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Netflix Anchoring Blunder

Anchoring? Exactly. I noticed my wife and daughter’s tendency to remark how something they bought for 25% off was a bargain. Perhaps, but was it a value? I tried to walk them though the process merchants use to price their goods, setting an anchor value in our minds. If the ‘sticker’ price of an item is $200, it surely must be a great deal at $100, no? Well, no, not when it’s a sweatshirt that’s hardly worth even $50. You get the idea.

How did Netflix stumble? In a sense, by offering too much value, and then trying to raise their price after the fact. They recently announced that the current plan of unlimited streaming and one out at-a-time DVDs which currently cost $9.99 will be split into two plans, each $7.99, or $15.98 to keep the current features. What I find so curious is that the DVD plan has a lot of value, $30 or so, I’d say. We have a RedBox at our supermarket, but it’s 10 miles round trip, so that $1 rental pushes $5 when we get a DVD for a specific night and not during a regular shopping trip. On the other hand, I can flip the Netflix around fast enough to get 8 in a good month, just over 6 on average. Unfortunately, Netflix had me trained that the DVD plus streaming was worth the $10 I was paying, and any increase just felt like a rip-off. We weren’t using streaming that much, so by breaking out the service to 2 plans, I’ll actually pay less as I’ll drop to the $7.99 plan, now an even better deal for us.

Are you a Netflix customer? Will you change your plan after this price increase goes into effect?

  • Augustine July 14, 2011, 10:24 am

    I’ll probably decrease the number of DVDs out to bring the Netflix bill lower.

    As a matter of fact, I watch more streamed flicks than DVDs…

  • Daria July 14, 2011, 9:45 am

    I enjoy Netflix’s streaming. No hassle, works well – and I can watch a good movie in my bed – or when I’m traveling.

  • RT July 14, 2011, 10:02 am

    I am a netflix customer who is likely to leave Netflix over this. I just thought a 60% increase was a little absurd. I will get my DVD’s from Redbox which is a 5 minute walk from my house, and was considering Amazon Prime at $79 a year for my streaming needs…which works out to $6.58 per month. Plus there is no tax on Amazon prime, while there was on Netflix.

  • JOE July 14, 2011, 10:13 am

    The Redbox decision (in my opinion) is heavily based on distance to box. Those who pass a box to/from work every day or have one very close to home have a near-zero commute cost. With mine being $3-$5 total cost on the $1 rental, it’s not as good a deal. I envy the folk who are a short walk to the supermarket, we gave that up living in the suburbs.

  • Dirty Butter July 15, 2011, 7:08 am

    We use both streaming and DVD’s from Netflix, thanks to HD making our outside antenna all but useless. BUT, there’s always Hulu Plus, or maybe we’ll bite the bullet and get cable or a dish. I looked at Amazon prime, but the TV show selection won’t help us enough. (We use Netflix for TV series almost exclusively – some from DVD’s and some streaming.)

    I do know we won’t stay with Netflix.

    I follow you on ExposeYourBlog.

  • Maggie July 15, 2011, 4:17 pm

    We heavily use streaming. We just exhausted our queue for the DVDs, so going streaming only is our choice. Any given day you can one movie streaming on the TV, one on a laptop and another on the iPad. We also just downgraded our Cable TV relying on Netflix and Hulu Plus.

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