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Minimizing Churn in a competitive OTT market

 August 2018

By Michael Lantz, CEO, Accedo

Over recent years, with huge amounts of competition and new market entrants, video service providers have seen churn generally get worse, and this is seen as one of the biggest challenges for a modern video service providers.

In some cases, churn happens because the subscription simply comes to an end and is not renewed, or perhaps the credit card is now out-of-date and therefore automatic renewal doesn’t work. Obviously, the more of an effort it is to renew, consumers won’t bother unless they’re really frequent and engaged users. Active churn, i.e. when a consumer actively terminates a subscription, is most common at the end of free trial periods, but will also happen over the course of any subscription. If we exclude the “normal churn” (moving outside a coverage area, different family circumstances, change of lifestyle etc), termination of a subscription is normally related to low usage and engagement with the service.  It’s these consumers that are easiest to analyse and improve relationships with.

Currently Pay TV churn tends to be lower than in the OTT world, which makes the business case worse for OTT service. My personal opinion is that this difference will go away over time as the differences in business models and service structures will be less. For the time being it is clear that OTT video providers need to work more actively with their subscriber base to be able to reach attractive churn levels. This is partly because traditional TV has retained more conservative, older audiences, which tend to have lower churn levels, but it’s also because the fact that it’s more hassle to change a traditional pay TV subscription. In addition, you may have paid someone to install a satellite dish or you may have an expensive cable TV gateway STB. Finally, traditional pay TV operators have successfully over the past 10-15 years been selling triple play or even quad play services to their user base, creating a group of users with lower churn and higher ARPU.

From Accedo’s perspective, as a video experience company, we see how effective a good video experience can be to improving customer satisfaction and engagement and in turn reducing churn. However, to do that, you need a few things in place:

  1. Understand the Data

It’s clear that customers who are not engaged with the service and are not using it are more likely to churn. But it’s not only about volume. Absolutely, a person using a video service 10-15 hours per week is clearly less likely to churn than a person using a service 1 hour per week, but in reality the majority of the users are in a grey area where it’s difficult to know just from the usage how likely they are of churning. Instead, churn likelihood requires an analysis of many parameters, both related to the type and frequency of content, the demographic situation of the household and length and business model of the subscription, to name just a few. Most video service providers have the right data in their systems, but are not analyzing the data and more importantly are not taking the right action. A data-driven video experience has the potential to enable video providers abilities of adjusting the experience to reduce churn or at least be able to detect high-churn likelihood subscribers so they can be targeted with campaigns.

  1. Make it Easy to Discover Content

As mentioned, while usage volume is not the entire answer, it’s clear that it’s highly correlated with loyal users who have lower likelihood of churning. Consumers who find more content to watch will stay with the service, while consumers who try find something to watch but fail may leave the service frustrated with the perceived lack of attractive content. The reason may not be lack of content but simply that the user doesn’t find the content that he likes.

From Accedo’s perspective, we don’t believe that there is one “optimal user experience” that will guarantee that consumers find content. Different consumers will interact with a service in different ways. It is possible that a service with a very clear user demographic can have one defined way of interaction for all users. However, more generic services targeting a wide variety of consumers should consider different varieties of user experiences, and preferably experiment to find the best one for the different user groups. It may even be necessary to have different user experience for different time of day, since consumer behaviour changes depending on situation.

  1. Creating a dynamic user experience

Once you have the right data and understand the user segments you have in your service, and you have visibility of how these user groups are behaving and churning from the service, you can start addressing the problem. Accedo One, our video experience cloud platform, allows customers to control their user experience in a dynamic way and to learn from customer behaviour to understand what is working. It is possible to test alternative experiences on the same user group and draw conclusions of what works best. The ultimate objective is to reduce churn for that user group, which is a measurable KPI which drives profitability for the service.

  1. Using marketing and promotions to drive loyalty

One thing I find surprising is how limited marketing and user campaigns are used by OTT providers. When they are used, it’s often generic campaigns promoting some new hero content which has been acquired, rather than something which is more customized to each consumer.  It is a really simple yet effective way of creating a trusted relationship with consumers and to drive interest for the service. If those promotions and campaigns are relevant they will provide a measurable uptake in usage which, according to the previous discussion, will have a high correlation to lower churn. Finally, clever campaigns outside of the service itself are also the most effective anti-churn method if used specifically to target the high churn risk users

We have a range of solutions aimed to help you gather the right data, make the most from that data, and adapt your service dynamically to respond to trends and profiles identified. If you want to find out more about how these solutions can help you reimagine your video service and reduce churn, get in touch.

You can also see these solutions in action on our booth (14.E10) at IBC. Book a meeting to find out more.

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