Presentation on how Netflix can expand target market

1. Presented by Laura Nicholson
BUS 621 – Individual Project
12/15/2011

2. Company Background
 1997 – Reed Hastings and fellow software executive Marc Randolph co-found
Netflix to offer online movie rentals.
 1999 – Netflix launches the subscription service, offering unlimited rentals
for one low monthly subscription.
 2005 – Netflix ends the year with 4.2 million members, up 60 percent from
2004.
 2007 – Netflix introduces streaming.
 2009 – Netflix partners with consumer electronics companies to stream on
the PS3, Internet connected TVs and other Internet connected devices.
 2010 – Netflix is available on the Apple iPad, iPhone and iPod Touch, the
Nintendo Wii, and other Internet connected devices.
 2011 – Netflix Raised prices and segmented DVD Rental and streaming and
lost 800,000 customers.

3. Financial and Operational Performance
Financial Summary 2009 2010 End of Q3 ‘11
Revenue ($M) $1,670 $2,162 $2,329
Operational Summary As of Q3 ’11
Members in millions Domestic International
Streaming subscriptions 21.45 1.48 (stream only)
DVD Rental subscriptions 13.93
Operational Expense Summary 2009 2010 End of Q3 ‘11
Cost of Revenues ($ in millions) $1,079 $1,357 $1,464
Operating Expenses ($ in thousands) $399 $521 $550
EPS $2.05 $3.06 $3.63

4. Executive Summary
5 Main Points:
• How does Netflix recover from losing 800,000
customers?
• Identify reasons for segmenting divisions and
price increase.
• Strategic positioning through expansion and
target market.
• Netflix has options to rebuild market share
through improved products and services
• Outcome will be to show how Netflix will regain
market share.

5. Specific problem I address:
Problem Statement:
Netflix has lost 800,000 customers due to an
increase in price based on segmenting DVD rentals
and streaming services.
I selected this problem because:
After researching Netflix’s reason for the price
increase, I believe the decision makes sense for
future growth and market share.

6. Current BMG Canvas
Key Partners
 Paramount
 Miramax
 Sony
 Dreamworks
Key Activities
 Expanding
markets
 Customer
Service
 Software
development
Value Propositions
 Streaming
 DVD Rental
 Convenience
 Entertainment
 Timely
 Innovation at
internet pace
 On demand
Customer
Relationships
 Availability and
choice
 Personalized to
taste
Customer
Segments
 Families
 Entertainment
seeking
 Convenience
seekers
Key Resources
 Marketing
Strategies
 Technology
development
 Licensing
Channels
 Website/Media
 Movie Studios
 HBO/Stars/ESPN
Cost
Structure
 Ongoing Licensing Costs
 Overhead
 Technology Development
 International Expansion
 Staffing/Infrastructure
Revenue
Streams
 Streaming Movies
 DVD Rental
 Membership Fees

7. Hypothesis
Through a more focused customer segment
target and revised positioning strategies,
Netflix will regain lost market share and
increase growth in revenue.

8. Problem Logic Tree
Macro-Hypothesis
Through a more focused customer segment
target and positioning strategies, Netflix will
regain lost market share and increase revenue
growth.
Sub-Hypothesis #2
Through international
and domestic
expansion, Netflix will
regain lost market
share in increase
revenue growth.
Sub-Hypothesis #3
By introducing a new
product/service line of
video games, Netflix
will increase revenue
growth and regain
market share.
Sub-Hypothesis #1
Netflix will regain
market share and
grow revenue by
focusing efforts on
demands in the target
market.

9. Tools Used
The tools that will be used in this
presentation are:
• The BMG Canvas
• The Value Disciplines Model
• The SWOT Analysis
• Activity Map

10. Sub-Hypothesis #1
Netflix can regain lost market share and
grow revenue by focusing efforts on
demands in the target market.

11. Netflix has been the innovator for DVD rental by
mail and online streaming capabilities.

12. Netflix’s Current Value
Discipline of Product
Leadership
Product
Leadership
Customer
Intimacy
Operational
Excellence
Competition
NetFlix

13. Proposed Value Discipline of
Operational Excellence
Product
Leadership
Customer
Intimacy
Operational
Excellence
Competition
NetFlix

14. Sub-Hypothesis #2
Through continued international and
domestic expansion, Netflix will regain lost
market share and increase revenue growth

15. Activity Map Template
Selections
Domestic
Revenue
Choice/
Selections
Key Partnerships
International
Expansion
TV Series
Streaming
DVD
Hybrid of DVD
and Streaming
Service
International
Revenue
On-Demand
Global
Revenue
Convenience
Price
Availability

16. Sub-Hypothesis #3
By introducing a new video game
product/service line, Netflix will regain lost
market share and increase revenue growth

17. SWOT Analysis
Strengths:
• Branding
• Convenience
• Technology Base
• Key Partnerships
• On demand
• Streaming
Opportunities:
• Video Game Market
• International/Domestic
Expansion
• Key Partnerships
Weaknesses:
• Technology Expense
• Current customer dis-satisfaction
• Negative media
Threats:
• Increased competition
• Price competition
•Technology development of
competitors

18. TOWS Matrix
November 7, 2014
Strengths:
• Branding
• Convenience
• Technology base
• Key Partnerships
• On Demand
• Streaming
Weaknesses:
• Technology development
expenses
• Current customer Dis-satisfaction
• Negative media
Opportunities:
• Video Game Market
• International/Domestic
Expansion
SO Strategies
• Focus on global expansion
of video steaming and key
partnerships
WO Strategies
• Focus on global
expansion of video game
streaming using less
operating expenses for
technology development
Threats:
• Increased Competition
• Pricing Structure
• Technology development
of competitors
ST Strategies
• Partner with streaming
video game companies to
offer new product line
WT Strategies
• Improve negative media
and reduce technology
development expenses

19. Summary of Findings
Macro-Hypothesis
Through a more focused customer segment
target and positioning strategies, Netflix will
regain lost market share and increase revenue
growth.
Sub-Hypothesis #2
Through international
and domestic
expansion, Netflix will
regain lost market
share in increase
revenue growth.
TRUE
Sub-Hypothesis #3
By introducing a new
product/service line of
video games, Netflix
will increase revenue
growth and regain
market share.
Sub-Hypothesis #1
Netflix will regain
market share and
grow revenue by
focusing efforts on
demands in the target
market.
TRUE TRUE TRUE

20. Conclusions
 By shifting to Operation Excellence and re-focusing
the target market, Netflix will regain
market share and increase revenue
 By expanding streaming service
internationally and domestically, Netflix will
regain lost market share and increase revenue
 Introducing video game streaming and
developing additionall key partnerships, Netflix
will regain market share and increase revenue

21. Recommendations
To regain lost market share and increase
revenue growth, Netflix should:
 Shift from Product Leadership to
Operational Excellence
 Continue expansion of international and
domestic streaming markets.
 Introduce new product/service of video
game streaming service.

22. November 7, 2014
BMG Canvas Based on
Recommendations
Key Partners
 Paramount
 Miramax
 Sony
 Dreamworks
 Video gaming
companies list
 Onlive.com
Key Activities
 Expanding
markets
 Customer
Service
 Software
development
Value Propositions
 Streaming
 DVD Rental
 Convenience
 Entertainment
 Timely
 Innovation at
internet pace
 On demand
 International
Market
 Video Game
streaming
Customer
Relationships
 Availability and
choice
 Personalized to
taste
 Innovative
technology to
improve
choice/service
Customer Segments
 Families
 Entertainment
seeking
 Convenience
seekers
 Multi-device users
 Tech Savvy
 Gamers
Key Resources
 Marketing
Strategies
 Technology
development
 Licensing
 International
Markets
Channels
 Website/Media
 Movie Studios
 HBO/Stars/ESPN
 Mobile Devices
 Apps
Cost
Structure
 Ongoing Licensing Costs
 Overhead
 Technology Development
 International Expansion
 Staffing/Infrastructure
Revenue
Streams
 Streaming Movies
 DVD Rental
 Membership Fees
 Video game rentals/streaming
 Apps

23. Risks
• Losing market share to more innovative
companies.
• Costs associated with International
expansion and impact on operation
expenses.
• Possible partnership issues and costs
associated with introducing video game
streaming

24. Summary
5 Main Points:
• Netflix has lost 800,000 customers and needs
to regain market share despite price increase.
• Customer demands are shifting due to
technology.
• Strategic positioning through expansion and a
more focused target market.
• Introduction of new product/service proves
opportunity for a new market share
• Netflix has opportunities for a come back!

25. Action Items:
• Shift to a Value Discipline of Operational
Excellence for pricing and convenience
with a consumer focus of multi-device
users
• Continue global expansion of streaming
service
• Partner with Onlive.com to offer video
game streaming to consumers

26. QUESTIONS?