Product Differentiation = from Mailing DVDs to Streaming Service to Original Content

Product differentiation creates a competitive advantage by increasing the willingness of customers to products or services through perception. Netflix has created product differentiation since the inception of the company. Originally, Netflix established new distribution channels for providing movies to customers. Rather than go to a movie rental store, Netflix created a subscription based service that offered DVD direct to the consumer through the mail. Customers could choose a level of service that dictated how many movies they could have at any given time. Shortly thereafter, Netflix added a streaming service to compliment then ultimately replace the DVD in the mail model. As this service evolved, Netflix customized the experience to recommend movies or shows to consumers. Customers didn’t consider other streaming services for the most part because Netflix already had a solid reputation from the mail business. Additionally, the subscribers did not want to switch as they were accustomed to paying for the service.

Netflix’s latest product differentiation is in the content space. With an established distribution channel through streaming content, Netflix began to create original content. With a captive audience already on the platform, marketing the original content was easy. Furthermore, the entire season of a new show would be added all at once. No more waiting until next week with Netflix. Thus, Binge Watching was born and Netflix once again achieved product differentiation.