Netflix is an American Media Company that was founded in 1997 by Reed Hastings and Marc Randolph in Scotts Valley, California. Netflix launched as the first DVD rental and sales website taking its first step to becoming a streaming service. Since then they have become the largest streaming service giant with 220 million subscribers. Netflix follows the value-based pricing strategy in which businesses price their product based on their perceived value by their customer. This leads to the recent price changes in consumers’ monthly subscriptions, both domestically and internationally.
The advantages associated with value-based pricing are the development of valuable research, the optimization of the product, and the nursing maximization of revenue. Each market differs in prices acceptable to that host, that’s why many companies such as Netflix conduct sufficient market research before entering the market. Not only does this find your price point but it also expands Netflix’s knowledge of the industry and market. This valuable research tied in with value-based pricing leads to the optimization of the product. Consumers play a part by contributing their thoughts, needs, and wants to allow the cultivation of a higher quality product. All these advantages overlap one another as stepping stones. As the price point is tailored to the market and their perceived value, a larger base is reached and a greater audience can be reached allowing the maximization of revenues.
Exploring Netflix’s strategy it’s vital to explore their price changes and the aftermath. In 2017 Netflix increased prices globally by 10%, and many expected rejection by the market. However, their service growth was not hurt by the pricing increases. They added 2 million new streaming subscribers in the US and 6.4 million overseas. The reason both present and new customers happily swallowed the price increase is that they value the service provided by Net Fz as being worth the current prices.
Further demonstration of their value-based pricing strategy is when they once again hiked prices in 2019. The result of Netflix’s largest price increase in its history was successful. The price increase had a positive impact on the stock price while maintaining consistent churn levels consistent with 2017. Furthermore, they soared past expectations, with domestic and international expectations at 9.6 million versus the expected 8.9 million. This increase in users led to a $720 million increase in their annual revenues.
We have explored price increases but what happens when customers don’t value the service or product a brand is offering? Netflix has had to drop prices in around 30 markets to keep its recently reviewed subscriber growth rolling amid stiffer competition and inflation pressures that are pushing more households to curb their spending. In a quarterly conference call where the company was examining ways to attract more subscribers in its smaller markets “There’s a bunch of people around the world in countries where we’re not deeply penetrated, and we have more opportunity to go attract them”.
Sources:
https://www.paddle.com/resources/guide-to-value-based-pricing#What
https://apnews.com/article/inflation-technology-netflix-inc-canada-3080194bb205686bc832216b3388a579
https://www.cnn.com/2023/02/24/media/netflix-price-cuts/index.html
One reply on “Netflix International Pricing Strategy”
Hi Saba, I found your analysis of Netflix’s international pricing strategy really interesting. As someone who lives in Egypt, I’ve noticed firsthand how the pricing has changed over the years. When Netflix first launched here, the standard plan used to cost 250 EGP per month, which was quite affordable. However, over time, the price has increased to 450 EGP per month. While this is still cheaper than some other streaming services, it’s not as accessible to everyone as it used to be for these reasons.