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 $8.99 per month, or a premium plan at $11.99 per month. Thus, subscribers who renew on a monthly basis would pay between $95.88 and $143.88 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?
A) customer impact score
B) customer retail calculation
C) customer lifetime value
D) customer profitability value

Question

Quizplus · Accepted Answer

Customer lifetime value is the marketing term that best captures the importance of customer loyalty and its impact on Netflix. This term refers to the total value that a customer will bring to a company over the course of their relationship with the company. In the case of Netflix, customers who renew their subscription on a monthly basis, like the customer mentioned above who generated over $700 in revenue to Netflix over five years, contribute to the company's stable revenue stream and long-term success. Understanding and maximizing customer lifetime value is crucial for businesses that want to build sustainable relationships with their customers and drive business growth.

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