Netflix and the Subscription Model: How to Acquire & Retain Customers

Netflix and the Subscription Model: How to Acquire & Retain Customers

Just a decade ago, Netflix was known primarily as the disruptor of Blockbuster and pioneer of online subscriptions for specific products or services (in this case DVD delivery, but there were also shaving clubs, travel clubs and so on). Around 2007, Netflix decided to keep its subscription model but made the wise decision to transition from DVDs to streaming content.

Today, Netflix is one of the biggest Internet companies in the world with 125 million streaming subscribers (as of Q1 2018). Increasingly, Netflix is creating its own content – the company is expected to spend up to $13 billion this year on content, with 85% of new spending earmarked for original series and movies.

And while the original idea of Netflix hasn’t changed – using the Internet to deliver video content more conveniently – today the site competes in a “subscription economy” where any product or service (movies, beauty products, travel and lifestyle benefits) can and probably has been offered for a recurring fee.

The Subscription Model and Software as a Service

The subscription model has become popular (and necessary) in a market where consumers value access over ownership. Think of Napster and the first attempts to distribute music via digital download. The music industry learned that rather than “criminalize” music fans who are accessing these new downloads, it had to think proactively through new pricing models (i.e., Apple’s ingenious $0.99 downloads on iTunes).

Today’s online subscription services are essentially a pricing model that evolved out of digital downloads. Companies like Spotify took a streaming approach to music and needed a pricing strategy that suited their new business model. Rather than sell ownership of songs (CDs, downloads) they would give access to an entire catalogue of music and offer moreaccess and a betterexperience for customers willing to pay a premium (i.e., monthly subscribers).

This is what companies like Netflix and Hulu have done for entertainment and what Custom Travel Solutions is doing for travel – provide an online platform for users of a specific product or service and drive value and revenue for the wider industry. All of this helps explain the success of Spotify and other subscription services like Apple Music, Birchbox and our own branded travel clubs.

Brand Value and Loyalty through Travel Clubs

What distinguishes Netflix from companies like YouTube or Twitch (major platforms in their own right) is that Netflix distributes content forcreators rather than being a platform where creators to publish their own content. Users go to Netflix because they value the quality of content and personalized or specially packaged recommendations, and other subscription services, such as shaving clubs or travel clubs, offer a similar value proposition.

But the subscription model only works if the target buyer absolutely and immediately loves it once they subscribe (i.e., there needs to be a market/service fit). In the case of travel clubs, the benefits are almost fail-proof in terms of appeal because most people are consumers of travel products and services. They are willing to pay a yearly subscription to access a private booking engine with exclusive discounts, travel services, elite lifestyle benefits and social tools to plan group trips.

This is why travel clubs work in the context of non-travel businesses and organizations: both because everyone travels or aspires to travel, and because today’s consumers are accustomed to online subscription services. After all, who doesn’t have a Netflix account, or know someone who does? Netflix has built a culture of membership that encourages brand addiction (“binge watching”) and its ability to recommend the most personally relevant content assures higher customer acquisition, retention and loyalty across a wide audience.

Are Your Ready for a Branded Travel Club?

In much the same way, online travel clubs can be thought of as “Netflix for travel.” Suppose Netflix wanted to incentivize any business or organization to sell their own customers on a Netflix subscription. The company would have a great ancillary program to offer its own customers (because Netflix would manage the site and content), and offering the subscription would help the company build loyalty, brand affinity, and ultimately, brand equity in the form of subscription fees and lower churn rates. And customers would win because they get access to travel products they would have consumed anyway, with or without a travel club, but now at a discount. Travel clubs provide added value for customers and attach your brand to their larger satisfaction and loyalty.

Custom Travel Solutions can provide your non-travel business or organization with a private label travel club that is as easily accessible online – and just as valuable in the public eye – as a Netflix subscription. Think of a travel club as a private online travel agency for your customers – the key is quality of content and personalization, and that is what our technology can provide. Contact us today to learn more about our platform and enjoy another blog on common revenue opportunities for member clubs, loyalty programs and travel clubs.