The recognition of a particular brand is a critical factor for ensuring continuous business growth. It is usually evident in business operations, which allow customers, get to purchase premium prices for the brand. A brand is a name that is typically designated to a particular product or service, which allows its unique and independent existence. Ideally, consumers gain satisfaction while interacting with a brands products or services, which attract a sense of loyalty. Branding not only fosters expression for the external stakeholders but also yields a robust internal business environment. According to Campbell (2003, p. 378), employees gain motivation to put extra effort aimed at ensuring the success of an organisation based on the firms operational efficiency and achievements.
On the other hand, marketing is responsible for connecting a specific company to its customer base. Subsequently, it influences their consumption habits concerning the marketing strategy incorporated. In the modern day world, the marketing trends and technologies affect the revenue output and value addition of an organisation. Brand managers and marketing officers are usually responsible for developing marketing communication geared towards the increased demand for a brands products or services. In ensuring the development of a sound customer base, most firms set up a marketing budget geared towards brand management (Kotler & Keller, 2009). In understanding the importance of marketing and brand management, the paper will explore on the situational analysis of Netflix Inc., which will be used to critically assess the branding, marketing, and business strategies employed by the company.
Netflix Inc. which started in 1997, boasts as the worlds largest subscription service company. The company is ranked as the 78th best global brand in 2017 with more than 12 million active subscribers of media content that includes video streams, DVD and Blu-ray rental mail services. The headquarters of Netflix Inc. is based in Los Gatos, California. Over the years, the company has expanded on-demand video services to reach more than 40 countries globally. The expensive operations are mainly attributed to the steady growth in annual revenue. For instance, between the years 2007 and 2011, the company reported about 48% yearly revenue growth (Aliloupour, 2016, p. 19). The steady growth in revenue allows the company to increase the earnings for shareholders as well as pursue its developmental activities.
The successes of Netflix Inc. resulted in the establishment of various DVD rental companies in the US and several parts of the world. The companys success has also led to the development of the brands stores across the globe. In recent times, the DVD rental industry has witnessed an increase in consumers due to the efficiency of high-speed internet services. In spite of the companys massive market presence the industry, it is important to acknowledge the challenges of attempting excel in the online market. In conducting Netflixs situational analysis, the focus will delve into the companys macro environment, which will be examined using PESTEL analysis. Political.
The current viewership trends in the US market reveal a sudden shift from the traditional television towards online streaming services. Nonetheless, due to the intensified usage of internet services, service providers such as AT&T continuously insist on the implementation of stricter regulations by the relevant government agency. In case the policy is drafted as law, the situation could have an adverse impact on the companys business model of disseminating streaming services. Moreover, a controversial EU ruling is anticipated to categorise both the firms streaming services as a traditional TV distributor. If the verdict is drafted into law, Netflix Inc. would be expected to provide 30 % European media content. (Robinson and Murgia, 2017, n.p)
In 2016, Netflix recorded over 110 million subscribers who access the companys services across the globe. The principal factor for such an achievement involves the firms competitive pricing which is relatively cheaper when compared to traditional TV services. According to Shaw and Bond (2017), despite the aftermath of the economic recession which affected the industry, Netflix is perceived to be more attractive than traditional media subscriptions. One of the main issues that affect Netflixs expansion involves the global exchange rates. Although the company intends to price its services around the US market fee of 10 US dollars, some markets do not allow it because of value-added tax (VAT) and exchange rate. Thus, it makes the brands services luxurious to purchase thereby limiting market growth (Pelts, 2016, n.p.)
Bond (2017) posits that the current market in the United Kingdom has more than two-thirds of the young population shifting to online streaming services for entertainment purposes. Additionally, social trends indicate that most of the customers prefer watching online content using their mobile phones than on television screens. In 2015 alone, online consumers used an average of at least 25 minutes on their smartphones to stream online content. The following year had the online consumers averaging about 40 minutes. Evidently, the trend indicates the growing demand for online media content which satisfies their busy schedules (Mintel, 2016, n.p).
The demand of 4K television in the market scene has resulted in a ten-year development of more than 40 % in the US market which is projected to be worth 70 billion dollars (Hankinson, 2013). In support of the developments, Netflix has heavily invested in R&D technology that allows streaming of 4K videos. The shift in 4K screen resolutions creates a challenge in the dissemination of streaming services since the data required for steaming such quality strains a consumers broadband services. Roettgers (2017) suggests that with the inception of Netflix Labs, the company is expected to develop technology that allows compression of 4K videos to improve data consumption as well as create a competitive advantage. The companys R&D labs are responsible for the development of Hermes software which allows automatic translation of programs.
Companies, which provide streaming services, encounter the challenge of accessing data servers. Subsequently, the situation puts pressure on the environment. Thus, such companies must provide resolutions to limit their carbon footprint. Presently, Netflix accounts for more than 30% of the internet traffic in the United States. The situation has resulted in the continued calls to use renewable energy sources for the companys data centres.
In 2016, Netflix endured a class-action lawsuit from the companys esteemed customers who were angered by the firms intent to increase subscription prices without clarifying how users of the companys services would be affected. Subsequently, the companys actions received heavy criticism for their unstructured consumer contracts (Spangler, 2016, n.p). The firm also introduces blocking workarounds as a strategy to satisfy the demands of film and television studios over content accessibility. Consequently, the move is expected to affect a section of users and their desire for the brands products due to limited availability.
Netflix lacks strong diversification since the brands entire services fall under the television and film industry. Thus, Netflix uses content marketing as the primary avenue for providing a unique selling point to its customer base. It is conducted through the creation of original and high-quality content which suits a wide range of audiences (Thezenagency.com, 2017, n.p). With success of producing original content that includes House of Cards and Arrested Development, Netflix continuously expresses that unique content is very marketable in the industry.
Netflixs expansion to international territories totals to about 190 countries. The business strategy employed by the company focuses on localisation of media content across the operating nations. The company purchases local content from local producers by paying an upfront fee, royalty bonuses or both (Unicornomy.com, 2017, n.p). The strategy aids in company to compete with local television channels or networks which provide regional content for its viewers. Other than providing localised content, the firm also heavily invests in international content, which attracts a niche audience. The foreign content also attracts advertisements, which offer a source of revenue for the brand.
The branding technique employed by Netflix Inc. is known as The Stack. It is supposed to be perceived as a stack consisting of printed cards that have an association with Netflix. Ideally, the stack is meant to symbolise the extensive viewership experiences associated with the brand. Although the branding strategy is mainly centred on the firms streaming services, it is also relevant to the DVD-mailing service since the approach focuses on Netflixs extensive video library. The diagrams shown below illustrate the companys strategic alignment.
Content marketing of original shows and programs
The Stack to symbolise the extensive viewership experiences
High value Subscription for consumers
Exploiting current technology
Maintaining customer loyalty
Original and International content library
The companys alignment on the strategies reveals its business strategy as the driving factor, which is reflected in the branding and marketing strategies. The perspective has widespread application since it facilitates business management. The alignment strategy can be infrared from the companys vision in 2000. Netflixs CEO envisioned the Video-on-Demand before its inception. Ideally, the companys branding and marketing strategies cannot be used as enablers since the company cannot adapt to any environment when both factors are used as the ancillary factors. Therefore, it is critical for the company to align its strategies to maintain consumer agility and loyalty.
Aliloupour, N.P., 2016. The Impact of Technology on the Entertainment Distribution Market: The Effects of Netflix and Hulu on Cable Revenue.
Bond, D., 2017. Traditional TV becomes turn-off for young viewers. Financial Times. [Online] Available at: https://www.ft.com/content/0aa8f2fc-6339-11e7-91a7-502f7ee26895 [Accessed on 19 Dec 2017]
Bradshaw, T., and Bond, S. (2017) Netflix looks to become world's entertainer as it hits milestone. Financial Times. [Online] Available at: https://www.ft.com/content/06b55bb8-6d0c-11e7-bfeb-33fe0c5b7eaa [Accessed on 19 Dec 2017]
Campbell, A.J., 2003. Creating customer knowledge competence: managing customer relationship management programs strategically. Industrial marketing management, 32(5), pp.375-383.
Hankinson, B., 2013. Streaming 4K/8K Video over IP Networks: Daunting Problems, Proposed Solutions. Streamonix Limited.
Kotler, P., & Keller, K. L., 2009. Marketing management. Upper Saddle River, N.J., Pearson Prentice Hall.
Mintel, 2016. Music and Video Streaming-U...
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