Audit Report on Netflix
Students Name
Course Code and Title
Institutional Affiliations
Instructor
Date
2
Table of Contents
1. Introduction..................................................................................................................................3
2. Service Marketing Mix Analysis.................................................................................................3
2.1 Service Product and Positioning................................................................................................3
2.2 Pricing, Productive Capacity, and Demand.............................................................................5
2.3 Physical and Electronic Distribution........................................................................................5
2.4 Integrated Service Marketing Communication........................................................................6
2.5 Service Process............................................................................................................................7
2.6 Managing People........................................................................................................................9
2.7 Servicescape and Physical Evidence........................................................................................10
3. Recommendations......................................................................................................................11
3.1 Consolidation............................................................................................................................11
3.2 New Competitor........................................................................................................................12
3.3 Buyer Power..............................................................................................................................12
How the Improvements Should Be Implemented.....................................................................13
4. References...................................................................................................................................15
3
Audit Report on Netflix
1. Introduction
A considerable movement away from conventional forms of entertainment is being driven
by the rapid development of digital distribution channels in Australia. The dominant
competitor in this developing sector is Netflix. This service enables subscribers to watch
various TV episodes and movies in High definition via multiple devices. With 190 countries
served, the business, which started in the US in 1997 as a mail-order DVD rental service, is a
significant player in the online entertainment sector (Shattuc, 2020). Due to its user
interaction and intangible delivery of services, Netflix is classified as a cognitive stimulus
processing service under Lovelock's service categorization paradigm (Shattuc, 2020). To
analyze the marketing mix and identify any chances to increase organizational efficiency and
effectiveness, it is essential to recognize that Netflix is a service targeted at people's thoughts.
2. Service Marketing Mix Analysis
2.1 Service Product and Positioning
Any start-up must first consider its "Brand Positioning" or how it will stand out to its
ideal customers. One more definition of brand equity is how consumers rate one brand
compared to another in the marketplace. Netflix uses a unique targeting method to increase
the number of subscribers who become regular customers. Positioned as a subscription-based
video-on-demand platform, it boasts a wide range of content, a user-friendly interface, and
broadcast-quality video to meet the needs of modern digital media consumers.
Based on demographics, behavioral intentions, and psychographics, Netflix has
segmented its audience to serve them better. Statistics show that on a budget, young adults,
teenagers, and middle-class families make up most of Netflix's subscriber base. Because of
4
Netflix's enormous collection of foreign and international films, viewers come from many
walks of life. Netflix focuses on specific demographics of active users. Netflix's marketing
bundles are curated for specific user demographics. Netflix knows its subscribers may move
to a different demographic anytime (Wayne, 2022).
Choosing the right audience to target and choosing the best positioning are the
cornerstones of an effective and persuasive communications plan (Wayne, 2022). Targeting
men and women between the ages of 25 and 55 who are in the medium to higher
socioeconomic strata, Netflix now caters to the general public. According to former Vice
President of product management Gibson Biddle, it may be challenging to position in such a
big market successfully. Still, Netflix tries to stand out by promoting "convenience, variety,
and value" (Shattuc, 2020). Their product caters to a wide range of entertainment tastes by
providing a comprehensive collection of films and TV shows in every genre, from action to
comedy. Netflix uses prediction models and expert systems to customize content for their
audiences and offer consumers a distinctive watching experience as soon as they log in.
Although the company's current marketing statement is "Movie Enjoyment Made
Easy," it has grown much too similar to rival services like Presto and Stan, which also provide
convenience in recent times (Shattuc, 2020). To stand out in such a large and crowded
industry, Netflix must concentrate on its customers' motivations, sentiments, and emotions in
connection to the entertainment they are offering (Shattuc, 2020). Marketing the emotional
value of enjoying movies and television with loved ones is essential for establishing yourself
in such a vast market since it appeals to consumers' emotions. Additionally, the corporation is
having problems with the material that differs between the US and Australia. Netflix Australia
falls short of consistently and routinely adding fresh material. Customer satisfaction will
increase, and service quality will improve by upgrading product offers to standardize content.
5
2.2 Pricing, Productive Capacity, and Demand
Netflix's price structure is intended to provide users with an exceptional bargain.
Under value-based pricing, the three available membership tiers offer varying amounts of
value. Each of Netflix's three membership tiers—Basic, Standard, and Premium—provides a
range of features, including HD and the number of devices subscribers may stream
simultaneously. The Standard membership, which costs $11.99 a month and gives users HD
access on two devices, is the most popular (Wayne, 2022). Additionally, the business
strategically enables members to try the service for free for the first month. With prices in line
with services like Stan and Presto, Netflix runs at typical industry rates. Due to the size of the
company's target market, they choose not to use price differentiation strategies; instead, they
promote its non-restrictive, terminate-at-any-moment membership, which offers a very
reasonable monthly pricing. This fair pricing properly fits the target market's demand and
production capacity, although Netflix might raise prices by continuing its year-round sales
campaigns.
Netflix's pricing is based on economic supply and demand. Netflix must continually
develop and update its collection to fulfill viewers' unquenchable need for "more, more,
more" content. There are many content creators, but the number of accessible, guaranteed
attractions is decreasing, and their costs are growing. Internet streaming video is growing.
Due to increased competition for a limited supply of well-established entertainment, prices
may rise, and service providers may need to find new revenue streams (Zhu, 2022). Netflix's
only source of revenue is membership fees. Therefore, it might not be easy to reconcile vital
needs with consumer price-hike tolerance.
2.3 Physical and Electronic Distribution
Netflix now employs a self-service model, where the consumer carries out all tasks
alone. When a consumer has a problem while using the service and requests help, that is the
6
only time a Netflix staff would become involved. Customers often choose remote channels
because of their ease, high product knowledge and confidence levels, and technological
sophistication (Kannisto, 2019). Due to its technical self-service nature, the Netflix service
may now be accessible 24 hours a day, 365 days a year. On a computer, a laptop, a tablet, a
smartphone, a smart TV, a Blu-ray player, a video game console, a media streaming player,
and a set-top box, Netflix may be evaluated (Netflix, 2016).
All of Netflix's operations in Australia are conducted electronically. Other nations,
like America, have physical and digital distribution outlets for Netflix. Additionally, Netflix
may provide optional physical channels via which staff members may interact with users who
need support. Older age groups are not yet reflected in statistics, and 55 to 64-year-olds are
the least likely to utilize Netflix (Kannisto, 2019). Because older people see Netflix as a
"high-risk service" given that it can only be accessed online; Netflix may be able to draw
them in by offering interpersonal services.
Because the company's services are accessible through the internet (and other strategic
distributors), clients may use them whenever and wherever they like, regardless of location.
As a result, Netflix will use multichannel distribution so that it can provide a service that is
both more efficient and effective. Like, several libraries provide first-time users access to
streaming services. In addition, Netflix has negotiated exclusive partnerships with other
platforms, including Fox, so that when the premium pay television licensing contracts for the
movies in those other platforms' libraries expire, the film will become accessible on Netflix.
2.4 Integrated Service Marketing Communication
To achieve marketing goals, service organizations' marketing communications mix
comprises advertising, personal sales, direct marketing, corporate communications, and lead
generation (Kannisto, 2019). According to Ted Sarandos, Chief Content Officer at Netflix,
user interface use determines how much money the company spends on marketing (Dias et
7
al., 2018). In its communications approach, Netflix uses direct marketing, media relations,
and advertisements. Netflix has utilized interactive, outdoor, and broadcast advertising, all of
which have proven successful. Public relations coverage from this campaign has increased
consumer involvement with Netflix.
Netflix uses direct marketing, particularly email, to promote new content. In general,
Netflix's marketing communications mix is quite successful in speaking to its consumers, who
directly impact the company. When attempting to persuade older individuals—who may not
be digitally savvy—to start utilizing Netflix, unique marketing techniques may be employed.
However, this marketing method is costly; as a result, test marketing is suggested. When
recruiting older clients to join up, sales promotion may be combined with personal selling.
Although active, outdoor, and television ads have been utilized extensively abroad, including
them in Australia would be advantageous for the company to boost user sign-ups and
consumer engagement.
Since it contains owned, licensed, and licensed first-window content, Netflix provides
movies, shows, documentaries, and originals. It has standard, essential, and premium plans
and consistently adds TV shows and films to match demand. Netflix's DVD rental service is
still operating and will likely remain profitable. Netflix customers with an Internet connection
may watch TV series, movies, and more (Kannisto, 2019). Netflix uses geotargeting to
promote its services, which ensures that it can be seen on almost any screen at any time. It
may be seen on many mobile devices, desktop computers, televisions, tablets, and video
gaming systems.
2.5 Service Process
To lead the entertainment business, Netflix invests extensively in its media
infrastructure and user experience. Even though much of the work to improve the user
experience is unseen, it takes time and effort. This includes the user interface, content
8
production, and partnerships on the front end. The technology at the heart of warehouse
operations is vital to the success of the organization as a whole since it increases customer
satisfaction and brand value (Shattuc, 2020).
No one can monitor Netflix's health because of its size, complexity, and dispersion.
Netflix's IT infrastructure is now in Amazon's cloud data centers, making it more adaptable.
Netflix has problem-monitoring tools in place. By automating and centralizing these tools,
Netflix can spot issues, establish their cause, and fix them before they spread. Netflix's
success depends on serving tens of millions of concurrent users. Sending high-quality films
without any breaks requires a lot of bandwidth. Netflix's Open Connect content distribution
network is built on a caching architecture. During peak times in North America, Netflix might
be responsible for one-third of all internet traffic. Because Netflix's algorithm can predict
which movies its customers want to view the next day, it can schedule DVD installations for
off-peak times.
The Netflix service procedure has a few stages and very little complexity. Netflix
collaborates with content producers to license the streaming rights, enabling them to offer
users a wide selection of TV episodes and movies (Netflix, 2016). The Netflix Service
Process Blueprint (see figure 1) defines this self-service distribution (Wirtz et al., 2012).
Because it makes the procedure incredibly comfortable for the client and allows them to
consume whenever and wherever they desire, this low-contact approach has been successful
for the business. Netflix videos can only be streamed at speeds greater than 0.5 Megabits per
second (Netflix, 2016).
As the business grows its service globally, it can be difficult for specific areas to see
where internet connections might be shaky (Shattuc, 2020). Giving customers who can't
always get a stable internet connection an opportunity to view content offline would improve
the customer experience (Shattuc, 2020). The effectiveness of this approach would improve
9
Netflix's experience to profitability model, customer contentment, and service quality.
Customer happiness and service quality growth promote cumulative satisfaction, boosting
consumer loyalty behaviors, increasing financial loyalty outcomes, and enhancing the
company's return on investment (Shattuc, 2020).
Figure 1: Netflix Service Process Blueprint.
2.6 Managing People
When hiring employees, businesses that don't understand the basics typically pay the
price. As a company, Netflix takes care of its employees from the bottom up. This
necessitates selecting job applicants whose values and aims to mesh with those of the firm and
who will contribute to its success. Netflix contends that the best course of action is to
eliminate the few employees who aren't doing their weight so that the firm can focus on
10
retaining its most exemplary individuals. At the same time, other organizations are
continually concerned about the few employees who aren't pulling their weight.
The success cycle at Netflix is ongoing because the business promotes employee
autonomy (Netflix, 2016). To boost its chances of long-term success, Netflix thinks it has to
recruit and support creative individuals (Netflix, 2016). Netflix believes that, in the long run,
flexibility will win out over efficiency (Netflix, 2016). Instead of focusing on the amount of
work an employee can do during the hours they choose, the firm does not have a working
policy that requires workers to put in a certain number of hours each day (Netflix, 2016).
Employees are also urged to take holidays so they may return rejuvenated and motivated to
develop and work more efficiently (Netflix, 2016).
Employees are compensated generously since a strong performance culture depends
on it (Netflix, 2016). Employees are given challenging tasks to complete, fostering their
growth as skilled workers (Netflix, 2016). Employees that exhibit a strong work ethic and
talent and represent the company's culture and ideals are offered promotions (Netflix, 2016).
The Wheel of Effective Human Resources idea supports Netflix's management paradigm as it
recruits the appropriate people, and provides for, inspires, and energizes its staff (Onesto,
2022). This argument contends that Netflix's present management structure is enough and
does not need improvement.
2.7 Servicescape and Physical Evidence
Three physical variables are considered when describing a specific business's
servicescape: the surrounding environment, the spatial structure and functionality, and
symbols, signs, and artifacts (Bitner, 1992). Although Bitner's Servicescape Model refers to
actual locations, many sensory qualities also hold when considering virtual areas that are
present throughout service provision. Netflix captures the online atmosphere through the
excitement-inducing color red and images of popular TV shows. The website's spatial
11
arrangement is straightforward and brief, but it is less practical because there are few
indicators, symbols, and artifacts. The website provides very little information to a new user
without using the "Sign In" option; only a single FAQ page is quietly offered at the bottom of
the page. According to research by Harris and Goode (2010), opinions of online
servicescapes' credibility and loyalty plans are related. A Netflix information section should
be included and prominently presented on the homepage to portray a trustworthy website and
clarify client expectations.
Additionally, Netflix offers smartphones and smart TV applications, which serve as
physical items for customers, in addition to their website. Although many customers familiar
with technology find the applications adequate physical proof, individuals who do not share
this knowledge may find it easy to ignore them. To reduce the gap between customers and the
intangible virtual service, a bimonthly or quarterly Netflix TV guide might be sent to
members through the mail and contain information about future releases and Netflix Original
programs.
3. Recommendations
Even if Netflix has more than 200 million subscribers, it should not rest on its laurels
because of this achievement (Dias et al., 2018). The following paragraphs will detail how we
think Netflix can improve and the issues we feel it should focus on the most moving ahead.
3.1 Consolidation
There are just a few significant players in the streaming industry. For a long time, Netflix
was the undisputed market leader with almost no serious opposition. Many new companies
are trying their luck in the streaming sector now that they know it may be lucrative. Many
companies and networks have combined their efforts into one streaming service since there
aren't many demands in the streaming sector. Other services have separate sites but provide
packages at a discount. Disney+, for instance, may be bought alone or as part of a package
12
subscription that includes ESPN and Hulu. Netflix is one of the few streaming services that
has managed to avoid this (Desterro, 2021).
Consolidation is not in Netflix's best interest at the moment, but it is something to keep in
mind as an option for the company. Netflix has no plans to merge with any other companies
shortly, but the streaming industry's current trend of consolidation has affected the company.
Considering how consolidation boosts the allure of Netflix's rivals, it poses a potential threat
to Netflix's market value and foothold.
3.2 New Competitor
Consideration must be given to the new competitors that have just entered the streaming
industry. In general, more competition lowers the possibilities for Netflix's growth. The
launch of Disney+ serves as a perfect illustration of this point. Disney+'s meteoric surge in
popularity had a detrimental effect, but I suspect it was more than offset by the substantial
increase in volume that COVID-19 indicated. But this doesn't make up for the harm that
Netflix has taken from upstart rivals like Disney+ (Fleischman et al., 2021). Consequently, I
believe that the entry of new competitors will, to some degree, slow down Netflix's growth,
but I do not anticipate this to be as disastrous as it would have been if it did not benefit from
the first mover.
3.3 Buyer Power
Customers (viewers) now have greater bargaining power due to the growing number of
businesses entering the streaming sector—the balance of power changes for the consumers
when there are more streaming services from which to choose. A wide variety of service
providers are available to consumers, each with its pros and drawbacks. Because switching
service providers is so easy, the customer has a lot of power in the negotiation process. Most
streaming services are paid monthly, and subscribers can cancel their subscriptions anytime.
As a result, viewers have a great deal of influence on the companies that offer the material.
13
Since most monthly subscriptions cost less than $10, the industry is not particularly
sensitive to pricing. Therefore, the content presented to consumers is the critical factor
influencing their ultimate choice. On the other hand, some viewers may stick to watching the
content they like most rather than making do with what they have. If Netflix does not produce
sufficient investments in creating original, high-quality programs, the company risks losing its
content and users.
How the Improvements Should Be Implemented
Reintroduce Risk-Free Offers
Free material is always well received. Though something is free, you may take it even if
you do not need it. For some viewers, the prospect of a free trial is enough to warrant a
subscription. They accurately represent what it's like to use a service from beginning to end.
Netflix has a broad selection of high-quality videos, so everyone will likely discover at least a
few that they like watching. Bringing back free trials is a must for Netflix if it wants to attract
new customers and even re-engage inactive ones.
Quickly and Easily Disseminate Content Across Multiple Networks
How often do you wish you could share a movie or TV show on WhatsApp or another
app? Netflix finally enabled this much-requested feature. A share button is essential to every
digital business. Sharing Netflix programs on social media is an easy and cheap way to boost
membership. People may join Netflix only to watch a recommended show, even if they have
no interest in it since they feel the suggestion is credible.
Capitalize On Merchandise
For decades, Netflix has created famous shows (Dias et al., 2018). Disney wants to cash in
by marketing similar items; this technique has succeeded. For years, Netflix has produced
unique content, so it must swiftly conquer this market to catch up to Disney. Netflix is wise to
explore merchandise to promote its programs, but it must be strategic. If done correctly, these
14
brands will become fixtures in consumers' lives and homes, ensuring they won't be forgotten.
If Netflix succeeds, it can advertise its content more effectively, improving its profile and the
number of subscribers.
Netflix's business and membership base have grown as the streaming leader for years. A
household brand alone can't maintain growth in a continually evolving market due to global
events and day-to-day problems. Netflix may gain market share by making service changes.
Over 200 million subscribers are impressive, but there are still more prospective clients.
15
4. References
Bitner, M. J. (1992). Servicescapes: The impact of physical surroundings on customers and
employees. Journal of Marketing, 56(2), 57-71.
Desterro, A. F. D. C. (2021). Netflix: see what's next-gambit to the crown (Doctoral
dissertation).
Dias, M., & Navarro, R. (2018). Is Netflix Dominating Brazil? International Journal of
Business and Management Review, 6(1), 19-32.
Fleischman, B., Ondracek, J., Saeed, M., & Bertsch, A. (2021). Netflix: Strategizing
Corporate Resources and Capabilities.
Harris, L. C., & Goode, M. M. H. (2010). Online servicescapes, trust, and purchase intentions.
Journal of Services Marketing, 24(3), 230-243. doi:10.1108/08876041011040631.
Kannisto, K. (2019). The motivations for Netflix to vertically integrate its business model.
Netflix. (2016). Connect to Netflix using your favorite devices. Retrieved from
[Link]
Onesto, A. (2022). The Road Ahead for HR Management. In The New Employee Contract
(pp. 99–108). Apress, Berkeley, CA.
Shattuc, J. (2020). Netflix, Inc. and online television. A companion to television, pp. 145–164.
Wayne, M. L. (2022). Netflix audience data, streaming industry discourse, and the emerging
realities of 'popular television. Media, Culture & Society, 44(2), 193–209.
Zhu, B. (2022). Book Review: No Rules Rules: Netflix and the Culture of
Reinvention. ABAC Journal, 42(1), 303–306.
