Netflix: Case Study on Pricing Strategy and Customer Retention

MuddleG-MKT87505-14: NETFLIX 1
Netflix
Grant Muddle
California Southern University
MGT 87505
XX June 2018

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“Case Study: Netflix continues to change the face of in-home movies around the globe.”
Introduction
The sStreaming giant Netflix has changed the face of entertainment industry by allowing
people to watch an unlimited supply of movies and TV shows at from the comfort of their homes
through a single platform. The case highlights a change in the pricing strategy adopted by the
brand where in which users had to pay a different fees for Netflix’s streaming service and their
DVD by mail service (Hawkins & Mothersbaugh, 2016). The decision has invited an immense
wrath from the customers over on various social media platforms. This is because the customers
will must now need to pay an additional 60% of total their total subscription fees. The move has
encouraged competing brands to promote their product offerings, and the customers have
threatened to cancel their subscriptions.
Analysis
The pPricing strategies adopted by any business play a significant role in attracting
customers (Armstrong et. al., 2015). The primary problem identified in the case is the issue of a
new pricing strategy adopted by Netflix wherein the overall cost to customer is raised by 60%.
HoweverAlthough, this increase in price is necessary for the brand in order to meet its expansion
costs, it s. This may lead to a drastic reduction in the company’s number of subscriptions, for
the brand which in turn could result in reduced revenues for Netflix.
The brand also faces the second problem faced by the brand is theof reduced goodwill
that that the brandNetflix has to experiences due to this change. Post theAfter announcement of
the new pricing strategies were announced, customers have resorted to various social media
platforms to express their disappointment in the matter. Social media is a powerful tool that
largely impacts a business’s brand image (Hudson et. al., 2016) and . This includes platforms

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like such as Facebook, Twitter and Instagram. Consumers are extensively using tThese platforms
are being extensively used by consumers to reach out to brands which has created transparency
and allowed fora two- way communication between organizations and their customers.
HoweverThus, if a large number of people post negatively about Netflix, then the brand’s
goodwill of the brand would be hampered, leading to a negative brand image.
The third problem faced by Netflix faces is that the adopted pricing strategy change in
pricing strategy adopted by Netflix has in turn encouraged competitors to put in additional efforts
in promoting their offerings products and services to the customers. Competitors of any
businessMost businesses are often looking for opportunities where they canto gain a
competiveng advantage over other players in the industry, which is . This is why it becomes
imperative for businesses to keep a tabs on their competitor’s strategies and work towards
countering these strategies in an effective manner so as to gain a competitive advantage in their
industry of operation (Ranjith, Patel & Rao, 2017). The increasing competition and through these
additional efforts by competing firms can provide disappointed customers with alternative
offerings in the face of changing pricing strategies and disappointed customers. This competition
can lead to a major shift in Netflix’s customer base from Netflix to its competitors like
Blockbuster, Prime Vvideo, and Walmart.
Solution
The primary problems Netflix faces are d by Netflix is reduced goodwill, increasing
competition and hence reduced customer base. The brand’s new pricing strategy is important for
the brand to sustain its costs, and survive the competition in the market, and as well as retain its
customer base. Therefore, in order to address the same, it is critical that Netflix adopts strategies

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to counter the effect of the new pricing strategy to address the issues it faces, while retaining its
customer base, maintaining costs and improving goodwill.
The first solution Netflix could offer ed to Netflix would be effective and extensive
promotions. Netflix has adopted a premium pricing strategy which now. This strategy refers to
the process of pricing business offerings higher than industry level in order to position the
product or service effectively in the minds of customers (Nagle & Muller, 2017). Premium
pricing strategy should be adopted by brands in order to target premium consumers and position
the brand effectively among this customer segment. Therefore, it is imperative that through all
platforms, Netflix continues to promote itself through all platforms as a premium service offering
meant for high- end customers.. This will Proficient promotion strategies of Netflix will assist
the brand in attracting more customers.
In order to makeTo en sure Netflix’s that the offerings of Netflix indeed remain as
premium service, the brand will have to work upon the content it offersed by the brand. Netflix
must curate unique TV shows and, movies and tie up with distribution and production
centersmake sure . This will ensure that new movies are streamed on Netflix making it available
to a larger audience. Allowing new content to stream on the platform will help in keeping
viewers entertained. If Netflix continues to offer unique content, then not only will the existing
customers stay retained with the brand, but even new customers would also be attracted to buy
their subscriptions.
Secondly, bBrand positioning is the image that a brand’s customers have about the
product or service in their minds of its customers (Solomon, 2014). Netflix must work towards
setting the right positioning itself positively in the minds of customers. This positioning can be
done achieved through by establishing effective communication with customers and curating