Wait, that’s not a deal!

I was on Netflix today and clicked on the “Give Netflix” icon, wondering what kind of gifts they offer. I was surprised by two things. First, it appears that you can only gift streaming service, not DVD-by-mail service. Why can’t I choose either one, or even both? Second, there was no discount for buying bigger packages. One month = $7.99. One year = $95.88. For those of you who haven’t been practicing mental math, that’s $7.99 x 12.

It reminds me of the guy who sold newspapers at a busy intersection near UPenn (my undergrad alma mater). He had a big sign that said 75¢ each or 2 for $1.50. I walked by him every day for weeks until I paid enough attention to realize …

Wait, that’s not a deal!

In his case, I doubted it mattered because, really, who buys two newspapers? However, in the case of Netflix, it might matter a lot. The gift cards are for streaming service, where marginal cost of each additional customer is negligible. That means each sale contributes to the bottom line. PLUS, the cash up front is like an interest-free loan. Why, then, doesn’t Netflix decrease the monthly average as the size of the gift card goes up? From what I’ve seen elsewhere, it doesn’t take a lot (say, make one year = $84.00 = $7.00 x 12) to influence customer behavior.

Customers love deals. This seems like a missed opportunity for a win-win.

This entry was posted in Customer behavior, Marketing, Pricing. Bookmark the permalink.

2 Responses to Wait, that’s not a deal!

  1. Big Jon says:

    Why buy one one, when you can get two for twice the price, right?

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