Marketing Report on DVD Rental Services

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Introduction

DVD Rental Service's Current Target Market Demographics

Movie renters are usually those people who have gone to see a move within the first two weeks of its release. These same people will then rent the move from a DVD rental establishment from such locations as Blockbuster, Hastings, or Netflix. DVD rental services' target market is comprised of a population of 18-24 year olds where 52% are female, and 63% have at least one child, and 51% have at least four people who reside at home (Haven, Ross, Stephens, West & Williard, n.d.). In 2010, the female and male population of 15 -24 year olds numbered around 43,626,000 (U.S. Census Bureau, 2012).

Determine why you believe the product or service is declining in popularity

McIntyre, Sauter and Stockdale (2010) assert that the DVD rental service, gasping for air on technology created in the early 1990s, is marked for obsolescence. Aside from new advances of technology, online video piracy has long been an enemy of DVD rental services. As fast as one illegal operation is shutdown like BitTorret an Pirate Bay, others rise up to continually victimize legitimate DVD businesses. Other legal entities have overcome the DVD rental service such as cable TV and Video on Demand VOD, which began delivering streaming video to viewers since 2000. In fact, in 2009 VOD digital sales accounted for at least 10% of the $20 billion home entertainment industry (Edson, 2013). By 2009, video delivered over the Internet through medias such as Internet-Enable Blu-ray and TV, streaming movie devices like Roku, and dedicated video players called set-top boxes played a large role in the decreased consumer interest in DVD rental services (Edson, 2013). The bottom line is that delivery platforms like Netflix are changing the way content is delivered to viewers, and as far as Netflix is concerned this is just fine with them (Edson, 2013).

One of the issues that have decreased the popularity of DVD rental services is the policy called "throttling," which involves a practice of giving priority to the customers that were least active (Wagner, 2006, p. 10). For example, Netflix uses this policy to increase their customer base and profits by developing a close relationship with customers and their needs. As Wagner (2006) points out, Netflix's policy is "firing the customer" (p. 10). Firing the customer involves identifying and purging the business of the least profitable customers in order to gain higher profits, and thereby concentrating on the best customers. At Netflix, customers pay a flat fee for the use of unlimited DVD rentals based on which membership level the customer choices. Since the revenue is fixed (so much per customer), and the expenses variable depending of shipping costs, the customers who are the most active cost the company more money and are therefore less profitable. Netflix's attempt was to only fire those customers they cannot satisfy, however this action caused negative customer reaction not only from the most active customers but from those who have not been affected by this policy (Wagner, 2006).

DVD companies like Netflix need to make their policies known and clear to ...