Netflix, Inc. is a subscription-based movie and television show rental service that offers media to it’s subscribers through on-demand internet streaming and DVD-by-mail service. Since its start in 1997, Netflix has taken the movie rental world by storm, becoming the world's largest online movie rental service. As of January 2013 Netflix had a total of 29.4 million streaming customers worldwide (Cohan). Netflix can attribute much of its success to its decisions to follow trends in consumer behavior, while its major competitors, namely blockbuster, sealed their fate by ignoring them. In the following paper I will tell you how Netflix was able to stay afloat while other movie rental companies failed, and gained success by following trends in consumer behavior.
Netflix was founded in 1997 by Marc Randolph and Reed Hastings. Hastings had the idea for the DVD-by-mail service when he was forced to pay $40 in late fees after returning an overdue video. The company began its operation in April of 1998, with its core business being DVD-by-mail rental service. Besides being one of the first companies to rent DVDs by mail, Netflix also planned to capitalize on the fact that major brick and mortar video stores, such as Blockbuster, did not carry a wide selection of DVD rentals at the time. Netflix experienced much success with DVD-by-mail rentals, hitting the one million subscribers mark in February of 2003, and shipping over 1,000,000 DVDs by mail per day by 2005. In 2007 Netflix introduced it’s Video on Demand Service. This service was extremely successful, eventually making Netflix the number one online video streaming service in the world. (Netflix, Inc. History)
Consumer Behavior Trends Towards Entertainment
There are several key trends in consumer behavior towards entertainment that Netflix was able to capitalize on. The first consumer behavior trend is convenience. The fast paced world that we live in has the average consumer seeking out anything that will save them the smallest amount of time or effort. Therefore, consumers expect entertainment fast, and at their fingertips. The next trend in consumer behavior is to limit spending. Due to the financial hardships our country has been experiencing in recent years consumers are looking to cut cost in whatever way possible. Before making a purchase decision, consumers are looking for a much higher cost/value ratio than they were in the past. The third consumer behavior trend Netflix was able to pick up on is the Smartphone/ tablet trend. According to Business Insider, “there are at least 165 million active Android and Apple iOS devices in the U.S. and that they are used by 78% of the adult population (Blodget).” Today’s consumers are hardwired to participate from anywhere at any time; they use their smartphones for everything they can and expect to be able to do almost anything on it. Having the ability to stream media straight to their smartphones was almost expected by consumers. How Netflix Followed Consumer Behavior Trends
Netflix was able to satisfy the consumers need for convenience at first by shipping unlimited DVDs through the mail for a monthly membership fee, instead of making consumers visit a brick and mortar location (Kang). Since then, Netflix has furthered adhered to the consumers need for convenience by introducing Video on Demand streaming in 2007. Through Video on Demand Netflix subscribers have their choice of thousand of new and old TV shows and movies to watch at just the click of the mouse. Customers can stream videos from netflix using a multitude of devices such as Xbox, PlayStation 3, Wii, Roku, their smartphone or tablet, or their computer, making Netflix easily accessible to almost all consumers. Netflix’s decision to incorporate Video on Demand into its service offerings was brought on by two factors- the decline in DVD sales starting in 2006, and the increase in the amount of consumers who were viewing video content...
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