Netflix marketing plan

Marketing Plan

100 Winchester Circle
Los Gatos
CA 95032
USA
Phone#:+1 (408) 540-3700
Website:www.netflix.com

Evelyne Ringia
Phone#: +1 205 223 0436
Email: eringia@kent.edu
Date: December 05,2013

Executive Summary
The 2014 Marketing plan for Netflix is designed to increase sales and brand awareness. Netflix offers DVD
rental by mail and instant steaming of movies and TV shows at affordance prices consistent with their
vision, “Our appeal and success are built on providing the most expansive selection of DVDs; an easy way
to choose movies; and fast, free delivery”.‖
Dominated by a rapid technological advancement which characterize the industry, the DVD rental portion
of business is slowly declining replaced by the instant Streaming refer to figure3 page 7. The changes in
the DVD portion of the business makes it even more important to have great marketing plan to
strengthen the brand name and profitability of the streaming portion of the business and this marketing
plan focuses on the Online streaming business for the same reason.

Netflix has customers are for Online streaming, DVD rentals and few who have both plans. There are
environmental factors affecting Netflix like economic, social cultural, technological, political and legal
factors. All these factors and many more either positively or adversely affect Netflix but the major five
factors are explained in detail in page 4 of this marketing plan. Apart from the external environmental
factors a SWOT analysis is done to further describe the company and the industry.
Netflix has two product lines each facing a different group of competitors. DVD rental by mail
competitors are Blockbuster and Red-box with market share of 16.9% and 45.5%
respectively while Netflix has 24.3%. Virtual rivals include Amazon, Hulu, Red-box Instant, X-finity StreamPix, I-Tunes, Love-Film, and cable TV companies. Their strengths and weaknesses are analyzed in detail in
page 8. Netflix still claim its top position due to strong Brand, high selection of content, affordability,
flexibility with internet speeds and various devices than can be used to stream from Netflix. Netflix had
over 40 million subscribers in the end of Q3, 2013 and according to their forecasts the subscriber number
may be 44.4 million by the end of the year which is a tremendous growth compare to all of its
competitors.
Netflix targets a mass market aiming at acquiring as many subscribers of all ages and preferences.
Segmentation is not done in this particular industry because the service offered is highly tailored to
individual needs using complex prediction algorithms and a recommender system, marketing efforts are
aimed at getting as many subscribers as possible. Another reason for not having specific segments is the
profitability aspect, since the price per person is low it will not be profitable going after a single segment.
Apart from that the customer base is extremely diverse to be able to achieve any meaningful
segmentation.
Netflix positions itself as a convenient, great choice of content and affordance entertainment option for
people who are interested in movies and TV shows. The perceptual maps have been prepared to
elaborate the positioning aspect refer to figure 4&5.
Marketing strategies have been designed with focus on 7Ps each with strategies to either improve or
promote what is already been offered by Netflix to raise brand awareness and increase Netflix market
share in Instant Streaming product line. Some other objectives of the plan is to increase media presence
and the use of promotional tools.

One year implementation plan has been prepared to show when the proposed activities will be done.
(Refer to table 4& figure 10) Evaluation methods and metrics have been discussed to enable the
marketing team know how successful all the plans have been and whether these marketing promotions
have attracted new subscribers or improve the brand awareness and value which are the main objectives
of the plan.
Conclusion is a summary of the plan and what the team hopes to achieve after implementation. The
message that Netflix plans to send out through all of its campaigns is “watch what you want, when you
want at affordable price”

Contents

1.1 Introduction ......................................................................................................1
1.1 Netflix background ..................................................................................................................... 1
1.3 Netflix Mission ........................................................................................................................... 2
1.4 Netflix Culture ............................................................................................................................ 2
1.5 Netflix management .................................................................................................................. 2
1.6 Netflix customers ....................................................................................................................... 2

2. Situation Analysis ................................................................................................3
2.1 Environmental factors................................................................................................................ 3
2.1.1 Economic factors........................................................................................................ 3
2.1.2 Social factors .............................................................................................................. 3
2.1.3 Technological factors ................................................................................................. 3
2.1.4 Political factors........................................................................................................... 4
2.1.5 Legal factors ............................................................................................................... 4
2.2 SWOT ......................................................................................................................................... 4
2.2.1 Strengths .................................................................................................................... 4
2.2.2 Weaknesses ............................................................................................................... 4
2.2.3 Opportunities ............................................................................................................. 5
2.2.4 Threats ....................................................................................................................... 5
2.3 Customer description................................................................................................................. 6
2.4 Competition ............................................................................................................................... 7
2.4.1 Comparisons with the 2 closest competitors ............................................................ 7
2.5 Segmentation ............................................................................................................................. 9
2.5.1 Why Not? ................................................................................................................... 9
2.6 Targeting .................................................................................................................................. 10
2.7 Positioning ............................................................................................................................... 10
2.5.4 Research needs ........................................................................................................ 12

3. Marketing Planning ...........................................................................................13
3.2 Strategic direction, targeting and positioning ......................................................................... 13
3.3 Marketing objectives ............................................................................................................... 13
3.3.1 Marketing................................................................................................................. 13
3.3.2 Media ....................................................................................................................... 13
3.3.3 Promotion & advertising .......................................................................................... 13
3.4 Marketing mix .......................................................................................................................... 14
3.4.1 Product offering strategies ...................................................................................... 14
3.4.2 Promotion, communication and influence .............................................................. 14
3.4.3 Price ......................................................................................................................... 18
3.4.4 People ...................................................................................................................... 18
3.4.5 Place & Process, ....................................................................................................... 18
3.4.6 Distribution .............................................................................................................. 18
3.4.7 Physical evidence ..................................................................................................... 18

4.

Implementation and Control.......................................................................19
4.1
Strategy implementation details ...................................................................................... 19
4.2 Time lines ................................................................................................................................. 21
4.3 Evaluation ................................................................................................................................ 22
4.3.1 Internet adverts ....................................................................................................... 22
4.3.2 Event sponsorships .................................................................................................. 22
4.3.3 TV advertisements ................................................................................................... 22
4.3.4 QR codes .................................................................................................................. 22
4.4 Closing summary ...................................................................................................................... 23

5.

References ..................................................................................................24

List of Figures
Figure 1 Rapid Subscriber growth table ..........................................................................................................1
Figure 2 Consumer spending and time spent on leisure and sports ..............................................................3
Figure 3Netflix subscriber trend 2012/2013 ...................................................................................................7
Figure 4 Perceptual Map (selection/personalization) ..................................................................................10
Figure 5 Perceptual map (convenience/economy) .......................................................................................11
Figure 6 Adult gadget ownership in America................................................................................................15
Figure 7 Sales forecast resulting from online banner Adverts .....................................................................16
Figure 8 Media comparisons study 2012 ......................................................................................................16
Figure 9 Example of QR codes ......................................................................................................................17
Figure 10 Implementation time line ............................................................................................................21
List of Tables
Table 1 Worldwide Broadband subscriptions .................................................................................................5
Table 2 Netflix Competitors analysis...............................................................................................................9
Table 3 Values used to construct the perceptual map .................................................................................12
Table 4 Implementation blue print ...............................................................................................................19

1.1 Introduction
1.1 Netflix background
Netflix, Inc. is an American provider of on demand Internet streaming media available to North and South
America, the Caribbean, United Kingdom, Ireland, Sweden, Denmark, Norway, Finland, the Netherlands,
etc. and flat rate DVD-by-mail in the United States, where mailed DVDs are sent via permit reply mail.
Online streaming service and DVD delivery service are the two main two main product lines for Netflix.
Netflix core product is a service .This marketing plan will focus on online streaming service.
1.2 Netflix history
Netflix was incorporated in Delaware in August 1997 and started its subscription-based digital
distribution service in 1999. It made its initial public offering on May 22, 2002 on NASDAQ under the
ticker NFLX. Netflix introduced instant streaming in 2007, by 2009 Netflix was offering a collection of
100,000 titles on DVD and had 12.3 million subscribers. In September 2010, they began international
operations by offering streaming service in Canada, and now offers streaming service in Latin America,
the United Kingdom, Ireland, and the Nordic countries of Finland, Denmark, Sweden, Norway and others.
Beginning the fourth quarter of 2011, Netflix had three operating segments: Domestic streaming,
International streaming and Domestic DVD. The Domestic and International streaming segments derive
revenues from monthly subscription services consisting solely of streaming content. The Domestic DVD
segment derives revenues from monthly subscription services consisting solely of DVD-by-mail. By end of
2012 the total revenue for Netflix reached at $3.6 billion a 12.6% compared to 2011 results and it is
estimated that Netflix will hit the revenue of $4.4 billion end of 2013. Netflix announced having over 40
million subscriber in its shareholder letter of October 21, 2013. 31.09 million being domestic streaming,
9.19 million and 7.15 being international streaming and DVD delivery subscriptions respectively. Netflix
has been growing both financially and with ever increasing the subscriber base from the start with a
brief stumble in second half of 2011 when it separated the DVD service to Quickster and increased prices
for the subscription by 60% of which it bounced back and regained its stock value and lost subscriptions.

Rapid subcriber Growth
45

Rapid subcriber
Growth, 41.49

40

Subscribers Millions

35
30
25
20
15
10
5
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Figure 1 Rapid Subscriber growth table
Source Netflix

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1.3 Netflix Mission
Netflix mission states “our appeal and success are built on providing the most expansive selection of
DVDs; an easy way to choose movies; and fast, free delivery” (Topix.com)

1.4 Netflix Culture
Netflix culture is that of freedom and responsibility as elaborated in CEO Reed Hastings’ presentation on
Netflix’ “Freedom and Responsibility” culture. They have nine specific values, which includes Judgment,
Communication, Impact, Curiosity, Innovation, Courage, Passion, Honesty, and Selflessness. Employees
help each other to be great.
1.5 Netflix management
Founder and CEO Reed Hastings has created a unique management style that is most notably similar to
that of George Clooney’s Danny Ocean role; that is, “a leader who hires the best, and gets out of the
way” (Wells). Netflix thus has a laid-back structure that allows employees to make their own decisions,
but greatly encourages that smart decisions are made. Some of the perks include allowing employees to
structure their own compensation packages, no clothing policies, and having a—hypothetical—unlimited
amount of vacation days. Hastings understood that valuable employees are happy employees. However
much of the importance of this style of management is in its beginning: hiring top-notch colleagues. And
finally, regarding expensing, entertainment, gifts and travel, simply “act in Netflix’s best interest”
(Siegler). By creating an ideal workspace to provide a highly productive environment, excellence in work
quality is expected, and crucial. In the case that employees do not live up to this high standard, Netflix
provides large severance packages for quick termination (Kaltschnee, 2007). Some of Netflix Divisions are
content division, streaming and partnership division, product division, Finance division, Counsel Division,
Talent division, marketing and communication divisions. Names of division heads are in Table 5.
1.6 Netflix customers
Netflix customers are divided into two sections: traditional DVD delivery and online streaming customers.
Traditional consumers are particular and selective; they have a specific title or genre they are looking for,
(often making up niche market consumers), and they desire a rich viewing experience, which currently
makes them more likely to consume hardcopy media. They are willing to wait a few days to acquire their
title, as long as it meets their expectations. These also have a low propensity to substitute, because they
are committed to video entertainment, and possibly a higher propensity to purchase video, more likely to
be older, and because they view and access rentals through more traditional channels, they invest more
time and energy in their choices. This customers opt for Netflix mail-delivery services as well as more
differentiated online subscription plans.
Online streaming consumers are not as selective as their counterparts. They watch videos when they can.
They value easy and immediate access, portability and transferability of the product, and are more than
willing to watch video on their computers or other devices like I pads, computer tablets and even smart
phones. This consumer has a higher propensity to substitute than the DVD rental customer. They are also
typically younger, and more Internet-savvy. These customers often opt for affordable monthly online
subscription plans. To access Netflix’s services customers incur monetary costs for rental fees and
subscription fees. Apart from the cost that is directly related to Netflix services, customers have to purchase
devices in which they can use to access Netflix services like computers, television sets, modems and
Internet packages.
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2. Situation Analysis
Netflix core products are service for moves online streaming and DVD rentals. This marketing plan is going
to focus on the online streaming product line.
2.1 Environmental factors
Netflix has environmental factors affecting it like economic, social cultural, technological, political and legal
factors. All these factors and many more either positively or adversely affect Netflix but the major five
factors explained below have the greatest impact.
2.1.1 Economic factors
This industry is affected by changes in consumer spending, which can be influenced by changes in
the rate of employment growth, interest rates and tax rates. When spending rises, consumers will be
more likely to buy subscriptions. Consumer spending is expected to increase slowly during 2013 and
presents a potential opportunity for the industry.
2.1.2 Social factors
People with increased leisure time availability are more likely to watch movies and TV shows and video
games from companies in this industry. As unemployment gradually falls during the next five years,
people will be more likely to opt for less time-consuming rental options like streaming. Time spent on
leisure and sports is expected to decrease slowly during 2013.

Figure 2 Consumer spending and time spent on leisure and sports
2.1.3 Technological factors
As the internet served more functions and became more popular, video streaming services, such as
Netflix, rose in popularity. Consumers will continue to look to the internet for services previously
conducted with physical media. Therefore, the increased adoption of the internet will be an opportunity
to the industry. The percentage of services online is expected to increase in 2013. Increased use of
smartphones, tablets and computers has also worked in favor of this online video streaming industry.

3

2.1.4 Political factors
Network neutrality is the principle that Internet service providers and governments should treat all data
on the Internet equally, not discriminating or charging differentially by user, content, site, platform,
application, type of attached equipment, and modes of communication. The possibility of regulations
designed to mandate the neutrality of the Internet has been subject to fierce debate, especially in the
United States. If the network neutrality bill will be rejected then Netflix and the like companies will face a
major threat because their existence depends on the internet and if the cost of using Netflix will become
too high as a result of lack of network neutrality then Netflix will be adversely affected. Apart from
network neutrality there many other laws which are not in favor of the industry like the Video Privacy
Protection Act (VPPA) which Netflix had to actively lobby for its amendment to allow them have the
social media sharing features. Other political factors include FCC restrictions on vertical integration and
content monopolies, funding problems for US postal service, increased state taxation for online
businesses and congress’s historical receptiveness for Hollywood lobbying. Netflix has its political action
committee.
2.1.5 Legal factors
Due to extensive use of licenses for contents and contracts with content providers also customer privacy
issues there is a potential for a lot of legal actions against companies in this industry.
2.2 SWOT
2.2.1 Strengths
• Netflix has the First Mover Advantage into the movies and TV shows instant streaming which gives
its brand higher recognition compare to other competitors.
• Netflix brand has Strong Brand Recognition and winning Emmy awards with its House of cards
show, Emmys best the Personalized Recommendation Engines for Video Discovery award and
many others making it the strongest brand in the industry.
• With the personalized recommendation system and a large selection of content Netflix has
managed to get high Customer Satisfaction
• Netflix has the largest Streaming library compare to other competitors like amazon and Hulu.
• Netflix has the ability to adopt to various platforms like TVs, game consoles, smart
phones, tables and computers as well as flexibility to different internet speeds which other
competitors like Amazon do not have
• Production of original content has increased Netflix brand equity, customer loyalty and revenues
for example House of cards and orange is the new black.
• A huge database of customer data and a good system for analyzing the data enabling them to
have more accurate predictions and recommender systems.
2.2.2 Weaknesses
• Netflix has a big window of time from when the movie is launched to when it is adopted by Netflix
library. Customers have to wait for 28 days to have access of new content releases
unlike Hulu who can provide them earlier
• Contractual restrictions on streaming content. Netflix is bound by the contracts with the content
providers restricting its flexibility on expansion of the market and the content.
• Expired contracts with Sony & Stars, resulting in lost videos about 1800 titles setting back the
efforts to expand the video library. Also losing a video provider EPIX to Amazon who is a competitor
was a setback for Netflix.
• Damaged reputation after attempting to increase fees and separate DVD & streaming video
4

•

memberships.
Financing large aggressive international expansion may affect its liquidity (Reed Hastings in Q3
interview with BTIG and JP Morgan)

2.2.3 Opportunities
• Product Line Expansion of original shows may have a favorable effect to Netflix subscriber base,
profits and brand equity
• More expansion in International market. According to table below there is a rapid growth of the
number of broadband subscription every year and this is a tremendous opportunity for Netflix to
introduce video streaming in those markets.
Worldwide broadband subscriptions
2007a

2010a

2013a,b

World population

6.6 billion

6.9 billion

7.1 billion

Fixed broadband

5.2%

7.6%

9.8%

Developing world

2.3%

4.2%

6.1%

Developed world

18.0%

23.6%

27.2%

Mobile broadband

4.0%

11.3%

29.5%

Developing world

0.8%

4.4%

19.8%

Developed world

18.5%

42.9%

74.8%

Per 100 inhabitants. Estimate.
Source: International Telecommunications Union.

Table 1 Worldwide Broadband subscriptions
•

Other potential areas in Internet streaming services where Netflix has opportunity for growth are
the live sports, and online games that Netflix do not currently provide.

2.2.4 Threats
• Exclusivity agreements with content providers may effect availability of movies for streaming
• More competition from big name companies (Apple, Microsoft, Amazon) and global competition
from companies operating locally overseas. The Competitors offering streaming video are also
bidding for exclusive rights to content example: Amazon, HBO, TV networks which makes gives the
content providers higher negotiation power which results to Higher licensing costs. The former
Netflix content provider, EPIX currently provides Disney videos to Amazon; Disney recently acquired
Lucas film & entire Star Wars franchise that makes Amazon a stronger competitor than before.
• Limits on Bandwidth usage from internet providers if the Congress will not pass regulations to
honor network neutrality. This will make Netflix services more expensive that the customers are
willing to pay and therefore affect Netflix business.
• Price adjustments to cover new expenses can result to consumer outrage like it happened in 2011
• Competitor partnerships. There is a threat of Netflix competitors forming partnerships which will
5

•
•

•
•

make competition more hard to overcome for example (ex: Amazon & Epix)
Movie & TV industry less willing to make exclusive deals with online video services.
Netflix receive web services from Amazon who is also a competitor which draws attention to
conflicts of interest issues and Netflix faces a risk of Internet disruptions. However Netflix have
developed a software tool called Isthmus, which manages Elastic Load Balancing services to curb
Amazon services outages early this year.
Motion Pictures Association of America (Industry regulator) poses a risk if changes will
be made affecting Netflix adversely.
Increasing in cost for content licenses and increase in cyber-crimes are some of the other
stumbling blocks for Netflix

2.3 Customer description
Netflix serve a business to customer market. The potential market includes people of ages from 5 (kids), 18
to approximately 59 years and beyond and they are located in the US and other 41 countries where Netflix
currently operates. They have two major product categories which are DVD by mail subscription and online
streaming subscriptions. The focus is online streaming.
Netflix customers are highly diverse in their watching preferences, ages, income, technological
advancement and in many other aspects with the only common factor uniting them being access to
internet and interest in video content. Most are accustomed to free/ad based content and the black
market. With these options available, prices are driven down as consumers have high bargaining power
To be able to understand and serve this kind of extremely diverse customer base Netflix collect and retain
the following information about their subscribers in order to understand individual preferences and be able
to serve every one of their customers individually. The information is collected from the website by keeping
track of subscribers interaction with them; Email addresses, names, age, credit card information and other
basic information, title selections, reviews, ratings, payment history, correspondence, internet service
providers, Internet protocol addresses, devices and software data (such as type, configuration and unique
identifiers), instant-watching hours/movies, TV shows and related activities.
They also collect information from other sources; including offline data and subscribers’ browsing behavior
on other sites and interactions with Netflix’s advertising, movie & TV show ratings, consumption habits,
commentary and reviews.
Subscribers may Choose to connect one or more social networks (such as Facebook) with them Netflix
account. If they do, Netflix will import, use, and retain information from their social networking account(s)
such as names and profile pictures as well as their e-mail address, list of friends, subscriber’s Likes and
Interests as well as information they make public on social networks
From analysis of collected information it is clear that Netflix online streaming customer’s primary needs are
affordable, convenient, fast and individualized entertainment. Netflix has kept on delivering and
responding to these needs which results to a rapid growth of its customer subscription base. Figure 3 shows
customer subscription trend for 2012&2013

6

Netflix subcribers trend in millions
35

25

23.41

23.94

25.1

10.09

9.24

8.61

3.07

3.62

4.31

Q1/'12

Q2/'12

Q3/'12

33.1

29.17

29.81

31.09

8.22
6.12

7.98
7.14

9.19
7.15

10.5

7.75
7.51

Q4/'12

Q1/'13

Q2/'13

Q3/'13

Q4/'13
(forecast)

30
27.15

20
15
10
5
0

US streaming

DVD rental

International streaming

Figure 3Netflix subscriber trend 2012/2013
2.4 Competition
Netflix’s two product lines video streaming and the DVD by mail, each face a different group of
competitors. DVD by mail competitors are Blockbuster and Red-box with market share of 16.9% and
45.5% respectively while Netflix has 24.3%. Virtual rivals include Amazon, Hulu, Red-box Instant, X-finity
Stream-Pix, I-Tunes, Love-Film, and cable TV companies. According to NPD Group, in the first quarter of
2013, 67% of U.S. streaming customers subscribed only to Netflix a significant drop from the 76% posted
in the first quarter of 2012. Hulu Plus scored 10% of total subscribers among those who used only one
service, while Prime made up just 2% of such single-source users. In the same NPD Group study, 10% of
viewers used Netflix and Prime both for streaming movies and television shows. 8% used Netflix and Hulu
Plus. Other indirect competitors are providers of home entertainment like cable television, satellite
services, other unofficial websites with movies, you tube etc.
2.4.1 Comparisons with the 2 closest competitors
Price per month

Netflix
30 day free trial
membership
3 types of plans, unlimited
DVD only $7.99, unlimited
streaming only $7.99 and
2 DvD at a time $11.99

Content selection

Most extensive selection
with thousands of tittles.
Has licensing deals with
CBS, ABC, Fox, NBC, Stars,
BBC, Starts, BBC, Sony and
DreamWorks contributing

Amazon
30 day trial period

Hulu
1 week trial membership

$6.67 with two day free
shipping for purchases
made in Amazon

$7.99 and there is a free
Version with limited
selection and fewer
episodes of shows.

Selection not as big as
Netflix and shows movies
released within the past
year similar to Netflix.

Own licensing deals to
provide content from Fox,
NBC, Disney, MTV and a
bevy of cable channels.
Updates library more
frequently than its

7

to the library.

competitors.
Customers get latest
episodes faster and it’s a
great alternative to cable.

Devices

Speed

Features

Is compatible with most
devices like PC,x box 360,
PS3, Nintendo, Wii, smart
TV, Roku, Android, Blue
ray player, Nook, tablets
and iOS devices
Netflix is more adaptive of
the internet speeds and
can work from slow
internet and also fast
connection as well
Adverts free platform

Not compatible with
gaming devices.

Lacks compatibility with
Smart TVs and blue ray
player

Moderately adaptive of
the internet speeds

Moderately adaptive of
internet speeds

Adverts free watching
experience

Limited commercials in
movies

Ability to rate movies and
receive personalized
recommendation

Plays newer movies and
shows compare to
competitors

Ability to share with
friends in social media

Market shares
Strengths

Weaknesses

Personalized profiles to
enable parental controls
for children and the whole
family can share the
subscription.
Account for 89% of TV
streams
Largest library selection,
strong brand, good and
accurate recommender
system, biggest number of
subscribers, original
production of shows,
offers Netflix for kids,
social media integration

The selection is not as
current as Hulu

streams
Have a strong brand but
associate with its other
businesses apart from
streaming , cheapest for
people who prefer whole
year commitments, high
financial capability, unlike
Netflix video streaming is
only a small part of the
business portfolio for
Amazon
Subscriber is forced to
commit the whole year.
Some selected tittles are
paid per stream basis the

streams
Latest movie selection, A
good substitute for cable,

Commercials appear while
subscribers watch, the
selection is limited unlike
Netflix,

8

subscription is not
unlimited like Netflix and
Hulu, prime subscribers
use the free shipping
service more than they use
the video streaming (A
Bernstein Research survey
in July found that 29% of
Prime subs don’t use the
video option.)

Table 2 Netflix Competitors analysis
Netflix has begun investing in original programming, a tactic that stole the focus from content licensing in
the subscription VOD category this year. Netflix successfully introduced multiple series, including “House
of Cards” and “Orange Is the New Black,” while Amazon ordered a string of series in the comedy and kids
genres.
But all that activity has obscured the fact that competition over licensing has intensified during the same
period, as both Amazon and Netflix seem to have moved away from an earlier emphasis on building the
most comprehensive libraries to focus on snaring exclusive contracts that help them stand out in the
marketplace
2.5 Segmentation
Netflix market is very dynamic and constantly changing in response to changes in technology and
consumer behavior. Netflix had 36.7 million subscribers as of June 2013 with age range from 18 years
of age to 59. They spend 2bilion hours watching streamed video on hi-speed internet.
There are multiple ways of segmenting the market in the video streaming industry but due to highly
diverse nature of the customers who varies in age, income, geographic areas, education levels, and
watching preferences vary with time, mood, beliefs, company etc. none of the segmentation will be
totally Homogeneous within, Heterogeneous across, Measurable, Substantial, Accessible, Differentiable,
Actionable and most of all Profitable.
2.5.1 Why Not?
First a person may have extremely different preferences influenced by a number of reasons like
company, mood, time, curiosity, new movies premier, awards like Emmy awards tends to influence
peoples preference at particular times, what a customer sees as trendy on social media at the same time
these preferences are not pinned to a particular kind of people so it will be impractical to obtain a
homogeneous group within, heterogeneous across or even measurable.
Second people change these preferences in split of seconds and that will make it very hard to make the
segmentation accessible, differentiable, actionable and substantial enough to make profits because
Netflix depends on the large number of subscribers to break even, much more to make profits and
focusing on a particular segment will not make this achievable.

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2.6 Targeting
Netflix target a mass market of consumer-paid streaming subscription of TV shows and movies aiming to
have the biggest market share with the largest number of subscribers it can get regardless of age,
backgrounds, beliefs, preferences etc. Although Netflix target to recruit mass market it focuses on
individual subscribers needs in order to retain them for a long time. The higher the number of paying
subscribers the more Netflix can achieve return on heavy investment in content and technology because
only low prices can be charged due to the nature of the industry and service.
2.7 Positioning
Customer’s top priority is convenience, affordability, speed, personalization of the video streaming and
high selection of titles. Netflix aim at being the top and only choice for its customers by providing a more
personalized, fast, convenient, high selection and yet affordable online streaming service than all of the
competitors.

Figure 4 Perceptual Map (selection/personalization)

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Figure 5 Perceptual map (convenience/economy)
Perceptual Maps key
N=Netflix, H= Hulu, R=Red-box Instant, A=Amazon, C=Comcast (Xfinity Streampix)

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Values used to construct the perceptual maps
Company

Selection

Personalization(a
good recommender
system)

Convenience (speed,
number of devices,
how adaptive to
internet speed)

Affordability
per month

1

Netflix

Over 60000

Highly convenient

$7.99

2

Hulu

Between
30000&40000

Not very flexible to
internet speed

$7.99

3

Redbox

About 4600

Excellent
recommender
system it uses both
internal data and
external data from
social networks
Great it uses
internal generated
data
Redbox instant do
not have a reliable
recommender
system compare to
Netflix and Hulu

Don’t play on as
many devices as
Netflix

$6.00

4

Amazon

About 40000

Comcast

1 Fifth of Netflix
collection

Do not play in apple
TV and gaming
devices
Ties the service to
the Comcast cable
so not very
convenient

$6.67

5

Lacks a reliable
recommender
system.
Do not have any
recommender
system

$4.99

Table 3 Values used to construct the perceptual map
2.5.4 Research needs
Additional research results needed to fully characterize the market will be the supplier information because
there are many Netflix content suppliers and the information Netflix content license purchases.

12

3. Marketing Planning
3.1 Market size and growth potential
Netflix market has had a consistent growth trend over the years. It started operations in 1999 with
101000 subscribers to more than 40.28 million streaming subscribers ending Q3 this year and 7.51 million
physical DVD mail subscribers as of June 2013 (Yahoo: By numbers: Netflix subscribers) According to US
census bureau as of June 30 2012 North America had a total of 273million people with internet access
who can be Netflix’s potential subscribers. Netflix target the mass market both in United States and
internationally and there is a promising future for growth for Netflix.
3.2 Strategic direction, targeting and positioning
Netflix streaming service is positioned as the personalized low price instant movies and TV shows
entertainment with the biggest collection targeting the mass market. Comparing to other competitors
Netflix offers the watching experience without disruptions from other adverts compare to Hulu, It has the
largest selection compare to all close competitors and customers can watch from a bigger variety of devices
and internet connection speeds which puts it on top list when it comes to convenience.
Every customer is served individually using a sophisticated analysis of big data and accurate recommender
systems so that the service can be as personalized as possible while aiming at attracting as many
subscribers as possible from all walks of life.
3.3 Marketing objectives
3.3.1 Marketing
1. Increase the brand awareness and goodwill especially in new international markets.
2. Highlight the competitive price and variety of content and the social media integration that Netflix
offers compared to their competition by including these details in every message.
3. Increase number of subscription from 40 million people to 70 million
4. Improving the Instant streaming service in various aspects (discussed under product offering)
3.3.2 Media
5. Increase our share of voice by 40 percent by the end of the campaigns first year.
6. Increase the frequency rate of all current advertising messages by 50 percent and extend our reach by
10 percent.
3.3.3 Promotion & advertising
7. Reach 95 percent of the target audience at least twice with messages detailing Netflix‘s instant
streaming.
8. Use mobile ads to increase awareness of Netflix‘s instant streaming service on particular mobile
devices.

13

3.4 Marketing mix
3.4.1 Product offering strategies
Netflix could have more recent movies in their collection in order to attract customers who only want to
watch new movies online and could also get move recent TV shows for the customers who want current TV
shows. Apart from that Netflix do not currently have online games and does not currently carry in their
libraries.
Sports instant streaming which have a great potential market since none of the close competitors provide
this kind of service, between 21.6% and 22.4% of all Fans in Major North American Sports Leagues spend
between 1 and 4 hours a week on internet search for the sports news and clips (sports business
daily.com)
Netflix has to keep expanding the collection it already has by bidding for more popular TV titles. Increase
exclusive content from in house production. Collaborate with well-known actors to create more original
series and release the seasons in less than 12 months that Netflix currently does.
Netflix can do more to accommodate different internet speeds so that these customers can watch from
anywhere they have an internet connection and can work with internet service providers so that customers
may have special internet packages enable them watch their movies more comfortably with affordable
internet service.
Netflix should make it possible to pay using other medium for payments apart from credit cards like mobile
money, cheques, western union any many other forms of payment to allow customers from countries
where credit cards are not popular have access to Netflix too.
3.4.2 Promotion, communication and influence
Netflix offers a free month trial for all of the new subscribers aiming at showing the high value of service
before the subscriber commit to Netflix. The objective is to attract more loyal subscribers because people
join Netflix with confidence of what they are purchasing which increase trust and loyalty among
subscribers. This promotion sends a message that Netflix is confidence of the value it has to offer and does
not hesitate to let people have the Netflix experience before they decide to buy subscriptions.

14

Communication
The main vehicles that will be used are the internet, Television commercials and Billboards.
a. Advertising through mobile phones & tablets messages
As of May 2013, 91% of American adults had a cell phone, 56% a smartphone, and 34% had a tablet
computer. As of January 2013, 26% of American adults owned an e-book reader. The figure below shows

gadget ownerships in United States. Ads will include notifications that the current free trial offer will run
through the campaigns first year and all other Netflix new features.
Adult gardet ownership overtime
% of American adults 18+ who own each device

100%
90%
80%

85%

82%

64%

62%

65%

52%
56%

47%

50%
37%

40%
30%

45%
41%

61%

42% 43%

42%

34%
19% 19%

20%

2%

3% 5%
4%

8%

Desktop
computer
Laptop computer

58%
55%

25%

10%
0%

Cell phone
57% 57%

60%

20%

83% 84%

73% 75%

70% 68%

30%

91%

88% 88% 89%
87%
85% 85% 87%

10%
9%

18%

29% 31%

mp3 player
34%

26%

Game console
e-Book reader

24%

18%

Time

Figure 6 Adult gadget ownership in America
Source: Pew internet surveys 2006-2013
b. Social media and internet advertising
Social media is extremely important for Netflix because the service is located on the internet the same
place where the social media is. Netflix provides opportunities for its customers to share and interact
with their friends in various social media while they are on Netflix account. Netflix also collect the social
media information to better serve the customers and know how the customers perceive them.
90.1 percent of the U.S. actively use the internet. That is a huge coverage rate. The biggest advantage to
internet advertising for Netflix is one click on an ad and the potential consumer is taken right to the
product. Internet users have come to accept and even expect banner ads. The figure below shows
forecasts and estimated of sales as outcomes of banner and search Ads in US.

15

Fan chart forecast of U.S. search and banner ad sales, 2007-17

Figure 7 Sales forecast resulting from online banner Adverts
Source: Mintel/IAB/PwC
c. TV commercials
Based on the America‘s commercial broadcast television industry‘s (referred to as TVB) media
comparisons study 2012, Television reached more people than the internet (88.3% > 73.1%). However,
considering that the location of the product is on the internet, we want to focus a good part of the
advertising to internet ads as well. Television will have more money budgeted to it, due to the production
costs
88.3

Television
73.1

Internet
58.8

Radio
36.1

Newspaper

27.8

Mobile Phone

24.8

Magazines
Tablet

11.7

% Reached Yesterday
Persons 18+

Figure 8 Media comparisons study 2012
Source: TVB media comparisons study 2012

16

d. Additional promotional tools.
QR codes
QR codes are becoming popular as smart phones become more standard. Netflix may agree with a candy
company to put Netflix QR codes on their movie size candy. They can also arrange for the QR codes to be
put on pop-con packages that are used in movie theatres even those sold in stores. The QR codes will
lead customers to Netflix.com and YouTube clips of commercials. Netflix can also run a follow up
campaign for Netflix users to submit their own video of them using or advertising the Netflix. If their
video passes YouTube regulations, those videos can be put on YouTube with a QR code attached the
customers may be rewarded with discounted subscriptions for a month or two. This creates consumer
excitement and involvement.

Example of QR codes. These are machine-readable codes consisting
of an array of black and white squares, typically used for storing
URLs or other information for reading by the camera on a
smartphone

Figure 9 Example of QR codes
Sponsor Movie related events
Some of the major Film related events are Sundance Film festivals in US which is held in late January
every year in different big cities in US. International Film festivals in Rotterdam Rotterdam Film Festival is
one of the most important film festivals in the world focusing predominantly on world and international
premieres with a large art-house and experimental focus. Other film festivals are Slamdance, Raindance,
Rendez Vous in France, Gotterburg international for Scandinavia.
Other events that Netflix can sponsor are movies and entertainment awards like Emmys, BET etc.
Netflix will gain more awareness in the market and get to advertise to the customers who have actual
interest in movies.
Use of Netflix data for Advertising and service improvement
Netflix use subscribers e-mail address to send newsletters, messages about new Netflix features, Netflix
special offers, promotional announcements, consumer surveys and other correspondence and marketing
concerning their services. The information about online activity, watching preferences, internet speed
and user devices can be used to determine subscribers general geographic location for the provision of
localized content, enforcing Netflix terms (such as determining eligibility for free trials, age restrictions),
providing recommendations on movies & TV shows, personalizing services and marketing to better
reflect particular interests, helping Netflix quickly and efficiently respond to inquiries and requests and
otherwise analyzing, enhancing, administering or promoting service offering. Netflix also uses the
information to provide analysis of their users in the aggregate or in anonymous form to prospective
partners, advertisers and other third parties. Information from Social Networking sites is
17

used to better improve the Netflix personalized experience for the subscribers and their friends if they
agree to share such information.
The consistent message Netflix sends with all communication is “watch what you want when you want at
affordable price”
3.4.3 Price
Netflix pricing objective is gaining the maximum market share for Netflix which translates to customer
attraction and retention. Their pricing is also set to match the competitors where they charge
$7.99/month for unlimited streaming, the same price as Hulu while Amazon prime $6.50/month but the
customer incurs extra cost for some individual titles. There have not been a lot of price changes with the
online streaming industry and all the major players keeps the price at the similar margin which means if
any one of the competitors will change the price Netflix is likely to react if not changing the price will
result to lost subscriptions. Netflix changed its prices and separated the two products lines of streaming
and DVD rental by 60% increase in price for customers who wanted both services. Netflix has ever since
maintained its price at the industry average. Netflix does not practice price differentiation because it
targets the mass market
3.4.4 People
Netflix should have highly qualified and fast customer service people to take care of the customers because
that is the only point of contact with the customers. Netflix respond within 5 minutes of a call to all
customers and this could be improved further to 3 minutes.
3.4.5 Place & Process,
Process in which customers go through to subscribe is made simple and self-service. It takes a few minutes
to create the Netflix account and to start watching instantly and it all reflects the convenience aspect of the
service.
3.4.6 Distribution
Netflix accommodate different internet speeds so that the customers can watch from anywhere they have
an internet connection and in order for them to do this Netflix is strategically establishing relationships
with ISPs because there is a threat that the government may not honor the internet neutrality law which
will allow ISP to charge customers differently with different content which will hurt Netflix business.
Netflix can also partner with companies to develop Netflix programs specific to their platforms that will
come pre-installed on all their devices, further partnership can be done with cable and gaming companies
to develop instant streaming option for video games. Content providers also should be approached for
exclusive rights to content before the competitors do the same.
3.4.7 Physical evidence
Online movies and TV shows streaming primary physical evidence is the Netflix website where people log in
to watch their movies and Netflix apps which enable people who use phones to access Netflix get that
experience, the website should be improved constantly and more user friendly so that subscribers can
search for content more easier and prevent any possible downtime.

18

4. Implementation and Control
4.1 Strategy implementation details
Table 4 Implementation blue print
marketing
Marketing
Content
mix
(Kelly Bennet) (Sarandos Ted)

Product
offering

Reducing the
window from the
time movies are
released to the
time they are
adopted by
Netflix Library
from 1 year to six
month.
Expanding the
video library to
70000 tittles

Promotion

One month
free trial.

Talent
(Tawni
Cranz)

Communica
tion
(Jonathan
Friedland)

Product
(Neil Hunt)

Introducing
video game
streaming
and sports
instants
streaming,

Streaming
and
Partnerships
(Greg Peters)
Improve the
movie
streaming
speed.
QR codes
Sponsor
Movie
related
events

Finance
( David
Wells)

Objective
fulfilled

Introducing
new
payment
methods
especially
for
internationa
l market.

1,3,4,

1,3,5,6,7,8

Advertising
through
mobile
phones &
tablets
messages.
Social media
19

and internet
advertising.
TV
commercials

People

Price

Train
customer
service to
achieve a 3
minute
return call
per
customer.

4

Communica
te the price
stability and
the one
month free

Have good
price plan
which do
not change
suddenly

Distribution

Place

Strategic
partnership
with ISP to
ensure
smooth
distribution
Website
improvemen
ts

2

3,4

4

20

4.2 Time lines

Implementation time table year 2014
Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Get recent movies and expand library, be more adaptive of internet speeds for customers, continue the free month trial membership, banner
advertising
(partnerships ISP, content providers, gaming companies), Adding features to the website and Netflix apps
Start a sports section within the library
Add new payment methods for international customers
text Adverts through gadgets like smartphones and tablets once every two months
awareness TV commercials
new features sports& payment forms TV commercials
QR codes
Sundance festival, and other
European festivals

Emmy
awards

Customer service improvements
Figure 10 Implementation time line

21

4.3 Evaluation
Evaluation is important for us to determine which promotion or advertisement have had bigger impact
for our sales and brand awareness which are the top priority. A pre and post evaluation will be conducted
for each of them to measure the effects and determine whether the campaigns were successful and to
what extent they were successful. We will select small representative samples groups and test consumer
perceptions for the campaigns aiming at improving brand awareness and image, and for the campaigns
aimed at improving sales new sales will be allocated to particular campaigns.
4.3.1 Internet adverts
A click counter will be used to assess which sites are being visited most the Internet banner adverts.
General site counter that will let us know the amount of traffic the site is receiving on daily basis and how
many of the clicks resulted to membership subscriptions. A Focus group will be used to assess the
consumer’s perceptions on the Netflix adverts they see from the internet.
4.3.2 Event sponsorships
During the event sponsorships there will be promotional codes distributed to interested people while
different adverts play on sponsor screens emphasis being the free month trial. These codes will be used
to give the new customers discounted prices for the second month after joining and the count will be
done on the codes which were used to subscribe and these will be a good indicator of the effectiveness
of the method. Since the sponsorships are also aimed at improving brand images Netflix will conduct a
survey after the events to find out the impact.
4.3.3 TV advertisements
With the help of stations a number of viewers can be determined. The commercials will contain a
promotional code and the customer will use the codes to get extra benefits on Netflix website like the
discounts which will be a way to track effectiveness of such advertisements. Surveys will be conducted to
know the customer perception of the advertisements.
4.3.4 QR codes
These codes will be tracked over the internet to know how many of them were put to use. To find out
how customers perceive the QR code advertisements and promotions a survey will be conducted.
For other service improvement campaigns like forms of payments, speed, increased library selection, and
introduction of sports content will be evaluated periodically using online survey which will pop up before
or after starting a movie. These various mentioned evaluation techniques will be able to tell whether the
marketing campaigns are successful. If the some of the campaigns are not effective will be stopped in the
next period and new strategies will be applied.

22

4.4 Closing summary
Netflix have managed to position their brand as affordable, convenient, with largest library and most of
all personalized. They have successfully stocked their company with the widest range of films and the
first to have a good recommender system, ahead of its competitors they have integrated their service
with the social media. By starting their instant streaming product line as soon as broadband internet was
able to support it, they not only stayed ahead of the competitive game, they‘ve monopolized the field.
Now that the instant streaming feature has become so popular, many are trying to imitate and enter into
the market. By implementing the creative strategies suggested, Netflix will secure their place on top.
Through increasing the reach of their instant streaming message, eventually every home will have a
Netflix subscription. Netflix will not only be a choice but the choice for everyone.

23

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