For Immediate Release:

Friday, July 19, 2019

Featuring Disney, Etsy, Roku and Business2Community

This week’s Five on Friday is packed full of news updates, predictions, new initiatives and tips for growing your subscription business. We share what some experts are saying about Disney +’s potential for success, Business Insider takes a look at why Roku is having such a great year, Etsy’s plans to grow its free shipping program to compete with Amazon and Walmart, we examine why offering discounts to unhappy customers can actually work against you, and Business2Community explains how subscription billing adds value to your business.

Disney’s Magic Extends Far Beyond Amusement Parks 

With Disney’s acquisition of Hulu earlier this year, we thought we had seen it all in terms of streaming. Disney launched ESPN+, a sports video on demand service, and we thought that was all they had in their pockets. With the announcement of Disney’s own streaming service, Disney+, that was the final wheel in the Imagineer machine.

That’s not to say that they haven’t cut some of their losses, as the company made the decision to shut down FX’s video subscription service. The company says they are driving more content towards Hulu, and the service will shut down August 21.

Many subscribers to other video services said they would give up what they’re currently subscribed to in order to switch to Disney+ when it launches in November, but Netflix says otherwise. Forbes also says that Disney+ will not be a Netflix killer. A lot of studies seem to agree that most SVOD subscribers subscribe to one service.

The advantage with Disney is that they already have an established and loyal fanbase, and if you know anything about Disney, it’s that their megafans will shell out the dough if needed. Disney’s SVOD service will cost $7 a month, or $70 a year, which is pocket change for some annual passholders. Many analysts are already saying that Disney could have as many as 13 million subscribers by the end of 2020, according to Variety. In a five-year projection, this could lead to 130 million subscribers worldwide, for all their video services.

Sounds like some hefty cheddar for Mickey Mouse.

Three Ways the Subscription Model Brings Value to Your Business

These days you can buy practically anything by subscription, including everything from beauty products, car washes and snacks to sports tickets, air travel and vehicles. This business model removes barriers to entry for some consumers who might prefer to pay-as-they-go or who don’t want to make a long-term commitment. From a subscription business standpoint, this business model adds a great deal of value, says Jean Moncrieff in a recent article for Business2Community. He cites six ways a subscription model supports a business long-term.

1. Predictability: Knowing how many customers you have helps you predict revenue, expenses and inventory needs. Sure, there will be monthly variances but a subscription model makes operating and managing your business more efficient and less wasteful.
2. Increased value: Having stable, recurring revenue is attractive to investors, increasing a company’s value because revenue is more predictable and it is measurable.
3. Upsells and additional sales: Moncrieff calls this the Trojan Horse effect, but in simple terms, it means that once you get a customer in the door, the more likely they are to buy other products and services from you. Think of the beauty boxes or fashion subscription boxes. They draw you in with their monthly box, but they add-ons and full-size products you can also purchase. If you have come to know and trust a brand, and have a positive user experience, you will buy again.

Read Moncrieff’s original article, “Six Reasons a Subscription Billing Model Adds Value to Your Business,” on Business2Community.com.

Roku’s Stock Has Grown by 240%+ This Year

Roku, a streaming video platform, is exploding in popularity with its stock price growing by more than 240% since the beginning of the year. Markets Insider has compared their growth to being faster than giant corporations, and Roku continues its upward trajectory. Roku’s stock price hit an all-time high last week, says MarketWatch. This mean their stock value increased 259% since the beginning of the year. Their annual revenue is currently projected to rise 43% in 2019, a huge contrast from last year, when their stock was down 41% through 2018.

The company started with Roku players, then moved onto producing smart TVs, and later, their own video service. Their video service is on par with Tubi and Vudu, where they provide free movies and television shows, but you can also purchase or rent content for a small fee. Not a bad progression for a company that doesn’t produce or own their own content.

But how are they doing so well? They serve as not only a platform for SVOD services, having their own, but they act as a platform for other services. If you have a Roku player or TV, any available streaming service in their app store is at your fingertips. Don’t have a subscription to Netflix? You can sign up through their Netflix player, and if you do, they get a small cut.  

Another factor? The company has 40% more users than it did a year ago, says The Motley Fool, and those viewers are watching roughly 3 billion hours of content a month. For those who weren’t already using it, new Roku users cashed in on the sales Amazon had on the streaming hardware on Prime Day. Way to go, Roku.

 

Etsy Encourages Sellers to Offer Free Shipping to U.S. Customers

Last week, the popular online marketplace Etsy made a bold move when it announced its plans to make free shipping a core part of its offerings. To facilitate this, Etsy is providing global sellers with tools and support so they can guarantee free shipping to U.S. customers on orders over $35. Also, starting July 30, items that have free shipping available will get priority placement in search engine results. The company said it is an initiative that they hope will build buyer trust and increase loyalty.

“Shoppers come to Etsy to discover over 60 million special and unique items that often cannot be found anywhere else. Yet we hear that high shipping prices often deter shoppers from completing their purchases,” said Josh Silverman, Etsy CEO, in a July 9 news release. “By making free shipping the norm on Etsy, rather than the exception, we'll connect more people with items that they love. Ultimately, we believe this will help increase marketplace conversion and order value, encourage repeat visits, and drive more sales for Etsy sellers.”

Why the big change? Etsy says their data shows that buyers are significantly more likely to buy an item in their shopping cart if it will ship for free. Shipping fees sometimes cause cart abandonment. When testing a free shipping promotion in May 2019, Etsy sellers had higher order values when free shipping was offered.

“Buyer expectations continue to evolve, and we want to help sellers adapt and thrive in an increasingly competitive retail landscape. Free shipping is now table stakes when it comes to online shopping. We realize that offering free shipping may be a big step for some of our sellers, and we will be there to support them every step of the way. We are providing numerous tools, resources, and customer support touchpoints to make it easy for them to set up a guarantee and understand how free shipping can help them reach their business goals,” said Kruti Patel Goyal, senior vice president of product.

Why Discounts for Disgruntled Customers Don’t Always Work

A new study by the University of Notre Dame suggests that offering discounts to unhappy customers does not necessarily retain them long-term. A discount may pacify a dissatisfied customer temporarily, but it could also backfire, lowering their perceived value in the subscription product or service.

"The economic theory of reference prices (amount a purchaser thinks is appropriate to pay for a good or service) leads us to believe that discounts to make up for service failures will provide a new price point for customers to anchor on," said Vamsi Kanuri, assistant professor of marketing at Notre Dame’s Mendoza School of Business, and lead author of “The Unintended Consequence of Price-Based Service Recovery Incentives.”

"In turn, this will lead them to compare the price of the service renewal with their reduced service price following the service failure. A higher discount results in consumers forming a lower reference price, which in turn increases the difference between the full renewal price and the reference price. This difference then translates into a perceived loss, which ultimately results in lower renewal probabilities,” Kanuri added.

A tactic that is more likely to be successful is to correct the problem and “delight” the customer at the point of the service breakdown. A customer whose issues or concerns are addressed promptly and professionally is more likely to stick around because they feel both heard and valued.

When a discount is necessary to satisfy a customer complaint, a subscription company can attempt to recover the subscriber long-term by lowering the price at renewal, extending the contract at an agreed-upon price and regular contacts with the customer to try to retain the business. Read more of the study’s results in “Deal or no deal? How discounts for unhappy subscribers can backfire on businesses” by Shannon Roddel for Phys Org.

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