Brands seem to fall victim to some of the clearest, most detectable, beyond-doubt brand-building principles. Netflix is our latest example.
One cannot say this enough: adore your core. Focusing on gaining new customers at the expense of current customers is death-wish marketing. Yet, Netflix has for years wooed Wall Street with its acquisition numbers. Wall Street wants growth, and it has a habit of penalizing streaming brands when acquisition numbers are too low. But Netflix’s behavior is not solely due to Wall Street. It is bragging rights. My customer base is bigger than yours. Therefore, my profitability is bigger than yours.
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Now, Netflix’s retention numbers are causing internal agita. Its core customers are losing their engagement with the brand. Engagement measures time spent viewing and how often viewers actually finish an entire series or movie. In Tinsel Town, engagement is a driver of satisfaction. Hollywood executives tie satisfaction to maintaining a subscription. Another myopic mismarketing action: I can be satisfied with a service without loving it. Cable TV learned that lesson. Once there are viable options, customers are out the door.
Not a surprise that Netflix engagement is dropping. Every brand needs new users. But, purposely becoming a leaky bucket of current customers is just doomsday marketing. Take care of your own, or some other brand will do that for you.
A subscriber may, at some point, have watched most of what he or she signed up for, then cancel and move on to the next shiny new streaming service. There is a lot of streaming competition. Where is the additional value that keeps subscribers loyal to Netflix? All of Netflix’s energy goes into the promotions, tiers, and deals it offers to attract new customers. What makes Netflix relevantly differentiated other than size? Netflix may lead in size but not in thought. IBM was the biggest computer brand, but Apple was vastly more popular and innovative.
Netflix is the epitome of a scavenger brand. A scavenger brand relentlessly hunts for new customers. Scavenger brands are all about growth by acquisition of new customers. Netflix has been a voracious vulture for viewers while taking its current customers for granted. This behavior is coming home to roost, according to reporting in The Wall Street Journal.
“While Netflix remains an industry leader among subscription-streaming services, shares are down more than 40% over the past 12 months. In April, the company reported disappointing guidance for the second quarter, including lower year-over-year operating margins. Its share of TV viewership fell to 7.8% in April, according to Nielsen, the lowest level since May 2025.”
Netflix is discussing various ways to increase engagement among its subscribers. Some of these strategies are ones abhorred by founder Reed Hastings.
Some observers believe that Netflix’s engagement has peaked in the US. Keep in mind that engagement affects ad and revenue growth. Netflix has raised prices. Loyal customers may accept higher prices for a while. But loyal customers stay loyal up to a point. When the content is not perceived as valuable at a higher price point, the customer leaves.
The lower engagement numbers indicate that Netflix customers have reached a point of indecision. These customers are wavering on the line of disconnect.
What is so confounding is that, in 2022, it was clear that the furious search for new customers was affecting Netflix’s relationship with its customer base. But instead of refocusing strategies, Netflix doubled down on acquisition. Wall Street applauded earnings reports with higher conquest numbers.
Once upon a time, Netflix was the brave, innovative pioneer. Netflix was the category definer. Netflix was the brand that each of the new streaming services emulated. But in 2022, it found itself in a common mismarketing situation. What do you do to grow when there are fewer and fewer new users to attract? Or, as one observer wrote in Inc. magazine, “There comes a point when you are the largest streaming service, that it’s difficult to find people who are not already subscribers. You would think that would be considered a win, except that shareholders want to see growth, even when you are as big as you are reasonably going to get.”
Additionally, in 2022, to offset lower new sign-ups, Netflix raised prices well above the competition. Netflix’s standard package was more expensive than HBO Max’s and Disney+’s. Subscribers to Disney+ could also bundle Hulu and ESPN and still pay less than the standard Netflix package. Frito-Lay raised prices and recently had to reverse course. Those bags of Doritos were just not worth their price.
Higher Netflix prices did not translate to higher content quality. In 2022, articles noted that much of Netflix’s content was perceived as of lower quality. Netflix produced so many shows that it took real effort to sift through the dreck to find something worth watching.
This was a warning. Yet, an unheeded warning.
A brand cannot survive on customer acquisitions alone. To generate quality revenue growth, a brand needs to both attract new customers and build brand loyalty among its current customers.
Current customers should be retained, respected, and loved. Brand loyal customers are a brand’s most valuable assets. Brand loyal customers are less price-sensitive; they are less willing to abandon your brand for a competitor; they are more forgiving when the brand makes a mistake; and they are more willing to consider new products and services from the brand they love.
Failure to focus on your current customers is dangerous and destructive marketing mismanagement. Current customers are not dupes; they will find other streaming services.
Scavenging for new customers at the expense of loving your current customers is a suicide strategy. Brands need to reinforce customer attachment.
Brand should strengthen competitive position, pricing power, and enterprise value. The Blake Project helps make that happen.
The quantity of growth is not the same as the quality of growth. You may be attracting customers, but they may not be profitable. New customers may sign up for some special movie or original series and then leave. They may use a free trial to watch an original program or a box-office movie without subscribing. They may be loyal to the deal rather than loyal to the brand. Deal loyalty is not the same as real loyalty.
Meanwhile, current customers – whose long-term value can be extraordinary – are forgotten, ignored. It is imperative that Netflix make the customer experience special. Netflix must use its creativity for content. Netflix needs to think creatively about how to make its customers love it a bit more each day. Adding sports and regular TV just diminishes Netflix’s relevant differentiation.
Observation Of The Obvious
Attract customers and keep them loyal. This is common sense. Attract new customers and build the loyalty of current customers at the same time.
Ultimately, the brand’s bottom line is more customers, more often, who are more brand loyal, generating more revenues and more profit. The first focus must be to shore up the core customer. In other words, adore the core or your brand is done for.
Contributed to Branding Strategy Insider by Joan Kiddon, Partner, The Blake Project, Author of The Paradox Planet: Creating Brand Experiences For The Age Of I
At The Blake Project, we help leaders turn brand into a disciplined driver of financial performance — strengthening pricing power, competitive position, and enterprise value. Email us to start a conversation about enduring profitable growth. For The EBITDA.
Branding Strategy Insider is a service of The Blake Project, a strategic brand consultancy focused on turning brand into pricing power, growth, and enterprise value.
