Background

Netflix has become an online video streaming platform categorized by high loyalty for its original content such as Stranger Things and The Great British Baking Show. In 2000, Netflix was a movie rental service that delivered DVDs by mail. In 2007, the company began online streaming in the United States and in 2013 offered its first original content. In 2016 Netflix was available in 190 countries. Recent focus has been on increasing the number of subscribers outside of the U.S. Netflix has certainly had success in the entertainment streaming industry, an industry that includes a number of competitors hoping to succeed in the streaming market, including Amazon, Hulu, Disney, HBO, and NBC.

This spreadsheet Download This spreadsheetis provided for you to complete this assignment. Note that the formulas have already been added to the spreadsheet.

METRICS

Although Netflix obtains paying subscribers through unique deals like bundles and discounts, these are the numbers you should use to calculate your metrics in this assignment:

$12.99/month for a paid subscription * 12 = $155.88 annual revenue

Cost to acquire and maintain each subscriber = $99 annually

Annual Retention rate = 60%

Annual Discount rate = 10%

GETTING STARTED

Customer lifetime value (CLV) informs companies about how much a customer is worth to them. Its especially important for companies like Netflix, where they want customers to continue to subscribe to services. These metrics focus on the LONG TERM value a single customer brings to the company.

You can calculate the Customer Lifetime Value using this formula:

CLV = (Average Profits Per Customer Per Period) formula

Retention rate = percentage of customers who remain loyal over time

Discount rate = cost of capital for the organization

CHANNEL METRICS

Netflix uses pay-per-click (PPC), social media advertising, original content creation, email marketing, and PR & event channels to acquire customers. Use these metrics as assumptions for Netflixs ad spend per channel:

PPC: $60m

Social Ads: $175m

Original content creation: $300m

Email marketing: $50m

PR & Events: $75m

And assume these are the total conversions per channel:

PPC: 500k

Social Media Ads: 2.3m

Original content creation: 2.8m

Email marketing: 300k

PR & Events: 200k

The formula to calculate cost per acquisition:

CPA = Total Ad Spend:Total Attributed Conversions formula

A13 ^fx Average Profits per Customer A B C D Enter your data in the shaded cells \begin{tabular}{|c|r|c|} \hline Netflix Data & \multicolumn{1}{|c|}{ Monthly } & Yearly \\ \hline Subscription Revenue & $655.80 & $7,869.60 \\ \cline { 2 - 3 } & & \end{tabular} Cost to aquire customer Retention rate Discount rate \begin{tabular}{|l|} \hline$33.91 \\ \hline \end{tabular} Customer Lifetime Value \begin{tabular}{r|r} \hline Average Profits per Customer & $7,835.69 \\ \hline (Retention Rate) & 0% \\ \hline 1+( Discount Rate) - (Retention Rate) & 100% \\ \hline CLV & $0.00 \end{tabular} \begin{tabular}{|c|l|c|} \hline & \multicolumn{1}{|c|}{ A } & \multicolumn{1}{c|}{ B } \\ \hline 1 & Netflix' s ad spend per channel & Spend \\ \hline 2 & PPC & \\ \hline 3 & Social Ads & \\ \hline 4 & Original content creation & \\ \hline 5 & Email marketing & \\ \hline 6 & PR \& Events & \\ \hline 7 & & \\ \hline 8 & & \\ \hline 9 & Total conversions per channel & \\ \hline 10 & PPC & \\ \hline 11 & Social Media Ads & \\ \hline 12 & Original content creation & \\ \hline 13 & Email marketing & \\ \hline 14 & PR \& Events & \\ \hline 15 & & \#DIV/O! \\ \hline 16 & Cost per acquisition = Total Spend / Total Conversions \\ \hline 17 & Channel & \\ \hline 18 & PPC & \#DIV/O! \\ \hline 19 & Social Ads & \\ \hline 20 & Original content creation & \\ \hline 21 & Email marketing & \\ \hline 22 & PR \& Events & \\ \hline \end{tabular} A13 ^fx Average Profits per Customer A B C D Enter your data in the shaded cells \begin{tabular}{|c|r|c|} \hline Netflix Data & \multicolumn{1}{|c|}{ Monthly } & Yearly \\ \hline Subscription Revenue & $655.80 & $7,869.60 \\ \cline { 2 - 3 } & & \end{tabular} Cost to aquire customer Retention rate Discount rate \begin{tabular}{|l|} \hline$33.91 \\ \hline \end{tabular} Customer Lifetime Value \begin{tabular}{r|r} \hline Average Profits per Customer & $7,835.69 \\ \hline (Retention Rate) & 0% \\ \hline 1+( Discount Rate) - (Retention Rate) & 100% \\ \hline CLV & $0.00 \end{tabular} \begin{tabular}{|c|l|c|} \hline & \multicolumn{1}{|c|}{ A } & \multicolumn{1}{c|}{ B } \\ \hline 1 & Netflix' s ad spend per channel & Spend \\ \hline 2 & PPC & \\ \hline 3 & Social Ads & \\ \hline 4 & Original content creation & \\ \hline 5 & Email marketing & \\ \hline 6 & PR \& Events & \\ \hline 7 & & \\ \hline 8 & & \\ \hline 9 & Total conversions per channel & \\ \hline 10 & PPC & \\ \hline 11 & Social Media Ads & \\ \hline 12 & Original content creation & \\ \hline 13 & Email marketing & \\ \hline 14 & PR \& Events & \\ \hline 15 & & \#DIV/O! \\ \hline 16 & Cost per acquisition = Total Spend / Total Conversions \\ \hline 17 & Channel & \\ \hline 18 & PPC & \#DIV/O! \\ \hline 19 & Social Ads & \\ \hline 20 & Original content creation & \\ \hline 21 & Email marketing & \\ \hline 22 & PR \& Events & \\ \hline \end{tabular}