:: Three imperatives for Showtime to prevent record churn numbers ::
When David Lynch's original cult classic, "Twin Peaks," premiered on ABC in 1990, 35 million viewers tuned in 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 last 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 David Nevins, Showtime's chief executive, 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.
"On average, spending on subscription over-the-top (OTT) video services now accounts for 85 percent 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 percent of U.S. broadband households, while 9 percent of its subscriber base canceled. On the other hand, Hulu (14 percent of U.S. 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?
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. Deliver 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 artificial intelligence-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.
2. Continuously predict churn before it's too late
There are always telltale behavioral signs for a user who's at risk for churn.
For Showtime, obvious behaviors include a lack of engagement across content, decreased session lengths, payment lapses, customer service outreach, etc.
However, traditional churn models are like smoke detectors-they're good at letting you know when your 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 to 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 its 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.
How does bad content and experiences affect churn likelihood of an individual user and their surrounding community?
In a recent Columbia University Business School study,
researchers found that social connections of targeted customers 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 percent 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, Showtime has the opportunity to show subscription-based models how to prevent record churn in the wake of record acquisition.
About the Author As senior director of brand marketing at Amplero, John Kinmonth helps guide the intuitive creative collision of human narrative and artificial intelligence marketing technology. Prior to Amplero, he led company-wide marketing strategy for rapidly growing Inc. 5000 digital analytics agency acquired by Merkle. He's also served as lead designer and creative strategist for analytics, executive and data visualization deliverables for large clients, such as T-Mobile, Microsoft, Dignity Health, Hyundai, Williams-Sonoma and Nike.