Reference no: EM133174714

Netflix began as a streaming service and DVD-by-mail company. Services were initially linked, and consumers could add-on streaming services to their DVD rental, for simply $2 more. Reed Hastings, founder and CEO noticed the need for the two to become separate entities in order to better ensure the success of both. The cost structures and benefits differed and needed to be marketed in such a manner.

The initial thought for Netflix occurred when Hastings discovered an old copy of Apollo 13 in his closet. The concept was to appeal to the new technology adopters, and provide better in-home movie services. Focusing on those aspects, a website was created, which allowed consumers to sort through the selections by various categories, such as the movie title, actor/actress, director, and genre. Utilizing the search engine allowed customers to build a list known as a "que" of movies for Netflix to mail out overtime. The beauty of it all, was the ability to receive a new movie immediately after the return of the previous rental. The plan was successful, but only for a short period of time. Companies, such as Best Buy and Wal-Mart began discounting DVDs, and rental outlets like Blockbuster began replacing the VHS cassette rentals with DVDs. In addition to the discontentment of the consumers. Many were displeased with the prices, because they were equivalent to the retail locations, but provided slower delivery. As a way to improve customer satisfaction, Netflix implemented its no-late-fee subscription model. With various factors working against them, there needed to be a more lucrative idea, which explains the launch of their prepaid subscription services.

Hastings believed this would provide better value to the customers and turn its longer delivery times into an advantage, and he was (somewhat) right. The pricing system changed several times, but eventually the offering for unlimited rentals was introduced. This decision allowed the subscribers to keep three movies at a time, and exchange them as frequently as they desired. With the change came a new group of supporters-individuals who regularly rented movies.

What personal lessons in organizational strategy, leadership, and culture did you take away from this post?

• Did the information above deepen your insights in any manner?