THE BUYING PROCESS
The advent of the Internet has led to the development of digital goods and services that
are rapidly replacing physical consumer goods. Digital goods can be easily transferred to the
consumer, providing instant gratification for consumers and minimizes overhead for physical
stores. One example of a service and good that has been drastically impacted by the transition to
digital goods is the movie rental business.
The Problem, Differences between Current and Ideal State, and how it Benefits the Buyer
Traditional movie rental stores had to maintain physical inventory of the most popular
movies that consumers wanted to see. This meant that selection was limited to the inventory that
the storeowners maintained as well as the inventory that could be maintained in the physical
space of the location. In order to pay for the overhead of running such operations, fees for
renting movies $3-7 per movie, depending upon the release date, with substantial late fees if the
film was not returned within the deadline.
The current market offers services that move away from the traditional movie rental
stores. Physical movies can now be rented from anywhere a movie rental kiosk is located. These
kiosks are commonly found in stores that are already frequented by the consumer, such as the
grocery store. Additionally, there are services that allow consumers to receive their movie rentals
directly in their mailbox, as well as view content online directly. However, the ideal market
would eliminate the need for any physical copy of the DVD. Movie rental companies would be
able to host a massive movie selection online instantaneously available to the consumer.
Realization of the ideal movie rental market would hold many benefits for the consumer. The
biggest benefit would be a huge selection of entertainment and instant gratification for the
THE BUYING PROCESS
consumer, without having to wait for the DVD to come in the mail or to drive to a local kiosk to
pick up the DVD.
Product Description and Internal and External Sources
One digital service and product that is seen in the current movie rental market is Netflix.
For a monthly fee, Netflix allows consumers unlimited online access to their inventory, which
can be viewed on the TV using a gaming console, on their computer, or on their Internet-
accessible device. If consumers still wish to get DVDs in the mail, they have the option to do so
with an additional fee. The service also offers Blu-Ray discs as well, again with an additional fee
(“Frequently,” 2013). In other words, Netflix provides a service that provides movies and TV
episodes instantaneously to consumers, eliminating late fees and trips to the rental store or kiosk.
There are both internal and external sources that make the service provided by Netflix
possible. A major internal source is the company’s hosting of the digital goods. Netflix simply
acts as a gateway between the consumer and the movie production company, and consumers
only have access to the movies that Netflix has in inventory. This means that Netflix must have
significant storage capabilities as well as hosting abilities with customers streaming the digital
goods online through the website. In fact, Netflix accounts for a third of all Internet traffic in the
United States (Reisinger, 2012). Meanwhile, external sources would include the licenses
required for each of the movies and TV episodes in Netflix inventory, as well as the inventory of
movies and TV episodes themselves.
Alternatives and Selection Criteria
THE BUYING PROCESS
Netflix is by far the largest competitor in the online movie rental business. However,
there are alternatives in the market that are available to consumers. One alternative is
Blockbuster’s On Demand service, which allows movies to be rented via the Internet without
having to go into the store to rent, and offers a subscription by mail program as well. However,
Blockbuster does not offer monthly subscriptions, meaning a set price is paid per movie (“On
Demand,” 2013). Another competitor is BestBuy’s Cinema Now, which allows consumers to
digitally rent movies and offers the option to digitally purchase the movie (“CinemaNow,”
2012). Again, no monthly subscription is available and prices are significantly higher than
Netflix. Meanwhile, a third competitor is RedBox, which operates as a kiosk. DVDs are
physically rented and consumers must return within one day to avoid being charged for another
day (“How Redbox,” 2013). However, RedBox is the only alternative that does not require an
Internet connection unless movies are reserved online.
While there are many alternatives available, there are many criterions on which to make a
selection. A major criterion is how the service operates—is the product offering solely online, is
it a mix, or are DVDs only physically rented? A second criterion is price and if the value of the
product is acceptable. Meanwhile, a third criterion is the amount of accessibility and the level of
use as a consumer.
Purchase Decision & Factors that Deter Purchase
Netflix, by far, is the best value for the money. It allows consumers to have unlimited
access to their database of movies for one low monthly rate. The more movies and TV episodes a
consumer watches the better the value of the service. Additionally, Netflix offers a wide array of
movies and TV episodes in many genres, providing a massive selection to consumers.
THE BUYING PROCESS
Furthermore, a singular Netflix account provides access on all devices, including the TV through
a gaming console, computers, tablets, and smartphones with Internet access.
However, there are factors that could deter the purchase. A major factor would be having
to have home Internet access. If Internet access is not readily available, or beyond the amount
budgeted for entertainment, Netflix may not be the best purchase. Another deterrent may be the
cost. While there is a low monthly fee for a Netflix subscription, it may not be justified
depending upon the use of the service. If the service is only going to be used to watch one or two
movies or TV episodes per month than other alternatives such as Blockbuster’s On Demand or
RedBox may be a better alternative. Therefore, a consumer must carefully analyze their needs
and limitations before deciding on a service.
After purchasing a Netflix subscription, I have found that it is the best service for my
entertainment needs. Rather than having a cable subscription I have simply watch movies and
TV episodes through my Netflix subscription. The selection is large, frequently updated, and I
have no trouble finding something to watch. The large selection that is available easily justifies
the cost of the subscription. In fact, my subscription with Netflix has actually saved me money
since I no longer subscribe to cable, which was more expensive than the Netflix subscription. As
a consumer, I am highly satisfied with the service
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