Netflix Pricing Strategies

Hi there, 

I would take these factors into consideration:

1. After shifting to the pricing per movie, the sales and marketing cost will increase, because now we are not seling a package, but single movies, hence single movies need to be promoted.
2. When we have a package, there is a tendency to binge watching, so you end up watching movies that you not necesserily like. With per movie pricing, the customer will be more cautious, and probaby the consumption of movies will reduce.
3. DVD-player and similar will come in much more closer competition. A DVD you buy and you can keep it whereas a movie on Netflix you can't possess. So you'll have to compete in price with DVDs.

Factors 1&2 will increase the price, but at the same time your price should be lower than your competitor's from factor 3.

Hope it was helpful,

Cheers,

GB

Sorry, I'm a bit confused here. You're saying to charge a family $168,000 per month? Or $168?

Now, in terms of pricing, remember that you have the option to do value-based, benchmarking, or cost-based (in that order of preference).

Question #1: Are there competitors (or is this a new market)?

Q1A: If yes, can I differentiate my product?

If yes, value-based

If no, competitor pricing/benchmarking is eliminated.

Q1B: If no, can I determine the value-add of my product (i.e. if saves x costs or a survey says people will pay x)?

If yes, value-based

If no, cost-based

Summary: If you can, you always want to do value-based. This is the most effective form of pricing. If you have "something" to go off of, you use it, else you use cost-based because you have no other choice.

Value-based occurs if:

1) You are a monopoly

2) You are the first entrant into a market

3) You can differentiate your product from other (I.e. monopolistic competition)

Hey,

For pricing strategy, you have following options:

1. Price above competiion
2. Price at par
3. Price below
4. Hybrid- rather than one size fits all, charge differential pricing based on customer segment

One way you can approach is to prove/disprove the options above & settle on the right pricing strategy. You can drill down to understand:

1. Current revenue
2. Costs (fixed/variable)
3. Services offered in the package
4. Competitive advantage

Hope this helps.

Hello!

To add on top of what has been said so far and not repeat: you are right, but you are only focusing on the more econ and qualitative part of the problem. What about social and operational aspects? What about risks? Mainly, everything that goes beyond economics. 

Best, 

Clara