Survival Analysis & Lifetime Value
An audience’s lifetime value is a powerful and straightforward metric that is highly important in determining the long-term health of a subscription business. As we talked about in Calculating Lifetime Value in an SVoD Business, using a simple calculation to combine the churn rate and ARPU could mislead you when it comes to determining the investment in your streaming video service. Utilizing survival analysis techniques and plotting the retention rates to estimate a companion survival curve for an SVoD business, more accurately predicts overall lifetime value and empowers people to invest more confidently in their marketing and content library.
Let’s walk through survival analysis in the Wicket Scorecard and see what steps can be taken to address retention rates.
Survival analysis is a branch of statistics for analyzing the expected duration of time until one or more events happen. It involves modeling a series of time-to-event data. The event in question is referred to as the subjects’ “death,” in this case, subscribers churning out of the system. Survival analysis provides the tools for exploring these events.
Retention rate is the ratio of the number of retained customers in a given time period. The retention rate in the Wicket Scorecard uses the observed churn for customers who joined the service in the last 13 months. This ensures that the retention rate is based on your service as it exists recently and is long enough to capture annual renewals and churn.
With survival analysis, you can understand how the retention rate changes over time. Additionally, it can be viewed through the lens of different cohorts like which subscription plan they signed up to, the distribution channel from which they subscribed, which device they primarily use, etc.
In the Wicket Scorecard, the survival curve is derived from the retention rate and projects the retention for tenures up to 1000 days (143 weeks) for use in projecting subscriber lifetime value. Outsized differences in the Survival and Retention lines indicate irregularities or notable events in customer churn.
What Does Survival Analysis Show Us?
Diving into the Customer Retention Wicket (Fig. 1), you can quickly see some interesting insights right out of the gate. It would be easy to assume that the retention rate is just the inverse of average churn but it doesn’t actually follow average churn. Instead, we nearly universally find that new customers churn at a much higher rate over the first few billing cycles. Typically a fairly precipitous drop around week six with a consecutive drop after the next billing period. “Why week six instead of week four?” you may be wondering. This includes a period of billing retries before those customers are considered to have fully churned.
More tenured customers will typically continue to churn at lower rates, hence the retention rate begins to level off. SVoD services that offer an annual subscription option will also likely begin to see another drop around week 54 as those come up for renewal. The same scenario for billing retries applies here as well.
Keep in mind, every video service is unique. While these are the trends we see, each service may utilize different trial periods, have different subscription plans, etc.
Make it Actionable
You’ve invested in a trial acquisition program and done your due diligence to select the marketing tactics that show high trial conversion and the best subscriber retention. Now that you’ve seen how retention rate affects the survival curve of the video service, what can be done to stem the flow of users churning out of the system as trial periods end and billing dates begin to hit?
- Once a trialist converts to a subscriber, the work to keep them doesn’t stop there
- Engagement is key – emails and notifications can entice them to try a similar series or movie that has a high Attention Index
- Demonstrating the value of your video service to its subscribers at every stage of their lifecycle and developing a program to manage this can set your video service up for long-term success
- Since the largest drop in retention happens in the first or second billing cycle, these are areas of critical importance
Turning Bingers into Fans
One of the root causes of a steep survival curve is binging. There is a certain percentage of subscribers that only sign up to binge-watch particular pieces of content, a new season of a series, etc. Their plan is to minimize their investment by watching as much content in the shortest time possible and then canceling their subscription. But what if you could change some of their minds? How can content providers best engage their binge-watching users with related content to reduce churn and increase audience lifetime value?
Fortunately, Turning Bingers into Fans is a topic we’ve written about! The object, quite simply, is to make these Bingers become Fans. We define Bingers as:
[ binj·er ] | noun
- users who watch at least three episodes of a series in the same calendar day
To find a deeper understanding of binger behavior, take a look at the Trial Drivers Wicket (Fig. 3). This helps you to see which content is driving new trials but additionally, new conversions, fans, and bingers.
By analyzing this information, you can get a sense of which content to promote to new users; a new season, series, or perhaps a movie that has strong clustering with content they’ve already binged by tapping into the power of the Content Explorer.
Taking it further
As we’ve shown, using the insights from a combination of Wickets can aid you in the fight to keep new subscribers in your service and increase your retention rate. Utilizing our tips to combat churn or the more comprehensive whitepaper, Understand & Combat Subscription Churn, is a great start to begin to improve the retention rate of your video service. Let us know if you’d like a full demonstration of the Wicket Scorecard’s survival analysis and the actions you can take to reduce churn. We’re always happy to help!
Combat Churn Whitepaper
You know that churn is a potential hurdle for your service. Click the button below to download the Understand & Combat Subscription Churn Whitepaper to see how the Wicket Scorecard can help you recognize and reduce churn in your video business and begin to maximize audience lifetime value.
Tags: ARPU • attention index • audience lifetime value • bingers • churn • content engagement • content explorer • lifetime value • retention • survival analysis • SVoD • trial drivers