Computer Information System

Assignment 1

                          Weidi Li

1. . Describe the two separate Netflix offerings.

Netflix started as a DVD-by-mail rental service business. Customers do not need to pay any extra mailing fee to rent DVDs, and its website makes people have more choices and is more convenient for customers to choose. Based on its own model, Netflix grows into a giant, and then foresaw that streamed video is the future so the firm was then split into two section. Netflix streaming is established. It offers streaming-only subscription online, and for only $9 a month, customers are able to access unlimited streaming library. It’s much better because you don’t need to tune in at a specific time and you can rewind and fast-forward as you like.

2.What were three of Netflix’s sources of competitive advantage in the DVD-by-mail business?

Netflix’s maintained its lead in the market by having a big customer base, the data asset and best-in-class customer experience.

Big customer base: the economies of scale of Netflix is comparatively larger than others. Any firm who plans to replicate its operations will cost a lot. The yearly running cost of Netflix is about $300 million, so it‘s a quite high entrant for this industry. In addition, Netflix has its own special operation and customer experience, therefore, after Blockbuster and Walmart launched copycat efforts, the churn rate of Netflix even fell.

the Data Asset: Netflix owns massive and growing arsenal of user data, which include customers rate, views and favor. Netflix gathers those data and creates a special software technology called Cinematch, which not only offer the best-in-class customer experience( which will talk in the following section, but also bring Netflix operational advantages. This system examines inventory availability based on customers and tailors recommendations to favor movies in order to save user’s waiting time. Furthermore, Cinematch is also beneficial to studios, it developed a revenue-sharing system where studios could offer Netflix their DVD catalog at a wholesale price in exchange for a cut of Netflix subscriber revenues each time someone requests a given DVD.

Best-in-class customer experience: According to the system Cinematch, Netflix provides a personalized videos service to customers. It monitors trends among customers and filter system to customize each users webpage which shows recommendations videos, music, and news. Based on this system, there are over 60 percent of the content that Netflix users request their order. This is only a tiny part of its excellent customer experience strategy. Netflix was always ranked the best on many ranking indexes like ACSI and Nielsen ranking.

3. What is the Netflix churn rate and what are the reasons behind the rate?

Netflix churn rate is roughly below 10%, which is said by Parks Associate in an article on August 3, 2015. As I mentioned above, its churn rate even fell when other competitor launched copycat efforts. Such a low churn rate ascribe to Netflix special operation strategies. For instance, users will store a bunch of data in Netflix, turn to a rival means to give up such valuable personalized information, which creates a huge switching cost. In addition, Netflix is able to deliver DVDs overnight to nearly 97% of the US population due to its large scale of the distribution network, such unique customer experience will also remain customer to stay loyalty.