Table of Contents
4.0 The Marketing Audit (Situational Analysis) 5
5.0 SMART Marketing Objectives. 7
7.0 Marketing Mix Programme. 11
7.3.1 Traditional advertising. 11
8.0 Implementation and Control 13
Executive Summary
The following is a marketing plan for Netflix, a subscription-based streaming platform and production firm that offers its services globally. The report outlines Netflix’s mission statement and corporate objective and explores its macro and microenvironment. Some of the tools used in the analysis include SWOT, PESTLE, and Porter’s five forces. The report also assesses’ Netflix competitors and their market share.
Results from the audit reveal that Netflix has opportunities to expand in other growing markets and leverage the growing trend towards high mobile usage in video streaming. The audit also shows that the firm faces significant economic threats and political pressures such as the 26 per cent media tax imposed by the EU. Based on these results, the report recommends Netflix to expand its operations in growing markets such as China and adopt a yearly subscription plan to retain subscribers for a longer period. The report also recommends Netlflix to offer low-cost mobile streaming services in the United States before expanding to other regions.
1.0 Introduction
Netflix is an American subscription-based streaming platform and production firm headquartered in California. Netflix has about 14 offices across ten countries, and it offers its services in over 190 nations (Netflix Help Center n.d.). Although Netflix services are available in several countries, the catalogue of content varies significantly based on the streaming language and variety of content. Notably, some regions having a smaller content selection because of the licensing and agreement variation (Netflix Help Center n.d.). As of 2020, Netflix had approximately 9,400 full-time employees, a significant increase from 2016 (Stoll 2021). The company’s value has also risen in the past few years. Marketing research shows that as of 2020, the company was worth $194 billion (Shapiro 2020). This increase in worth has also seen a tremendous rise in Netflix’s revenue over the last three years.
As a firm operating in the tech, entertainment, and mass media industry, Netflix offers various products and services to millions of consumers worldwide. Among the firm’s products is the subscription-based streaming media video on demand (VoD). The following marketing plan will focus on VoD, although other related services such as film production may also be considered. The report will also cover the firm’s mission statement, corporate objectives, situational analysis, SMART marketing objectives, marketing strategies, and marketing mix programme. The report will also address the implementation and control of the marketing plan in practice, and lastly, a summary of the key recommendations will be provided.
2.0 Mission Statement
“At Netflix, we want to entertain the world” (“About us” n.d.).
Netflix’s mission statement reflects the nature of services and products offered by the company. This statement meets the criteria of what a mission statement is as proposed by the literature. Notably, a mission statement is a statement that melds the inspiration of the vision, realities of what the company is, and what it does for who (Ken, Lance and Kurke 1993). In this case, the mission statement depicts Netflix as an entertainment company aspiring to be an internet entertainment leader. However, the mission statement does not meet the nine components of an effective mission statement; customers, products/services, geographic markets, technology, concern for survival/growth, philosophy, public image, employees, and distinctive competence, as proposed by David and David (2003). Though, it is likely that adding all the nine components would make the mission statement cumbersome and difficult for employees to follow through. Besides, Cochran, David, and Gibson (2008) argue that mission statements should communicate the desired feeling that may guide managers to action and be practical. Undoubtedly, Netflix’s mission statement expresses what it wishes to achieve, thus providing adequate guidance to its employees and managers. In the next section, the firm’s corporate objectives will be explored.
3.0 Corporate Objectives
Netflix’s corporate objectives are not explicitly stated on the website. However, information from the firm’s annual report shows that its core strategy is to “grow its streaming membership business globally within the parameters of operating margin target” (“Form 10-K” 2019). More information from the report also shows that the company strives to enhance its member’s experience, probably to boost its attractiveness relative to other competitors. This information suggests that Netflix’s corporate objectives are to become a global entertainer and maximize profits. An analysis of these corporate visions indicates that they meet some of the SMART criteria of corporate objectives (See Appendix 6). Notably, the corporate goals are specific, measurable, achievable, and realistic. The next section will constitute Netflix’s marketing audit.
4.0 The Marketing Audit (Situational Analysis)
One of the critical steps before developing a marketing plan for Netflix is conducting a marketing audit. This audit may help identify some of the underutilized resources and develop an effective strategy for their use (Brownlie 1993). The marketing audit will also guide the implementation of a strategic plan for the entity.
4.1 Micro Analysis-Internal
The SWOT analysis is the tool used to analyze Netflix’s internal environment (See Appendix 1). According to Helms and Nixon (2010), SWOT is a practical, traditional means of getting insights into ways of developing and maintaining a profitable match between a venture and its environment. Coman and Ronen (2009) also emphasize that the focused SWOT methodology distills a firm’s strengths and weaknesses into core competencies and problems, facilitating their linkage into an action plan to preserve and leverage an entity’s competencies and defend against core problems.
In the next section, the firm’s macroenvironment will be analyzed.
4.2 External Analysis
4.2.1 PESTEL Analysis
One of the tools that will be used to examine Netflix’s external environment is the PESTEL analysis. As the literature suggests, this analysis helps evaluate the macro environment and determine uncontrollable external conditions that an enterprise must adapt (Shabanova, Ismagilova, Salimov and Akhmadeev 2015). The PESTLE analysis will help examine the firm’s macro-environment, help identify and adapt to any changes in the environment. Appendix 2 provides a detailed PESTLE analysis for Netflix.
4.2.2 Porter’s Five Forces
The other tool that will be used to analyze Netflix’s external environment is Porter’s five forces (See appendix 3). This model aims at accounting for long-term variances in one industry’s economic return versus another (Grundy 2006). In this case, the tool will be used to understand the significant forces affecting the industry and their degree of influence. The next section will explore Netflix’s competitors, especially in North America, the product’s largest market.
4.2.3 Competitor Analysis
Appendix 4 shows Netflix’s closest competitors in the competitive positioning map, comprising live TV and VoD services. As is evident from the appendix, the firm has some strategic groups that compete closely based on service quality and price. Strategic groups are collections of firms with similar key strategic dimensions as Netflix (Ferguson, Deephouse and Ferguson 2000). In this context, Netflix’s strategic groups in the United States include Disney Plus, HBO, and HBO Max because they have similar strategic dimensions, and they all offer VoD services. Based on the competitive positioning, it is evident that Netflix is not the cheapest VoD service provider because other products such as Disney Plus charge a monthly subscription of $6.99 (Cho 2020). Therefore, Netflix faces price-based competition from such firms operating in the media and entertainment industry.
Furthermore, Netflix has a higher streaming share compared to its competitors (See appendix 5). Notably, Netflix had a 22 percent streaming share in the fourth quarter of 2020 compared to products such as Disney plus, with a 6 percent streaming share (Bean 2021). It is also evident that Live TV does not pose a significant threat to Netflix’s competitiveness because the former charges a high subscription fee. In the next section, I will discuss the SMART marketing objectives for Netflix.
5.0 SMART Marketing Objectives
These marketing objectives are suggested based on results from the above marketing audit.
Adapt A Discounted Yearly Subscription Plan
As is evident from the marketing audit, one of the industry threats facing Netflix is consumers’ low switching costs. The switching cost is the one-time transaction cost incurred by consumers for switching from one service provider to another (Bhattacharya 2013; Zhang, Chen, Zhao and Yao 2014). Caruana (2003) also adds that switching costs deter consumers from a competitor’s product. In essence, the switching costs play a part in determining consumers’ loyalty. Arguably, a high switching cost is likely to build consumer’s loyalty to a given brand.
Unfortunately, consumers incur low switching costs from seeking VoD services from other strategic groups because their prices are relatively low. For example, Disney Plus charges $6.99 for its monthly subscription plus while Netflix charges $8.99 for the same duration (Cho 2020). This data suggests that consumers can seek cheaper VoD services from Disney Plus. Besides, customers pay a monthly subscription plan, implying that they can cancel their subscription at any time. Such subscription cancellations are sources of losses for Netflix. Notably, for the streaming service to incur about $200 to acquire a subscriber and charge about $5 to $15 per month, it must retain subscribers for a while (Paris 2021). Therefore, to mitigate the underlying threat to its profits, Netflix should adopt a discounted yearly subscription plan that would help the firm retain subscribers for a long duration but remain competitive in terms of prices.
Expand VoD services on Portable devices such as Mobile Phones, iPads, and Tablets in the United States and Globally
As is evident from the marketing audit, consumer behavior is changing significantly from huge to smaller screens such as iPads and mobile phones. This trend presents an opportunity for Netflix to target a growing market of mobile users. For example, studies estimate that by 2020, 34 billion internet-enabled devices will be in circulation globally (Gadzama, Bitrus, and Maigana 2017). In the United States, it is estimated that 294.15 million people are smartphone users (O’Dea 2021). Netflix should target the rising circulation of internet-enabled devices in the population to expand its market base. Besides, Netflix already launched trial versions for low-cost, mobile-only streaming plans in Malaysia and India (Choudhury 2019). Therefore, it should establish similar plans in the United States market to tap into the growing consumer base of people who use their mobile phones to stream content and low-income earners who may not afford the other monthly subscription packages.
Expand To Growing Markets Such as China By 2023
The marketing audit also revealed that one of Netflix’s weaknesses is its overreliance on North America, which is an already saturated market. Media reports indicate that the streaming market is heading towards saturation considering the wealth of options available for consumers (Editorial board 2019). Therefore, Netflix’s overreliance on such markets may not contribute to the firm’s profitability in the long run. The firm should expand its products in other growing markets such as China which might boost its income and revenue. Netflix should also consider using various strategies to penetrate the new markets, such as partnerships with local network providers, to mitigate the challenges posed by government policies in countries such as China. Netflix’s marketing strategies and those I choose to meet the suggested objectives will be discussed in the next section.
6.1 Segmentation
Market segmentation is vital for selecting a profitable market that can contribute to Netflix’s competitiveness. Scholars describe segmentation as dividing a market into homogenous groups with distinct needs and wants (Goyat 2011). Tynan and Drayton (2010) also add that market segmentation aims to identify and delineate a set of buyers who ultimately become targets for a firm’s marketing plans.
An analysis of the firm’s profile suggests that Netflix uses two segmentation strategies; behavioral and geographic. Geographic segmentation encompasses the selection of markets based on their location and other variables such as climate and natural resources (Camilleri 2017). In this context, Netflix groups its target markets based on their geographic areas, such as domestic and international ones. This type of segmentation enables Netflix to develop different library catalogs for various regions depending on national policies, culture, and the national language. Netflix also uses behavioral segmentation, which involves dividing consumers based on their purchasing behaviors (Camilleri 2017). Netflix utilizes behavioral segmentation to customize its content to various consumers based on their “watch” history. Netflix consumers enjoy this content through monthly subscriptions. After considering the marketing audit and proposed objectives, a similar niche market segmentation is recommended, emphasizing behavioral and geographic segmentation.
6.2 Targeting
Although it is not clear from the firm’s website and report, Netflix likely utilizes mass marketing as its targeting strategy. While the available Netflix content mainly targets millennials, it is also suited for people of all ages, gender, and middle- and high-income earners. Arguably, Netflix uses this strategy because it is cost-effective compared to producing different content for each target market. Millennials and Generation X will also be the target market for the proposed objective because they are the generation that uses Netflix and other VoD the most.
Netflix currently positions itself as a “streaming ready” brand. This brand positioning is appropriate for the firm because it reflects its major streaming and film production services. Therefore, a similar positioning strategy will be used to position the brand among the new target consumers in the new markets. This positioning strategy is helpful for the organization because it will help potential customers quickly identify where the brand fits in the market and consider subscribing to its streaming services. In the next section, I will discuss some of the marketing mix programmes that Netflix should consider.
7.1 Product
Netflix offers diverse content in its various markets; for example, some of the library catalogs in Australia consist of Australian content. However, studies also show that in 2017, the service’s local content mainly consisted of 2.5 percent of the catalog, with a significant decline to 1.7 percent in recent years (Cunningham and Scarlata 2020). Although this diversity is ideal to expose the globe to international content, it is recommended that Netflix should restructure its content to ensure that the local content comprises the most significant part of the catalog. This strategy may help Netflix comply with some EU requirements, such as the 30 percent content quota.
Currently, Netflix utilizes a low-price, high-quality pricing strategy, which is also suggested for continuous use for the service. Arguably, price is a critical factor in this industry because of consumer’s high bargaining power. Therefore, if Netflix wishes to retain and attract more consumers from growing markets, it should maintain low subscription rates and yearly discounted plans where possible.
Although Netflix is a reputable brand, it needs to adopt promotional strategies to inform, persuade and remind new and current customers about its products. These promotional strategies include traditional and digital marketing, which should send a consistent message to all its consumers.
Traditional advertising has long been used in a majority of firms as a promotional strategy. Studies reveal that firms invest approximately $130 billion in traditional advertising to build their brands and increase sales (de Vries, Gensler, and Leeflang 2017). Netflix should use traditional advertising tactics such as running campaigns through TV ads on US TV channels to reach target markets that still rely on traditional broadcasting networks as a source of information. Netflix should also set aside some capital for traditional advertising because this strategy is somewhat costly.
7.3.2 Online Advertising
Online advertising is the ideal way of targeting a significant fraction of Netflix’s potential consumers, who mainly consist of millennials. As the literature suggests, emerging adults spend about 6 hours on social media each day and visit multiple platforms simultaneously (Hruska and Maresova 2020). Therefore, social media platforms would be an ideal strategy for communicating to new and current markets about Netflix offerings. Besides, many social media platforms have a vast following implying that they would influence consumers’ purchasing decisions. Some of the digital advertising platforms that Netflix should use include social media posts, google ads, and Instagram posts.
Netflix should also adopt sale promotion as a strategy for attracting new subscribers. According to Kumar, Suganya, and Imayavendan (2018), sales promotion is an ideal strategy for increasing sales volume by enticing consumers to make positive buying decisions. In this context, Netflix should conduct sales promotions by offering discounts in some of its subscription plans to attract new subscribers or establishing a discounted yearly plan to encourage consumers to adopt more extended subscription plans.
Although Netflix encounters restrictions in some countries, it still operates in a large geographical area. Therefore, it should seize the opportunities of globalization to market its products and acquire a large consumer base. The next section will discuss the implementation and control of Netflix’s marketing plan.
8.0 Implementation and Control
Appendix 7 shows a Gantt chart that will be used to implement the proposed marketing plan for Netflix. This plan will be launched for the next three years because of the complexity of some proposed actions, such as expansion to growing markets such as China. However, frequent reviews, after every two months, will be conducted to monitor the proposed activities. Appendix 8 also provides a budget estimate for some of the proposed marketing mix programmes. One of the key limitations of this marketing strategy is reliance on budget estimates. Therefore, some of the projected costs may be higher than expected. Nevertheless, the budget estimate will guide investment and prevent the firm from overspending.
In summary, this report offers a few recommendations that Netflix should consider in its marketing plan. As is evident from appendix 8, the proposals will cost the firm due to the investment required to advertise and expand the product to new markets. Nevertheless, these recommendations will contribute to the firm’s profitability and sustainability in the long run. The recommendations include:
- Expansion to growing markets such as China
- Expansion of VoD services on Portable devices such as Mobile Phones, iPads, and tablets in the United States and globally
- Adoption of a discounted yearly subscription plan
- Focus on sales promotion, traditional and online advertising such as sponsored ads on Instagram, google ads, and social media posts.
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