netflix loyalty

Passikoff: How Netflix Got You Glued to Your Screens

Netflix was #1 in the Streaming Video category, so we’d pretty much presume Netflix was going to do pretty well in their category. And they did. Most recently they added more than 200 million subscribers.

I’ll bet you’ve been streaming a lot of stuff recently. Come on, be honest! And by “recently,” I mean since the lockdown and sheltering-in, two terms previously reserved for tornados, hurricanes, and blizzards. And sure, everyone has their favorite shows, and everyone had binged at one time or another, but in this instance, I’m talking about really, really high levels of engaged streaming, that in normal times might be thought to be excessive. Don’t worry, “excessive” is acceptable when it comes to streaming video these days.

I mention the streaming because I’ve been watching a lot of shows over the past 9 months, and because in the past month Netflix was named #1 in our 2021 Customer Loyalty Engagement Index. It’s the 25th year we’ve conducted the survey, this year examining 94 categories and 855 brands. So, pretty sizable, but not excessive given the number of brands in the world. As far as I know, it’s the biggest loyalty study of its kind, and includes the “Streaming Video” category. T’was not always the case. Being so big, I mean, but also including streaming video as a category.

When we started the survey in 1996, we had 25 categories. We started with categories like “Fast Food” and “Automobiles” and “Cosmetics” and each year we’d add more categories. As new categories materialized, like “Online Retail,” or when old categories morphed into new categories or when categories became obsolete, like when cameras on ”Mobile Phones (which morphed into the “Smartphone” category) displaced Single Lens Reflex Cameras thus making the SLR category superfluous. The same thing happened with “Movie Rentals,” (remember Blockbuster and Redbox?), which became “Streaming Video,” which technically became “Subscription Video-on-Demand (SVoD),” currently a $55 billion dollar global market with a user penetration of 48%.

And at the top of the Streaming Video loyalty list is Netflix, which, even in the face of entrenched giants and a growing SVoD marketplace (Amazon, HBO, Hulu, Disney+, Apple TV+), is the de facto brand for movie and TV streaming. It’s really big (but not excessive, according to viewer expectations), constituting approximately 18% of the world’s internet bandwidth! Not too bad for a company that started life as a rent-by-mail-pay-per-rental DVD service, huh?

Incidentally, Netflix is the company that put Blockbuster out of business. To add insult to bankruptcy, Blockbuster had the opportunity to buy Netflix for $50 million dollars and passed. At this point in the column I’d like to buy a vowel because, Oh my god! Netflix generated a total revenue of nearly $7.5 billion last year! That’s expected to be up 20% this year.

Axiomatically, if consumers behave better toward a brand, the brand should – barring egregious brand or marketing mismanagement – do better.

A small methodological detour: The reason we rely on loyalty as our North Star is that loyalty is a leading-indicator, unlike satisfaction, which is a lagging-indicator. Satisfaction is about what someone did last time. And these days, if you don’t, or can’t, satisfy customers, they have plenty of options. Options are un-satisfaction killers. Loyalty, on the other hand, is about what someone will do next  time, so a measurable variable that forecasts changes before they show up in the marketplace.

Our Loyalty and Engagement Index are leading-indicators of consumer behavior. That means when brands are able to increase their ability to emotionally engage their audience, loyalty increases and moves them up in their categories, which is an absolute sign consumers are going to behave more positively toward the brand. Axiomatically, if consumers behave better toward a brand, the brand should – barring egregious brand or marketing mismanagement – do better. And they do. Better, I mean. We see correlations with our metrics and positive behavior at the 0.80+ levels, so, very predictive of what’s going to happen to a brand. Like Netflix being #1 and adding subscriptions like they were free, but they’re not, so revenue is going to increase significantly. That’s how loyalty works.

Why the digression? Well, Netflix was #1 in the Streaming Video category, so we’d pretty much presume Netflix was going to do pretty well in their category. And they did. Most recently they added more than 200 million subscribers. Netflix is the most in-demand streaming service, with the vast majority of users of other services also subscribing to Netflix. Amazon Prime was a top choice too, and they were #2 in our survey. Disney+, a brand new entry was #3, such is the power of emotional engagement, followed by Hulu, Apple TV+, YouTube, and HBO Max.

OK, the Netflix subscriber increase is a landmark for them powered partially by the pandemic and housebound consumers. Lockdown measures created a surge of TV and video streaming. I mean, you can only clean your apartment or re-organize your closets just so many times. It’s estimated that adults stuck indoors spent 38% of their time in front of one kind of  a screen or another with streaming service viewership doubling at the height of the pandemic. Is that “excessive?” I’ll leave that for you to decide.

But in light of our survey results it’s important to remember consumers had lots of choices. They didn’t have to pick Netflix. If you were sheltering in, you probably spent more time streaming stuff too and discovered the TV networks got caught short on original content because of COVID-19 production shutdowns. Netflix, on the other hand, had a content inventory, including a list of movies that will be released on the platform every week of 2021!

So, a lot of content, Variety and Wide Range of Original Content being one of the most critical category drivers when it comes to loyalty and engagement for streaming video brands. It’s a loyalty driver where viewers have very high expectations, and one where Netflix excels. Netflix currently has more than 500 titles in post-production. Netflix creates content much further in advance than competitors, who have a long way to go to catch up to both Netflix content and viewer expectations. You might remember that a dearth of engaging content nearly killed Apple TV+ two years ago. Just saying.

Anyway, as there’s a likely chance you’re a subscriber, you’ve probably been engaged by “The Crown,” “Queens Gambit,” “Lupin,” “Bridgerton,” or any of the thousands of other options available on Netflix. With 82 million households tuning in the first 28 days of it was available, “Bridgerton” exponentially outpaced the biggest hits on linear TV. Twenty-nine million viewers logged in to watch the 4th season of “The Crown” in its first week. And it’s estimated that “Lupin,” the French original (and the one with subtitles no less) will be seen by 70 million subscribers in its first 28 days!

That all sounds like real engagement to me and, as it turns out, that’s precisely what real loyalty and emotional engagement is supposed to do.

Robert PassikoffRobert Passikoff is founder and CEO of Brand Keys. He has received several awards for market research innovation including the prestigious Gold Ogilvy Award and is the author of 3 marketing and branding books including the best-seller, Predicting Market Success.  Robert is also a frequent contributor to TheCustomer.

Photo by David Balev on Unsplash.

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