Tag Archives: environmental scan

Netflix Now Offers Ad-supported Subscriptions

It’s long been rumored that Netflix was considering adding advertising to its streaming service. That time is finally here.

Beginning in November in 12 countries (including the U.S., U.K., Australia, Brazil, Britain, Canada, Germany, and South Korea), Netflix will offer a $6.99 per month subscription option (Basic With Ads) that will show four to five minutes of advertising for each hour of content watched. The 15 to 30-second ads will show before and during TV shows and older movies; for new movies ads will only be shown before the movie begins.

Netflix’s subscriber base dropped significantly this year for the first time in a decade. Netflix is showing signs of maturing compared to other streaming services that are earlier in the cycle and must remain competitive. In 2021 ,it release 500 original programs (roughly $20 billion/year) but only a small percentage became hits.

Why the new pricing package? It’s one of Netflix’s key strategies to increase its subscriber base and improve average revenue per user. The company hopes that the new service option will encourage viewers who currently share passwords to get their own subscription, thereby increasing the customer and revenue base. (Netflix estimates that it has 100 million users who share passwords, making it a significant loss of potential revenue.)

For advertisers wanting to promote their brands, the new service is an opportunity to extend their reach to specific segments based on country and genres such as action, comedy, romance, and more.

Netflix isn’t alone in offering new subscription tiers. Disney+ will soon offer an advertising-based subscription in December at $7.99 per month. Hulu has long offered ad-supported subscriptions which accounts for more than half of its customers; HBO Max also offers ad-supported subscriptions.

Will you switch to the advertising version?

Group Activities and Discussion Questions:

  1. Poll students: What streaming services do they use? How much do they spend each  month? Is it worth it? Do they share passwords?
  2. Discuss the product life cycle. Where is Netflix in the PLC? What is the biggest challenge in that part of the PLC?
  3. Show a WSJ video that outlines Netflix’s strategy: https://www.wsj.com/video/series/news-explainers/netflix-hit-a-subscriber-peak-heres-how-it-plans-to-keep-growing/62158AB3-FBBB-4C38-8F72-30F8E27C9CD7
  4. Divide students into teams. Have each team build a price chart that includes the options from streaming services such as Disney, Prime, Paramount, Showtime, Hulu, etc.
  5. Discuss various pricing models. Which model is Netflix using?
  6. Have students develop pricing objectives for Netflix.

Sources:  Krouse, S. (13 October 2022). Netflix’s ad-supported plan will launch in November at $6.99 a month. Wall Street Journal; Sperling, N. (13 October 2022). Netflix to offer cheaper ad option beginning Nov. 3. New York Times; other news sources

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World Population Grows to 8 Billion in 2022

Marketers understand the importance of doing research and analyzing demographic factors such as population, gender, education, age, economics and geography. This is why they continually track environmental factors – these factors are important in an organization’s strategy and growth.

Recently, the United Nations Department of Economic and Social Affairs estimates that the global population, while growing slowly at under 1%, will still reach 8 billion people by mid-November, 2022; 8.5 billion by 2030; 9.7 billion by 2050; and 10.4 billion in 2100. This equates to a 31% increase in Earth’s population by the end of the century.

Half of the world’s population lives in seven countries: China (1.426 billion), India (1.417 billion), United States (338 million), Indonesia (276 million), Pakistan (236 million), Nigeria (219 million), and Brazil (215 million). And, next year (2023), India will exceeds China’s population and become the most world’s most populous country.

Population growth is very unequal though; just eight countries will account for more than half of the global population growth before 2050: Democratic Republic of Congo, Egypt, Ethiopia, India, Nigeria, Pakistan, the Philippines, and Tanzania.

While some countries will experience economic growth per capita, the increasing number of older citizens will pose problems with health care and senior care. By 2050, people ages 65 and older will account for 16% of the global population, up from 10% in 2022.

And let’s not forget the importance of social factors on population. The coronavirus pandemic plays an important part of the slow population growth as well as economic impacts.

The world keeps spinning!

Group Activities and Discussion Questions:

  1. Discuss the importance of environmental scanning.
  2. Show the World Population Clock: https://www.census.gov/popclock/
  3. In class, have teams of students examine different topics within the site.
  4. Video of U.N. Population Report: analysis: https://youtu.be/bZZ9gFnCzCM
  5. The U.N. World Population report can be accessed at https://www.un.org/development/desa/pd/sites/www.un.org.development.desa.pd/files/wpp2022_summary_of_results.pdf
  6. Optional: Assign students to read the report and report on critical information. The report may be divided into sections for different teams.
  7. Based on their analysis, what are the issues and risks that might occur for organizations?
  8. What should organizations do to prepare?

Sources:  Hackett, C. (21 July 2022). Global population projected to exceed 8 billion in 2022; half live in just seven countries. Pew Research Center; Tsui, K. (11 July 2022). World’s population to hit 8 billion before year’s end. Washington Post.; other news sources.

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Kellogg Splits into Three Companies

Organizations never sit still for very long. Before you know it, there is a new product/service rival, or new company, or change in supply chain, or change in consumer demands. Since we know change is inevitable, the challenge for marketers is to be aware of the environment and know where their company is strong and weak. Where are the opportunities? What are the threats? What companies want to take their market share?

Often these environmental changes, combined with revised corporate strategies, cause an old, established company to split into separate entities in order to better serve the market and shareholders. For example, last year, Johnson & Johnson announced it will break into two companies serving (1) consumer health products and (2) pharmaceuticals. General Electric will split into three companies to serve (1) healthcare, (2) power, and (3) aviation. 

The most recent example of a large conglomerate breaking into separate companies is Kellogg. Kellogg is the latest large company to announce it is splitting businesses into separate entities. The North America cereal business will be around $2.4 billion in sales; the plant-based foods business at $340 million in sales; the global snacks business is the largest at $11.4 billion (and was 80% of Kellogg’s sales last year).

Each of these businesses faces different environmental factors, and of course markets its products to different segments. In this case, cereal is stable, plant-based is growing but with increasing competition, leaving snacks as a large and growing segment.

Breaking Kellogg into independent companies will help it focus on distinct strategic priorities and opportunities in each of the three markets. Snacking is a higher-growth market than is cereal. Plant-based foods are growing overall, but need attention. And all three companies face increasing competition not only from established companies such as General Mills and Mondelez, but also new companies building more plant-based and natural food products.

What would you do?

Group Activities and Discussion Questions:

  1. Show WSJ video on why companies split up: https://www.wsj.com/video/series/news-explainers/why-conglomerates-split-up/F7EF3E9D-2D5D-4732-AA79-F41889C7D039
  2. Discuss when breaking up a conglomerate makes good business sense.
  3. Review Kellogg’s products and overall company: https://www.kelloggs.com/en_US/home.html
  4. Show the company announcement of the split: https://investor.kelloggs.com/news-and-events/press-releases/news-details/2022/KELLOGG-COMPANY-ANNOUNCES-SEPARATION-OF-TWO-BUSINESSES-AS-BOLD-NEXT-STEPS-IN-PORTFOLIO-TRANSFORMATION/default.aspx
  5. Discuss the components of a situation analysis: company, general industry, trends, key competitors, technology, legal, etc.
  6. Ask students what data they would want in order to make a marketing decision for dividing Kellogg into separate companies.
  7. Divide students into teams. Have each team use laptops to do general research to answer the questions above. (ex: overview of industry, size, growth, new technologies, environmental impact, etc.)
  8. Debrief the exercise by compiling information on the white board. Does this give a good picture of the situation faced by Kellogg?

Sources:  Gasparro, A. (21 June 2022). Kellogg splitting into three companies as it shifts focus to global snacks. Wall Street Journal.  

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