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A LOWER PRICE MAY NOT DELIVER VALUE

September 15, 2011

Netflix just cut the cost of their popular $9.99 per month program to $7.99. So, why are nearly a million customers rejecting the offer? It’s a great marketing lesson on the importance of “value” in selling a product or service.

The original $9.99 per-month price covered two services, DVD-rental and movie-streaming. Now, you have to pay $7.99 a month for each service ($15.98 total). Netflix business model requires a balance between keeping the price right and providing content. As Wedbush Securities analyst Michael Pachter states in a Wall St. Journal article, “Suddenly, the value proposition isn’t that great. The consumer gets less for a higher price.”  As I state in my book (www.powershiftmarketing.org), people don’t buy price, they buy value. How healthy is your value equation for your customers?

P.S. If you’ve been following my marketing blog, you might ask, where have you been? Well, my wife and I have been in Alaska on a travel blogging assignment for the State of Alaska. You can check out our blogs on www.NorthtoAlaska.com.

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