Qualitative and Exploratory

Report
Team Newbility: Liwen Bai, Qihui Wang,
Chaoqun Yin, Hanqi Zhang, Mingyue Zhu
 01 Research Methodology &
Question structure
Hypothesis

How relevant is a rewards program to a streaming customer? By establishing a loyalty program, Netflix will be able reduce
Do the benefits we propose motivate customer behavior? the churn rate and prevent higher consumer churn in the
future.
Why is customer retention important? Previous research & findings

Netflix lost 200,000 subscribers in the first quarter of 2022 and
1,000,000 in the second quarter.
○ As a result: stock was on a decline of approximately
70%
According to Nielsen research, 92% of global consumers don’t
consider themselves brand loyal.
Competitive landscape: Disney+, HBO Max, Hulu, etc.
Netflix isn’t collecting, analyzing, and acting on its customer
feedback.
From Annisa Auditya’s paper “
Netflix in Indonesia: Influential Factors on Customer Engagement among Millennials' Su
bscribers
”:
Exclusivity has a significant impact on willingness to subscribe
Perceived price negatively contributes to customer engagement and has a
significant impact on willingness to subscribe.
According to Didi Tarmidi and Dimas Harvid Irgandi’s paper “
The Effect of Promotion, Customer Relationship Management and Brand Satisfaction on
Customer Loyalty: Netflix Indonesian
”, if Netflix increases its value of promotions, there will be an increase in
customer loyalty.

According to Kaarle Kannisto’s paper “

The motivations for Netflix to vertically integrate its business model”:
Netflix’s ability to attract customers is based on its content choices and quality of
experience.
Netflix has raised price in 2022 Competitors’ pricing can affect Netflix’s attraction and retention.
 Loyalty Program & Benefits This loyalty program will be point-
based.
On the baseline, a one-month
subscription will give the customer 10
We roughly calculated that the customers with these points
are likely to have subscribed for these amount of time:
points. If the customer decides to
● Get one month free for every 6 months subscription subscribe for 3-months at one time,
he/she will receive additional points,
● Sneak peak: one episode ahead
and likewise for those who subscribe
Cumulative subscription ● Movie tickets redemption (2/month) for 6-months or a year at one time. The
>6 years ● Access to presale exclusive merchandise more one subscribes, the more points
● Access to presale comic con tickets he/she will receive.

● Get one month 50% off for every 6 months subscription

Cumulative subscription ● Sneak peak: first 10 minutes of the next episode
>3 years ● Movie tickets redemption (1/month)
● Access to presale general merchandise

● Get one month 50% off for every 12 months

Cumulative subscription
subscription
>1 year
● Movie tickets redemption (1/ 3 months)

Cumulative subscription
● Get 15% off if re-subscribe for 6
<1 year
months
 02 Interview overview
To determine the relevance of a rewards program to a streaming customer and whether the proposed benefits
would motivate consumer retention, we designed an exploratory survey and conducted 10 interviews.

Our ten interviewees range in age from 22 to 27 and represent a variety of races, including Asian, Caucasian,
Hispanic, and African-American. They reside in cities such as New York, Los Angeles, and Tokyo. They hold
prestigious bachelor's and master's degrees and originate from wealthy families. Compared to other attributes,
they are typically more concerned with the contents. Even though they are wealthy, the majority of them are still
price sensitive, so they will not accept loyalty programs with additional fees. In addition, they have a pattern of
passive behavior; they will not strive to improve their status but are more likely to accept benefits automatically.

The survey focuses primarily on four aspects:

● Consumer journey: Understand the four stages of the consumer decision process—awareness,
consideration, purchase, and avocation
● Motivation: Evaluate the most important factors that influence consumers' decisions to subscribe to a
streaming service and join a loyalty program.
● Benefit: Identify the attitude and expectations of consumers towards the design of NETFLIX's loyalty
program.
● Competitor: Determine how consumers feel about other streaming platforms and their loyalty programs.

(Complete survey is attached in appendix)

 03 Key findings
We found that our interviewees care the most about the
following:
01
content
Content: All of interviewees kept mentioning "content"
as their top priority. They were satisfied with the existing
mechanism of releasing all the episodes at once, but they
will be more excited to get a sneak peak as the rights to
watch it first.
Post-credits scenes & behind- the-scenes:. Some
interviewees expressed an interest in exclusive post-
credits scenes after viewing the episodes, primarily in
the hopes of discovering what plot will come up within
the next show. They are also eager to watch behind-the-
scenes to learn more about the inner workings and
interactions between their favorite actors.
Personalized recommendation: Some interviewees have
been enjoying the personalized recommendations
feature. They wish Netflix can be more accurate in
recommendation, specifically time-wise: for example,
since many prefer to watch while eating, they want
Netflix to recommend short, light-hearted shows
suitable for meal time.
02
Price
sensitive
The second element the majority of our
respondents regard as important is price. They
indicated that they do not want to pay extra
money to get the benefits. Moreover, they
pointed out that if Netflix continues to increase
subscription price, they would not consider
renewing the subscription regardless of any
rewards; they hope to reduce their spending on
subscription through loyalty program.
03
○ Annual pay
bonus
Respondents indicated that they would be
more willing to participate in the loyalty
program if they can gain access to a higher
level of membership and enjoy benefits by
making a one-time annual payment.
04
social engagement
Especially after pandemic, connecting with
others via online platform became popular.
When asked which level of subscription
they are in currently and why, most of the
interviewees who are in premium cited the
ability to share with family and friends as
the main reason. They pointed out that if
they can watch videos simultaneously and
interact remotely with family and friends,
their viewing experience will be enhanced.
05
Video Quality
Some, but not all, of our interviewees
consider video quality to be one of the
components that affect user experience
and an important factor when considering
level of subscription.
 04 Insights
Customers of Netflix value content and pricing above all else. A portion of the proposed benefits of our loyalty program, particularly
the discount and sneak peek, appear to excite customers the most, whereas benefits such as access to exclusive merchandise and
pre-sale comic-con tickets do not motivate customers significantly.

When our interviewees took a look at the loyalty program and review the benefits, they mostly agree on the ones that give them
access to additional contents, including sneak peak and the movie tickets. The controversy mainly took place regarding to the
merchandise and comic con ticket benefit. While some of our interviewees - mostly females - expressed that they are very excited
about the merchandises and ability to access to presale comic con tickets, some others - mostly males - indicated an indifferent
attitude - they are very tenacious about “content”. However, according to the study, 63% of comics are bought by men and, 37% by
Women (Rich Johnston|).

Netflix’s average user, according to reports, leans toward younger adult age bracket, a member of Gen Z or Millenials, and with a
lower income range of $25-50K. There are slightly more female Netflix viewers than male, but only just – 52% female to 48% male
(Katie Canales ). The younger generations are very into collecting things for several reasons: nostalgia, seeking comfort, self-
expression, etc (Caroline Bologna).

Therefore, despite some of our interviewees said that they do not care much about the additional benefits, it is likely that, they will
still be very excited if Netflix actually implements the program and offers them these exclusive benefits.

I won’t participate if I need to spend extra money. Otherwise I

think these rewards are cool, I’d love to have exclusive These other benefits … I don’t care really, I just want
merchandise! And comic cons, I always wanted to go but I them to have more contents, the more the better.
have never been to one! I would say yes.
 05 Conclusions
Since the loyalty program provides a variety of benefits, Netflix will need to invest more than it currently does. However, the main
focus of this loyalty program should still be on content and price - the two factors that customers deem the most important and that
are the “foundation”. Any additional benefits are but icing on the cake.

Therefore, our loyalty program will primarily focus on what our interviewees consider essential and what the post-COVID trends are.
Netflix should put most of the investment on negotiating for more general and behind the scenes, calculating the ideal price
promotion point to maximize motivation for re-subscription while still able to make a profit, and introduce additional features. Netflix
will also invest on the merchandises (the right to manufacture and sell), but to a lesser extent.

In conclusion, we suggest the management team consider the following:

More Contents Price Promotion Shareable Feature

Netflix should consider purchasing
movie rights for classic movies to enrich
its content library, or, it can negotiate
with the shooting crew to record some
behind-the-scenes credits.
The higher the cumulative points of one
customer, the contents he/she can
access. Hence, customers will have the
motivation to unlock the exclusive
contents.
Netflix can develop a feature that allows
While offering price discount for
people to watch the same video with
different customer tiers, Netflix can also
their friends/families simultaneously,
consider other kinds of promotions,
which will be similar to a cloud viewing
such as bundle sales, referral discount,
experience.
and progressive discount. This is to
This feature will be exclusive to standard
encourage current customers to keep
and premium subscribers, and the
renewing the contract while attracting
premium subscribers will be able to share
new customers for the business.
with more than 1 friend.
 06 Limitation & Mitigation
limitation
● Sampling bias
○ Small sample size: limited number of
interviewees
● Self-Selection Bias
○ The selected interviewees are not reflective
of the greater group: except for race, our
interviewees have similar backgrounds,
such as age, level of education, and region.
● Response bias
○ Interviewees may not be 100% honest and
share limited information when answering
the questions and interviewer cannot verify
the results
○ Interviewees may misunderstand some of
the questions and respond incorrectly
○ The way the interview questions are
framed may lure interviewees to respond
toward interviewer’s expected answers
Mitigation
● Reach broader audiences: include people with
different backgrounds (income, age, level of
education, race, region, etc.), but be sure to target
the right audience group
● Develop structured questions and randomize
item’s valence to prevent response bias
● Pay attention to their body language and facial
expressions - sometimes these indicate whether
or not the interviewee is telling the truth, and
hesitation/pauses may indicate that the
interviewee is not in complete agreement
● Minimize unrelated talk: help support equitable
conversation by minimizing the effect of personal
similarities between the interviewer and the
interviewee.
 07 Guides of quantitative research
In the following phase, well-structured scales should be added to surveys, which will facilitate the use of linear
regression to our research. We will use linear regression to investigate what factors and to what extent those
independent variables will influence our dependent variable, which is consumers' propensity to renew subscriptions. We
will create questions similar to the ones below.

● What genres of contents you expect Netflix to produce? Please select all that apply.
● If Netflix launched contents that satisfy your need, how possible would you renew your subscription? Please
select from one to five points, one represent “no possible”, five represent”high possible”.
● Please rank those factors that will affect your decision to renew your subscription. (content, price, video quality,
exclusive bonus for loyalty consumers, etc )
● ……

Moreover, We will consider whether the value of R square is between 0 and 1 based on the research study's results. To
judge the rigor of the model. Secondly, we will try our best to optimize the linear regression model designed by us
according to the improvement of Adjusted R squared to make the research results more meaningful in the case of
analyzing customer churn rate.

In addition, we may use CLV as a metric to determine whether the loyalty program increases the profitability of each
customer, which would indirectly demonstrate the audience's propensity to prolong their contracts with Netflix. As the
corporation is notoriously secretive about the data it shares, we will review Netflix's SEC filings to determine how they
demonstrate value to investors, which will help us implement our research strategy more effectively.
 Appendix
Survey Questions (qualitative state)
1.Consumer journey
What do customers leverage/consider the most when it comes to streaming subscription?
Indicate which online streaming/rental services the customer currently use? (Netflix, Hulu+, Amazon Prime, HBO Max, Disney+, Blockbuster, etc)
How often does the customer stream online content during a given month?

2. Motivation/factors
To what extent does price matter - what is the tolerance? In other words, how much is the customer willing to pay each month?
Is the customer willing to pay for premium? What is the expectation (for basic, standard, premium)?
How long has the customer been subscribed to Netflix (or any other streaming service?)
What makes the customer decide to continue subscribing or turn away from the service?

3. Benefits
If Netflix establishes rewards programs, how likely is the customer willing to participate?
The Netflix rewards program is retention based - which level does the customer think he/she will meet? (i.e., 5+ years is platinum, 3+years is gold, 1+year is Silver)
If Netflix had exclusive member benefits (refer to the proposed benefits page), how likely is the customer willing to participate/ refer Netflix to friends? Why?
What kind of additional benefits would the customer expect Netflix to offer?
Does the customer have an ongoing membership subscription? How does membership affect the watching experience (if there is any) ?

4. Competitor
Has the customer ever subscribed to another streaming provider and stopped subscribing before? Why did he/she stop subscribing? If he/she keeps subscribing, what
are the reasons? What aspects does he/she enjoy most?
Please rank live streaming service providers regarding their consumer service. In other words, which service provider does the customer feel most intimately
connected to?
 Appendix
sources
Dubov, Mikhail. “What Netflix’s Customer Retention Crisis Teaches Us about CX.” MyCustomer, 16 May 2022,
www.mycustomer.com/customer-experience/loyalty/what-netflixs-customer-retention-crisis-teaches-us-about-cx#:~:text=For
%20the%20first%20time%20in. Accessed 11 Oct. 2022.
‌
Johnston, Rich. “Report: 63% of Comics Bought by Men, 37% by Women.” Bleeding Cool News and Rumors, Bleeding Cool News And
Rumors, 20 Oct. 2017, bleedingcool.com/comics/63-of-comics-bought-by-men-37-by-women/.
‌

“What Is Interview Bias and How to Avoid It.” Thomas International,

www.thomas.co/resources/type/hr-blog/what-interview-bias-and-how-avoid-it.

Canales, Katie. “Meet the Average Netflix User, a Millennial Woman without a College Degree Living in the American Suburbs Earning
Less than $50,000 a Year.” Business Insider, 18 Sept. 2021, www.businessinsider.com/typical-netflix-user-subscriber-
demographic-millennial-age-political-views-income-2021-9.
‌
“Why Millennials Are so into Collecting Things.” HuffPost, 16 Dec. 2021, www.huffpost.com/entry/why-millennials-collect-
things_l_61b80b36e4b0911ceb59b49d.
‌