RESEARCH REPORT

In brief

In brief

  • Thanks to the industry’s investment in premium content, there is an abundance of high-quality programming audiences can choose from.
  • But OTT services have yet to deliver the level of relevance consumers desire. How can video providers win the customer relevance battle?
  • Explore three key takeaways—including data-driven product innovations across pricing, tech and platforms—for video providers to drive hyper-relevant experiences.


Thanks to Over the Top (OTT), entertainment options have never been so plentiful or flexible—there are over 200 OTT services in the United States alone. However, customer expectations have never been so high. Combine these factors with low switching costs and you have a market of fickle and fleeting customers. When it comes to OTT, however, consumers would prefer to stay put. Despite the abundance of choices, 86 percent of global consumers do not want to juggle multiple services.

A little over a decade old, it is fitting that OTT is in its adolescence—with a solid foundation and enormous potential, but not quite grown up.

As OTT looks to the next phase of its life, how can it best prepare for the future?

How can video providers win the customer relevance battle at a time of unprecedented disruption? By adapting to changing customer preferences and market conditions with speed and scale. This means rotating from the current content-focused business model to one that puts the customer at the center—delivering tailored capabilities and offerings that meet customers’ needs and predicting and adapting to future ones. Then, to make it profitable, they must scale this tailored approach across their consumer base, leverage it to grow their audience base and apply it to fuel a multi-revenue strategy to capture additional income streams.

We have identified three key strategic recommendations for video providers to drive new hyper-relevant experiences, now.

The power of pricing

Truth is, if you are an OTT provider, you have more pricing power than you think. Currently, money is being left on the table when it comes to subscription revenues, as evidenced by our findings from the 2018 Accenture Digital Consumer Survey.

43%

Consumers who subscribe to both a pay-TV package (a cable or satellite bundle) and an OTT service spend 43% of their total viewing time on OTT content, compared to only 23 percent of their monthly media consumption budget.

While a flat rate hike may not be the best strategy in this crowded competitive landscape, there is room to reap additional revenues and provide customers with welcome choices by experimenting with rate structures and product offerings.

Major areas ripe for innovation are the current subscription and advertising revenue models. According to Accenture research, one-third of consumers would pay to remove advertising from their video content—while the other two-thirds would not. Current subscription-based and ad-supported OTT services do not offer consumers the flexibility to tweak or customize their model preferences. It is currently an either/or situation—but why not offer options and let viewers choose?

Knowing what customers value—a lower subscription rate with ads, or a higher subscription rate without ads—is a powerful first step in segmenting the market to understand where customers’ thresholds lay. Or their sweet spot could be somewhere in between, with a hybrid model that trims down ads, or switches up the traditional ad formats. Segmentation and experimentation will be critical to giving customers the options they want and arriving at the right mix that optimizes revenue.

Make me an offer

Digital providers built upon a solid data-driven foundation have powerful upselling opportunities. Some OTT companies are already wading in these waters by providing premium content or services for an additional fee, such as Netflix which offers three tiers of options for additional streams and ultra high-definition content. Filmstruck’s Criterion Collection also has broader choice and exclusive commentary via a higher tiered package. What other products and services might audiences want to buy? There is no shortage of opportunities—think one-time payments for immediate experiences, dynamic products like special content, mobile games and cross-product promotions. And, just imagine the possibilities with AI, AR and VR.

Getting your weight up, and keeping it up

Of course, the key word here is “customized,” and targeting must be precise. Personalization makes customers feel special and leads to further transactions, but one-size-fits-all offers—or spam—will have the opposite effect. Successfully implementing an upselling strategy requires a deep understanding of your customers and the capability to innovate to deliver dynamic products.

This is a critical reason why OTT platforms need to be supported by 1) highly developed data and analytics capabilities that gather and analyze data across the entire consumer journey and 2) agile infrastructures that can turn these insights into action. In addition to analytics, this customer-focused approach requires capabilities like payment and CRM systems that help facilitate customer engagement and monetization.

Conclusion

OTT adolescence will soon morph into teenage angst for OTT providers not prepared to build two-way, synergistic relationships with customers. Achieving and sustaining consumers’ desired level of relevancy will require a data-driven operating model that understands what individual customers want, customizes products and services accordingly, and operates with a continuous feedback loop that keeps up with their ever-changing needs.

Being early to this party is critical. Not only will customers be willing to pay a premium for this type of relationship but, once in it, they won’t want to leave. Done right, this approach creates an upwards spiral where the seamless exchange of customer insights and information continually tightens the customer/provider bond, putting them perfectly in synch and resulting in increased loyalty, reduced turnover and improved market share. OTT providers that can scale this approach and use it as a base for a multi-revenue strategy will be prepared to meet the future.

About the Authors

Lynn McMahon

North America Media & Entertainment Lead


Michael Chapman

Media and Entertainment and Video Strategy Global Lead​


Mark Flynn

Global Communications and Media Research Lead

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