rategies 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.
