Digital Media in India

Netflix in India

Product

Product mix

Strengths and Weakness of Product

Product Life Cycle Management and New Product Development

Brand Name, Brand Image and Brand Equity

The Augmented Product

Price

Pricing Objectives

Pricing Method

Pricing Strategy

Discounts and Allowances

Price Elasticity and Customer Sensitivity

Break Even Analysis at Various Prices

India is one of the emerging markets for digital business. It is also a lucrative market for companies dealing in digital content. It is crucial for many digital content companies to have a presence in India given the population of the country and the growing number of first time users of internet in India. This market holds great prospects for future growth.

One of the major companies to provide digital content is Netflix which has been announcing updates for its online platform and has shown that it intends to chalk out plans to be able to penetrate and approach consumers in the high-growth markets.

Some of the innovations that the company has come up with include carrier billing and in-app subscription sign-ups. These are verticals that have been announced by the company.

With its eyes on the lucrative Indian digital content market, Netflix has given indications of entering India and company authorities have announced their intent of creation of Bollywwod content -- Bollywood is the acronym given to the Indian Hindi movie industry, the largest in India.

These are signals that the company is indeed serious about attempting its entry into India and the capturing of the Indian digital content market.

There are two major issues present in the digital market in India according to experts. These are low credit card penetration, and the fact that most new consumers will be 'mobile first' internet users. These are indeed serious issues in India and for Netflix as, according to the most recent data, the credit card and bank account penetration in India is just around 2% of the population. Netflix has tried to address both the issues through announcement of its plan for India. For example, the Carrier billing is a very easy and apt solution for the problems as discussed above. The company is banking on the data that 71% of the people in India using smart phones are used to topping their airtime balance. Netflix authorities claim that enabling the consumers is the key to success in its possible venture in India (Netflix.com).

Further the carrier billing method can also be a very good too for consumer acquisition in India as this process if somewhat different from those in the developed economies. Partnerships with mobile service providers could be a very strong marketing proposition for Netflix as the mobile service providers are used to managing billions of impressions daily through more than 20 customer-facing channels they operate. These range from SMS and top-up notifications to websites and call-centres.

To start off Netflix could think about acquiring Bigflix, the Indian version of Netflix. This company has been active India over the last few years and in manner similar to Netflix, allows the user to stream and download high definition digital content against subscriptions. The subscription charged by the company is around Rs. 250 per month. The company services are primarily limited to a section of Bollywood movies and some movie sin the regional languages in India. However the company offers its services across all devices such as desktop, tablets, smart phones and connected TVs (Bigflix Watch Online Movie).

There are other features like the movie on demand ecosystem spanning across product, distribution and content. The company intends to replicate Netflix in India and hence is a competitor for Netflix. Through its extensive HD quality movie library, Bigflix offers access to Hindi, English and several Regional language movies to users. The collection of movies for Bigflix is not as huge as Netflix with just around 2500 movies, but the users are able to watch the movies without any ads or breaks in between.

Hence it is clear that Netflix needs to acquire Bigfix for a start in the Indian market. This would not only provide the company with a ready user base but also provide instant rights and access of around 2500 Indian movies. When coupled with the rich bouquet of English and other foreign language movies that the company already posses, the combination would be very impressive.

Product

Product mix

Something that is produced in order to satisfy customers is called a product (Kotler, Philip, and Gary Armstrong, 51).

The product mix and range of the Netflix is envious. While the most common form of product is the movie library that users can access online using any of the devices like smart phones laptops, tabs and even connected TVs, the company also offers users access to thousands of popular television shows. These are accessed against a fee through online streaming. Apart from this Netflix also offers mail-in DVD where the company also mails DVDs to customer's home on demand against a fee. This has given the company a competitive edge over their rivals. The product range can be accessed through three forms of subscription plans by the users. They are online streaming only, DVD's which exclude online streaming and the DVD in addition to the streaming. The last product was introduced in 2012 (Netflix.com).

Apart from these, the product range is diversified on the basis of picture quality such as high definition or non-high definition and the number of screens that one can watch the content on simultaneously (Netflix.com).

Thus the company offers both tangible and intangible products to its users. The mail-in DVD's is a tangible product as the user can physically see and touch it while the online streaming of movies and TV shows is intangible as it cannot be felt or touched or made contact with.

Moreover the products are easily available as intangible products of the company are available on Xbox, Playstation, and Wii which are, on the other hand, easily available. Since the online steaming service is also adaptable to the smart phones, hence the company products are available anywhere and everywhere provided that the device is connected to the internet (Varadarajan).

Strengths and Weakness of Product

Strengths

The primary advantage for Netflix is that is does not have to produce the product themselves. The products -- the movies and the TV shows, have already been produced by someone else. In that sense, this is a big strength of the company products that they are already developed. The work of Netflix is to simply become a distributor, acquire the products through acquiring of rights of the product and take the products to the people.

The advantage of the intangible product -- the online streaming of the movies and the TV shows is that they can be accessed from anywhere and everywhere provided that there is an internet connection. Users simply have to log on to the company websites, go to the product library for movies or TV shows, choose the product, make the payment and watch the movie or TV show.

Another strength of the product is that the products can be downloaded or streamed in multiple devices. The films and the TV shows can be downloaded or watched on devices such as PCs, laptops, smart phones, tabs and even the connected TVs. This reduces the chance of handicap of video adjustability of the product to any particular type of device. Hence anyone anywhere with an internet connected device can access the products of the company (Varadarajan).

In terms of the quality of the content -- movies and TV shows, the company can boast of a substantial collection. The tie ups with the various production companies -- Disney for examples, given allows the company access to very popular films. The TV shows that the company offers to users are pretty good and includes hit original productions like "House of Cards."

The collection of DVDs for the mail-in DVD business is also impressive.

Weaknesses

The primary weakness of its products is the medium itself. Since the sale of products would depend on the quality of the internet connection, the company is dependent on others for its business. A slow internet connection -- which is problem in many places in India and similar developing markets for example, would hinder its sale even if the products are good and are in demand. The company does not have any control over the internet quality and its speed and hence might suffer due to a faulty network.

Controlling the inventory is a problem for the product especially in the mail-in DVD business where delays in delivery can leave customers huffing. Moreover, the some DVDs might get broken or lost during delivery. This can result in the company losing some customers despite the product being excellent.

Renting of Netflix products is a problem as a customer needs to rent one before renting another. The products of the company are also not suited for customers who watch one or two movies a month and for such customers, the costs can be too high.

Product Life Cycle Management and New Product Development

The product lifecycle of Netflix depends on two factors. The fist is the demand and the continuing popularity of a particular content. While here can be demand for new content -- new movies and TV shows, there can also be demand for old content. People might like to watch old movies and TV show. In the U.S. for example, there is still demand for the 'Star Wars' series of movies even after 25 years. There is similar demand for other old movies and TV shows. Hence in this respect the product life cycles of Netflix products is determined by the demand of the content and not by the number of years the product has been in the market.

A second factor for the life cycle of the products of Netflix is the agreement of the original manufacturer of the films and TV shows. The product life cycle depends on the longevity og the agreement between the two parties. In case there is a fall out between the two parties and one of the parties decide to move away from the agreement, the product life would end abruptly. For example, Netflix had to end its agreement or association with Viacom recently and thus lost rights to the products -- movies and TV shows that the production company had produced. This ended the life cycle of the products abruptly even though a number of the products were in demand. However with another agreement with Disney, Netflix managed to acquire new products from Disney.

Therefore it can be said that the Product Lifecycle Management at Netflix in India would depend on the number of agreements and deals that they manage to strike with the producers of the films and TV shows while keeping in mind the possible demand for the content that they would get access to following the deals and agreements. More and better deals mean more products. However the product life cycle would primarily depend on the popularity of the content and its demand. Therefore managing the product life cycle for Netflix would mean judging which content is or is likely to be in demand in the future and striking deals with the corresponding producers of the content to gain access to rights over the products.

Brand Name, Brand Image and Brand Equity

Netflix is a global brand. Though primarily based in the U.S., the company plans to move ot o tehr markets -- especially the emerging markets of India and China where there is a growing number of net users. The company has a subscriber base of around 50.65 million globally and the brand image of the company is the strongest point for it entering India. With only Bogflix to give competition in India, Netflix can boast of a head start for itself in the Indian market given the globally recognized brand name -- including India where its brand is known. A large section of the internet users in India are aware of the products and the services that are offered by the company. The reputation of the company of being the global leader in digital content is a strong marketing factor compared to the local digital content provider BigFlix. Hence the brand name and brand image of Netflix would be critical in its plans to enter the Indian market.

The Augmented Product

For Netflix, the augmented product would be the presale support that is provided by the company in terms of easy access and users friendliness of the website where users can search the movies or TV shows easily. Product augmentation can also be done during the purchase of the products through assistance in purchasing which can be extended to the after sale support through mitigation of any problem that the users might encounter while viewing the content. In India, where there is a growing number of first time internet users, these aspects of users friendliness and sale and after sale support is critical to enable customer acquiring.

Price

Pricing Objectives

The pricing objective of Netflix in India would be dual. While initially, the company would want to acquire users, it would also strive to price products to attain sustainability of its business operations. Since the Indian market is still price sensitive, Netflix needs to formulate a price strategy that meets both the objectives.

Pricing Method

Netflix uses the value-based pricing method. This pricing is independent of the cost of purchasing the product. Here the pricing depends on the demand and the popularity of the product -- movie or TV show. It is suggested that in India too, the company should follow the same principle.

Since there is not much competition in the Indian market -- no big players except Bigflix, Netflix does not need to go for competitive pricing method.

Being a market leader, Netflix can opt for a value-based pricing method for its products. At present the company has three separate subscription rates all of which have different features that users would be able to access -- the higher the subscription value the higher the features available to the users.

Pricing Strategy

Netflix follows a penetrative pricing strategy where the company keeps that initial prices low for new products and new market entry in order to acquire users and later on increases the prices of the products from time to time (Zhang).

When the company started its business in 1997 as an online, mail-order and streaming movie rental company, the company's pricing strategy included one-, two- or three-at-a-time DVD rental plans which had different prices. The three-at-a-time package, which the company called its "best value" package, was priced at $14.99. Other offers included a little over $1 per DVD during the month for customers who turned around at least three movies each week.

The aim of the low pricing strategy was to draw away customers and viewers from Blockbuster. Netflix managed to pull in customers with this initial pricing strategy along with the first-mover advantages in mail order and streaming technology. Thus the company managed to develop a sustainable competitive edge by the initial low pricing before the larger competitors entered the market.