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Team 3
Has this happened to you?
Your change of plan
Hi Sebastián,
As requested, we have changed your plan to the the 4 screens at a time plan for $21,000 (Colombian pesos) per month.
If you have any questions, call us at 01 800 755 0114 or click here to view or change your plan.
-The Netflix team
Current plans
Overview of the company
Analysis of the case
Class discussion
Our recommendations
Agenda
Overview of the company
19971998
19992002
20032007
20082010
2011
Founded Flat fee introduced
1 million subscribers
Streaming hits devices
Qwikster
1st distribution center
IPO Streaming introduced
iPhone App
Analysis of the case
Problem Mistakes Learning
Problem
+ =
+ =
Unlimited Unlimited
Unlimited Unlimited
Problem
+ =
+ =
Unlimited Unlimited
Unlimited Unlimited
60% increase in
price!
Mistakes and learning
1. Define Price Window
Price window
Mistake: one account per product made it more complicated to the customerLost of contract with content provider
Learning: Don’t make it harder for the customer to do business with youWait until there is value to add to increase price
Mistakes and learning
2. Set initial price
Price window
Mistake: misjudged customers (didn’t now what they value and how were they using the service
Learning: must understand what customers value about the service
Mistakes and learning
3. Communicate prices to the market (fair perception)
Mistake: did not communicate value and no social media strategy
Learning: when and how to communicate matters: time it right!Social media must be in place
Class discussion
What do you think were the positive and negative differential values of Netflix in 2011?
Before: $10/monthAfter: $16/month
$80/year and bundled with
prime
Free but with ads
Recommendation
Price window
Negative: the buying process got more complicated by having to create 2 accounts (rising costs for the customer)
Positive: Better content than competitors and position in the market
Understand what are the positive and negative differential values
Class discussion
How would you have set the price? Would you have used existing products, create new ones or bundled differently?
+ =
+ =
Unlimited
Unlimited
Unlimited
Unlimited
Recommendation
Create a new service with an added value
Trade-off to make it profitable
$16
$10
C1C2
$X
$10
C1C2
• Maintain the $10 but for a “limited” service
• Calculate the trade-off to set new price• Offer a cheaper option analyzing
possible “dilution”
Analyze possible down-sell or “dilution”
• Thought there was only one segment and everyone had the same preferences
C3
What they did What they should’ve done
Class discussion
How would you have communicated the value to the market?
Recommendation
Complete communication through different channels
How much the service is worth today
VS
How much they are charging
Focus on the value that differentiates them from
competitors
VS
Company’s problems
Communicate better through social media and
multiple channels
VS
Not communicating anything
What did Amazon do?
•Increase of annual price after 9 years•Increase due raising of fuel and transportation cost
Added value:
•Number of items increase from 1 to over 20 millions•Unlimited access to over 40 000 movies and episodes•Selection over 500,000 books to borrow
Raised the Amazon Prime price from $79 $99
Thank you