On July 10th, Netflix stock was trading at $381.00 by July 23rd it was down over 19 % to $307.30. Why did this happen? Reported by Robinhood’s Snacks Daily Podcast, for the 2nd quarter of 2019, analysts expected 300,000 new users to sign up for Netflix. However, Netflix ended up losing 100,000 users. Internationally they were supposed to get 4.8 million new users abroad. What they got was 2.8 million.
Why? Price increases may be partially to blame. A standard Netflix subscription went from $11 to $13 a month. In spite of this, Netflix attributes these missed estimates to a lack of particularly interesting content for the 2nd quarter of 2019. This lack of interesting content upsets both longtime viewers as well as new users. Despite this recent downturn, Netflix is optimistic about the 3rd quarter. The 3rd quarter will include new episodes of established Netflix shows like The Crown and Stranger Things, as well as a new Martin Scorsese piece titled, The Irishman. This 3rd quarter lineup of shows promises to satisfy both existing users interested in established original content as well as new users looking for new original content.
The bottom line is this…
Acquiring customers is harder than retaining current ones. Analysis shows that it can cost five times more to get a new person to use your product than to keep an existing user. In a 2018 Forbes article, Jia Wertz wrote that new customers are attracted to new content and new content costs money. While Netflix is producing new content, they are scraping their new content almost as fast as they are putting it out. So far in 2019, Netflix has plans to cancel 16 original shows. The majority of cancelled shows lasted on average, 2-3 seasons. Netflix says these cancellations are purely data driven and based off viewership. However, this approach can leave longtime customers feeling jaded and left out while Netflix tries to acquire new members.
What can we learn from Netflix?
All of this is not to say that you should not market to new clients. However, the aforementioned statistics should be taken into consideration when budgeting how much you spend on acquiring new clients versus taking care of your existing client base. What you should do is identify your most valuable clients. Depending on your business model, this can relate to:
· How much they spend personally with your company over a given period of time,
· Which customers are brand advocates and have the highest number of friend referrals,
· Which influencers bring in the most sales by sharing your products on blogs and social media.
It is crucial to know who your most valuable clients are. Once you have identified these clients, implementing a customer segmentation marketing strategy for each subgroup allows you to maintain the relationship and even glean some insights into how to convert more customers into these client groups. Not to mention, this strategy will achieve much better results than a one-size-fits-all marketing approach. It’s easy to see why Netflix is optimistic about the 3rd quarter. Two key components to their 3rd quarter strategy involve cultivating a large and well-established client base. The other key component seeks to attract new members.
Check back with us in the 4th quarter of 2019 to see how this strategy plays out for Netflix.Subscribe to the Dunham Blog