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Posted by on Nov 16, 2009 in Branding | 0 comments

Cut Costs or Customers?

We have seen cost-cutting measures go to the extreme in the past year. Either cut or die, essentially. In fact, 52% of HR departments have conducted layoffs in the past year.

Though Netflix is not suffering as much as other companies, it’s exploring its own ways to cut costs. Lifehacker reported that Netflix is considering delaying its new releases to reduce the purchase costs or they are going continue with their current model — new releases when they come out.

Essentially, Netflix is battling whether or not to maintain the model that has made it successful (featuring great, new releases along with its competitors) or giving customers a reason to go to the Blockbuster down the street. Unless Netflix intends to charge less for its lesser product, it gives customers a reason to change services. Why pay the same amount for a lesser product?

The way Netflix could create a win-win situation is to offer a tiered plan based on movie release dates. Pay X to receive new releases and pay a lesser amount for everything else. This way consumers have the ability to choose a lesser service. Unfortunately, if Netflix decides to make users pay for a lesser product by delaying new releases, it could give consumers a reason to shop down the street.

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