changed consumer behavior not once but twice. First, Netflix convinced consumers to move from the video rental store model to video rental by mail. They built a very good business based on having consumers order DVDs on their site, and then get them via the US Mail, and return them the same way. Consumers embraced both the subscription-based model (unlimited access for a single monthly fee) and the on-line selection and ordering process.
As the technology improved, Netflix succeeded in migrating those consumers to streaming, dramatically reducing their costs and dramatically increasing consumption by members. Streaming members were no longer limited to 3 DVDs at a time, they could watch Netflix all day, every day. This, in turn changed Netflix cost structure from being driven by the costs of buying and shipping DVDs to being driven by the cost of having enough compelling content to convince new consumers to subscribe and to convince current and lapsed subscribers to renew. In addition to buying the rights to many movies, Netflix also started buying old TV programming in bulk, and became a very aggressive creator of new, exclusive programming – new programming that was compelling enough on its own to both attract and retain subscribers.
Netflix was able to do all of this in a relative competitive vacuum. Netflix was the dominant DVD-by-mail service, and quickly became the dominant streaming video company. Hulu was a competitor, but they were narrowly focused on old TV. YouTube was growing wildly, but it was free (supported by Advertising), and focused on very short-form programming – cat videos, old ads and the like. Netflix has been global in their aspirations, with businesses in a variety of countries all over the world
Netflix built a huge, successful company, but their world is changing and changing fast. Over the last few years, streaming has exploded and is quickly becoming the dominant video delivery system. And the Covid epidemic has taken this trend and greatly accelerated it. With most of us spending most of our time at home, Netflix has become the way many of us spend a significant amount of our time. Netflix has seen its business boom, and subscriptions are now at an all-time high and growing.
At the same time, competition has shifted from almost non-existent to very fierce. Hulu has bulked up their offerings, Amazon has become a significant force in streaming video, in an effort to attract more prime members, while You Tube has added long-form programming. And all of the major entertainment companies have entered the fray. Disney has introduced Disney +, which offers much of the Disney content on one site. They have also bought the balance of Hulu and have combined it with Fx programming resources and launched ESPN +, for sports addicts. To date, they have already attracted over 70MM subscribers in their first year. ATT, through its acquisition of Time Warner and others has launched HBO Max with a large inventory of historical and original programing. And CBS has introduced CBS All Access, And NBC Universal has introduced Peacock. And Apple has introduced Apple TV+. All these emerging streaming services are aiming squarely at Netflix. Not surprisingly, they have all been growing like crazy in the time of Covid.
This means that Netflix now competes in a totally different market. Netflix has succeeded by being great at convincing consumers and companies to try something different – convincing consumers to subscribe to and watch Netflix programming, convincing hardware suppliers to build the links from the Internet to viewing platform hardware, and convincing content producers to work with them and deliver unique, superior programming. But convincing people to try something new is very different from competing with giant, well-financed rivals for the attention of the same consumers, hardware manufacturers and content creators. Netflix is great at selling streaming as a concept, but are they good at building and selling Netflix the brand?
What should Netflix do in the post-Covid environment? Sometime soon life will begin to establish a new normal, most likely something in-between the old normal and the current Covid reality. Consumers will be watching less TV, and will probably be thinking about whether they still need all of the streaming services they signed up for. Do I really need Netflix and Amazon and Apple +? Can I live without Hulu?
By all measures, Netflix been and continues to be hugely successful. They are one of the major successes of the Internet age. But it is also clear that they will not continue to succeed by continuing to do the same things. The fact that they are great at convincing consumers to try streaming is totally different than the activity of convincing consumers to pick Netflix over Disney Plus or Apple TV Plus or any of the others. And no one knows how many streaming services a consumer is interested in having all at the same time. Similarly, it is one thing to convince a director like Martin Scorsese to try a streaming movie (see The Irishman), but it is something else to convince him to work with you rather than with Disney or ATT or Apple.
Think about the future of Netflix. Evaluate their current situation using the tools and approaches we have discussed in class and in the text book. Develop a going forward strategy for Netflix which will allow them to continue to grow in a rapidly changing environment. Discuss aspects of the current strategy to keep and leverage, and identify those aspects whifktch need to be changed.