Two streaming services with similar penetration levels can enjoy different churn rates. Prime Video, for example, has an effective brand activation (bundled-up free shipping), but their brand equity levels lag behind Netflix’s. In its latest report, Kantar BrandNow analyzed how Prime Video can maintain its “unfair” activation advantage and reduce its churn rates.
Churn remains one of marketers’ greatest challenges. It is churn that holds a platform back from maintaining its full subscriber/revenue potential, that surfaces “bundling together” talks among rival streamers, and that galvanizes the idea of shifting from ad-free to ad-supported streaming. According to Kantar, the eureka moment for this US streaming video-on-demand market case study comes from combining brand equity (attitudinal data) and point of sale (behavioral data). This unique blend of observation and discussion make the picture complete, as they both weigh into the answer.
Diving in, penetration, churn and demand power are pawns in a game of streaming chess, Kantar notes, but what are the correlations among them? Overall, penetration and churn are inversely correlated: the higher number of subscribers, the lower the churn. Meanwhile, demand power (a brand equity metric) and penetration are positively associated: the larger the equity, the greater the penetration.
● WHAT DRIVES PENETRATION?
Given that Netflix and Prime Video have comparable penetration levels, one would expect their churn rates to be similar as well, but this is not the case. Prime Video’s subscriber base leaks more excessively.
According to Kantar BrandNow, Prime Video’s unconventional brand activation bears penetration fruits: free trials and original content lure people to sign up. However, it is the household membership to Prime that offers the most organic access to Prime Video. If you get complimentary shipping, you naturally qualify to watch hundreds of TV shows and movies from Prime Video on any of your devices. The only caveat is that these new viewers drop off as soon as the complimentary shipping disappears. This is because Prime Video has weaker equity than Netflix’s, so they fail to maintain their penetration levels for the long term (post the free delivery benefits). Netflix, on the other hand, enjoys higher equity and a 50% lower churn rate.
Kantar notes that Prime Video have been using its activation advantage to facilitate current sales. In order to influence consumers’ ongoing preferences though, they have got to turn their activation advantage into a more sustainable penetration tool. In other words: if Prime Video wants to accelerate its growth trajectory, it is time to take its brand equity up a notch.
Consumers do not choose randomly between what is available. A brand’s equity plays a crucial role in consumers’ decision to choose it now, in the future and often again. Brand equity is one of the business’s most valuable assets, as it unlocks penetration that has not happened yet and converts existing penetration into longer-term preference.
“However, although there is undeniable evidence that the stronger the brand, the greater the shareholder returns and the higher the contribution to a business’s cash flow, many brand managers fail to track their brand’s equity, what is in people’s minds about their brands,” the report concluded.