Friday, March 03, 2006

Netflix Throttling & Price Strategy Follow-up

If you have not read my post on Netflix's Business Paradox, I suggest reading it.

Recent articles about Netflix's "throttling" - that is where Netflix purposely slows down how many movies you receive based on your usage - strongly suggests that their pricing strategy is disconnected from their operational strategy, just as I discussed in my earlier blog post. Until Netflix considers changing its pricing or its operating practices, it is going to lose customers to dissatisfaction and competition.

Recently I had the opportunity to try out the Blockbuster service, and while Netflix's website and selection are still superior to Blockbuster's, it seems that Blockbuster's ability to leverage its retail outlets with its online rental business is a strong model. Blockbuster should continue to tie its online and offline to drive consumers into its retail stores (and vice versa). One way Blockbuster can do this is to place kiosks in their stores where users can access their queues and compare their queue to store inventory. This can also be used to print coupons for purchase of used movies based on the user's queue. There are many opportunities here for Blockbuster to use its multi-channel approach to drive sales in both retail and online venues.

1 comment:

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