Why Netflix’s StreamFest strategy will push fence-sitters ‘over the fence’

In their Q3 2020 earnings call, global streaming behemoth Netflix reported 195.2 million subscriptions worldwide. Netflix added 2.2 million paid subscribers in this quarter, its slowest growth in the year compared to Q1 growth of 10.1 million and Q2 growth of 15.7 million subscriptions. The highest contribution to the video streaming service’s paid subscription growth came from international markets, with the APAC region contributing to 46% of the total growth.

The company is planning to launch even more original shows in 2021 and is banking on its robust content pipeline to win new subscribers. However, that’s not where the buck stops. On the marketing and distribution front, Netflix has been making several tweaks to its strategy. Their partnership with telco Reliance Jio announced in September will help them net close to 4.6 million paid subscribers, according to an analysis by Media Partners Asia. The deal allows Jio’s post paid subscribers to avail Netflix’s mobile-only plan for Rs 399 and above.

A year ago, Netflix quietly phased out its 1-month free trial in India, instead offering its mobile-only plans starting at Rs 199 to attract new subscribers. In fact, in the last couple of months Netflix has phased out this offer in several international markets, including its home market, the US. The company has said that it is experimenting with different marketing promotions to attract new subscribers.

“The first-month free trial has been running for a long time on Netflix across multiple countries and is very old as a strategy, even for consumer software products,” observed Karthik Srinivasan, Communications Consultant.

This customer acquisition strategy is based on the behaviour heuristic called ‘zero price effect’ studied in behavioral economics, which demonstrates that when the value of a service of product is determined to be zero, the expected benefit is perceived to be substantially higher. All the OTT streaming services bank heavily on this strategy offering up to 3 months of free trial to get new users to sample their content and services.

However, in reality customers face a major deterrent (or friction) when it comes to availing free trial subscriptions on OTT platforms.

As Mitchelle Rozario Jansen, Regional Head Operations (West), WATConsult, explained, “The biggest deterrent to the one-month free trial subscription is the fact that one had to update the payment details. Revealing that information and giving that access is a commitment that the user has to make in order to get the benefits of the free one-month trial.”

Many of the users may have shared bogus card details to avail the 1-month free trial. Netflix is sharpening its content sampling strategy to go after only the serious users.

So, they have launched Netflix StreamFest, where users can avail Netflix content for free over an entire weekend (December 5 and 6). What are the advantages of this strategy?

Srinivasan said, “The 2-day stream-fest makes the offer more focused, like an Amazon Prime Day sale, narrowing and heightening the interest and awareness to 2 specific days, unlike no particular one month in the first-month free trial. That is, in the first-month free offer, the free period would differ from person to person, but in the stream-fest, it would be the same for everyone. That adds FOMO to the offer and makes it a compelling value proposition, provided the stream-fest is adequately publicised, like the Prime Day sale.”

Adding further, he said, “Also, since Netflix is not seeking payment details, it becomes easier to trust the offer, since you would only part with enough details for Netflix to email/ text you after the trial, to tempt you to become a paid subscriber. The idea clearly is not to expect you to forget cancelling the credit card/ payment details on the 29th day of the offer, the usual strategy.”

Uday Sodhi, Senior Partner, Kurate Digital, remarked, “It’s an interesting marketing strategy as it brings in a lot of fence-sitters and it helps in understanding how many users are looking to switch to Netflix and are looking for better pricing. Also, it gives a strong insight into consumption patterns to improve recommendations for the Indian users. While this is great for the consumer, it’s a great way to get consumer insights and push a few users ‘over the fence’.”

“For a price sensitive market like India, Netflix subscription packages were a barrier for people to experience Netflix content. It’s a smart ploy, with these two day consume all you can, they would attract enough eyeballs and give the much desired experience and sneak peek into its content library. However, would be interesting to see how many of these would convert. Feel they could have capitalised the momentum or excitement with a follow-up limited offer on subscription, and you never know if it’s in the pipeline. One way Netflix would definitely gain would be getting a deep insight on mass consumer choice of content, with just two days at hand a consumer would pick content which they prefer the most or has been on their list for long,” said Balkrishna Hari Singh, Founder & CEO, Frenzi, a single window search and recommendation app for all streaming content.

“The content repository on Netflix itself is quite rich and focuses on different kinds of target groups. It has something for everyone. By simply sampling out the content for the weekend, it is going to keep users intrigued. Once you’ve created that appetite in the minds of the consumer, they are sure to come back for more. If they don’t, well, you can always reach out to them through re-targeting and remarketing now that the accounts have been created,” believed WATConsult’s Jansen.

“This new offering allows the brand to tap into new users and give them an opportunity to become part of a new community – the StreamFest members. Netflix is an international name and being associated with it even in this capacity surely holds value for young adults as well as lower income groups in India who aspire to a certain lifestyle,” she concluded.