Churn is undoubtedly bad for your business. That’s true whatever your business is, but goes double for subscription-based businesses. And yet, while it's clear that churn negatively affects the topline, most subscription businesses don’t have a churn management strategy. Here are a couple of reasons why churn management is not considered a pivotal growth move -
- The amount of time and effort subscription businesses need to invest in understanding churn and tackling it is exceptionally high, especially if the plan is to build an in-house churn management solution.
- Managing churn in-house means giving up time that could rather be dedicated to structuring growth objectives.
- Churn management needs an intelligent churn prediction algorithm and tech that supports the functioning of this algorithm. Building such a solution in-house is a highly time-consuming and expensive affair.
Retention is your springboard to profitability. According to a Microsoft survey, 96% of customers say customer service is important in their choice of loyalty to a brand. A foolproof growth strategy will align with a gradually growing customer retention rate. An agile approach to improving customer retention is to employ a mixed monetization strategy in your core billing function. How can mixed monetization propel higher retention and profitability - and just what do we mean by mixed monetization? Let’s break down the first piece of this two-part question by understanding the monetization ecosystem in the subscription landscape before we delve into the second.
The Power of Three
Three main monetization models run revenue for subscriptions. Here’s a brief outline of each -
Advertisement Video On Demand (AVOD)
AVOD allows advertisers to run ads on streaming platforms when users watch video content. AVOD’s Customer Acquisition Cost (CAC) is quite low, making it accountable for 50% of the OTT revenue. Because of its cost-effectiveness, AVOD has a comparatively lower entry barrier (specifically if the subscriber pool is larger). This model is also considered a scalable revenue solution for OTT platforms with a large and rapidly growing subscriber base.
Subscription Video On Demand (SVOD)
SVOD is a widely used monetization model in which subscribers pay a monthly or annual fee to access OTT content. Subscription businesses can forecast revenues better with enhanced visibility of subscriber profiles, history, and viewing habits. This model creates a massive opportunity in SVOD for streamers and makes the space extremely competitive. Original OTT content aligning with subscriber choice wins the game in SVOD.
Transactional Video On Demand (TVOD)
TVOD is also a Pay-Per-View (PPV) monetization model in which subscribers watch content on a one-time basis. This model caters to those customers who seek the highest value from the content they care about by limiting their presence on many or most subscription platforms. While AVOD’s target segment is quite a niche, this model is still cost-effective for picky viewers who know what they want and don’t need anything else.
To attain an edge over the competition, a single pure-play model can be inadequate. The subscription ecosystem is seeing greater adoption of mixed monetization models to cover the missing piece of its growth puzzle.
Mixed monetization, also known as hybrid monetization, is a revenue model that combines two or more independent revenue monetization models to manage a subscription platform.
Mixed monetization maximizes revenue by inviting more customer touchpoints while streaming a single video. The most popular mixed monetization model is AVOD+SVOD, in which a video is interrupted by ads. This offering can then be positioned for an upgrade to an ad-free subscription for a higher fee.
Most sports platforms team up with SVOD streamers to broadcast their most popular sporting events (grabbing eyeballs), skyrocketing their user engagement levels and maximizing revenue. Since such services broadcast just a popular sports event on SVOD, this mixed monetization model combines TVOD and SVOD.
The Right Mix For You
Well, what’s the right mix of monetization for you? The answer to this query can evolve as your subscriber base grows and your business expands. As your growth strategy matures, consider the following factors that decide the right monetization mix for you.
- Audience demographics
- Pricing sensitivities across the globe
- Ad responsiveness
- Buying behaviors
Making this decision undoubtedly requires a lot of data from your customer profiles. Customer intel is precious as an indicator of your retention rates and revenue. The more you know about your customers, the longer you can retain them. We at Evergent simplify this effort for you with our subscriber analytics capabilities. The Evergent Monetization Platform (EMP) maximizes customer care by expanding data visibility across all your departments.
EMP powers your payment system with a hyper-personalized mixed monetization strategy tailor-made for your business needs. Our solution seamlessly stitches over 150 global payments to strengthen your user engagement model, boosting retention.
Talk to our monetization experts at the 2023 NAB Show to explore the right mix of monetization models catering to your growing business needs.