Netflix's system collects a lot of information from customers about viewing habits, ratings, and preferences. When ordering DVDs for a new release, how can Netflix take advantages of the information in making the ordering decision? How might customer information be valuable to the film studios? What would you suggest to Netflix on using information to manage its customer relationship, as well as studio relationship?
With the information from customers about viewing habits, rating, and preferences, the CineMatch would automatically recommend movies for customers, from which customers could pick what they like. In this way, the demand for new releases would decreases to make Netflix to reduce the high demand for new movies. For film studios, customers’ feedback let them know what customers’ tastes are and how they think about the films. To manage its customer relationship, Netflix could use the information to give recommendation, and know what is needed now and avoid the situation of that movies are out of stock. For the studio relationship, it helps studios know the feedback, majority audiences and ratings based on the information. Also, it leads to better future films for studios according to taking the feedback
In a recent article about the Netflix business model, the following statement was made: “Boutique movie studios like IFC films, which released last year’s critical hit Y Tu Mama Tambien love Netflix because it provides a huge market for movies that can’t muster a widespread theatrical release, as well as for those that last only a few weeks on the big screen.”
How does Netflix help these studios in a way that Blockbuster cannot? What principle of nature is at work here? Is, after all, Netflix best suited to be a niche market player? Should it become one? How can it use the demand segments and Cinematch software to create a profitable niche market? Justify your answer.
Although traditional video stores rarely take the time and money to market smaller films, instead deriving about 80 percent of rental activity from about 200 of their on average 1000 titles, using CineMatch, Netflix can recommend titles based on a member’s rental history and ratings, regardless of how the film did at the box office. Thus, when members’ possible preferences are such movies, CineMatch could recommend them to customers automatically. The Pareto Principle is at work here. I think Netflix is best suited to be a niche market player and it should become one because it would not bring much more extra cost based on CineMatch but would lead to extra customers satisfaction and profits. From my point of view, Netfix could just use Cinematch to recommend movies to customers and would get into a profitable niche market by lowering the cost it related to with the new releases and targeting.
Blockbuster offers video game rentals. Based on the above analysis, should Netflix expand its product offering to game rental? Justify your answer. What are the product and supply chain features that make DVDs or games amenable to this business model? Are there any other product categories you might consider appropriate for a “Netflix- like” model based on these features?
I think it should expand its product offering to game rental because video game rentals could be processed in almost same processing system as DVD rentals, which is familiar to Netflix without extra technology cost. The product and supply chain features include:
low to moderate product for low inventory cost and to suit general public product should update frequently to keep customers
light and small for easy reassembling and ship
product that could be reduced
Based on these features, general or digital books could be appropriate for it.
An alternative to the Netflix warehouse mailing model are the growing number of Automatic Entertainment Machines (AEMs) movie rental machines, such as RedBox, in which customers can choose DVDs from a vending machine and return them to...
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