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.
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. 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
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. ii. 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...