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The Executive Magazine

Business

Netflix’s continued growth highlights rapid rise of the subscription model

With almost 7 million new subscribers, the online streaming giant have proved that they can bounce back from their disappointing subscriber growth in the second quarter.

With the rise of competitive rival video-streaming services, including Apple, Walmart and Walt Disney, companies like Netflix are working hard to retain customers and ensure their subscription model remains attractive to new and existing customers.

Research conducted by relationship marketing hub Optimove has found that up to 80 percent of customers who sign up for subscription-based services will unsubscribe within the first three months. As competition heats up, the battle to win and retain the customer is at the forefront of every marketer’s mind. To do this, the importance on creating value for their existing and potential customers is more important than ever.

Despite falling short last quarter, Netflix has reported continued growth in subscribers. The streaming giant were hoping to have added 5 million new subscribers over the last quarter, which would bring its total number of paying subscribers to just over 135 million, but the latest figures have shown that previous forecasts have been smashed, with almost 7 million new users.

Netflix has made a strategic decision to boost growth numbers by pouring USD$8 billion into further developing its content budget in 2018, and through a data-driven approach, Netflix is using subscriber streaming behaviour to retain subscriber numbers and keep ahead of the growing competition.

Pini Yakuel, CEO of relationship marketing hub Optimove, says: “Subscription based models are attractive, as they guarantee recurring revenue. To make the most of the subscription model, brands need to understand what customers want and need, as well as what motivates their decision to unsubscribe.

“If brands want to ensure their subscription model is successful, they must recognise that subscription-based business models create consumer behavioural patterns which are different than pay-per-product consumer patterns. By analysing valuable customer data to better understand customers, subscription-model companies like Netflix can nurture long-lasting relationships with their customers, which is the key for securing brand loyalty and increased customer lifetime value.

“With fierce competition eating into the subscription market and customers having more choice, streaming companies are under pressure to personalise experiences and stop competitors luring away their customers. Tracking data that enables brands to know their customers more personally can help companies like Netflix whose business models are subscription-based to deepen customer engagement. Aside from their demographics, brands can learn a lot about their customers by their behaviour, purchase history, preferences – what they choose to watch, and when they choose to watch.

Using data based on customer activity and preferences can help brands deliver tailored messages and recommendations through preferred channels to improve both short-term engagement and long-term brand loyalty.”

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