Netflix’s Growth Looks Good for the Subscription Model, but Retention Remains an Issue for Other Brands
Netflix’s positive growth predictions and Spotify’s recent
success with its IPO highlight the growing success of the subscription model. Customers
now have the option to subscribe to a wide variety of products and services,
ranging from music and film to razors and lingerie, and they seem more than
willing to do so.
According to ING, the average European household now spends
approximately €130 per month on subscriptions to durable and consumable goods -
showing how subscriptions are now going far beyond the gym membership or
Netflix account that people traditionally gravitate towards.
However while customers are now seeing the appeal of subscription-based
purchasing, at least initially, many brands struggle to retain their custom for
longer than a few months, with many users simply taking advantage of a free
trial month or similar offer before cancelling. I dare say a fair amount of
these companies’ revenue comes from people forgetting to cancel when they
intended to, as I know a fair few people who have done so and must confess to being
guilty of it myself on the odd occasion.
Pini Yakuel, CEO of relationship marketing platform Optimove, says the problem lies with these
companies’ failure to get to know their customer base, their wants, and the
motivating factors that ensure their continued investment. Mr Yakuel asserts,
“Given the wide-spanning influence of Amazon, the subscription based model
leaves place for other brands to also thrive. If brands can encourage customers
to subscribe, they are guaranteed recurring revenue.”
“However, our research has found that some brands suffer as
80% of customers unsubscribe within three months of signing-up. To make the
most of the subscription model, brands need to understand what motivates their
customers to invest in subscription, but also what influences their decision to
unsubscribe.
“For instance, Netflix gives suggestions based on what a
customer has viewed previously and then offers options that align with this.
The most important thing is to get to know customers as individuals - to work
out what appeals to them, and what will encourage them to develop a long term
relationship with the brand.”
Sam
is an aspiring novelist with a passion for fantasy and crime thrillers.
Currently working as Editor of Social Songbird, he hopes to one day drop that
'aspiring' prefix. Follow him @Songbird_Sam
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Netflix’s Growth Looks Good for the Subscription Model, but Retention Remains an Issue for Other Brands
Reviewed by Unknown
on
Wednesday, April 18, 2018
Rating:
Reviewed by Unknown
on
Wednesday, April 18, 2018
Rating:
Unknown
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