E-Marketing Case Study #1 (Netflix) -- Question 3

3.    Compare Blockbuster’s and Netflix’s profit models.  How might the differences affect the respective company’s strategies?

 

We define Netflix’s and Blockbuster’s profit models as “The customer satisfaction & online rental” and “The market share & in-store shopping” respectively.

 

Company	Profit Model	Comparison of Strategies	Effect of the strategies
Netflix	Satisfaction & On-line Rental Model	1.    The start-up of Netflix reflexes it’s customer-oriented. 2.    Owing to its customer-oriented concept, Netflix insist that it focus on doing business on-line, for it accurately predicts Internet will profoundly change consumers’ behavior.	1.    Under the umbrella of its customer-oriented strategies, Netflix is equipped with ability to be the Pioneer of business model.  It can always know what the next main trend is and design a new model to fit it. 2.    Insisting on the “on-line” business model makes it cost-saving for Netflix.
Blockbuster	Market share & In-store shopping Model	1.    Blockbuster cares much about its market share, which can be told by its large number(5194) of store opening in 2006. 2.    It also believes that the “in-store” atmosphere determines consumers’ buying.	1.    Under Blockbuster’s business model, it ends up being the Follower.  Lack of proper understanding of consumers, it can’t develop a good business model in time. 2.    Being not able to know its consumers makes Blockbuster misunderstand customers’ behaviors as “in-store” type.  As a result, it will spend more effort on finding visible stores in high-traffic area and high payrolls of employees, which is extremely costly.