What Netflix’s customer retention crisis teaches us about CX


Netflix has been forced to cut 150 jobs as its subscriber numbers plummet. What's gone wrong at the streaming giant - and what customer retention lessons can we learn from it?

19th May 2022

It’s not been a very good start to the year for Netflix, has it? 

For the first time in a decade, the world’s most popular streaming platform lost subscribers. 

200,000  in the first three months of 2022, in fact, with an estimated two million more predicted for the second quarter. The impact? $200 billion wiped from their stock market valuation in six months, and 150 US-based jobs cut

If this doesn’t teach us anything about the business impact of customer retention, nothing will.

Retention is today the most critical business metric for any business that wants to drive growth. For subscription businesses, it’s always been important. But now, with heightened competition across every industry, price pressures, and customers less loyal than ever, having a laser focus on customer retention is business-critical whatever sector you work in. 

The businesses that will thrive today, and in the future, are those that truly understand their customers, meet their demands, and deliver experiences that drive loyalty and retention. 

But before we delve deeper into what we can learn from Netflix’s retention dilemma and how they might solve their issues, let’s take a look at what might have gone wrong.

What’s gone wrong at Netflix?

When Netflix announced it had lost subscribers in the first quarter of 2022 and expected to lose more than 2 million subscribers in the next, Wall Street was baffled. Market analysts had predicted an announcement of 2.5 million new customers. The reality couldn’t have been more different. 

Much has been said about Netflix’s potential issues. 

Price rises have, of course, been at the top of the agenda given the current economic situation – with rival services from Disney and Apple now also costing a fraction of the price in some countries.

The rumoured crack down on password sharing has also been widely discussed as a factor. Content quality has also come into question – with Disney, HBO, and other major networks taking back control of classic films and tv programming, and investing in more selective, high-quality content. 

But though we can discuss these factors at length, and we know they’ve all impacted Netflix’s success (or lack thereof), for Netflix itself, the only way it’ll really understand what’s gone wrong is by actively listening to its customers. Only then can it solve its retention problem. 

The same goes for your business, too. First, let’s look at customer feedback.

Why Netflix (and we) need to listen to customer feedback

When was the last time Netflix asked you for customer feedback?

It’s a question that I’ve been asking myself in light of the recent news. 

Like many people, there have been times when I’ve unsubscribed from Netflix for a short period, and then resubscribed when I realised I couldn’t watch the latest season of Better Call Saul or Ozark. However, Netflix has never collected feedback to learn why I took either action. Speaking to my colleagues and friends, this isn’t unique to me. Netflix doesn’t do feedback, it seems.

Which is odd, because as we all know in CX, customer feedback is essential to guiding and informing our decision making, and influencing innovations and changes to our products or services. It’s also crucial for measuring customer satisfaction. Ultimately, it allows us to better understand our customers. 

Feedback is important for customers, too. Microsoft research suggests that 77% of consumers view brands more favourably if they seek out and apply customer feedback.

If Netflix isn’t collecting, analysing, and acting on its customer feedback, how can it make informed decisions about the future of its products, services, and programming? How can it fully understand why its customers are churning? And how can it get a clear picture of its customers’ motivations?

Now, I’m not saying that Netflix doesn’t have its own way of collecting data to understand its customers. They will no doubt have mechanisms for this. But if Netflix isn’t collecting, analysing and acting on customer feedback, it's missing a critical source of intelligence that would enable them to better understand and resolve its retention issue. 

Understanding why customers leave for competitors

In every industry, competition today is higher than ever. The pandemic has fundamentally changed the way customers behave. According to Nielsen research, 92% of global consumers don’t consider themselves brand loyal. And more businesses (especially online-only ones) are competing for their attention.

Handily, Netflix is a great case study on understanding today’s hyper-competitive business landscape. As we know, Netflix has found itself under increasing pressure from new competitors in the past few years. 

Disney has entered the market, and has grown faster than any other provider. Apple uses its considerable budget to compete on both price and quality of programming. HBO, Hulu, Discovery, Paramount, Amazon, and in the UK, NowTV have all considerably upped their game. The competition is, as it is in many industries today, unbearably hot. 

However, this isn’t a reason to just plough on or give up. We need to take a step back and understand why customers leave us for competitors. Assumptions and cold, hard viewing figures aren’t enough. Otherwise, there wouldn’t be so much blind panic about Netflix’s predicament.

So, what could Netflix (and we) do to understand why customers are leaving? A critical part to this has to be understanding customer feedback. 

A first step might be to take a simple two survey approach.

In its simplest form, you would analyse and compare data from the two key surveys sent to customers at the time of first purchase, and at the point of churn using a Unified Customer Intelligence platform. From this, you can see why customers stay with you and clearly understand why customers leave you for competitors. 

This approach isn’t rocket science, of course. But from all available evidence, Netflix hasn’t been doing this. And from speaking to companies across multiple sectors, this also happens to be the case for many, many companies across almost every industry. We all need to get better at understanding customer retention.

Of course, listening to customer feedback might not be the golden ticket to reducing churn. But at the very least, you can get a solid understanding of what’s going wrong, where you need to improve, and what makes your happiest customers stick with you. 

So, what is this golden ticket we speak of? Let’s quickly discuss. 

It’s time to unify your customer data

Customer feedback is not the only customer data source we should consider if we’re going to fully understand and solve customer retention problems. To get a complete view of customer retention, and what drives churn, we need to take a more unified, intelligent approach.

Why? Because customers are telling us what they want across the customer journey – not just in feedback surveys. For example, app reviews can tell us a lot about where to improve our products. Conversational data from chatbots can inform us of our customers’ critical issues. And Customer Support interactions can offer insight into why customers might be churning.

By unifying all of these customer data sources, analysing them side-by-side, and at scale, we can begin to see the customer reality, and get the full picture of what issues might be leading your customers to leave you for competitors. Through this, you can make smarter decisions that lead to better customer retention, and less churn. 

Unified Customer Intelligence is by no means the only answer to Netflix’s (and your) retention problems. But it’s an extremely good place to start. 



Replies (1)

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Steven Walden
By Steven Walden
19th May 2022 19:43

There is big data, deep data and rich data. Covering all three is important in CX. The term Unified only refers to skating over the surface of big data.

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