We've all heard Netflix's claims that data gives them a competitive advantage over incumbent pay TV operators. The logic is that because they have data on all of the content their subscribers are watching they can better engage with them and improve their service.
Our client, an MVPD, had recently launched a video-on-demand service but found that usage had plateaued after the first nine months. Although their marketing was effective in getting people to use the service initially, they were struggling to convert triallists into paying customers.
We had previously created a data warehousing infrastructure for our client using Amazon Redshift and used the data we had already collected to build a model that the client could use to drive usage.
Mapping the customer journey
We initially analyzed the data by clustering the audience into eight different segments based on the level of usage of the free service, the subscription service, and the transaction service. We then looked at how customers moved between these different segments as their engagement with the service evolved.
We identified that although a few customers were upgrading from the free service to the subscription service, it was more likely that they might occasionally rent a movie. The subscription service was receiving some upgrades from the free service, but the subscription audience tended to be distinct from both the transactional and free viewers.
We worked with the customer's content marketing teams to apply these insights to the marketing mix.
Our first recommendation was to take some of the premium content that was available on the free service and move it to the transactional tier. This resulted in some drop-off in the free service, but the increase in paid usage was significant. Over time, we further optimized the upsell process using personalized outbound messaging to consumers after they first used the transactional service. These messages were text messages with an offer on a transactional movie that was personalized to the individual subscriber. A/B testing showed that subscribers who received the personalized communications were 13% more likely to increase their usage compared with those who received only the usual communications.
Our second recommendation was to alter the positioning of the subscription service to make it appear more distinct and separate from the free and transactional service. The content that was resonating on the subscription service was significantly different, and we felt that creating an independent brand would reduce cannibalization and drive increased revenues.
The client decided to implement a new sub-brand for the subscription service, and once this was launched, together with the changes to the free and transaction service, the client had re-engaged growth on the VOD platform with year-on-year increases of more than 60% following our recommendations.
