Why the success of Netflix highlights the need for a new loyalty framework

In our most recent blog, we highlighted the difficulties most brands currently face in engendering loyalty among their customers.

Most of the brands in the four sectors we asked consumers to rate (hotels, restaurants, gyms and on-demand music & entertainment services), can only dream of Netflix’s relative success and huge, global subscriber numbers.

We know Netflix is the current beacon of value, where preferred content is literally at the touch of a button, perceived bang for your buck is high and viewers feel an affinity for the brand that brings them everything from Breaking Bad to Bird Box.

But what’s most important to learn from this success is that a new framework is needed to rebuild success among a general audience that is growing in scepticism about the value of brands’ loyalty programs.

Let’s take a look at why Netflix is doing so well with customer retention. Firstly, it has a customer-centric approach to loyalty. Secondly, it makes the best possible use of its customer data. With those things in mind, we ran Netflix through our proprietary loyalty framework.

Our framework is split into two essential elements: implicit and explicit loyalty. Implicit describes a group of assets that create positive brand sentiment. Explicit refers to tangible tactics - such as rewards and discounts - that create new consumer behaviours.

Brands often leap straight for the explicit, the good stuff they think customers want as instant gratification. However, by doing so, they ignore the power of implicit loyalty strategies. Focussing on the qualities that create positive attitudes in the first place adds value to the brand in the eyes of its consumers. And this positive attitude is like loyalty gold dust.

loyalty 2020 assets implicit explicit

Relating Netflix to this framework, we can put the three elements of implicit loyalty under the microscope.

  • Brand trust is an attitudinal driver that can be expressed as the brand delivering on its promise. A big tick here for Netflix, where the level of personalisation of the service and the ability to maintain its high quality while remaining affordable are key.

  • Perceived quality is an experiential/choice driver that can be expressed, for example, as “it provides a good sales experience” or “it’s easy to use”. Here again, Netflix smashed it by living up to its own strapline, “Watch TV shows and movies anytime, anywhere.” It’s also easy to use and cancellable at any time.

  • Finally, shared values are something customers admire and often see in themselves. When the #MeToo campaign broke, and the service faced allegations about an actor in one of its series, it swiftly removed the person in question and related content, creating a stronger ethical bond with its audience.

As the rewards of explicit loyalty behaviours flow from implicit activity, it’s crucial to have the latter as the bedrock of any brand and associated customer retention push. Customer reward is a two-way street: Netflix customers feel valued and rewarded due to the implicit loyalty foundations the brand has built, and Netflix itself benefits from a growing subscriber base to which it can offer precisely more of the reward they desire: great content.

To find out more about Rare’s loyalty framework and our groundbreaking report, Loyalty 2020, get in touch at hello@rare.consulting. You can download the report here.

Rare: Consultancy