Sunday, June 5, 2016

Southwest Airlines and GE are both big companies who had to assess their strategies and adjust based on the market trends. Another company who had to assess their strategy throughout the years is Netflix. Netflix used to be the mail version of Blockbuster. They rented out DVDs via snail mail. Nowadays, they're still in the DVD and Blu-Ray rental business, but their main purpose is a streaming service with critically acclaimed TV shows and movies.

In the 2000's, the usage of the internet grew at a very fast rate, per http://www.internetworldstats.com/emarketing.htm. From 300 million users to 2 billion users by 2010, the management team at Netflix made some difficult decisions to monetize from this burst of users. Luckily for them, they made the right decisions and Netflix is thriving as a streaming video service. In 2007, Netflix started to add streaming videos to their DVD rental plan. This was free of cost to all Netflix subscribers. In 2011, Netflix made changes to their subscription plan that came with very negative public feedback. Netflix first increased DVD rental rates by 60%. Then, within a month, they started to charge separately for the streaming video service. The cost of the streaming service would at least double the overall cost of Netflix for those who rented DVDs.  As if this was not bad enough, 2 months later, Netflix announced that they would change their DVD rental service to be called Qwikster, and customers had to subscribe to Qwikster to be able to subscribe to the online streaming service. The public outcry led to their stock plummeting and a drop in their customer base. Netflix retracted the obligatory Qwiskter subscription and allowed customers to subscribe to their online streaming service as a separate entity. After the public calmed down, Netflix began to see an increase in their online streaming service. The internet was still growing and users became accustomed to streaming media.

Netflix started to add exclusive content such as TV shows, movies, and documentaries that enhanced the brand. It gave customers an incentive to subscribe to Netflix. Shows such as House of Cards, Arrested Development, and Orange is the New Black, gave Netflix credibility as a TV network. Netflix's management team was able to see the trend in internet usage and foresee that DVDs were becoming obsolete. While their strategy worked, it was incredibly risky to make the changes in 2011 and alienate many of their customers. Unlike the Southwest case study, Netflix didn't listen to their customers on pricing. Instead, they created almost a new version of Netflix which included new shows. Southwest and Netflix had similar strategies in attracting customers to their niche way of providing a service. For Southwest, bags fly free and there's no assigned seating. For Netflix, they created brand new exclusive content for their subscribers.   Netflix and GE both realized that although they were successful companies, they had to change for the better. Both companies made difficult decisions which shaped the company for the future.

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