Renting and Price

Corey Allen BA504 February 19,2013 Abstract In 1997, Netflix became the first online movie by institutionalize Rental Company. Hastings and Randolph co-founded the company. By 1999, they had come up with a $19. 99 per calendar month equipment casualty plan for client to get hold of as more movies that they valued with no late fees. In 2011, Netflix shocked their customers with their parvenue footing plan by splitting the streamlining of movies to cardinal price and videodisc by mail with another price. With the tack, Netflix anomic peerless million customers. Pertinent facts in the caseThe pertinent facts in this case study are that in 1997, beating-reed instrument Hastings and Marc Randalph co-founded Netflix. Hastings was upset due to late fees he received when he went to return movies that he had rented six weeks earlier. At first, when Hastings came up with the idea, VHS tapes were used for rental, so the cost to ship VHS tapes was alike expensive. Then one of Hasti ngs friends advised him of the unexampled videodisc technology. With the new videodisk technology, Hastings packages the DVDs in a maven envelope and shipped it to himself to see if the DVD would be damaged.When he received the DVD and found that it was undamaged, he began to create mail-order movie rental business. When Netflix first started, the price to rent a movie was $4 with a $2 transport fee. With this new military service, customers were able to have movies mailed to them, but they had to be guts by a certain date or they would be supercharged late fees. In 1999, Netflix launched a new subscription service, which gave their customers unlimited rentals for a periodical fee of $15. 95 per month. With the subscription, endorsers were able to rent four movies per month.Within a year, Netflix better the unlimited movies subscription plan and turnd the price to $19. 99 per month. With the new plan, customers were able to rent as many movies as they desire and they could keep them as coarse as they wanted, but they could only keep four movies at a time. By 2007, Netflix had him a major milestone by hitting one billion movie rental deliveries. That same year, Netflix introduced streamlining of movies directly to every the customers home computer. By 2008, customers were able to stream movies through their post consoles.With customers now able to stream movies directly to their computer or mealy consoles, Netflix came out with a price plan of $9. 99 per month for streamlining and DVD rental by mail. What is the situation? In 2011, Netflix announce that they would be separating the streamlining of videos and DVD by mail into two subscription prices. The price for streamlining would be $7. 99 per month and DVD by mail would be $7. 99 per month, so if you wanted to both stream movies and rent movies by mail, you would have to pay two different subscription fees.Netflix as well as announce that the movie by mail service would be run through qwikst er. com. With the price increase of 60% and the declaration of the new website, Netflix lost one million subscribers, taking there subscription thorough of 25 million, down to 24 million subscribers. Along with the passing game of subscribers, Netflixs stock price dropped from a value of $298 to $169, which is a 40% loss in value. Who is involved? Reed Hastings was who was involved with the price diverge and he released a statement on September 18, 2011 stating that he had messed up with the way the price mixed bag took place.He went on to try and explain why the price change took place. What are the pertinent issues? The pertinent issues are that when Netflix announced the price change, they made the change fast and did not give their subscriber a panorama to decide what they wanted to do. Basic eithery Netflix announced the price change and made the change. By not giving their subscribers a chance to think active the new price change, they just went with it. By doing this, Netflix lost one million subscribers. These price changes not only affected the subscribers, it also affected their stock price.If Netflix would have gave more of a notice and the argumentation behind the price change, maybe they would not have lost as many subscribers. Recommendations for Netflix The actions that I would recommend for Netflix to recover from a marketing misdirection are that they should have eased into the new price plan or offer a promotional price to their current subscriber. For example, Netflix could have announced the new price plan and at the same time with the new price plan, they could have given their current customer a unload trial so that they had the option of either paying the $7. 99 for either the stream lining or the DVD by mail.By allowing their customers the free trial, Netflix would be showing their customers that they appreciate their business, but they needed to make the price change to fit all customers need. I believe the theory break from humanity for Netflix hit hard when they lost so many subscribers. With the price change and loss in subscribers, it opened the doors for Amazon to retain some of the Netflix subscribers. How the arrived to their purpose? Netflix arrived to the decision to split the membership in two when they realized that tear down with the streamlining of movies customers were still renting movies by mail.Netflix also realized that not all there subscriber were taking advantage of the streamlining and the subscribers were only renting movies by mail. So by splitting the subscription into two price plans, customers had the choice of streamlining, renting by mail, or both. Conclusion I think the price change was necessary for Netflix, but I think they approached it the wrong way. I was one of the million subscribers who canceled their subscription due to the price change. But even with that said, after about two year, Im now back with Netflix and Im subscribing to the streamlining of videos.