Hello Techies!! Hope You all are Safe and doing Amazing, As I promised in my previous Article about case studies of Big-AI Giants. if you haven't read that article please go through that article here. you can check out my previous case study on Uber. In that case study you'll get a proper understanding of how transportation businesses grow their customers using AI. today, In this Article I'll discuss How OTT businesses are growing and know their Customers. In Media and Live-streaming industry most important and crucial problem is Customer Churning i.e. knowing why customers are leaving their platform, So, the OTT which knows its answers and can understand its customers better is the leaderđ.
Let's see how Netflix is doing it differently than others.
You can access OTT platforms in many ways, including via your computer, phone, tablet, smart TV, or gaming console. You donât need a subscription to a TV service providerâbut depending on the OTT platform, you may need a subscription to the OTT platform. This is the case for services like Netflix and Disney+, where users can access curated content at any time with a monthly or yearly subscription. Some OTT platforms, like Amazon and Peacock, instead donât charge subscription fees to customers, instead generating revenue by showing their viewers ads while theyâre watching content or offering reduced-cost subscriptions with limited ads.
Before moving ahead let's first see how OTT is different than other content creation platformsđ.
How OTT is different than other Content Platforms like Youtube.
Why is OTT better than YouTube for creators and content platforms seeking to build a home for their content business or community?
They differ in these 4 aspects:
Control: OTT means control over your content, brand, user experience, audience, monetization, and most of all, your data. YouTube just doesnât give you all that.
Ad-Free Content: Most viewers don't like ads! OTT has opened up the possibility for ad-free content, by enabling subscription services (SVOD), one-time purchases (TVOD), and more monetization strategies. Even if advertising (AVOD) is your preferred model, OTT provides the power of more targeted advertising, endemic content, and control over your campaigns and inventory, including direct sponsorships.
Direct to Consumer: OTT is the ultimate platform for reaching your targeted audience directly with your content and delivering a premium video experience that you control entirely. With OTT, providers can get immediate user feedback through direct engagement and interaction. Whatâs more powerful than that?
Consumer Freedom: Consumers are now in the driverâs seat, due to OTT. More than ever, consumers can find exactly what they want to watch and only pay for the content and services that they want. OTT provides the flexibility to adjust your models to the market for maximum uptake. And OTT opens the door for niche content platforms and communities to thrive.
now, Let's see more about Netflix...
Netflix believes in providing the best user experience possible, which customers are willing to pay for. That is the only way to win the OTT streaming war; allow subscribers to continue watching what they want without interruption. Netflix has a churn rate as low as 2.3% and a recommendation system that generates US$1 billion from customer retention each year. During the pandemic, Netflix's growth skyrocketed. It added 8.5 million new paid subscribers in the fourth quarter of 2020 to reach a total of 203 million subscribers, which it has maintained to date.
Now, Several questions could arise in your mind:
How did Netflix keep its customers?
How does Netflix maintain such a low churn rate?
Is it Netflix's recommendation engine or another technology?
Let's take a closer look at how Netflix does it.
Use Cases of AI/Data Science/ML at Netflix
Netflix applies AI/Data Science/ML to running its operations, such as by implementing algorithms to provide movie recommendations and using AI to guarantee high-quality streaming even at reduced bandwidths. below are some catchy features that Netflix has than other OTT's.
Thumbnail Personalization:
The user places great importance on the thumbnail, which is becoming an extremely prevalent trend in modern times. The thumbnail alone is enough for many viewers to determine whether or not they should watch the video in question. Over time, Netflix realized that it wasn't enough to rely on titles; it also had to provide visually appealing thumbnails to entice viewers.
Netflix AI generates thumbnails by annotating and ranking hundreds of frames taken from a preexisting movie or TV program to determine which thumbnails are most likely to prompt a click from users.
Optimal Streaming Quality:
About 220.67 million people worldwide actively use Netflix each month. It becomes very difficult to provide high-quality video to everyone at once under these conditions. The use of AI has resulted in significant advancements for Netflix. Netflix AI is able to foresee how many subscribers it will have in the future. Therefore, it has room to make more technological advances. Netflix improves video quality for viewers even during busy viewing times by placing video assets near subscribers in advance.
Tailored Movies Recommendation:
Netflix customizes its data recommendations for each customer. A single Netflix account may be used in two distinct locations, but you will be shown different recommendations in each. Netflix AI is responsible for this function. The algorithm learns on its own and continues to gather information. Simply logging more hours on Netflix increases the quality of the Netflix recommendations sent to you. The annualized cost of Netflix's recommendation engine is close to $1 million. And its only purpose is to enhance the customer's overall satisfaction.
Any OTT business runs and grows by its quality of service and by predicting its customer churn rate.
but what is the Churn rate... Let's see each term one by one.
What is the customer churn rate?
Customer churn is one of the most important measurement techniques for a growing business to assess its position. It is the figure that indicates how effective the company is at customer retention.
Customer churn is defined as the percentage of customers that cease using your company's product or service within a specific time period.
Churn rate formula:
For example, if you have 10,000 new customers in January and lose 2,000 of them by the end of the month, your churn rate would be 20%.
Customer churn on OTT platforms
The OTT customer churn rate compares the number of customers leaving your OTT service in a given billing cycle to the total number of subscribers at the start of that period. Your subscriber churn rate shows if your brand will succeed or gradually decline. Churn management is critical in the OTT struggle; ongoing optimization of content and services is required for client retention.
Why does customer churn happenđ¤?
There is no single reason, thus here are some of the most common ones:
Inadequate user experience
Customers soon grow dissatisfied and perplexed when important aspects of your OTT platform fail to function properly. Users that are unable to sign up, encounter issues when setting passwords, or encounter instances in which the payment gateway fails or gets stuck, have a significant risk of churn. Another sign of a poor user experience is video or audio players that have buffering issues or time lag.
Uninteresting content library
Customers frequently sign up for an OTT platform without completely comprehending whether it suits their requirements. If consumers find the content uninteresting, they will switch to a competitor. In a sea of content, subscribers may not always be able to find what they are looking for.
Users may become saturated with content after a certain amount of time, so it is critical to provide information on a frequent basis. Engaging your users is simple, but keeping them engaged requires you to provide trendy and exclusive material that is not available elsewhere.
Subscription plans that are expensive
Offering a low-cost service is the best way to impress a customer. Most OTT platforms charge a significant service fee after the free trial period ends, which is often the cause of their high churn rate. If your clients believe your platform is too expensive, they will be more inclined to migrate to a lower-cost competitor, resulting in churn.
Netflix excels at customer retention, with the lowest churn rate
Today's OTT players are primarily concerned with acquiring new consumers while ignoring the churn of existing users after the free trial period. Unlike its competitors, Netflix accepts reductions, analyzes churn factors, and optimizes the service accordingly.
With over 207.64 million subscribers watching a combined million hours of television, Netflix has the lowest churn rate, which has been around 2.3% to 2.4% in the last two years, and it continues to constantly optimize content.
The effect of Netflix's recommendation engine on churn rate
The Netflix recommendation engine is widely used. With so little time to persuade you that there is something worth watching, Netflix delves further into factors like the genre you watch, your ratings, and what you don't watch.
The Netflix recommendation engine includes extensive data on user demographics and activity. It separates its audience into multiple categories using statistics. The Netflix recommendation engine analyzes the performance of each category and prompts the user to take the necessary actions.
For suggestions, Netflix employs a variety of ranking algorithms, including âTop-Nâ video ranking, customized video ranking, âTrending nowâ ranker, âContinue viewingâ ranker, and many others. Each algorithm then goes through the row-generating process to discover videos that fit a specific row.
In the year 2000, Netflix began using analytics technologies to propose DVDs to customers. Two decades later, the Netflix recommendation algorithm is among the most sophisticated in the industry. The personalized recommendations increase client retention by assisting users in discovering titles of interest in an ever-expanding catalog.
People discover more than 80% of the shows they watch through Netflix's recommendation algorithm. Netflix promotes original material on its pages through personalized suggestions and pays content owners a set price, so there's no need for its recommendation algorithm to favor a certain piece of content.
Everything the recommendation engine suggests is based on your previous behavioral patterns. The recommendation algorithm generates a webpage that is uniquely tailored for each user. Every 24 hours, the personalization algorithm resets itself, improving the content so that consumers can continue to find new things from Netflix's most recent collection. These features keep clients glued to their screens and ensure long-term customer retention.
5 reasons why Netflix is the OTT leader
Here are some of the reasons why we believe Netflix is far ahead in the OTT race:
A strong recommendation engine
Netflix has one of the most sophisticated recommendation engines. The choice is an important component of our lives, especially when it comes to media such as films, music, and podcasts. In addition, Netflix's recommendation engine plays a critical part in bringing people to the best few selections for them, resulting in better decisions by utilizing the massive quantity of data accessible to assist us in making choices easily.
Split testing
Netflix performs a significant amount of split testing each year, approximately 200 tests per year. It chooses roughly 300,000 subscribers at random around the world and tests everything from their user preferences to their conduct.
Split testing is primarily employed when big changes, such as a new homepage, are implemented. This change is used to learn about users' reactions to the modifications. Users are also made more comfortable with the new adjustments, which increases user retention.
User preferences have been thoroughly examined
The Netflix recommendation algorithm tracks the number of users who watch an episode, a whole series, and the time between two episodes. and delving deeper into when users pause, rewind, and fast forward.
Other metrics used to study user preferences include user views of episodes, browsing, scrolling behaviors, device type (mobile/laptop), ratings, and so on. The recommendation engine can deliver customized recommendations based on user preferences to increase client engagement.
Push notifications
Netflix does not miss an opportunity to inform customers about new seasons or episodes, tailoring them to what may be a user's top interest. For example, if you watched Season 1 of Money Heist, Netflix will notify you that Season 2 is now available to view. Netflix push notifications continue to change based on data from user behavior. Netflix avoids irritating customers by creating curiosity instead.
Email recommendations tailored to you
Netflix not only sends pop-ups but also email recommendations, personalizing the experience when a new show is added based on your viewing history.
The personalized email is excellent, and you can play the episode directly from the email on your mobile device or add it to your watch list. Users receive emails with the most recent episodes, new subscription plans, and new features. Every email contains a call-to-action button that directs you to the page.
What is Netflixâs customer retention strategy?
Netflix has hinted at a lower-priced ad-supported model comparable to HBO Max and Disney+.
Netflix has begun charging a little supplementary cost from users who want to share their service with others outside their household.
Netflix is constantly innovating and refining its algorithms to reduce churn and retain members by providing the greatest customer experience possible. It has the lowest churn rate, implying improved customer retention. Understanding the underlying intent of customers' activities and improving individualized recommendations with a sophisticated recommendation system is the key to customer retention.
Ending!!!
Hope you enjoyed this article and learned how knowing the churn rate is an important aspect of growing your business, especially in the Media and Entertainment industry.
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Happy Learning!!đĽł