Case 4

Internet companies, like brick and mortar companies, use a variety of pricing strategies to generate revenue for their company. The pricing strategies include fixed, dynamic and free. Netflix (www.netflix.com), a pureplay Internet company specializing in movie rentals, follows the fixed pricing strategy.

Netflix was founded in 1997 by two previous Pure Software employees. Netflix allows subscribers to select movies they wish to watch from a list of over 100,000 movies and 12,000 television shows and then sends them the movies through the mail. Depending on the level of subscription the customer will receive one to three movies at a time. As soon as a movie is returned, the customer will receive the next movie on their list. The movies are sent with prepaid envelopes so that the customer can return the movies free of charge whenever they wish. In addition to the movies that are sent through the mail, the subscriber can view movies via the Internet. The number of Internet movies that can be viewed depends upon the subscription level.With the high costs of per movie rentals at big chain stores such as blockbuster and the astronomical cost of movie theatres, consumers are looking for cheaper and more convenient ways to satisfy the movie watching desires.

As I mentioned before, Netflix follows the fixed pricing strategy. Fixed pricing means that the price is the same for all customers. Fixed pricing is divided into four sub categories; markup pricing, volume-based pricing, bundling pricing and promotional pricing. Netflix uses the volume-based pricing strategy. Depending on the level of subscription, customers’ prices will vary.

There are four plan options. The first is a limited plan that costs $4.99 per month and the subscriber would receive two movies per month and two hours of online viewing. The second is an unlimited plan the cost $8.99 per month a month and the subscriber would receive one movie at a time and unlimited online viewing. The third plan is unlimited and the cost is $13.99 per month. For this plan the subscriber will get two movies out at a time and unlimited online viewing. The final plan is unlimited, cost $16.99 per month and the subscriber will receive three movies at a time and unlimited online viewing. Customers can set up an account where their credit card is charged every month and they are able to cancel their membership online anytime they want.

This pricing strategy seems to be effective for Netflix. By dividing the subscription levels up, customers are allow to choose the plan that works best for them. According to Netflix’s annual report, their net revenue has increased 20 million from 2007 to 2008. This jump in revenue indicates that Netflix’s pricing strategy is working for them.

I personally like that I was able to pick the plan that worked well for me. As an avid Internet movie viewer, having the unlimited Internet movies was a huge benefit, which is why I chose to subscribe to the unlimited $8.99 per month plan. Having options is important to customers and by offering pricing options Netfix is appealing to a wide range of movie viewers. I feel that it would be beneficial for Netflix to offer a more customized subscription plan for customers. If customers were able to get exactly the amount of DVDs and/or Internet viewing they want, they may be more apt to sign up for the service.

Shop It To Me

Internet usage has increased dramatically in the past few years, which has caused a change in the typical business model. There has been an ongoing shift from traditional freestanding stores to pure play companies that exist solely on the Internet. By using the pure play model, companies have the ability to cut entry and overhead costs dramatically compared to traditional brick and mortar companies. For a company that is just starting off it is easier to break into the market as a pure play company because of the cheaper start up and overhead cost and the exponential room for growth in domestic and international markets.


One such pure play company is Shop It To Me, which is an online company that scours the Internet for sales based on the customer’s shopping criteria and then sends the customer daily or weekly emails with the sale information called salemail. When the customer comes to the welcome screen they must set up an account with their contact information and what sort of the clothing they are interested in purchasing. The customer can choose from a list of specific designers, styles or sizes and how often they would like to be notified about the sales. The customer will receive emails with photos and links to the clothing that matches their criteria. Personally, I love that I don’t have to search through hundreds of websites and categories to find that pair of jeans in my size at a price I can afford. Shop It To Me delivers the information directly to me, which saves me countless hours of browsing. In the busy and chaotic world that many of us live in, we simply don’t have time to shop around for a deal. With Shop It To Me we don’t have to. To the left is a sample of the type of clothes that were sent to me in my weekly salemail letter.

Shop It To Me has partnered with many leading retailers to provide this service free of charge. They feature certain designers that their affiliate department stores carry, in order to promote the sale of the discounted apparel. They have followed the affiliate model for revenue generation. The affiliate model generates revenue from banner exchange, pay per click or revenue sharing. The company may use any combination of the three to make up its revenue. Shop It To Me advertises retailers sale items in exchange for revenue sharing. They make a small profit on the sales that their website directs to their affiliate’s sales. Since the overhead cost is minimal, Shop It To Me is able survive on the profit they make from revenue sharing.

To evaluate their success, Shop It To Me has developed a way to track purchases and customers. The first way that they are able to track performance is by the number of people they have register on the website. Through this registration they are able to see how they are responding to the salemail that is sent to the customer and how often they are actually on the website. Another way that they are able to track success is through customer recommendations. Shop It To Me is marketed purely through word of mouth. Customers are encouraged to invite 10 of their friends to join the website and when these 10 friends actually register the customer will receive a $10 coupon to one of three features stores. The final way that they are able to track their success is through purchases at their affiliate’s websites. They are able to see who is being directed there from their salemail and buying the suggested products.

Pure play companies such as Shop It To Me make it infinitely easier for start up companies to find their place in the market. As a start up company, cash is often tight, but with pure play companies the overhead and marketing cost are limited. They are able to track their success and attract new users at a much lower cost than brick and mortar companies. In the future, pure play companies will continue to thrive in our Internet-focused culture.

Should Mega Video be held accountable for illegal content on its website???

The rise of the Internet has blurred the lines between legal and illegal use of digital media. There is an abundance of media available to anyone with just a stroke of a key and a click of a mouse. Copyright infringement occurs all over the Internet with music, movies, software and much more. It is a challenge to locate and disable these websites due to the vast quantity of sites.

Websites such as Mega Video provide users with television shows and movies free of charge. Mega Video is a user-generated site paid for by advertisers. The website is open to members and non-members. Non-members can view 72 minutes of content at a time with a 50-minute break between views. This is supposed to deter non-members from watching movies on the website; however, there are many ways around this “restriction.” Non-members have to simply let the video load completely and then go offline to watch it without being disrupted. Members have the option of a monthly membership costing $9.99 up to a lifetime membership of $199.99. Being a member allows you unlimited access to loading and downloading content on the website. The user-generated content on Mega Video ranges from home movies to sitcoms to blockbuster movies. There is a fair amount of content that is legally put on Mega Video; however, not all of it is.

Last week I watched two movies that are currently still in theaters on Mega Video, “Slumdog Millionaire” and “The Curious Case of Benjamin Button.” I know that it is illegal to watch these movies online; however, if other people are doing it why shouldn’t I? It is my opinion that people who are uploading the content to the site are in the wrong, not me. They are the ones that are infringing on copyright laws by taking this content and uploading it as their own. So if the movies and shows are online anyways, why shouldn’t I enjoy the perks and watch it?

Users provide the content on the site; therefore, Mega Video itself has little responsibility when it comes to the monitoring the website. Users are allowed to put up whatever they want on the website as long as they check the box saying it is not violating any copyright laws. Despite this “warning” Mega Video does little to enforce the removal of such material. Users must “notify [Mega Video] in writing in order for us to identify the allegedly infringing content” before they take action. This is an unnecessary hassle that most are unwilling to deal with unless they have a connection to the content that is being infringed upon.

Mega Video claims they abide by the Digital Millennium Copyright Act as an online service provider. The DMCA “criminalizes production and dissemination of technology, devices, or services intended to circumvent measures (commonly known as Digital Rights Management or DRM) that control access to copyrighted works and it also criminalizes the act of circumventing an access control, whether or not there is actual infringement of copyright itself” (Wikapdia.com). However, since Mega Video is based out of Hong Kong the same rules and scrutiny do not apply. Hong Kong’s infringement laws are far behind that of the United States; therefore, despite Mega Video’s obvious promotion of illegal material they will not face any serious legal problems in the near future.

I have been using Mega Video and other similar websites since I started college in 2005. I would estimate that 30% of the time that I click a link to one of these websites do I come across message saying the video has been removed for copyright infringement. And even if I do come across one of these messages I simply return to the previous screen that links me to the same video posted by a different user. Mega Video may try remove some of the illegal material on the website, but as soon as they do the same content is posted by someone else.

The DMCA needs to join forces with other global agencies in order to combat copyright infringement. If the continue to have separate laws for different countries, there will be no way to truly stop copyright infringement from occurring. If the DMCA stands as a global united force, they could put an end to this illegal activity. Until they do that, there is no end in sight for online copyright infringement.

Nike ID vs. Puma Mongolian Shoe BBQ

The increase in technology has caused mass production to be replaced by mass customization. Advances in technology have made mass customization a possible alternative due to its comparable cost and extreme customer benefit. Companies that allow customization of products allow customers to express their individuality, which creates a more enjoyable shopping experience. Two companies that have taken advantage of the mass customization trend are Nike and Puma through the NikeID and Puma Mongolian Shoe BBQ sites.
The NikeID website (www.nikeid.nike.com) is a fully developed branch of the Nike brand that offers men and women’s apparel that the customer can design. The customer can select the color palette they wish to work with or select the shoe or clothing style and change the color from there. The website allows customers to sign up for a NikeID one-on-one designer session where a Nike designer will assist you in creating your perfect shoe or you can sign up for studio updates. In addition the NikeID studio offers customers a chance to win the signature series contest sponsored by Nike and Ludacris. This contest rewards the customer’s individuality and creativeness. Nike has taken the high-tech performance approach to engage the customer into the design process. The website is fairly easy to navigate due to the contrasting colors and bright visuals. The dropdown menus makes it easy to find exactly what you are looking for or it allows you to search all products. The NikeID website also has pre-made creative sneakers and apparel for immediate purchase. These items are more fun and creative then the traditional Nike products, therefore they stick with the NikeID concept.
The customer has the ability to choose from a variety of sneaker models based on usage or style preference to design. From there they can select different parts of the sneaker; such as the base, swoosh, lining or lace and change the color to what you prefer. Each shoe has a thorough product overview and the technology that is behind the product to give the customer a better understanding of what they are purchasing. This sort of personalization makes your shoe unique to only you, which is appealing in an individualistic society such as America.
The Puma Mongolian Shoe BBQ site (www.puma.com/secure/mbbq/) uses the creative/ artistic approach to sell their sneakers. Upon entering the website you are greeting by a series of flash photos and text. The photos (and website name) confuse the customer slightly- are they going to a shoe or restaurant website? On the main screen you see very little reference to the Puma company. A “menu” opens which contains three types of sneakers that you have the option to design. This number is far less than the NikeID website. The shoes are not gender specific and rather typical compared to the regular line of sneakers. There is no other purpose for visiting the website besides designing your own sneaker, which is different than the Nike ID site that offers a variety of information.
While the website may appear to have far more graphics than the NikeID site, there are far less options when it comes to designing one’s sneakers. There are three shoe options that the customer can design. Like the Nike ID website, the customer can pick the colors and patterns of different parts of the shoe to create their unique shoe. If the customer likes the finished product they can purchase it or if they want to think about it before purchase they can save it in their “dogging bag.”
After visiting both website I found that I prefer the Nike ID website because of the ease of navigating and variety of options. The Nike ID website allows the users to find what they are looking for a lot easier than the Puma Mongolian Shoe BBQ website. The Puma website may have gone overboard with their creativity and flash images because it almost over powers the design possibilities of the shoes. For such a creative website, having only three sneaker options greatly hinders my willingness to design on that website. Nike ID uses technology to create the best customer experience overall. While visiting the Nike ID website I created my own sneaker, which was my overall favorite between the two sites.