The problem most OTT platforms face is the acquisition of new customers. It doesn’t matter how many new users you acquire if they end up on the churn after their free trial. So, in order to race ahead in creating the best immersive OTT experience, only those OTT services stand out who embrace churn reduction analytics and optimize subscriber retention. So, how do you go about identifying your OTT customer churn rate? This blog will give you all the information you need about customer churn and churn management strategies.
What is OTT Customer Churn?
In simple terms, OTT customer churn is the loss of subscribers from an OTT or streaming video platform . It’s an invaluable metric for video platforms indicating the number of OTT service subscribers that cancel their subscriptions. They fall into one of two categories:
- Voluntary churn: It denotes users who purposefully cancel their subscription. For example, they’ve binged a series that they signed up to watch, and now they’re done. So they just cancel their subscriptions voluntarily.
- Involuntary churn: These users churn unintentionally, whether their payment method has expired or a transaction is declined. Most users are unaware of their churn.
What is Churn Management?
Churn management is the process of identifying customers who have a high chance of leaving your service and implementing proactive strategies to retain them. Implementation of effective churn management strategies lowers customer churn rate, improves ROI and provides a solid foundation for guaranteed customer satisfaction, retention, and revenue sustainability.
Churn management is an essential step in customer retention and has become a more critical key performance indicator (KPI) than customer acquisition. Also, owing to the high OTT subscriber acquisition costs, customer retention remains the best solution to revenue sustainability and long-term profitability.
How to Calculate OTT Customer Churn Rate?
OTT customer churn rate is the percentage of subscribers leaving your OTT service in a particular billing period compared to the total number of subscribers in your service.
Before calculating the OTT churn rate, the following variables must be calculated for the specific billing period:
Active cancellations (A): Denotes the number of cancellations made by the customers
Passive cancellations (P): Denotes the number of cancellations resulting from credit card declines and non-renewals
Win-back Reactivations (W): The number of subscriptions from service reactivations by previous customers
Total subscribers (T): The total number of paid subscribers in your OTT video streaming service
Then, the net churn rate, using the formula, would be,
OTT churn rate = 100 × [(A+P)-W]/T
Take this example – Suppose we are calculating the net churn rate for December 2021,
Active Cancellations (A) = 100
Passive Cancellations (P) = 200,
Win back Reactivations (W) = 50
Total Subscribers (T) = 1000,
Then, the OTT churn rate would be, (OTT churn rate = 100 × [(A+P)-W]/T)
100 x [ (100 + 200) – 50 ] / 1000 = 25%
Video streaming giants such as Netflix, Amazon Prime Video, and Hulu have always enjoyed churn rates below the industry average.
What is a Good Churn Rate for OTT?
Experts agree that OTT brands should aim for a 5% net monthly churn rate for subscription services. Though this may seem easier said than done, tracking your churn is the first step to lowering it and improving your service.
Did you know that Netflix has had a churn rate from 2.3% to 2.4% in the last 2 years, while the rest of the premium streaming market players gained around 5.3 to 7% of the OTT retention rate.
Churn Management Strategies to Reduce Customer Churn
OTT customer churn depends highly on content. If subscribers don’t get to watch exclusive content that’s not available on other platforms, after paying for your service, then you can pick it as the most-cited reason for OTT customer churn. Also, It’s essential to release fresh content regularly so your OTT channel is continually updated, reminding subscribers why they pay for your service.
Consider this, when Game of Thrones ended after eight years of airing on HBO, the platform lost 38% of its subscribers. This is a glowing example of why your OTT platform should churn out freshly brewed content at regular intervals to hook your customer over longer periods of time.
You should not only limit yourself to releasing fresh content but also make them discoverable through creating different genres and easily discoverable search bars.
Needless to say, an appealing and intuitive user experience is one of the best ways to retain customers from letting them jump to other video platforms. If your users have a hard time finding the content that is meaningful to them, or your app is performing poorly, they’re going to spend less time there. Personalizing your user’s profile creates an easy streaming experience and your customers can choose their content with ease, that is already custom-made and presented on their screens.
Netflix excels in this area by providing personalized previews and thumbnails. It takes user experience to another level by personalizing every element in the app which includes customizations in artworks and video thumbnails.
For more information on UX/UI for your OTT channel, read our blog Essential UX/UI Features for OTT Apps
Your users should find your content everywhere, on every device. With the proliferation of new devices in the market and the rise of mobility, viewers expect video streaming apps to deliver an accessible, flexible content consumption experience as they swap from one device to another. Therefore, OTT apps should provide multi-device compatibility for maximum customer satisfaction. This will help users to enjoy content whenever they want.
Muvi is multi-device compatible and provides end-users with the ability to swap devices on-the-go without compromising on the video watching experience. With Muvi you can launch your Multi-Screen OTT VOD Platform across Website, Android App, iOS App, Roku, Apple TV, Android TV, Amazon Fire TV as well as Smart TVs instantly.
Excellent Onboarding Process
A strong move towards customer retention is creating a well-coordinated onboarding process with various optimized support tools. Designing a seamless onboarding process includes implementing the following processes:
- Provide a quick onboarding video tutorial to guide new customers their way through the app
- Greet first-time users with a welcome message on the first app launch.
- Showcase the key functionalities and benefits of the service
- Provide the user with actionable, clear instructions for each step
- Ensure that the Average Time to register (an important onboarding metric) is less. If it takes quite a long time to register, users may quit from registering or even uninstall your OTT app
- Ensure your website/app has a quick load time else users may want to cancel your subscription
It’s advisable to closely monitor metrics such as OTT customer acquisition and churn rate. Take necessary remediation actions when you notice negative behavior like:
High churn rate: This means you are losing more customers than you are gaining. A sharp increase in the OTT churn rate, or even a churn rate of above 10%, can be treated as a red flag.
More profile downgrades than upgrades: This may result in revenue churn, whereby you retain the customers but reduce the revenue.
Just dumping new content won’t help in OTT customer churn. Just as important as creating content regularly, maintaining consistent communication with your subscribers is also important. A simple email newsletter is a great way to keep current subscribers watching and convert free trial subscribers.
Honest and Transparent Policies
Creating an honest and transparent policy promotes your brand name and ensures customer satisfaction, that ultimately leads to increase in customer retention.
In May 2020, Netflix initiated a goodwill exercise to terminate the accounts of users who have not been using their service for more than 12 months. Although the owners of these accounts were still paying membership fees, Netflix chose to close their accounts to prevent them from paying for services they weren’t using. This is what you call an honest service policy!
In contrast, some OTT video services don’t even notify customers when they are about to be billed. This can result in increased customer complaints and a negative perception of the brand.
One of the most important growth level indicators for OTT platforms is OTT customer churn. Churn management, hence, should be an integral part of your OTT video business strategy to maximize revenue and profitability. Hope we have been able to guide you in practicing churn management strategies so that you can keep your subscription churn rates low.
We recommend experimenting with new things through split testing and analyzing the changes in churn stats. Well, it’s simple – Test, Innovate, and Refine your algorithms and keep users watching to prevent churn.
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