Maintaining Customers in Digital Media | Deloitte US has been saved
Digital media’s challenge: Keep growing while keeping customers’ attention
Industry dynamics are rapidly evolving for digital media companies. As customer expectations for personalized content on-demand continue to shift, leaders will have to take steps to keep their companies relevant and growing.
The number of consumers watching cable TV and movies in theaters is on a downward trend. Numerous digital catalogs provide on-demand shows, films, e-books, videos, articles, podcasts, across a variety of platforms, often teed up in a customized recommendation to fit the consumer’s preferences. Tellingly, the number of cable-cutting households is growing by an 11 percent Compound Annual Growth Rate1 and consumers are demanding niche, abundant, and tailored content on demand. Even streaming video services are seeing greater churn as the market matures. In Deloitte’s 14th Digital Media Trends survey, the churn rate—those who have added and canceled a paid streaming video service—jumped to 36 percent in 2021 from 14 percent a year prior.
Media companies are scrambling to organize, operate, and behave differently to keep up. Five shifts are taking place across the media industry as a result of this change in customer expectations:
Given these shifts, how should a digital media company configure to keep customers on its platform?
Step 1: Optimize the product and data analytics capabilities.
The companies that have transformed their business models to focus on content build from a few capabilities that are competitive necessities in today's digital media market. An established and trusted product and easy-to-use product interface is the starting point. These analytics-powered platforms organize and distribute content based on continuous feedback on consumers’ preferences. The same algorithms that organize content on the platform also guide consumers to the content most relevant to them. Coupled with a customer data platform (CDP) decisioning engine and a strong data science capability, companies can then draw connections between customer behavior and content decisions. The CDP can also make this data readily available for use across business functions.
To drive value from the data collected, teams across the organization must develop and leverage their own algorithms to power the specific need of their business unit or function. While a content insights team may use the data to build a content-development strategy, a product team may use the data to understand which types of levers within the platform are working best to drive consumer use. At a minimum, these algorithms should include propensity, churn, lifetime value (LTV), and unsupervised clustering for segment building and content personalization. Each respective team is then responsible for optimizing its algorithms according to its mandate. Deloitte’s Customer Lifetime Value accelerator is helping streaming companies retain subscribers and enhance profitability by augmenting consumer data with “outside-in” signals from mobile and web behavior and spending patterns to create personalized offers and experiences. Read more about it here.
Data is what creates subscriber personalization. The marketing organization collects data on its consumers’ preferences and behaviors inside and outside of the platform. This consumer data feeds insights to bolster marketing effectiveness and generate content suggestions for consumers on the platform. Relatedly, the same data can be used to drive content production planning, and product development, further strengthening the customer experience in a virtuous cycle.
Step 1: Organizational Design Considerations:
Digital media companies should align their organizational structure to make it easy to surface these insights and optimize data science capabilities. Consider elevating and consolidating the core product, customer, and data insights capabilities into a stand-alone, CEO-level function to set the mandate, accountability, and expectation across the enterprise. This increases the value data can provide by enabling insights across the organization.
To accelerate the adoption of insights capabilities, digital media companies should also consider creating data insights Business Partner roles and teams to embed dedicated data-driven decision-making support into content, product, marketing, and sales teams. Having these embedded capabilities is what creates a personalized customer experience, which leads us to the next step.
Step 2: Maximize personalization to provide a best-in-class customer experience.
Content and customer experience differentiate a company from its competitors and drive customer engagement and retention. Deloitte’s survey found that 52 percent of US consumers find it harder to discover the content they want to watch when it’s spread across multiple streaming video services, and 49 percent are frustrated when content recommendations are not relevant to their interests. These experiences can cause people to tune out, or worse—leave a service provider altogether. A more personalized experience is what ultimately drives customer loyalty. Gold-standard streaming companies are the ones that have a strong product and that can personalize content to the small anonymized segment the subscriber falls into, therefore creating a great customer experience. Netflix and Amazon are known for their customer centricity and, as of the date of this publication, reign supreme as “experience” companies.
By leveraging the data analytics capabilities set up in Step 1, digital media companies can maximize their ability to personalize and curate content for their users. Media companies are also using data to target content for acquisition and production based on marketplace media trends and consumer preferences. However, companies should be mindful of how they communicate data-collection practices and the value they deliver to their customers. Deloitte’s survey found that 77 percent of US consumers believe that the government must do more to regulate data collection and use.
Step 2 Personalization Capability Considerations:
The ability to personalize and deliver content to meet customer preferences requires strong data science capabilities coupled with a customer data platform decisioning engine.
Keeping in mind that content is key for a subscriber, we can proceed to Step 3.
Step 3: Create irresistible content to capture a global audience.
If customer experience through strong product experiences and data analytics insights can retain customers, high-quality, original, and local content is what attracts them to the platform in the first place. In Deloitte’s survey, 52 percent of current US streaming consumers of all ages (and 62 percent of millennials ages 22 to 35) said they subscribe to streaming video services to access the original content. Investing in and building both content acquisition and content-development capabilities is critical to ensuring a healthy pipeline of original content to attract subscribers.
Digital media companies are now focused on international expansion to diversify revenue streams and reach beyond the US market, which requires diverse global content. As they enter new markets, these companies should recognize that every country has consumers with unique content preferences, demanding a localized content acquisition and distribution strategy that can’t simply be executed from a global center. Even in circumstances where original content can be distributed across multiple regions due to shared consumer preferences, localized marketing approaches are still needed. Organizations that can acquire and develop content to address national or regional differences and needs will be best positioned to win through international growth and continued expansion.
Step 3 Organizational Design Considerations:
Ensuring the operating model design has local, in-market content acquisition and marketing capabilities will enable digital media companies to address differences in customer preferences and continue global expansion.
Consider creating a role in the global product organization to liaise directly with regional teams to ensure global customer preferences are taken into account in product development while maintaining a small and nimble product organization.
In a space that is experiencing rapid shifts and competition, the digital media companies best equipped to succeed are those with a trusted, highly personalized product and a vast library of original content that together create an unparalleled customer experience. Is your business ready to meet the moment?
1 Deloitte Insights, Digital media trends survey, 14th edition, 2020.
Don leads Deloitte Consulting LLP’s Managed Capabilities as a Service Leader – delivering leading human capital managed capability services to help change the shape of how you work—to match the changing shape of your business. He has over 17 years of experience in bringing together diverse leaders to co-create on-demand solutions that quickly foster their teams’ accountability to organize, operate, and behave differently to stay resilient in a fast-paced world. Don and his practice provide a variety of specialist managed capabilities, solutions, and talent to solve clients' highly specialized capability gaps such as org design, change management, program management, actuarial services, and people analytics.
Dennis is a principal with Deloitte Consulting LLP in the Technology, Media & Telecommunications practice, focusing in the Media & Entertainment sector. He specializes in digital operations transformation, working with media clients to define their transformation ambition, design new operating models, and execute transformation programs across the media value chain. Additionally, he leads the sector’s robotics and cognitive automation initiatives, including guiding the strategic and operational direction and driving pursuits and delivery activities at leading media clients.