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Rollover Movies

Rollover Movies. Strategic Planning May 21, 2008. What are current problems with HV subscription plan? How is Rollover different? Is there a market potential? What would the Price structure look like? Strengths of Rollover New Financial Model. Conclusions Recommendations.

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Rollover Movies

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  1. Rollover Movies Strategic Planning May 21, 2008

  2. What are current problems with HV subscription plan? How is Rollover different? Is there a market potential? What would the Price structure look like? Strengths of Rollover New Financial Model Conclusions Recommendations Rollover Outline

  3. MVP as a subscription program shows no growth except with incentives • MVP appears not to support customer retention • MVP appears not improve customer loyalty • MVP has customers that are high abusers of the program • New MVP members have abused the program by joining MVP with the intro price of $14.99 and then canceling their subscription prior to being bumped to the regular subscription price; this has recently been stopped Rollover Movies

  4. Not feeling one’s household rents enough movies to justify the cost is the major barrier to MVP subscription. Barriers to MVP Subscription * Q606 Why haven’t you considered subscribing/subscribed to the MVP program? Base: Non-Subscriber Already Familiar with MVP program (n=56) Q626 Why aren’t you interested in the MVP program? Base: Non-Subscriber Not Familiar in the MVP program pre-survey (n=118) * Not asked of non-subs not familiar with MVP pre-survey

  5. Not feeling one’s household rented enough movies to justify the cost is also the leading reason why former MVP subs say they stopped subscribing to the program. Rollover makes the justification. Why Stopped Subscribing to MVP Q665 Why did you stop subscribing to the MVP program? Base: Former MVP Subscribers (n=199)

  6. Blockbuster is the retailer most frequently used as a rental alternative by Hollywood Video customers. Rollover challenges Blockbuster by offering a unique switchover advantage. % Have Rented Movies From Specific Competitors In Last 3 Months Q560 Where have you and other members of your household rented movies from in the last three months?Base: Current MVP Subscribers (n=215), Non MVP Subscribers (n=202), Former MVP Subscribers (n=246)

  7. Problem Statement –Growth in MVP Membership only occurs with promotion Store Closures • Since January 2008 we have lost 94,311 subscribers; this number is now higher • In 2008 we had Phase II and III Store closures • The only times we show increased membership is when we run an in-store promotion (ARC amnesty or contest) Rollover Movies

  8. Problem Statement - Reimbursements average about 28K per week (2) Reimbursements reduce the MVP RPC by 6 to 13%. Reimbursements illustrate the weakness of the current program. Rollover Movies

  9. EDRC Has not been popular among Hollywood Customers either In March 2007, the top EDRC store took in $22,168. In the same time period, the Top 20th Store took in $3,578 thusEDRC depicts limited appeal. Rollover Movies

  10. Rollover Definition and Value Proposition Definition Guests buy a plan with an allotment of rentals included, if they do not use the allotted number of rentals, they roll over to the next month Value Proposition The Rollover subscription program is attractive to guests because it creates customer value through savings and the ‘no use or lose it’ concept and builds customer loyalty because it “eliminates the need to cancel the subscription.”

  11. There was a limit on the number of movies you could rent each month, but you could roll any unused rentals over to the next month : How likely would you be to stop subscribing to the MVP Program if the following happened? There is a 27% market potential for Rollover that suggests we test Rollover as a third program Absolutely certain to cancel Likely to cancel Not likely to cancel at all Q751A6 There was a limit on the number of movies you could rent each month, but you could roll any unused rentals over to the next month : How likely would you be to stop subscribing to the MVP Program if the following happened? * Base: Current MVP Subscribers (n=198)

  12. MVP: But 1 in 5 often forget about their MVP membership altogether.Rollover does not have this miscommunication. “You often forget about your MVP membership” Q735 How strongly do you agree or disagree with each of the following statements about the MVP service? Please use a scale of 1 to 5 where 5 is “Strongly agree” a 3 would be “Neither agree nor disagree” and 1 is “Strongly disagree.” Base: Current MVP Subscriber (n=204)

  13. Price structure (based on competition) • RPC for all Rollover subscription plans is currently priced at $2.50 which is better priced than MVP’s RPC average of $2.00 (which is known to be lower) • Structure is based on no late fees • Testing could help identify the “sweet spot” that will resonate with consumers and help design plans that appeal to the majority of customers

  14. New Financial Model NOTES 1. This data is from Faber 10/08/07. 2. The data was sorted by active members so that we could develop a model that would allow us to estimate the percentage of MVP consumers that would switch over to the high-mid/low rollover programs. 3. This analysis only is looking at MVP customer switchover and does not account for New customers, therefore we did not adjust any of the percentages. • Rollover has a switchover advantage • No need to offer an incentive

  15. We have a program that is unique from our competitors; Rollover is kept simple (avoidance of guest confusion); Differs from EDRC in that customers do not have to pay the upfront cost, but pay monthly; Eliminates the need to cancel the subscription based on usage thus improving churn; Roll-over creates a monthly fee that further encourages steady patronage; The POS can be configured to handle the program requirements; Rollover does not have the MVP seasonal affects with MVP subscription rates dropping in the summer months Rollover incorporates switchover costs Rollover Strengths

  16. Rollover versus MVP • MVP increases invoices and rents, but only marginal lift in Revenue • Rollover margins are better priced than MVP • Rollover is simple to communicate • MVP puts pressure on product availability, not sure the effect of Rollover • Rollover is recognizable with cost savings such as rollover minutes and in financial markets

  17. 41% of MVP subs say that “services just like the MVP program” are easily available to them, while 26% disagree.Rollover is innovative. “There are services just like the MVP program that are easily available to you” Q735 How strongly do you agree or disagree with each of the following statements about the MVP service? Please use a scale of 1 to 5 where 5 is “Strongly agree” a 3 would be “Neither agree nor disagree” and 1 is “Strongly disagree.” Base: Current MVP Subscriber (n=204)

  18. The appeal of Rollover is that the consumers do not lose anything HV regains better controls over the subscription program thus stopping new subscription members from abusing the system This initiative is innovative and unique in a mature market Attract new customers that typically don’t belong to a subscription program Attract customers that defected to Blockbuster and Netflix that find value in cost savings Rollover will decrease the effects that our HV subscription plan customers encounters in summer months thus improving rentals in this period as well as stabilizing rentals in all periods Rollover is easy to communicate to guests using an ‘elevator pitch’ Conclusions

  19. Recommendations • Open a new job with IT to begin testing the POS system for supporting this new third subscription program • Begin working aggressively with Marketing on POP that supports this program • Begin testing in 2 to 3 districts • Do not use MVP tactics to attract consumers; let them make the decision to join Rollover Movies

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