MKTG7512 Strategic Marketing Management Sample
You'll select a focal product from a company of your choice, conduct a situational analysis of the company, analyse the industry's competitiveness, and provide suggestions on the segmentation of the market and the potential repositioning of the product.
The report should include the following components:
(1) A title page, including the course code, your name and student ID (1 page)
(2) An abstract or executive summary of the report (1 page)
(3) (From point 3 starts the main body of your report): A background section regarding the firms, the products it offers, and the focal product your case study is about (2 pages)
(4) A situational analysis (i.e., the competitive position) of the company using SWOT analysis (2 pages)
(5) An analysis of the industry competitiveness based on Porter's five forces model (2 pages)
(6) Provide a segmentation analysis of the relevant consumer market (2 pages)
(7) Select two key product attributes of the focal and competing products, and construct a perceptual map onto which the products are located (2 pages)
(8) Compare and contrast the current positioning strategy the firm adopts about the focal product and potential repositioning of the focal product or development of a new product,
Present study is based on focal product of the company, such as Netflix. Focal product is referred as the central and most important product of company. For analysis of present study, focal product of Netflix such as subscription based video streaming services has been selected. It is because, such services are one of the most prominent services and company is generating significant revenue from this only. For Assignment Help The present study contains competitive position and industry competitiveness analysis, by application of SWOT method, and Porter’s five forces model. Subsequent to this, in-depth discussion regarding segmentation and product positioning is provided. At last, discussion about the betterment of existing product is explained by analysis of its features, attributes, and product slogan.
Netflix was incorporated in 1997 by Reed Hasting and Marc Randolph in California, USA. It’s an American top content creator and production company. Netflix is a content providing platform and a production company which offers various streaming services to its customers like award winning movies, documentaries, series, anime, TV shows etc. which are subscription based, a premium has to be paid to stream its services. At initial stage of Netflix, it deals with selling and offering of DVD services on rental basis to its customers, and today it is streaming service provider in almost 190 countries in the world to its subscribers but still Netflix has continued its rental services of DVD’s till now (Brennan, L. (2018).
The reason of selection of this company is its market share of content streaming services as well as good market performance. Users can stream through various devices by log in to their laptops, smart TV, tablets, smart phones. According to recent analysis of year 2020 Netflix has accounted for more than 45% of streaming subscribers of the market share and it’s been reported that Netflix has generated revenue of$25 billion in year 2020 along with the 200 million paid subscribers. The worth of Netflix is $162 billion as per the April 2020 report (Netflix, 2020).
The product for the analysis of present study is the subscription based streaming services, one of the most vital elements of Netflix. In the year 2018, Netflix achieved 8th position of the top ten streamed shows with respect to subscription streaming services. There are diversified contents available at Netflix even the house produced contents. The criteria of its subscription are divided into three tiers and each tier is charged different and provides different level of services and benefits to its users. Also, Netflix has amazing features like customization of subtitles, secret menu, its services can be used on the smart TV’s, it allows watching simultaneously on four screens also in terms of original content creator Netflix always stood out as compare to its competitors which are amazon prime, YouTube, Disney+, and Hulu. The major reason behind its success is its services which keep the needs of subscribers at heart, its technological innovations and the courage to adopt different business strategies to provide direction to its company (Jenner, 2018, pp. 105-118).
Competitive position and industry competitiveness
SWOT analysis is a tool for evaluating the four elements of business such as strength, weakness, opportunity and threats. The strength and weaknesses analysis internal company factors and opportunity and threats are the external factors, by which company’s current and future operations are affected and aid in development of strategic objective.
Table 1 SWOT analysis of Netflix
Strengths are the core competencies of the business which provides a competitive advantage to it as compare to its competitors. The core strengths of the Netflix are its strong brand equity, ad free contents, original contents and a huge customer base which makes it different and unique from its competitors and serve as its strengths (Van der Voet, 2016). It gives an amazing experience to its users through the ad free content which do not interrupt their entertainment with the interruption of ads, as Netflix fulfill the needs of its users and try to satisfy them at its best results in the large subscriber base for it. According to the annual report of 2020, Netflix has around 209 million of user and no other platform is currently enjoying this advantage (Netflix Investor, 2020).
Weaknesses are the disadvantages of the company which stops it to achieve success. However, there are some weaknesses of Netflix too. The Netflix does not have copyrights for the content available to it apart from its own produced content. After a particular point of time the content available on it can be easily seen on the other websites. Also, the business model in which Netflix works can easily get replicated because it is not so unique or hard to replicate it. There is various similar company providing same services (Maddodi, 2019, pp. 41-51). The requirement of internet is another disadvantage for the Netflix as the users require access to internet to stream its services, the heavy dependence on internet especially for users with low internet connection becomes the weakness of the Netflix to gain such subscribers.
It is an external factor which helps in the development and to grow business and its revenue. The opportunities available for Netflix is the expansion of its business in new markets as the platform is available over 190 countries of the world and by taping the recently most used service market group Netflix can increase its revenue (Gupta, 2019). The evolution of product mix, to attract the youth Netflix can offer them some international contents which are being watched in other countries this would attract new users and give additional interest to the platform. Netflix has the opportunity to enhance the variety of content it offers by further working on the local content, bringing that to the subscribers this would also improve its performance in the market and attract local people of the region toward this platform (Derr, Georg, &Heiler, 2021, pp. 17-24).
The threats are the difficulties faced by the company in its journey. The most effective threat to Netflix is increasing competition in the market the competitors like amazon prime, Disney+ are also offering the same quality of services apart from content from other producers they are also now producing in house content to attract more subscribers. Another threat is the illegal streaming od content, the privacy of content is not much which comes as threat to the companies like Netflix because the non-users illegally leak the content. Also, the censorship could become threat to Netflix, if they have to take approval from the censorship to present their content to the subscribers (González, Membiela-Pollán, &Cuns, 2020, p. 252). This is not so far as the government is now a day more concerned about the censorship of content.
From the above SWOT analysis of Netflix, it can be said that the challenges faced by the company internally and externally can be improved and as long as Netflix innovates its thoughts and ideas it will remain in the race of competition and can maintain its position in the market of entertainment.
Porter’s five forces
Porter’s five forces analysis is a technique that determines and evaluates the five competitive forces that creates impact on each industry and support in determination of weaknesses and strength of industry.
Figure 1 Porter's five forces
Threat of new entrants
Threat of new entrants for Netflix is a serious issue as there are several other companies planning to stream their services like it and also producing their own content. However, the barriers for new entrant are high due to heavy investment in producing own content and even licensing it from other producers require huge cost. However, according to the size of the organization the technological and marketing cost would not be an issue. Also, due to increasing competition among the competitors who are already in the industry are launching their new streaming services (Hadida, Lampel, Walls, & Joshi, 2021, pp. 213-238). The time is far when a single user would have various subscriptions available and maybe he would quit this subscription. Hence, the Netflix must carefully observe the new entries as the risk of new entrants is high for it.
Power of Suppliers
The power of suppliers in the industry is considered as moderate, and in case of Netflix, it is same. The high extent of impact on prices is because of the limited number of companies generating media and entertainment services or subscription based streaming services. Acquisition of a contract and obtaining license to distribute the content consists of negotiation on pricing in which supplier possesses control (Øverby, &Audestad, 2021, p. 105). It has been seen that, Netflix has significant competition with traditional media distributors; therefore it has to reflect more flexibility in the agreement as compared to conventional media. In the similar way, the supplier possesses lesser bargaining power at the time of contracting with traditional media distributor, but online distributor such as Netflix come from a significant extent of influence from the suppliers.
Power of Buyers
The power of buyer in such industry will always remain high as there are plenty of option available to them, they can easily cancel or continue their subscriptions according to their wish. Also, the price sensitivity is very less in this industry all the channels are offering their subscription at almost same rates which is not the matter of issue, the quality of content is most important factor which attracts the users toward subscription. In recent scenario the number of users is increasing vastly because of variety of services offered to them from a single subscription (Raats, & Evens, 2021, p. 65). Also, these subscribers are not bounded in contract they can quit whenever they want to therefore there is more power in hands of the consumers and the power of buyer tends to stay high due to these reasons.
Threat of Substitute Products
Threat of substitute product is less for Netflix as the demand of the television broadcast view is declining according to the yearly reports of people watching it; in 2019 it was 50min less than that of 2010 and still declining. The demand for Netflix has rose 7min than that was in 2017 compared to 2019. The YouTube has a great percentage as it provides recorded and live streaming; it is about 12% of the total viewing the YouTube is being watched (Porters five forces analysis for Netflix, 2020). The younger generation is now shifting towards the streaming services from the television broadcasts thereby the risk of substitution is low for Netflix.
The competition for Netflix is high as the competitors like amazon prime is offering other customer benefits to its subscribers like fast delivery, books etc. to increase its subscriptions. Also, some of the popular contents of Netflix are being removed like friends to get stream on some other sites. Therefore, the competition is high and risk of competitive rivalry (Kweon, &Kweon, 2021, p. 7).
Table 2 Porter's five forces analysis
Segmentation and Product Positioning
There are usually four consumer characteristics of market segmentation such as geographic, behavioral, demographic, and psychographic. Netflix is running its business activities in the dynamic and diverse market and therefore most important consumer characteristics for the company are behavioral and psychographic.
Behavioral segmentation is very important for the Netflix as it assists towards segmentation of consumers by their behavior, and it would permit the company to comply with current trends with distinct audiences. Additionally, it also enables the company to obtain the benefit of present purchasing behavior of the consumers and tailor market in precise manner. It leads toward improvement in the personalized experience of consumers. It can be noticed that, a number of consumers would select, recommend, or pay more for a brand that offer greater personalized experience (Diderich, 2020, pp. 3-14). Apart from this, another main consumer characteristic is psychographic, which is based on life style and personality of consumers. It is also important segment for the Netflix as it creates better understanding of the consumers. In other words, it can be said that, psychographic segment offers distinct competitive benefit to the company by obtaining valuable insights about personalities, consisting their values, interest, and preferred lifestyle. Further, this segmentation helps the company to understand about the dominant content in a category, which is mostly preferred through the viewers of Netflix. This would aid company to involve with viewers with the suggestion of their preferred category. Moreover, optimization of performance is possible through ensuring that they are providing right content to the right targeted audience at the right time.
Behavioral segmentation: In case of Netflix, it uses behavioral segmentation for delivering of customized content to its subscribers on automated basis in every day. It uses machine learning for understanding about behavior of consumers on the TV streaming map. Such information is then stored by Netflix to segment consumers into groups on the basis of their action, permitting the media service provider to provide more personalized experience to customers. For example, if a person is Netflix user, the company would know about shows that have been watched by them in the previous month (Wilbert, 2021). On the basis of such information, it could determine their favorite genres and provide recommendations for content to watch in subsequent period. Such customized mechanism supports them to enhance their viewership. In the second quarter of 2020, new viewers of company has been increased by 10million, and in the third quarter of 2020, overall membership was more than 195million (Positioning of product, 2018).Apart from this, cited organization also saves money and maintains customers through understanding their usage pattern. Netflix probably desires its users to watch a particular amount of hours of each month. By application of analytics, company particularly identify the number of hours watched each month carry with it a more percentage of user retention, which means customers who do not cancel subscription plans.
Psychographic characteristics: This type of characteristics consists of core identification of the end-consumers. Such characteristics can be personality and lifestyle of customers. It should be noted that, Netflix is emphasizing on the segment that require relaxation subsequent to the hard day of work, or just individuals who desire relaxation. Such segments like to watch movies and series in order to get relax. Another lifestyle that has by some consumers is the one that are fans of some series, they like to watch some particular genre and it is where the services of Netflix are founded. Further, Netflix is engaged in providing online streaming services that is designed to search and search the perfect series for the consumers. It mainly reflects that, personality preferences are used by company in order to provide right services to users. Usually, males and females of age 18-24 spend approximately 3.7 hours in a week for online streaming video (Pratap, 2020).
Perceptual mapping can be specified as a diagrammatic approach applied for emphasize on subjective feeling and opinion of customers i.e. displaying perception of customers. In simple words it positions the company being assessed along with competitors and assists in understanding where it stands (Susanno, Phedra &Murwani, 2019, pp810 (1)). The two main attributes which have been used for positioning product of Netflix i.e. video streaming services which are also used by competitors are quality of content and choice relating to movies and shows provided through their channel. Both the attributes are assessed in context with specific product i.e. video streaming while applying consumer centric brand strategy by the company. It does assist management in making informed decision in context with positioning themselves in market and leading towards lesser pitfalls and succeeding in making streaming enjoyable to everyone (Wayne, 2018, pp730 (2)).
The top requirement of customer is comfort, reasonableness, speed and personalization of streaming shows and other data along with high choice of titles. In case of Netflix it has been assessed that it does ensures accomplishing all specified requirement through making top decision for its customs and providing customized, quick, helpful ascertainment of choice (González, Membiela-Pollán&Cuns, 2020, pp252 (1)).
Relevance of Attributes in Segmentation Analysis
As Netflix, not only provides series or films but also huge adventure for members which does choose different movie and it is convenient for clients as they can watch on any screen associated with internet. Thus quality and choice are two main variants which should be applied for segmentation attributes i.e. Behavioral and Psychographic segmentation (Daidj&Egert, 2018, pp70) in context with product video streaming. The segmentation for product is being done considering the behavioral aspects i.e. spending habits and actions of customer, thus through same company is able to get information about choice of customers. On the other aspect psychographic segmentation is being done on the basis of life style and personality which represents the economic condition of customer and on the basis of same quality can be provided. Thus, in other words the higher class does prefer immense quality and does accept high charges for same. Moreover, product is recommended considering previous choice of customers. The same concept is being applied by the company that small screen is available at nominal range and higher charges are applied for big screen. This strategy does assist company in making adequate segmentation of targeted customer area and accomplish customer requirement to significant extent for product.
Figure 2: Perceptual Map of Netflix
Note: The name of companies represent their product i.e. online video streaming services
Justification of location of Netflix and its competitors on perceptual map
The above figure represents the measure between quality and choice variant between Netflix and competitors i.e. Hulu, Amazon Prime and Youtube. It can be clearly assessed that online video streaming service provided by Netflix has high quality and wide choice. However, the main competitor i.e. Amazon prime does have high quality and reasonable charges but choice provided in not as high as Netflix. Due to same reason Hulu is positioned below because charges are low but the quality and options of programs are limited in comparison to online video streaming product of Amazon Prime. Lastly, Youtube does provide mixed quality but charges are too low and even variety of product range i.e. video streaming is available free of charge, thus it has been positioned in first quadrant. After assessing the above map, it would be appropriate to state that online video streaming services (Netflix) does provides high quality along with wide choice to its customers, hence does have strong position in market. As the company mainly emphasizes on mass business section for purchasing membership of TV and films so that it could attain biggest no. of endorsers and less focusing on age, foundations, indications etc (Daidj&Egert, 2018, pp73 (2)). The main strategy applied by company is to enhance the no. of supporters of Netflix so that it could accomplish return on overwhelming interest in substance and innovation in light of fact that exclusive low cost can be charged due to high competition (Iordache, 2021, pp35 (1)). Thus, through emphasizing on main attributes i.e. choice and quality, usage, charges and data it is able to sustain leading position in market.
By the following manner, main product of the company could be positioned in better manner by alteration of the existing features in product and at the similar time appeals to a target segment –
Netflix must hire its own producers, directors, actors to create its own in house content instead of leasing it from the other producers. As according to the Denver Post reports in 2019, it has been seen that, there are many new announcements of the streaming services like Disney, NBC, of their own, because of this the shows which were leased by Netflix like The office and Friends which are one of the most major part of Netflix are being pulled away from it.Also the people who were subscribing just because of these programs are copied. To stay in the competitive market Netflix must stay relevant and adopt such aspect in the existing services in the changing online environment.
Reduce Rising Prices
Nowadays Netflix is reported to be the most expensive streaming service provider according to its competitors like Disney, Disney+ offer the cheapest services in the entertainment industry it cost around $6 a month and compared to this Netflix is charged too high as it costs around$ 13 a month (Wilbert, 2021). It is suggested that, company should reduce its prices up to $6 and below this, in order to remain competitive. Earlier, Netflix use to provide the cheapest and the convenient source of streaming services online in the 2000s. Ironically Netflix is most expensive in current scenario. It has to lower its price in the international market too survive as the competitors will take away its strength of large consumer base by providing them. According to Motley Fool’s article the Netflix is lowering its price to stay in competition in the international market. For example, in India Netflix is performing so well and is being successful massively through their competitive power in the market but it should reduce prices before the competitors like Hulu and Disney leg up on it. With the help of convenient marketing and costs Netflix can again take the advantage back and stay in the market.
Video Hosting Platform
The video hosting Platform is the essential for any of the online streaming service platform to organize their content. It can be said that video hosting is the process of managing, uploading, and hosting the video on your channel. Platform like Dacst are providing with the excellent video hosting services, the private YouTube with secure uploading. They provide us with the service of easy share and embed video which can reduce the cost and lessen the time and efforts to put the video in the service and running. This will also allow consumer to upload, tag and deliver your content anywhere with a great ease (Positioning of product, 2018).
Chapter markers allow the longer videos to be easily defined in segmented parts. Chapter markers are just like the table of content in a long book which provides us a short access to all the content in the book and from this it can locate the content where consumer want to see and reach to it easily. This is the most important for the viewers as it helps them to navigate the content within the video so an OTT platform must include it.
These analytics help in the future strategies formulation as they help the video creator to get the information of the video about its success, revenue generated, likes,views,shares and many more. The data analytics provide the information even with the breakdown of the geographic region of the viewers, revenue generated by a single content, the average length of the viewed video. In short this helps company to track the success of the video in terms of its profit, revenue, growth, subscribers and the viewers (González, Membiela-Pollán, &Cuns, 2020, p. 251-274).
Repositioning of product on perceptual map
Figure 3 Repositioning of product on perceptual map
Note: The name of companies represent their product i.e. online video streaming services
The new product i.e. Innovative video streaming would include characteristic such as real time analytics which will help to tract their important contents and the main focus area required by them, also to quantify the success at all the levels. This is a must tool adopted by an online streaming platforms to succeed in the market. Further option of chapter markets would be also available which helps viewer to go back, see previous content, pause, volume and brightness. They are visible in a form of dots and when these dots are tapped on we can see the title and use these chapter markers. They are available at the bottom bar of the each video along with these features mention above. The additions of this feature in new product (Innovative video streaming) would eventually embrace existed position and it would be placed at leading position.
“Have fun at anytime anywhere by Innovative Video Streaming”
Based on above analysis, it has been concluded, Netflix has achieved good position in the market by providing distinct and exclusive services. Since, Focal product of company, subscription based video streaming services, as it is one of the main product and prominent product of company. However, it is suggested to company to make improvement in the features of existing product and focus on attributes i.e. choice, price, data and quality so that the performance could be improved in comparison to competitors. The main attributes have been considered for new product i.e. innovative video streaming and new specification has been added such as real time analytics and chapter option so that existing brand image could be enhanced and new product could be placed as leading one.