Did Netflix underestimate the push-back from their price increase? (External Ana

Question

Did Netflix underestimate the push-back from their price increase? (External Analysis)

Did Netflix underestimate the bad publicity from their new pricing structure? (External Analysis)   

Did Netflix underestimate the number of subscription cancellations that resulted from their new pricing structure? (Internal Analysis)

Is Netflix actually correct in moving from mail order distribution to online streaming? (Internal Analysis)

Discussion of implications of the case for middle managers. (Internal Analysis)

Did Netflix implement too quickly? (Analysis of Strategic Factors)

Can Netflix compete with Amazon Prime? (Analysis of Strategic Factors)

Explanation / Answer

1. In my opinion, Netflix did not underestimate the pushback from the price increae. The current pushback was as expected because for any price increase the customer raises the voices and the rest of the industry tries to supress as has been the case historically. For Example when the oil prices increased there was pushback from the petroleum industry at the downstream value chain. However since the product was an essential, hence the customers adjusted to the hike. So is the expectation with Netflix, that people enjoy and value the content and hence will continuw to pay for it as this is what differentiates Netflix from the rest of the content on web.

2. The negative publicity was not something that Netflix would have been unprepared for. It came in as a trickle down effect of the resistance to the increase in pricing. Social media is now an easy and an effectve platform the raise the voice, however it also acts as the platform to spread negative perception of an organisation. The Netflix pricing fiasco was somethinge expected but the escalation was not something expected this quick.

3. The subscription cancellation analysis vis a vis customer retention and revenuew generation from the new pricing model was something that would have been evaluated. The pricing increase would hav etaken this is in consideration, the only miss would have been the rate at which the fall would happen and the increase in premium membership. Timing plays an important role in this analysis. A customer lost before the retention or a new customer acquisition would have caused the realisation of value delay however in long term the strategy of increased price is expected to work.

4. Online streaming has two major benefits pertaining to the increae in reach to different geographies and reduced asset holding. This enables asset light model, and hence an increased flexibility to Netflix as an organisation and to the customers across geographies. It has enabled multiple new market entries with only mimimalistic capital investments , even theough investments for content development has taken time, effort and money.

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