Group project for UC Berkeley Extension - Strategic Marketing class. Case from the Harvard Business Review, dated from 2007.

1. Case
Analysis
UC
Berkeley
Extension
–
Strategic
Marke7ng
Professor
Jim
Prost
• Byron
Pi/am
• Laura
DellaGuardia
• Lisandra
Maioli
• Ryan
Shi
• Svetlana
Fedorova
July
17th,
2013

2. Situation Audit

3. Company History
q Founded
in
1997
q Offered
DVD
home
delivery
via
snail
mail
q Very
li>le
compeAAon
for
DVD
rentals,
indirect
compeAtors
sAll
‘sold’
VHS
q Due
to
complaints
about
high
fees
and
slow
delivery,
in
1999
the
‘no
late
fees
policy
was
launched’
q Leap
of
faith
during
dotcom
boom,
subscripAon
model
put
in
place:
§ Unlimited
rentals,
§ Keep
4
DVDs
at
home
q 2001
announced
intenAon
to
create
a
VOD
business
3
-­‐
38

4. Current Situation
q $1
billion
business
and
almost
$64
million
in
cash
flow
q VOD,
pay-­‐per-­‐view,
and
streaming
are
gaining
in
popularity
q LimitaAons
in
computer
to
TV
connecAvity
and
in
access
to
content,
but
evolving
quickly
with
technology
q SubstanAal
Investments
in
Video-­‐on-­‐
Demand
(VOD):
2006,
$10
million,
2007
$40
million
(as
of
2007)
4
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38

5. Mission Statement
No
mission
statement,
but
they
have
an
official
‘vision’
of
Ne@lix’s
future:
q Becoming
the
best
global
entertainment
distribuAon
service
q Licensing
entertainment
content
around
the
world
q CreaAng
markets
that
are
accessible
to
film
makers
q Helping
content
creators
around
the
world
to
find
a
global
audience
q Company
values
to
guide
employees’
everyday
decisions
:
§ Judgment
§ ProducAvity
§ CreaAvity
§ Intelligence
§ Honesty
§ CommunicaAon
§ Selflessness
§ Reliability
§ Passion
5
-­‐
38

6. NETFLIX Evolution
6
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38

7. SWOT ANALYSIS

8. q SubscripAon
Model
q Unique
RecommendaAon
System
q Large
DVD
SelecAon
for
Online
Rental
q Fast
Delivery
Times
Strengths
8
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38

9. Weaknesses
q DifficulAes
providing
enough
copies
of
popular
new
releases
to
meet
demand
q SubscripAon
plan
does
not
appeal
to
less
frequent
movie
renters
q DVD’s
may
be
damaged
or
lost
in
transit
q Only
operaAng
in
the
DVD
segment
at
a
Ame
when
there
is
so
much
potenAal
in
VOD
9
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38

10. OPPORTUNITIES
q InternaAonal
Expansion
q VOD
Expansion
q Original
Content
q New
Product
Lines
such
as
video
games
or
educaAonal
materials
q Offer
alternaAve
SubscripAon
opAons
to
appeal
to
less
frequent
movie
renters
10
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38

11. THREATs
q
Blockbuster
q Other
VOD
CompeAtors
including:
§ Vongo
§ CinemaNow
§ MovieBeam
§ MovieLink
§ TradiAonal
cable/satellite
providers
q VOD
Content
Prices
and
Availability
§ Limited
VOD
Content
due
to
studios
concerned
about
piraAng
and
affecAng
DVD
sales
11
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38

12. Target Customers

13. Target customer
q Males
and
Females
ages
17-­‐60;
q $30,000
and
up;
q Different
racial/ethnic
groups;
q Psychographics:
§ Busy
people;
§ Movie
lovers
and
frequent
renters;
§ “All
you
can
eat”;
§ Early
adopters
(DVD
players).
13
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38

14. Competition

15. Competitors
(as
of
2007)
15
-­‐
38

16. Competitors
(current)
16
-­‐
38

17. Positioning

18. q VALUE
q CONVENIENCE
q SELECTION
POSITIONING
18
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38

19. Pricing

20. PricING
Pay
per
movie
($4)
+
shipping
and
handling
charge
($2)
with
late
fees
Prepaid
subscripLon
service
(4
movies
at
a
Ame
and
4
new
each
month)
Unlimited
rental
(3
movies
at
a
Ame,
unlimited
exchange)
20
-­‐
38

21. Promotion

22. Promotion
q Cross-­‐promoAonal
programs
with
the
manufacturers
and
sellers
of
DVD
players;
q Theater
Ackets;
q Commercial
and
radio
spots;
q Banners
and
popups;
q Nellix
affiliate
program
(free-­‐trial
promoAon);
q Word-­‐of-­‐the-­‐mouth.
22
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38

23. Problem/
Decision Statement

24. What
is
the
best
VOD
model
and
marke7ng
strategy
for
Ne?lix
all
while
keeping
the
company’s
posiGon
as
a
leader
in
the
home
video
market?
24
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38

25. Alternatives

26. Alternatives
Offer
raAngs
and
recommendaAons
system
to
cable
companies
1
Offer
online
video
streaming
at
no
extra
cost
to
exisAng
customers
2
Create
a
standalone
online
video
business
3
26
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38

27. Critical Issues

28. Critical Issues
q Technology
§ VOD
compeAAon
q Content
acquisiAon
&
piraAng
concerns
q User
acquisiAon
and
adopAon
q Financial
Investmen
q Employee’s
role
in
dealing
with
2
businesses
28
-­‐
38

29. Analysis

30.
RelaLve
Weights
OpLon
1
OpLon
2
OpLon
3
Technological
Improvements
0.3
4
5
5
Emerging
CompeAtors
0.2
2
5
4
Content
AcquisiAon
0.2
3
5
4
User
AdopAon
0.15
1
5
4
Financial
PosiAon
/
Cost
Basis
0.15
1
4
4
RelaAve
Weight
x
RaAng
1
2.5
4.85
4.3
Ne@lix
Summary
Assessment
AlternaAves
(RaAng)
Analysis
30
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38

31. RECOMMENDATIONS

32. RECOMMENDATIONS
q Technology
rapidly
improving
§ Nellix
needs
to
keep
up
with
the
Ames
§ ConnecAvity
will
be
facilitated
in
the
future
q Future
Access
to
Content
§ Easier
and
cheaper
(on
the
business
and
client
side)
q For
the
business
side
of
content
acquisiAon
§ Ensure
your
technology
is
up
to
par
so
as
to
reassure
content
providers
of
their
copyrighted
safety
Offer
Online
Video
Streaming
at
No
Extra
Cost
to
ExisLng
Customers
32
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38

33. RECOMMENDATIONS
q CompeAtors
also
doing
this,
don’t
want
to
be
lep
behind
q DVD’s
becoming
obsolete
q Use
strong
exisAng
customer
base
and
internet
savvy
forward-­‐thinkers
from
website
Offer
Online
Video
Streaming
at
No
Extra
Cost
to
ExisLng
Customers
33
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38

34. RECOMMENDATIONS
q Investment
in
technology
q Appeal
and
promote
to
exisAng
users
q Offer
one
month
free
trial
for
VOD
q Maintain
industry
leading
suggesAon
engine
How
We
Recommend
ImplemenLng
34
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38

35. RECOMMENDATIONS
Budget
Plan
q Invest
money
in
service
§ Online
service
&
mail-­‐order
speed
q Technological
improvements
§ Cloud-­‐based
opAons
q ConAnue
working
with
media
outlets
§ Improve
cost
per
watch
§ Increase
library
q RecommendaAon
engine
§ Steer
viewers
towards
cheaper
programs
35
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38

36. Future

37. Future strategy
q Improve
smartphone
app
q Technology
PenetraAon
§ Package
with
TV’s,
Game
Consoles,
DVR’s
q Original
Content
§ Movies
§ TV
Shows
q Increase
internaAonal
presence
q Different
pricing
policies
q Invent
iPad
37
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38

38. Questions?