Demographics throughout all Australian cities reflect significant opportunity for an online DVD ordering service, replicating the success of NetFlix in the U.S.
Development of music and other forms of digital content can also specifically be sold through this channel once established.
Potential exit strategy is to sell QuickFlix to NetFlix.
Well-funded broadband providers attack the downloadable movie market and force a premature consolidation of this business model.
Pricing becomes more inelastic and profitability suffers.
Postal costs continue growing exponentially and drive up costs that are not forecasted.
Order management systems fail to deliver with a high level of accuracy and much customer dissatisfaction comes about as a result.
5.0 Evaluation of Alternative Marketing Strategies
The use of a price skimming, price exception, or premium pricing strategy all are alternatives, yet the best possible approach is to define a services-driven costing model based on the specific rental levels of DVDs and other digital content.
The following are key marketing objectives for the company to pursue:
To develop a brand that is synonymous with exceptional customer service and breadth of selection.
To aggressively pursue partnerships that bring digital content into the distribution channels created by this venture.
To successfully build the venture on a state-of-the-art order management, CRM and Enterprise Content Management system architecture.
7.0 Recommended Marketing Strategy
To aggressively pursue the market position of being the most responsive and highly service-driven online DVD venture in Australia.
8.0 Economic Evaluation
Using the following figures, it can be seen that marketing is budget to get 58% of the total budget for launching the new venture, and 21% for the acquisition of 5,000 titles for the next two years. Technology development at $650,000 will necessitate the use of open source software for managing the development of the order management and content management systems.
Marketing costs and subscriber acquisition
DVD library expansion
Expenses related to capital raising
The following are the key assumptions of the sales forecast:
That adoption will be in the.2 to.4% rate for the first 18 months in the targeted geographies.
Postal costs will stay constant.
The costs of an open source-based platform for an order management systems and enterprise content management systems, along with maintenance, will hold constant at $650,000.
Break-even analysis completed using the HBR Working Knowledge (2007) Java Applet, using the following assumptions, delivers the breakeven chart and table shown below:
1,900,000 in fixed costs ($1,250,00 DVD library and $650K for technology development) per DVD order fulfillment process
49 per yearly subscription
44,186 units for break-even
1,200 expected sales per month
9.0 Implementation and Control
Implementing the venture will require extensive development of an order management system that can scale quickly across a wide variety of transactions and ensure the highest level of system responsiveness possible. The creation fo the implementation plan needs to center on this specific system development. Key action items in the development of the system include the following:
Phase I: User Requirements Definition of System - This includes the development of the website based on having customer advisory councils and the creation of a series of customer listening systems. It is critical in this first phase to gain as much insight into the specifics of preferences from customers.
Phase II: System Development and testing and product introduction planning. The two most critical aspects of this project center on the need for developing systems that can both track and respond as quickly as possible to the needs of customers. In this phase the CRM system also needs to be specifically developed and linked to the ECM system for tracking the specific DVDs in the library.
Phase III: Launch. This the point in the project plan where the order management system is tested, verified and the marketing launch is completed. As part of the marketing launch it will be critical for the venture to rely heavily on both Internet advertising and spot television in key markets.
Phase IV: Evaluation and correction. This is also a critical aspect of the launch of the new venture as it will require heavy use of analytics to track the performance of the systems, marketing efforts, and selling strategies over time. Trying to find what works and what doesn't is a critical aspect of this overall phase.
10.0 Contingency Plans
The best case scenario for this venture is that it achieves critical mass and taps into an entirely new market, stressing the systems in place. That's why its critical to take a very systemic view to the entire venture, so that the order management, CRM, and ECM systems can keep pace with growth. These systems must be highly synchronized with one another to deliver the high levels of service needed to retain customers. System synchronization is critical if the venture will be able to survive the best case scenario.
In a worst case scenario, the market is cannibalized by a broadband provider partnering with the major movie studios and completing an en masse free offering of all cable TV channels over broadband. This would be disastrous for NetFlix in the U.S. As well.
AustrailaDVDRentalGuide.com (2007) - Assumptions and interpolations of the online DVD rental market in Australia. Accessed from the Internet on June 15, 2007:
Colman (2006) - QuickFlix Limited (QFX) Profile. CCZ Equities Research. CCZ Equities Pty Limited. Roger Colman. 9 August, 2006.
Columbus (2002) - the Sell-Side E-Commerce Market: It's All About Integration. AMR Research Report. Monday April 1, 2002. Retrieved from the Internet on June 15, 2007: http://lwcresearch.com/filesfordownloads/SellSideECommerceMarketIsAllAboutIntegration.pdf
Columbus and Murphy (2002) - Re-orienting your content and knowledge management strategies. Report published October, 2002. AMR Research, Boston, MA
Gartner (2001) - Eight Building Blocks of CRM: A Framework for Success. John Radcliffe. December 13, 2003.
Gartner Group. Groton, CT. Accessed from the Internet on June 15, 2007 from location:
HBR Working Knowledge (2007) - Java Applet and Microsoft Excel Model for breakeven analysis. Assessed on June 15, 2007 from location: http://hbswk.hbs.edu/archive/1262.html
McKinsey & Company (2005) - Transforming Sales and Service. McKinsey Quarterly. Thomas Baumgartner, Roland H. John, and Tomas Naucler. 2005 Number 4. Pages 81-91.
Murphy (2003) - Establishing a True Source of Product Content for Competitive Advantage, AMR Research Report. Friday May 30, 2003. Jim Murphy. Boston, MA
QuickFlix Business Prospectus (2006) - QuickFlix Investor Prospectus. Includes Market Sizing on Page 7, Accessed from the Internet on June 15, 2007:
ScreenDigest (2004) - Australia Still Embraces Rental: Rental Leads the Market Despite strong…[continue]
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