Introduction
Many companies offer reusable services to consumers who inquire about such services in a particular random fashion (Randhawa & Kumar, 2008). Besides, the duration of service use by consumers is random in such systems. This means that the company cannot frequently accommodate all consumer’s inquiries since the number of accessible servers is regulated. Thus, to overcome such constraints, the company must set a capacity level to earn profits (Randhawa & Kumar, 2008). In other words, the company needs measures to enable it to gain revenues from subscribers instead of selling services or products as single items. This implies that access to such services is through subscription. Therefore, this essay evaluates the benefits and disadvantages of the Netflix subscription service.
Discussion
Netflix is a common online streaming service that offers TV shows, movies, and Netflix original content (Buchi, 2022). This implies that subscribers subscribe monthly to watch whatever movies or TV shows they want. Hence, subscribers can choose Netflix basic, standard, or premium to access the services, as Buchi (2022) explains. Netflix’s subscription service presents both advantages and disadvantages.
Advantages
Predictable revenue, leading to easy business management, is one of the advantages of the subscription service. According to Randhawa & Kumar (2008), one of the instant advantages of the subscription model is that the firm’s revenue could be pretty well predicted monthly. This implies that the company can easily calculate the revenue they could obtain from monthly subscribers. Unlike several sites that offer millions of products or services with flows and ebbs of recognition depending on various factors, Netflix offers a single service that is certain to the subscriber. As a result, the subscriber assures their payment (Buchi, 2022). As highlighted, there exists an open cost of reaching and winning over new consumers. However, once such consumers have signed up for the service, the firm can predict monthly income in advance. This, in turn, enables the company to manage its operations easily.
A good consumer relationship, leading to loyalty among consumers, is another advantage of subscription services (Bischof et al., 2020). With most businesses, it could be hard to engage and establish relationships with consumers since they always create a one-off buying, and the company could not hear from or see such consumers again(Holm, 2021). However, due to the monthly subscription services, Netflix has a long period to establish a relationship with its subscribers (Buchi, 2022). This implies that the business can learn what consumers value and what they would wish to see change. As a result, their feedback could enable Netflix to enhance its model further and retain subscribers for a long period. Netflix also has services like a great mix of shows and movies to keep consumers attached to the company, creating good relations with them (Buchi, 2022). The company also has tons of high-quality original content that enables consumers to access at their preferred period.
Disadvantages
Competition is one of the disadvantages of subscription services. According to Johnston et al. (2021), despite many subscription services performing very well, there will always be threats like ‘me too’ competition. Such competition comes from low-cost new entrants and existing rivals. For instance, according to Buchi (2022), despite Netflix ruling the streaming service industry, the company faces competition from firms such as Peacock and Disney+, who are joining the on-demand streaming game. Disney Plus offers various content, such as animated masterpieces and theme parks, giving it an advantage over Netflix (Buchi, 2022). Besides, the monthly subscription fee is lower than that of Netflix. Therefore, keeping loyal consumers is hard due to the various promotions and offers such rivals’ markets to consumers. Besides, splitting the market is difficult since it is a race to the bottom on the price. This implies that such competitors are willing to offer their services at a low cost to subscribers. Thus, customers are likely to be attracted to them.
Managing multiple consumers is another disadvantage of subscription services. According to Johnston et al. (2021), many firms do not serve a similar group of consumers. They usually serve various ways, different kinds of consumers. For example, Netflix serves various consumers, including young, old, tech-savvy consumers and anybody with digital connectivity entailing college-goer, working professionals, and entrepreneurs (Buchi, 2022). As Johnston et al. (2021) explain, these consumers have different needs and expectations. Therefore, managing them at once could be challenging.
Conclusion
Subscription service is crucial since it presents various advantages to the service organization. Predictable revenue is one of the benefits of subscription services. Since consumers subscribe monthly, it is easy for the company to predict its income. A good consumer relationship is another advantage of subscription service. This is because the monthly subscription service enables the company to create a good relationship with its clients. Although this subscription service offers particular benefits, there are also some drawbacks. Competition is one of the disadvantages of such a subscription service. Many firms such as Disney Plus and Peacock are joining the streaming services, posing threats to Netflix. Managing several consumers is another drawback where different consumers have different needs and expectations, making it hard for the company to manage them at once.
References
Bischof, S. F., Boettger, T. M., & Rudolph, T. (2020). Curated subscription commerce: A theoretical conceptualization. Journal of Retailing and Consumer Services, 54, 101822.
Buchi, C., 2022. Netflix Review 2022: Is it still the best? Reviews.org. Available at: https://www.reviews.org/tv-service/netflix-review/ [Accessed August 10, 2022].
Johnston, R., Shulver, M., Slack, N. and Clark, G., (2021) Service operations management (5th Edition). Prentice Hall: Sydney.
Randhawa, R. S., & Kumar, S. (2008). Usage restriction and subscription services: Operational benefits with rational users. Manufacturing & Service Operations Management, 10(3), 429-447.
Holm, Thelma, and Ebba Westin. “The effects of a subscription-based business model: A qualitative study of women who consume menstrual hygiene products and how subscription-based business models influence customer experience.” (2021).
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