Netflix's Luxury Pricing Position
April 1, 2019
How do you know when your price is too low? You know that's the case when raise your price, and you hear very little complaint and lose almost no customers. That's been the reaction to Netflix's price increase announced a few weeks ago. This article proposes a usage pricing model which would further differentiate Netflix's customer base and generate $1 billion in additional cash flow.
While Netflix might possibly be building to such a model over time, they possess a luxury small business owners don't have: access to public capital markets which can finance a focus on market share vs. profit maximization. In Netflix's case, Wall Street funds negative cash flow of $3 BILLION a year, according to this article.
As a small business owner, if you raise your prices without much customer pushback (or you haven't raised prices at all in recent years), your prices are most likely too low. You are pursuing a Netflix strategy, and you don't have a Wall Street safety net underneath to catch you.
(Image courtesy of Danimasetoma [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)], from Wikimedia Commons)
©Ray Business Advisors, LLC and John Ray
About me: I’m enthusiastic about how changes in pricing strategy can significantly change profitability for a business and enhance life choices for business owners. I live this passion through Ray Business Advisors, my outside CFO and business advisory practice, in which my pricing is exclusively value-based, not hourly. I work with business owners on how they can change their pricing not just to increase their profits, but better serve the wants of their customers. Click here to learn more or call me at 404-287-2627.
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