Feast or Famine: The next move for Netflix?

Something interesting happened recently in entertainment; there was a slight shift in the balance of power.

Netflix, traditionally a channel for reaching the content of other networks  became a producer in their own right.

Their new production, "House of Cards" was a shot across the bow for the likes of HBO and more traditional networks and at the moment it seems their $100m gamble is paying off with generally positive reviews.

A Netflix spokesman is quoted as saying:-

"We’re not releasing any data, but we are happy with the reception the show has gotten in the media, on social media and from our members in reviews"

This is a big deal for Netflix and they know it.  Ted Sarandos, Chief Content Officer is quoted as saying:-

"The goal is to become HBO faster than HBO can become us."

While this is interesting for the entertainment market, what's more interesting for me is the potential impact this series will have on both customer acquisition and retention for Netflix.

Clearly, unique, exclusive content is a major acquisition tool for Netflix, helping them draw in both new and lapsed customers.  This is a tried and tested model used by the likes of BSkyB who would in many cases pay over the odds for subsequent series of shows like 24, Heros or more recently Mad Men that had previously aired on free-to-air channels, hoping to bring those hooked customers across in the process.

Indeed, customers such as respected blogger Dave Winer who had previously (and publicly) turned off his Netflix account then made an about turn and switched it back on specifically because of this new content.

So there is no question that exclusive content can be a big draw for new customers.  However with "House of Cards" Netflix is also chalking up another first.

They have launched the whole of the House of Cards series in one go.  Original programming made available like a box set from the get-go.

This is really significant as traditionally broadcasters would utilise a high profile series to draw in audiences regularly at an appointed time; keeping viewers restricted and waiting with baited breath for the next episode.  For commercial broadcasters these episodes would be timed to maximise the audience and hence the revenues from advertisers.  It would also provide the opportunity to gain from the halo effect of viewers staying tuned into the channel for longer pre/post airing.

For Netflix however, this doesn't matter;  their revenue comes from subscriptions, not advertisers.  Without this restriction they have provided a veritable feast of television, allowing subscribers to binge on the whole series in one sitting if they like.  Whilst figures aren't available from Netflix directly, it has been reported that a "significant portion of fans binged on the entire series in the first weekend".

It's worth contrasting this with another form of entertainment, that of social games.

I'm currently hooked on the popular social game "Clash of Clans" which uses all of the best gaming mechanics to keep me playing, progressing and in the flow.  The more I play the more I unlock.  If I had access to everything all at once - if I could feast on all it offered - then I'd tune out pretty quickly.  It would be fun, but there would be no challenge.  Instead, they try to balance the game play, including the strength of foes I have to battle based on my current experience and level achieved.

In discussing the winning formula of the game design, the blog Deconstructor of Fun highlights how the game supports different types of play, saying:-

"Not all of the parts of the core loop are equally important as the importance of each part is influenced by [the] player's ongoing goal in the game, which creates different style[s] [of] game play [,] from resource gathering and building, [to] heavy [and] active battling"

Creating this "flow" within social gaming that ensures players are hooked with a fun and entertaining experience takes data.  They need to constantly monitor usage of the game and adjust the mechanics as users progress or they see usage drop at certain points.

Now Netflix are not short of data but i'd argue they're not really getting the maximum value from it as game designers do.

They are well known for their detailed data analysis of their customers viewing habits in order to serve up better and more targeted content.  Currently, around 75% of Netflix customers select content to watch based on their recommendations and Netflix aim for this to be higher.  Mohammad Sabah, Netflix Senior Data Scientist is quoted as saying:-

"The ultimate goal is to show Netflix customers content they’ll view to completion and then recommend the next thing they’ll view to completion"

The problem Netflix have though is the classic situation all retailers face; the consumer has choice.

There is an increasing plethora of streaming services and so whilst recommendations are important and so is exclusive content, the real key is that consumers "value" Netflix.   The stickyness from content only lasts for as long as the content is "exclusive".  Letting customers essentially burn through that exclusive currency too quickly may in fact reduce the time period its effective for but also the extent to which customers actually value the content.

PSYBLOG recently reported on an interesting study that looked at how consumers valued chocolate based on how they consumed it.

In the study, the consumers were split into 3 groups with one told to give it up completely for 1 week, the next given a big bag and told to gorge and the final group, acting as a control, given no chocolate related instructions at all.  At the end of the study, the groups were given more chocolate and asked to rate the experience.

Those who abstained reported getting more pleasure from the chocolate than either the gorging group or the control group.  Not only that, but they also savoured it more - in essence they valued it much more because they'd been restricted.

Getting the balance between feast and famine is key to keeping customers involved and ensuring they continue to value your product/service.  

It's early days for the Netflix experiment but it will be interesting to see if they start to introduce some of these restrictions on consumption to gain additional loyalty; managing the flow of their customers.  You could easily see top rated Netflix consumers - those who watch more shows, over more hours and engage more with other viewers via social media - being given the ability to watch new exclusive content more quickly than others.  This would then provide social currency into the mix, ensuring those customers stay loyal longer and encouraging others to strive to level up.

If you want to stop your brand falling down like a House of Cards, it's worth looking at how game mechanics can strengthen those bonds.

Game mechanics are not just for games.

What is gamification?

With the risk of sounding like a broken record - do I write another blog post about gamification.

Well in the last 6 months alone there has been an almost 300% increase in the number of blogs written about gamification and when you look at the twitter stats around the term gamification it's clear that the last 6 months have seen a significant uplift in chatter.

There was also a buzz around gamification at the Virtual Goods Summit and now it has it's own conference coming up, the Gamficiation Summit. The summit will feature authors such as Gabe Zicherman who co-authored the book Game-Based Marketing, released earlier this year that looks at how gaming mechanics can be applied within marketing programmes.

So far be it from me to buck a trend - this is obviously a topic which is both increasing in interest and dividing opinion.

People can't seem to talk about gamification without somehow linking in virtual gaming platforms like World of Warcraft or explicit real world gaming platforms like SCVNGR.

For me though this confuses the whole topic.

Gamification is not the linking of marketing efforts into games. It is not the evolution of marketing programmes into games. Instead it is the inclusion of gaming recognition mechanics into marketing programmes.

This is a subtle difference but it doesn't stop it from courting controversy.

Arguing that the term gamification is wrong, game designer Margaret Robertson from game design studio Hide&Seek says adeptly in her blog post

"Points and badges have no closer a relationship to games than they do to websites and fitness apps and loyalty cards. They’re great tools for communicating progress and acknowledging effort, but neither points nor badges in any way constitute a game".

Going on to say 

"games set their players goals and then make attaining those goals interestingly hard", contrasting this with loyalty programmes such as My Coke Rewards where she says "collecting enough My Coke Rewards for a Coca-Cola Telenovela Club Beauty Rest Eye Relaxation Mask is hard, but it isn’t interestingly hard."

This is very true. A loyalty programme such as a frequently flyer programme is not a game in the true sense. It does not have what Margaret describes as the "rich cognitive, emotional and social drivers".

However, whilst there are obviously people who love playing games for the games themselves and are drawn into the virtual worlds they create, if you took out the "points and badges" from these games so that there was no progress indicated, no achievements collected, no way to measure your performance against previous plays or your peers, you can bet the game play wouldn't last long.

These "great tools for communicating progress and acknowledging effort" do more than just communicate it - they positively encourage and motivate it.

It's these recognition and motivation mechanics that gamification is trying borrow and develop and not the ability to replicate the actual game play such as being able to "dump my sniper rifle for an energy sword"

The collection of points for rewards isn't gamification - it's simply one behaviour which is being encouraged and recognised. Instead, gamification is how this behaviour is integrated with other interactions, how these are orchestrated together and how overall goals are set, progress measured and achievement recognised.

It is possible to make attaining goals "interestingly hard" within the context of a marketing programme, and it doesn't need a virtual world or special powers to acheive it. Instead it simply needs to be interactive, responsive, timely and relevant to the participant.

Caution is still required here though. Just as I'd argue that a loyalty programme is not simply the provision of points for transactions which can be exchanged for rewards; gamification of a marketing programme is also not simply the awarding of badges and achievements for given behaviours.

Instead, the overall customer journey needs to be taken into account including how it is presented, communicated and shared. Awarding points or badges is the easy bit - making people actually want them, that takes great programme design.

As Margaret said, games should "make attaining those goals interestingly hard", and whilst the game play might be different, the sentiment should be the same.

Maybe there isn't so much difference between designing games and marketing programmes after all.

After 25 years - Amex games card loyalty

Back in 1985 there was a revolution in computing which although small at the time went on to dominate our everyday lives - this revolution was Windows.

For many, Windows 3.1 was the first version that will be remembered and this was also the first version that could be extended to support TCP/IP - or essentially the internet. 

While it has been full-steam ahead for both Windows and the internet since this time, there has also been major change with the likes of Apple and Google increasingly innovating - whether this is new operating systems, new hardware or new ways of distributing applications.

There was however another revolution that started 25 years ago - credit card loyalty schemes.

In 1984 Diners Club launched "Club Rewards" which allowed card holders to earn frequent flyer miles or merchandise rewards based on card spend. This was closely followed by Sears who launched the Discover Card. Although quite revolutionary at the time as it had no annual fee, higher credit limits and most importantly for wider acceptance lower merchant fees, the big innovation was the inclusion of a cash-back rewards programme - giving card holders 2% of spend back.

What's interesting however is that while Windows 1.0 would be unrecognisable for many today, the Diners Club and Discover Card loyalty programmes they pioneered are pretty much the same used on all loyalty credit cards today.

In fact the latest programme from Chase called Ultimate Rewards has all of these features including a new one "Pay Yourself Back" which allows you to offset any qualifying spend on your statement with points - something which is essentially what Discover introduced 25 years ago - namely cash-back.

It was great then to see Amex breaking the mold and doing something different.

Their new scheme Social Currency has partnered with foursquare to allow card holders to check-in to retail stores to share purchases with friends.

Using a dedicated iPhone app, members can then share what they purchased, what they want to purchase and photo's of the event/product.

Keeping with the foursquare gameplay, members are rewarded for taking part with a selection of unique badges based on their behaviour such as the "Thrifty Spender" badge or the "Chinatown" badge.

I've discussed recently that loyalty is changing and that adding a gaming layer to loyalty programmes is one of the most important changes to loyalty in the last 25 years. It's great then to see an industry that once pioneered loyalty now embracing the next phase.

Amex may have been a little late to the party with it's original loyalty offering, "Membership Miles" back in 1991, but it's certainly at the forefront now. I wonder how many other banks will be brave enough to follow suit.

What we (and Guns N' Roses) can learn from Google Instant

Google Instant has launched amongst mixed reviews. However, love it or hate it - it's part of an increasing trend amongst consumers to have have everything now. In the launch PR, the main selling point for Google instant was that it saved the worlds internet users the equivalent of 11 hours per second or 111 years per day.

On an individual basis this is just 2-5 seconds per user, and yet this is the main selling point.

It's easy to see why Google would want to minimise any possible wait time; in a recent survey, two-thirds of us have stated that we've walked away from buying something because we were fed up of queuing and 51% of us wouldn't even enter a store if we spied a queue.

This apparent impatience at having to wait for things also seems to be increasing. In the same research it was reported that British consumers are now only prepared to queue for up to two minutes - down from five minutes just six years ago. (At that rate we'd expect instant service by 2014)

This isn't necessarily just an impatience with queuing though - it's an impatience with anything that stands in the way of getting something now.

In a recent Experian survey it was noted that young people tend to use offline channels for purchases, despite researching them online simply because they "want it now" and don't want to wait for it to be delivered.

Even our leisure time doesn't escape this level of impatience as the legendary band Guns N' Roses recently experienced. At a concert in Dublin they were booed and bottled off stage after only performing four songs due to a late start to the concert. Keeping fans waiting for over an hour, they were shown peoples impatience when they did finally arrive on stage.

So with an increasingly impatient consumer, how do loyalty programmes fit which require a longer term commitment.

Many loyalty programmes work around annual timelines, with quarterly statements, annual tiering and rewards which take at least 12 months to make viable. This can make it hard to engage consumers early on when they are impatient for recognition from the programme they've joined, leading to disengagement.

For loyalty programmes to engage an impatient consumer they need, like Google Instant, to provide faster and more relevant recognition.

The standard response to this is to give more value more quickly. Giving double points, welcome point bonuses, hero rewards, instant discounts, merchant offers - anything which can bring the loyalty value exchange forward.

However, while I'd agree we need to make recognition faster and more relevant, I'd argue that the rewards tied to this recognition don't need to have a tangible value.

You don't need to give discounts, priority queuing or a £10 voucher to MAKE a customer feel special - you just need to make them LOOK special.

Giving someone a Black credit card might make them feel special - letting them show it to others makes them look special - and this in turn really makes them feel special. This is known as "Social Currency" and is defined as:-

• Things that help me belong
• Things that make me significant

Making loyalty programmes social so that peoples achievements can be shared allows this social currency to be leveraged. Using different achievement mechanics which have their roots in gaming dynamics, such as unlocking badges/levels or the use of leader-boards allows for many options to recognise and engage customers quickly and early on, without the need for monetary rewards.

Seth Priebatsch, CEO of SCVNGR recently wrote about some of the gaming dynamics which help form this social currency saying:-

Game dynamics are fast becoming a critical currency of motivation. Their power lies not in connecting us to our friends, but in directly influencing our individual behavior. Smart companies will take this time to look at their product portfolios and community behaviors through the lens of game dynamics.

Google is a smart company and is constantly looking at ways to improve its products and services to further engage consumers and stay one step ahead. If we don't want to be booed and bottled off the loyalty stage, then we also need to learn the same lessons; recognising and engaging consumers more quickly and more relevantly.

The use of social currency is one way to do this and is set to become the "Google Instant" for loyalty.

Loyalty Marketing - it's all a game. So play it.

Ted Turner famously said "Life is a game. Money is how we keep score."

How well you play it depends on understanding the rules and Albert Einstein said "You have to learn the rules of the game. And then you have to play better than anyone else."

In marketing it would be true to say "Loyalty is a game. Points are how we keep score."

Points are accumulated - the more points the better the prize. Points don't just mean prizes though, points can earn tiers and these open up additional benefits.

If a loyalty programme was a video game, then tiers would be like a new level - letting you unlock secret rooms like the "airport lounge" or giving you a new weapon such as "priority queuing". The monthly statement would be your end of level score sheet - letting you know how well you did by showing you your current and cumulative score, and on the better programmes, highlighting which puzzles you unlocked in the form of promotions achieved.

However, if loyalty was a game then in the words of Seth Priebatsch from SCVNGER - it would suck.

Seth makes a really interesting and inspirational speech at TEDtalks when he describes building the game layer on the real world - and how loyalty programmes are the forerunners to this.

What really interests me about this as a loyalty marketer is that we've been doing this for a long time - we just haven't recognised it as an industry - and haven't maximised it's benefits.

If you played a video game though which had no real direction, only recognised you when you happened to stumble upon something, had little or no challenges, took 12 months to get to the next level and 18 months before you got a reward - few but the most die-hards would play it.

Yet this is what many loyalty programmes are like.

For example, we know who's playing well. We have people tiered based on their frequency, value and recency. We have them segmented based on the products they buy, the promotions they use, the web pages they visit.

We know everything - and yet we hide it.

Foursquare on the other hand knows when I've visited a venue with a photo-booth 3 times and shouts about it, giving me a reward for it in the form of a badge. It knows if I'm out late, shopping locally or shopping with friends - and rewards me for it. It's a game for me and better still a competition with friends - creating social currency and influence - even if it's just a bit of fun.

When it comes to tiering, we make it very hard for a very small number of people to make it to each tier. This is for good reason as the benefits opened up at each tier cost a lot to fulfil.

However, if you take the monetary value out of a reward/benefit and replace this with social value, then you can emulate games like FarmVille and Mafia Wars which are engaging and influencing over 80m people with 40+ tiers/levels - something I wrote about previously saying:-

[They] create a really well designed journey which drives early engagement, rewards interaction, encourages peer comparison and recognises increased experience.

Adding a gaming layer to loyalty - or at least making the existing game play better - is probably the most important change to loyalty marketing since it moved from paper stamps to computerised points.

This is great for consumers, great for brands and great for loyalty.

Lets play.

Technorati Tags: loyalty, gaming, gamification, SCVNGR, foursquare, points