Friday, April 27, 2018

Sometimes Unhappy Customers Continue to Buiy

Two and three decades ago, it was somewhat hard to explain why buy rates for linear video were so high (up to 95 percent of U.S. households), but satisfaction routinely was so low. That sort of flies in the face of our general belief that happy or satisfied customers are good predictors of buying behavior.

In fact, even unhappy customers will continue to buy products for which there are no effective substitutes.

The answer is that, despite their mixed feelings, consumers did not actually have choices. If you wanted access to content diversity, the only choice was subscription TV.

That is no longer the case, so we should not be at all surprised that consumers are abandoning linear services for streaming alternatives that replicate much of the value, at far lower prices.

Linear video entertainment subscriptions have gotten more expensive for all U.S. consumers, but arguably most so for households with smaller incomes.

Though prices have virtually always risen annually, the issue is whether the rate of increase is in line with the growth of prices generally.

Nobody disputes the evidence that linear video entertainment subscription prices have risen faster than underlying inflation. According to SNL Kagan, the price increases have outstripped median household income growth since 2007.

All products have life cycles. Three decades ago, consumers might not have been completely happy, but there were no real alternatives. That is one explanation for persistently low satisfaction scores, but high buying rates.

That is not the case any more. Consumers do have choices, and the range of choices is growing.  So consumers are voting with their wallets to use streaming services that cost less. No big surprise, there.

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