Episode 67 - The One Question That Saves Netflix Millions in Lost Subscribers

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📰 The One Question That Saves Netflix Millions in Lost Subscribers

For brands that offer a wide range of options, such as brands with extensive content volumes or variations or even SKU’s, personalisation is essential for customer retention.

This is particularly important in subscription-based contexts, but it applies to any sector where the brand aims to establish a long-term, recurring revenue relationship.

Your Biggest Retention Opportunity

When clients ask about the most significant opportunity for customer retention, I often point to the early stages of the customer relationship. 

In episode 3 of this newsletter, I wrote about why this early period is a crucial opportunity for retention-led growth, as it typically sees the highest rates of churn.  

In episode 4, I explained that churn is often measured as an average across the entire customer base. However, these aggregated churn rates are usually poor indicators of a business's health. 

In reality, most subscription and recurring revenue businesses experience an exponential decay curve, where early-life churn (occurring within the first 0-3 months) is much more significant than in-life churn (which occurs after 3 months). When analysing churn by customer tenure, the curve often resembles the red line shown in the chart below:

Therefore, of course, to drive retention-led growth, it is critical to get the onboarding stage right. 

Early Life Mistakes

Often, brands assume that once converted, your customer is sold on the brand. 

But the reality is, they are not; they are simply slightly warmer prospects. 

In early life, customers are still evaluating whether you are a fit for their needs. 

So you must help customers get the most value out of your product or service. 

One way to achieve this is to leverage behavioural science and gamification techniques, which I have written about in previous episodes (all available in the archive). 

Another approach is to provide highly personalised recommendations in product experiences and CRM marketing. 

When you do this, customers feel that the brand aligns more closely with their needs and ultimately enables them to derive greater value from your products or services.  

But, how do you personalise when you know so little about the new customer ?

Put simply, a golden question. 

This is one question that you embed into your onboarding flows on your product or digital experience that allows you to quickly segment your customers into groups with similar interests. 

The Netflix Golden Question 

Netflix continuously expands its portfolio of owned content, and the brand now has 302m+ global subscribers (Jan ‘25, 16% YoY growth).

However, too much content can be a problem and doom scrolling is the single biggest reason customers leave Netflix. 

Its Netflix’s key moment of truth.

It is why personalised recommendations, trending, magic buttons and playlists are so crucial to Netflix. 

Onboarding is the moment when personalisation is most difficult, but is also the most important. 

So in the third step of the signup flow, customers are asked to pick three shows they like. 

This is highly predictive. This is Netflix's golden question and is key to their success.

Subsequently, as soon as customers arrive at the product, a meaningful level of personalisation is already applied to the content tiles.

Then, as customers use the product more, they continuously ask for feedback on what customers watch with simple thumbs up / thumbs down mechanics, by leveraging social proof (trending in your country, trending now etc.), magic buttons and playlists. 

Building & Executing a Golden Question 

There are essentially three steps: the model, the question and ongoing testing. 

Firstly, you take all of your existing retained customers and build a segmentation analysis (K-means is often used for clustering) based on what they watch, read, buy or do (dependent on your business). 

From this, you will have a group of segments with different characteristics. 

Next, identify which of the things they watch, read, buy or do (dependent on your business) are most predictive of each segment. 

Then execute the question, for some brands, in some contexts, it is ok to implement a multiple-choice text-based question.  

However, more value is most often gained from a more engaging visual multiple choice response mechanism (like Netflix), because you can infer additional attitudinal information, as well as allocate your customer to the most appropriate segment. 

The next step is, of course, to ensure your product, digital experience and CRM marketing reflect the responses given and then to refine and optimise your question and what you deliver to customers as you learn more. 

Final thoughts 

Most brands are flying blind during their most critical retention window.

You're investing in acquisition while your newest customers, the ones with the highest churn risk, are left to figure out your value on their own.

For many brands, this is a massive missed opportunity.  

Brands driving retention-led growth are engineering personalisation from day zero.

Until next week, 

Tom  

Do you need help with Customer Retention?

When you are ready, contact me to discuss consulting, my fast-track retention accelerator, courses, and training. Or if you are interested in sponsoring this newsletter, get in touch via [email protected]