Netflix'com

1
Netflix.com
2
BMG155 Final Presentation
Netflix.com
Anne Finlayson Joan Masters Valen Lewis
3
Overview Business Concept Statement
Netflix is in the business of providing
individuals and families with a wide variety of
entertainment in the form of movies and other
viewing (TV reruns, documentaries, etc.) through
the largest selection of DVDs at a completive
price using fast and free shipping. Customers
prefer Netflix's offerings to those of the
competition because of convenience, product
selection, community of users and customer
service.
4
Market Analysis

• Description of the Industry
• Description of the Market
• Description of the Target Customer
• Description of the Competitive Advantage

5
The Industry

• Chain of value close to the consumer end
• Trends
• On-line delivery of movies
• Materials used in manufacturing DVDs
• Postal rates and policies

6
The Market

• DVD rental
• Selling used DVDs
• Movie downloads
• User community

7
The Target Customer Demographics

• Female
• Age 28-45
• Married
• 2-3 children
• Professional or white collar career
• Family income 50-100K

8
The Target Customer Psychographics

• Busy, well-organized
• Life revolves around family, career
• Many interests but no time to pursue them

9
The Target Customer Major Problem to Solve

• Hassle-free experience
• Comprehensive selection
• Easy to find
• Availability
• Competitive price
• Free, fast delivery

10
The Target Customer Key Experiences

• Joy discovering long-lost favorite movies
• Surprise finding movies with her favorite actors
• Freedom/independence no due dates or late fees
• Serenity/calm can rent and return without
  leaving home
• Acceptance/belonging Netflixs user community

11
The Competitive Advantage Competition

• Other movie rental outlets
• TV and movie theatres
• Personal music players
• All forms of entertainment

12
The Competitive Advantage

• Selection
• Price
• Free delivery and return mailer
• User community

13
Strategy

• Description of the Offering
• Description of the Marketing Strategy
• Creating the Offering
• Marketing the Offering
• Description of the Operating Strategy

14
The Offering

• Comprehensive selection, adequate supply
• Search capability
• User community, reviews, ratings
• Variety of subscription plans
• Fast, free delivery with return mailers
• Free trial, cancel any time
• No due dates or late fees
• Order from home, save money on gas

15
The Marketing StrategyCreating the Offering

• Comprehensive selection, adequate quantities
• 24-hour delivery throughout U. S.
• Web site technology
• Reliable, secure ordering
• Search capability
• User community
• Simple, intuitive user interface

16
Marketing Strategy Traditional Advertising
Venues

• On-line
• Cooperative efforts with movie studios
• TV, radio
• Consumer packaging
• Direct mail

17
Marketing Strategy

• Word of mouth
• 2-week free trial
• User community

18
Operating Strategy Obtaining Videos

• Relationships with movie studios, distributors,
  independent producers
• Purchase videos outright
• Revenue sharing agreements

19
Operating Strategy Video Delivery

• Strategically located distribution centers
• U. S. Postal Service
• Return mailing envelope

20
Operating Strategy Technology and Web Site

• Reliable, secure ordering system
• Site operates 24/7
• Search capability
• User community

21
Operating Strategy Customer Service

• Defective video replacements
• Proactive email follow-up on delivery dates

22
Profit Analysis

• Estimate of Revenues
• Estimate of Costs
• Analyze Costs
• Analyze Profits
• Conclusions

23
Estimate of Revenues Potential Customers

• Households owning a DVD player
• Disposable income

24
Estimate of Revenues Subscription Service

• Customers purchase once a month
• Average price paid is the price of the
  subscription plan.
• Increased from 15 to 17 during the 1st 5 years.

25
Estimate of Revenues First 5 Years
26
Estimate of Costs Create the Offering - DVDs

• Videos 40,000 titles at start-up
• 60,000 DVDs each distribution facility
• 60,000 each facility at 10 each
• 600,000 total to stock 10 distribution centers

27
Estimate of Costs Create the Offering - Postage
Mailers

• 1 each rental for postage and mailer
• 1st 5 years rentals increased from 40,000 to
  400,000 per business day (5-days a week)
• Customers rent an average 2 videos a week

28
Estimate of Costs Postage Mailer, First 5
Years
29
Estimate of Costs Create the Offering - Website

• Website is a key part of the offering
• 100,000 for initial design, testing and coding
• 100,000 for servers and system support

30
Estimate of Costs Market the Offering

• 1 million on marketing costs
• Netflix relies heavily on word of mouth
  testimonials from satisfied customers - 85

31
Estimate of Costs Manage the Business --
Employees

• Company HQ
• 10 management/professional employees
  80-160K/year
• 10 lower-level employees 25K/year
• Distribution centers (ten)
• 1 manager - 40K/year
• 10 other employees - 15K/year

32
Estimate of Costs Manage the Business --
Employees
Benefits figured at an additional 30 about the
base salary.
33
Estimate of Costs Manage the Business

• Facilities -- Company HQ
• Rent 20,000 a month (240,000/year)
• Utilities 2,000 a month (24,000/year)
• Furniture, computers, office equipment/supplies
  100,000 to start up

34
Estimate of Costs Manage the Business

• Each of ten distribution facilities
• Rent 5,000 a month (60,000/year)
• Utilities 2,000 a month (24,000/year)
• Furniture, computers, office equipment/supplies
  30,000 to start up
• DVD management system 15,000
• DVD inventory 60,000

35
Estimate of Costs Manage the Business 1st Year
Costs
36
Estimate of Costs Manage the Business Costs
Years 2-5
37
Estimate of Costs Manage the Business

• Research and development
• 50,000 to create the business concept
• 50,000 to develop and test the DVD mailing
  envelope
• 100,000 for initial design and development of
  the website
• 100,000 for servers and systems support

38
Analyze Costs Variable

• Postage and mailing materials for mailing videos.

39
Analyze Costs Fixed

• DVDs
• Rent and utilities
• Hiring, training and paying employees
• Operating the website and associated back-end
  systems

40
Analyze Costs Start-up

• Obtain buildings for HQ and distribution centers
• Furniture, computers and office
  equipment/supplies
• Initial hiring of employees
• Creating the business concept
• Designing the mailer
• Designing the website

41
Analyze Profits

• 1st year loss
• 2nd year recoup loss
• 3rd year profit begins
• These figures are probably optimistic

42
Conclusions

• This business concept is successful.
• Details thought through with great care.
• Customer needs are met.
• Should continue to be successful.