The most noteworthy aspect of the marketing strategy of Netflix is how little actual marketing they've had to do in their rise to the top of the online movie rental heap. A few well-placed ads on such movie sites as the Internet Movie Database and Rotten Tomatoes, combined with some direct mail efforts comprise the bulk of Netflix's marketing these days. The question is not how popular Netflix is, but whether it earns its popularity.
The Strategic Marketing Strategy of Netflix
The basic idea is brilliant in its simplicity. For a comparatively low flat fee, a customer can rent an unlimited amount of DVDs. As quickly as a person can watch a film and send it back via the mail, he or she get another from the rental queue. It's a cinephile's dream come true. You pay your money and you end up saving a fortune in rental fees because you are promised new films within a day of receipt of the DVD you sent back in a handy pre-paid envelope. This is what's promised when you read the offer and sign up with Netflix.
The Marketing Can Be Misleading
The problem is that Netflix has found various means of limiting the number of DVDs it sends subscribers, thus bilking them and raking in more money. It was sued in 2005 by a subscriber pointing out that the supposed one-day turnaround could stretch as long as six days. If you paid for three movies per package, you could find yourself receiving only 10 DVDs a month, rather than the unlimited amount promised. It seemed as though the quick turnaround was only provided to new customers and those who watched fewer movies; which is to say, the customers who provide Netflix with their highest profits. The company has denied any false advertising or wrongdoing, but settled the suit out of court.
The settlement was problematic. It offered current subscribers a free one-month upgrade and at the end of that month sent them an e-mail. Anyone who didn't respond in time, or follow the instructions exactly, ended up being automatically enrolled in the higher service, and fee plan. Furthermore, former customers were wooed back with a free month of movies, but if they didn't opt out in time, they found themselves as paying members again. To some industry observers, the settlement looked more like a brilliant bit of marketing strategy on Netflix's part, rather than an apology and compensation for misled consumers.
Busy Parents Are Most Vulnerable
The brilliance of the marketing strategy of Netflix is that it knows exactly how to target those subscribers who might pay the highest monthly fee and end up with the fewest films. With ads in parenting and entertainment magazines, it woos busy parents who would like to keep a steady stream of vetted DVDs available for their children without constant trips to the video store that always take twice as long as it should. Those same parents would also like to have more grown-up fare available for the nights they might actually have time to sit down and enjoy a film together once the kids are in bed.
When these subscribers sign up, thinking that for a reasonable price they'll regularly get the films they request in the mail, they often find it ends up being a waste of time and money, exactly the opposite of what was hoped for and promised.
Ongoing Subscriber Complaints
Many customers, predominately those who only rent four to seven films a month, are very happy with Netflix. Others feel they continue to apply a bait-and-switch mentality in their marketing strategy. One potential customer found that, in looking for price plans, he had to first fill out the form on the Sign Up page, including his credit card information, before he was shown a list of fees. Others have felt cheated when many of the films on their list have been out of stock. While they may be offered other choices, this is not what was paid for.
The idea behind Netflix is excellent, and with three million subscribers, it clearly continues to do something right. One can hope that with the growth of competition from Amazon and Blockbuster, they will make more of an effort to address their problems and please all their customers.