When David Lynch’s original cult classic, “Twin Peaks,” premiered on ABC in 1990, 35 million viewers tuned in, simultaneously, from their bean bag chairs to follow the investigation of homecoming queen Laura Palmer’s mysterious murder.
In contrast, the much anticipated return of Lynch’s creation on Showtime this month only garnered 506,000 viewers, according to Nielsen numbers published in the New York Times. While this would be marked a major flop in previous decades, the continued evolution of media and entertainment from advertising toward a subscription model has ushered in a whole different set of key performance indicators.
“In the world that we live in now, offering original programming that attracts new subscribers is our primary business objective,” said Showtime CEO David Nevins, in a recent statement. “By that standard, the ‘Twin Peaks’ premiere is the biggest single-night driver we’ve ever had.”
Rather than seeking a mass audience for original programming, subscription models have quickly realized the value of producing and realizing content at a cadence and quality-level to spur acquisition and retention relevant to those subscribers and their interests and time preferences.
Subscription models have upended traditional media. Gone are the days of appointment based programs – time like content is determined by the viewer not the broadcaster.
“On average, spending on subscription OTT video services now accounts for 85% of all household spending on Internet video,” said Glenn Hower, Senior Analyst with the market research firm Parks Associates. “The key to success in the long term will be retention. Consumers are experimenting with different OTT services, and many providers incorporate no-contract, cancel-anytime models to remove barriers to entry and to entice consumers to try new services free of obligations.”
According to a 2016 Parks Associates study, researchers found that Netflix captured 52% of US broadband households, while 9% of its subscriber base canceled. On the other hand, Hulu (14% of US broadband households) saw approximately half of its paid subscriber base cancel in 2015.
Although Showtime saw a surge of subscribers based on the eerie Twin Peaks Return premier, will they be able to keep them in the competitive space that now includes Amazon, Hulu, Netflix, HBO, Showtime, and, even Walmart—along with traditional Pay-TV services? Only if they stay focused on understanding the preferences of smaller audiences and delivering relevant content that keeps them coming back for more.
Video streaming providers aren’t the only category fighting for retention in a new subscription-based economy. Retail banking, gaming, mobile carriers, and travel brands are all evolving to a new set of consumer digital expectations as linear transactional relationships are de-emphasized in favor of ongoing personal relationships.
While investing in quality content is a key imperative, there are several additional mission-critical challenges that Showtime, or nearly any subscription-based brand, needs to solve for in 2017 to keep consumers from churning and signing up for a competitor.
1. Leverage AI deliver highly contextual, personalized experiences at scale
Consistently held up as the performance standard for personalized consumer experiences, Netflix looks at subscribers beyond traditional segments. Carlos Gomez Uribe, former VP of Product Innovation at Netflix and now part of the newsfeed algorithm team at Facebook, described each subscriber as a stand-alone channel in 2014.
“Every subscriber is a different channel, so we have 53 million channels. And most of them are really different,” he said. They currently have more than 90 million subscribers.
While the AI-assisted recommendation engine saves Netflix a reported $1 billion per year based on content optimization and retention, many marketers within subscription-based models are still using rules-based marketing automation systems or decisioning engines to interact with their consumers.
At the scale of personalizing experiences for 90 million—or even 9 million—subscribers, marketers simply can’t keep up beyond basic segment-driven experiences. The average B2C enterprise has more than 100 attributes for each of their customers just from profile and behavioral data alone.
While personalization has become mission critical in the new subscription economy, marketers are often relying on traditional marketing automation or testing tools to optimize their customer experiences. The companies that will thrive in the current digital landscape require artificial intelligence-driven tools to truly deliver a 1:1 experience at scale.
2. Continuously predict churn before it’s too late
With appointment-based viewing, broadcasters measured retention loosely based on Nielson ratings which simply sample household viewers to estimate overall viewership. A ratings drop was the indicator of churn, but it’s effect was on CPM’s with no obvious correlation to what caused the rating drop.
In today’s subscriber-based models, there are telltale behavioral signs for a drop off in viewership, it’s called subscriber churn. But unlike the past, content providers can pinpoint exactly where the drop off is occurring down to specific subscribers and their associated attributes and historical behaviors.
For Showtime, obvious behaviors include a lack of engagement across content and device types, decreased session lengths and return visits, payment lapses, customer service outreach, etc.
However, traditional churn models are like smoke detectors—they’re good at letting you know when you building is already on fire.
The challenge lies in making sure this information is surfaced and acted upon in a timely manner to anticipate and prevent customer disengagement. If you’re trying to prevent churn with customers after they’ve already reached customer service or the unsubscribe page, you’re far less likely to save them than if you’ve intervened earlier in their journey.
It’s also not enough to simply engage in the days leading up churn with a generic turn-around offer. Instead, it’s critical to answer the following questions to guide dynamic retention messaging and experiences:
- Why is the customer at risk of leaving?
- Do you have a remedy for it?
- How likely is the customer to come back?
- How much will they spend if they come back?
- How likely are they to stay and for how long?
3. Quantify and engage the ripple effect
With Nielsen ratings, critic reviews, PR launches, and net promoter scores, perhaps no one understands the zeitgeist inherit in viewer preferences more than Showtime and their competitors. Even in the age of hyper-focused, psychographic-driven entertainment tastes, if a show is deemed a flop in the court of public opinion, it’s rarely renewed beyond the inaugural season.
But how does bad content and experiences affect churn likelihood of an individual user and their surrounding community?
In a recent Columbia University, HEC Paris, and Amplero study, researchers found that social connections of targeted customers for a major North American telecommunications increased usage were less likely to churn due to a campaign that was neither targeted at them nor offered any direct incentives. The study was able to measure a campaign multiplier effect of 28% on first and second degree connections with a customer or prospect database.
For companies focused on reducing churn, this surfaces an important insight: If a customer is at risk for churn, extend your retention strategies to their connected network, as well.
While Twin Peaks Returns continues to zig zag its way through a comically dark and confusingly immersive world of Lynch’s creation, subscription-based models provides its own drama - with the newfound challenge of anticipating and managing the ebb and flow of viewers who are no longer simply known as “the masses” but, rather, as individual customers who are hard to acquire and, yet, can easily churn away.
It’s not only media and entertainment who are dealing with this sea change. In their 2015 Global Media Report, McKinsey forecasts that 71 percent of consumer spending on media will be on access instead of ownership by just 2018. Traditional industries, from banking to retail, are all facing the transition from access to ownership in the subscription economy.
In this new paradigm, Showtime has the opportunity understand, connect with, and build long-lasting relationships with their customers. Harnessing the behavioral knowledge they have on their customers and rapid testing of content and marketing. Showtime can re-write the story of how traditional content providers—and have leveraged AI to skillfully compete in this brave new world.
Now, that’s a thriller, I’d be game to watch.
CASE STUDY: LEARN HOW AI MARKETING DROVE RECORD RETENTION AT A MAJOR MOBILE CARRIER
About Glenn Pingul
Glenn Pingul is VP of Scientific Marketing Strategies for Amplero, an Artificial Intelligence Marketing (AIM) platform that helps enterprises better connect with their customers. Prior to joining Amplero, he was a co-founder of the online video advertising ad tech company, Mixpo, where he was VP of marketing.
He has an extensive background developing digital marketing, analytics, and loyalty and retention strategies while serving in executive level positions at T-Mobile USA, Nordstrom.com/Inc., AirTouch Wireless (Verizon Wireless), Starbucks.com and The American Express Company.
Headquartered in Seattle, Amplero is an Artificial Intelligence Marketing (AIM) company that enables business-to-consumer (B2C) marketers at global brands to optimize customer lifetime value at a scale that is not humanly possible.
Unlike traditional rules-based marketing automation systems, Amplero's Artificial Intelligence Marketing Platform leverages machine learning and multi-armed bandit experimentation to dynamically test thousands of permutations to adaptively optimize every customer interaction and maximize customer lifetime value and loyalty.
With Amplero, marketers in competitive, customer-obsessed industries like telecom, banking, gaming and consumer tech are currently seeing measurable lift across key performance indicators—including 1-3% incremental growth in customer topline revenue and 3-5x lift in retention rates.
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