Netflix has one of the highest customer loyalty ratings in the entertainment industry with approximately 74% of current subscribers continuing to renew their subscription with Netflix on a month-to-month basis. In addition, many customers have cancelled their cable or satellite subscriptions and rely almost exclusively on streaming services such as Netflix for their entertainment. Netflix offers three different payment options or plans for customers-the basic plan at $7.99 per month, standard plan at $10.99 per month, or a premium plan at $13.99 per month. Thus, subscribers who renew on a monthly basis would pay between $95.88 and $167.88 per year to continue their Netflix service. If 74% of subscribers continue their service on an annual basis, Netflix is able to build a stable revenue stream based on repeat purchasers. A quick snapshot of one customer revealed that the customer had subscribed to the Premium plan for five years and generated over $700 in revenue to Netflix. Which of the following marketing terms best captures the importance of customer loyalty and its impact on Netflix?

Question

Quizplus · Accepted Answer

Customer lifetime value (CLV) is the term used to measure the total worth of a customer to a business over their entire lifetime of being a customer. CLV takes into consideration the customer’s loyalty, purchasing behavior, and average purchase value to calculate their long-term value to the business. Netflix’s high customer loyalty rate and long-term subscribers like the example given in the question highlight the importance of customer lifetime value in their business strategy.

Netflix Has One of the Highest Customer Loyalty Ratings in the Entertainment