Brand Architecture Strategy

1. 1
Netflix Branding Stumbles
Submitted by Ravi Khatri
PGP31223
Section B
Brand Management
Individual Assignment

2. Netflix
An American multinational entertainment company
Founded on: August 29, 1997
Age: 18 years+

3. Pioneered the DVD by-mail category
specializes in and provides streaming media and video on demand online and DVD by mail

4. Success Mantra: Flawless service delivery combined with
a state-of-the art movie recommendation engine for users
leading the way for digital content since 1997

5. Founder and CEO of Netflix 5
American entrepreneur and
philanthropist
Co-founder and CEO of Netflix
A media darling for his company’s
meteoric rise
In 1997 Hastings and Marc
Randolph co-founded Netflix,
offering flat rate movie rental-by-
mail to customers in the United
States.
Reed Hastings
"Netflix was originally a single
rental service, but the subscription
model was one of a few ideas we
had—so there was no Aha!
moment. Having unlimited due
dates and no late fees has worked
in a powerful way and now seems
obvious, but at that time we had
no idea if consumers would even
build and use an online queue."
Ideology behind Netflix
An unique management style: a leader who hires the best, and gets out of the way

6. Netflix Timeline 6
1997-2001
2002-2006
2006-2011
• 1997 - Reed Hastings and software executive Marc Randolph co-found Netflix to offer online movie
rentals.
• 1998 - Netflix launches the first DVD rental and sales site, netflix.com.
• 1999 - Netflix debuts a subscription service, offering unlimited DVD rentals for one low monthly price
• 2000 - Netflix introduces a personalized movie recommendation system, which uses Netflix members’
ratings to accurately predict choices for all Netflix members.
• 2002 - Netflix makes its initial public offering (IPO on Nasdaq
under the ticker “NFLX” with 600,000 members in the US.)
• 2005 - The number of Netflix members rises to 4.2 million.
• 2007 - Netflix introduces streaming, which allows members to instantly watch television shows and movies on their computers.
• 2008 - Netflix partners with consumer electronics companies to stream on the Xbox 360, Blu-ray disc players and TV set-top boxes.
• 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.
• Netflix launches its service in Canada.
• 2011 - Netflix launches throughout Latin America and the Caribbean.

8. Swot Analysis of Netflix 8
• First Mover Advantage into the movies and
TV shows instant streaming
• Strong Brand Recognition
• Personalized Recommendation Engines for
Video Discovery award
• get high Customer Satisfaction
• ability to adopt to various platforms
• flexibility to different internet speeds
• original content has increased Netflix brand
equity, customer loyalty and revenues
• a big window of time from when the movie
is launched to when it is adopted by Netflix
library
• Contractual restrictions on streaming
content
• Expired contracts with Sony & Stars,
resulting in lost videos about 1800 titles
• Damaged reputation after attempting to
increase fees and separate DVD &
streaming video
• Financing large aggressive international
expansion may affect its liquidity
• Product Line Expansion of original shows
may have a favourable effect to Netflix
subscriber base, profits and brand equity
• More expansion in International market
• 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
• 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
• Limits on Bandwidth usage from internet
providers
• Price adjustments to cover new expenses
can result to consumer outrage
• Competitor partnerships

9. 9
Netflix dove in head-first as streaming
technology evolved online and quickly found a
receptive audience ready to instantaneously
download and view video
Trouble begins…
The difference in gross
profit margins between mail
order (37%) and streaming
rentals (65%) was significant.

10. In part to better account for
these revenue differences,
management decided in
April 2011 to split the
company into two brands &
businesses.

11. Customers were told that they would begin to be
charged $7.99 for each form of rental instead of
$9.99 for both the forms.
In fact, a 60% increase for the 24million
subscribers who wanted to use both physical
discs and streaming.

12. Over 600,000 unhappy
customers terminated their
accounts in the following
months, catching Netflix off
guard.

13. Instead of conducting exhaustive consumer research on everything
,
Netflix had decided to forgo it based on its understanding that the
vast majority of new customers seemed to prefer streaming.
Whereas Customers viewed the online service as a free add-on to
their DVD rentals, not the other way round.

14. In 2011, Netflix announced that
it’s movies-by-mail service
would be rebranded
“Qwikster”.
They would also ass video games to its catalog.

15. Qwikster was a dumb idea.
Dumb, dumb, dumb!
In its month of existence,
Qwikster did nothing but foster
ill will toward Netflix.
Qwikster was pitched as a way to offer users more convenience,
though the entire concept of Qwikster seemed anything but:
Netflix was all but forcing its 12 million customers with
joint streaming-DVD accounts to create two accounts,
at two different domain names,
with two credit card statements
and two different sets of ratings and preferences,
all on a new website run by a guy
who couldn't even spell the word "quick" correctly.

16. In Oct 2011, after several weeks of
negative criticism and publicity,
company announced that they would
be no longer split its services in two.
Netflix has killed off Qwikster before
the DVD-only service announced in
September even launched.
The service was renamed DVD.com,
and is fully owned and operated by
Netflix.

17. Admitting failure, learning from Qwikster
Rebranding and Pricing Changes Can Be Risky Business
17
Business
Strategy
Manage
Expectations
Consumer
Research
Customer
Is supreme
Be open, transparent, and
notify customers of upcoming
changes in advance.
First lesson
Get real with your customers
and educate them about how
the market is changing.
Second lesson
Test pricing models with
market research or via a
controlled experiment with a
small set of customers first.
Third Lesson
Monopolist power does not
always mean that your
customers are powerless.
Fourth Lesson

18. 18
Why learn the hard way, first-hand, when you
can learn from the mistakes of others? Most
great strategies are a derivative of another great
company’s strategy. It is important to study the
history of business so you can leverage other
experiences to position your company best in the
market. There is a reason why Apple and Google
are investing so much money in their corporate
education programs to teach future leaders of
their companies about key decisions the
company has made and why they worked or
failed.
Conclusion

19. Current Position:
Netflix is the world’s leading Internet television network with over 83 million members in over 190 countries
enjoying more than 125 million hours of TV shows and movies per day,
including original series, documentaries and feature films.
In 2015, the number of paying Netflix subscribers worldwide was at about 70 million,
with just over 26 million subscribers located outside of the U.S.
It is estimated that, by 2020, there will be over a hundred million non-U.S. Netflix subscribers worldwide.

20. By 2020, Netflix’s penetration rate is forecasted to be around 35 percent in many countries such as Canada,
Argentina and the U.K. Netflix’s global expansion has a direct impact on its annual revenue,
which rose from 500 million U.S. dollars in 2004 to 5.5 billion U.S. dollars in 2014.

21. Disclaimer: These slides have been created by Ravi Khatri during the PGP Brand Management
course taught by Prof. Sameer Mathur at IIM Lucknow.
References:
1)http://www.scottparent.me/2011/09/19/netflix-stumbles-again-with-qwikster-rebranding/
2) Wikipedia pages of Netflix & Reed Hastings
3) https://www.netflix.com
4) Google Search & google image search engines
5) Slideshare.com
Thank You!