rollover movies strategic planning may 21, 2008. 2 rollover outline what are current problems with...
TRANSCRIPT
2
Rollover Outline
What are current problems with HV subscription plan?
How is Rollover different?
Is there a market potential?
What would the Price structure look like?
Strengths of Rollover New Financial Model
Conclusions Recommendations
Rollover Movies 3
MVP as a subscription program shows no growth except with
incentives
MVP appears not to support customer retention MVP appears not improve customer loyalty MVP has customers that are high abusers of the
program New MVP members have abused the program by
joining MVP with the intro price of $14.99 and then canceling their subscription prior to being bumped to the regular subscription price; this has recently been stopped
4
Not feeling one’s household rents enough movies to justify the cost is the major barrier to
MVP subscription.
Not feeling one’s household rents enough movies to justify the cost is the major barrier to
MVP subscription.
72%
40%
32%
28%
22%
20%
15%
17%
16%
3%
84%
54%
58%
18%
36%
39%
3%
32%
19%
Don’t rent enough movies to make it worthwhile
Always return videos on time
Too expensive in general
Video games are not available as part of the program
Too expensive to get MVP version w/fully available newreleases
Too expensive to get MVP version where there are no late fees
Already a member of another movie subscription service
Waiting for high-volume period before subscribing
Store location is not convenient for you
Been meaning to, just haven’t gotten around to it.
Already familiar withMVP
Not familiar with MVPpre-survey
Q606 Why haven’t you considered subscribing/subscribed to the MVP program?Base: Non-Subscriber Already Familiar with MVP program (n=56)Q626 Why aren’t you interested in the MVP program?Base: Non-Subscriber Not Familiar in the MVP program pre-survey (n=118) * Not asked of non-subs not familiar with MVP pre-survey
Barriers to MVP Subscription
*
5
Not feeling one’s household rented enough movies to justify the cost is also the leading reason why former MVP subs say they stopped subscribing to the program. Rollover makes the
justification.
Not feeling one’s household rented enough movies to justify the cost is also the leading reason why former MVP subs say they stopped subscribing to the program. Rollover makes the
justification.
34%
14%
9%
7%
6%
6%
5%
3%
Did not rent/watch enough movies to justify
Too expensive
Not a good value
Late fees
Personal/family reasons
Trying to save money
Only rent/watch movies during certainseasons/times
Use TV/Cable TV
Q665 Why did you stop subscribing to the MVP program?Base: Former MVP Subscribers (n=199)
Why Stopped Subscribing to MVP
6Q560 Where have you and other members of your household rented movies from in the last three months?Base: Current MVP Subscribers (n=215), Non MVP Subscribers (n=202), Former MVP Subscribers (n=246)
Blockbuster is the retailer most frequently used as a rental alternative by Hollywood Video customers. Rollover challenges Blockbuster by offering a unique switchover advantage.
Blockbuster is the retailer most frequently used as a rental alternative by Hollywood Video customers. Rollover challenges Blockbuster by offering a unique switchover advantage.
11%
3%
1%
1%
0%
0%
10%
25%
11%
1%
3%
3%
3%
9%
18%
8%
0%
2%
1%
1%
11%
Blockbuster
Netflix
Library
Family Video
Local VideoStore
Movie Gallery
Other
Current MVP Subscribers (A) Non MVP Subscribers (B) Former MVP Subscribers (C)
% Have Rented Movies From Specific Competitors In Last 3 Months
Rollover Movies 7
Problem Statement –Growth in MVP Membership only occurs with promotion
MVP Membership and Churn
0
100000
200000
300000
400000
500000
600000
4/23
/200
74/
30/2
007
5/7/
2007
5/14
/200
75/
21/2
007
5/28
/200
76/
4/20
076/
11/2
007
6/18
/200
76/
25/2
007
7/2/
2007
7/9/
2007
7/16
/200
77/
23/2
007
7/30
/200
78/
6/20
078/
13/2
007
8/20
/200
78/
27/2
007
9/3/
2007
9/10
/200
79/
17/2
007
9/24
/200
710
/1/2
007
10/8
/200
710
/15/
2007
10/2
2/20
0710
/29/
2007
11/5
/200
711
/12/
2007
11/1
9/20
0711
/26/
2007
12/3
/200
712
/10/
2007
12/1
7/20
0712
/24/
2007
12/3
1/20
071/
7/20
081/
14/2
008
1/21
/200
81/
28/2
008
2/4/
2008
2/11
/200
82/
18/2
008
2/25
/200
83/
3/20
083/
10/2
008
3/17
/200
83/
24/2
008
3/31
/200
84/
7/20
084/
14/2
008
4/21
/200
84/
28/2
008
5/5/
2008
To
tal
MV
P M
emb
ersh
ip
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Ch
urn
Rat
e
ON_PROGRAM Monthly Churn
Since January 2008 we have lost 94,311 subscribers; this number is now higher
In 2008 we had Phase II and III Store closures
The only times we show increased membership is when we run an in-store promotion (ARC amnesty or contest)
Since January 2008 we have lost 94,311 subscribers; this number is now higher
In 2008 we had Phase II and III Store closures
The only times we show increased membership is when we run an in-store promotion (ARC amnesty or contest)
Store Closures
Rollover Movies 8
Problem Statement - Reimbursements average about 28K per week (2)
Reimbursments by WeekCall Center and Store Level
Source: Suprtprd and Gaurdian
($50,000)
($40,000)
($30,000)
($20,000)
($10,000)
$0
3/3
1/2
00
8
4/7
/20
08
4/1
4/2
00
8
4/2
1/2
00
8
4/2
8/2
00
8
5/5
/20
08
Store Level Call Center
Reimbursements reduce the MVP RPC by 6 to 13%. Reimbursements illustrate the weakness of the current program.
Reimbursements reduce the MVP RPC by 6 to 13%. Reimbursements illustrate the weakness of the current program.
Rollover Movies 9
EDRC Has not been popular among Hollywood Customers either
In March 2007, the top EDRC store took in $22,168. In the same time period, the Top 20th Store took in $3,578 thusEDRC depicts limited appeal.
In March 2007, the top EDRC store took in $22,168. In the same time period, the Top 20th Store took in $3,578 thusEDRC depicts limited appeal.
10
Rollover Definition and Value Proposition
Definition
Guests buy a plan with an allotment of rentals included, if they do not use the allotted number of rentals, they roll over to the next month
Value Proposition
The Rollover subscription program is attractive to guests because it creates customer value through savings and the ‘no use or lose it’ concept and builds customer loyalty because it “eliminates the need to cancel the subscription.”
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There was a limit on the number of movies you could rent each month, but you could roll any unused rentals over to the next month : How likely would you be to stop subscribing to the MVP
Program if the following happened?
Q751A6 There was a limit on the number of movies you could rent each month, but you could roll any unused rentals over to the next month : How likely would you be to stop subscribing to the MVP Program if the following happened? * Base: Current MVP Subscribers (n=198)
Absolutely certain to cancel
Likely to cancel
Not likely to cancel at all
There is a 27% market potential for Rollover that suggests we test Rollover as a third program
12
MVP: But 1 in 5 often forget about their MVP membership altogether.
Rollover does not have this miscommunication.
MVP: But 1 in 5 often forget about their MVP membership altogether.
Rollover does not have this miscommunication.
Q735 How strongly do you agree or disagree with each of the following statements about the MVP service? Please use a scale of 1 to 5 where 5 is “Strongly agree” a 3 would be “Neither agree nor disagree” and 1 is “Strongly disagree.” Base: Current MVP Subscriber (n=204)
5 - Strongly Agree, 8%
4, 13%
3 - Neither agree nor disagree,
12%
2, 5%
1 - Strongly disagree, 63%
“You often forget about your MVP membership”
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Price structure (based on competition)
RPC for all Rollover subscription plans is currently priced at $2.50 which is better priced than MVP’s RPC average of $2.00 (which is known to be lower)
Structure is based on no late fees
Testing could help identify the “sweet spot” that will resonate with consumers and help design plans that appeal to the majority of customers
4 DVDs at-a-time MAX of 10/month with rollover $24.99 / mo + tax
Includes: No Due Dates
3 DVDs at-a-time MAX of 6/month with rollover $14.99 / mo + tax
Includes: No Due Dates
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New Financial Model
NOTES1. This data is from Faber 10/08/07.2. The data was sorted by active members so that we could develop a model that would allow us to estimate the percentage of MVP consumers that would switch over to the high-mid/low rollover programs.3. This analysis only is looking at MVP customer switchover and does not account for New customers, therefore we did not adjust any of the percentages.
Rollover has a switchover advantage
No need to offer an incentive
Rollover has a switchover advantage
No need to offer an incentive
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Rollover Strengths
We have a program that is unique from our competitors;
Rollover is kept simple (avoidance of guest confusion);
Differs from EDRC in that customers do not have to pay the upfront cost, but pay monthly;
Eliminates the need to cancel the subscription based on usage thus improving churn;
Roll-over creates a monthly fee that further encourages steady patronage;
The POS can be configured to handle the program requirements;
Rollover does not have the MVP seasonal affects with MVP subscription rates dropping in the summer months
Rollover incorporates switchover costs
16
Rollover versus MVP
MVP increases invoices and rents, but only marginal lift in Revenue
Rollover margins are better priced than MVP
Rollover is simple to communicate MVP puts pressure on product availability,
not sure the effect of Rollover Rollover is recognizable with cost savings
such as rollover minutes and in financial markets
17
41% of MVP subs say that “services just like the MVP program” are easily available to them, while 26% disagree.
Rollover is innovative.
41% of MVP subs say that “services just like the MVP program” are easily available to them, while 26% disagree.
Rollover is innovative.
Q735 How strongly do you agree or disagree with each of the following statements about the MVP service? Please use a scale of 1 to 5 where 5 is “Strongly agree” a 3 would be “Neither agree nor disagree” and 1 is “Strongly disagree.” Base: Current MVP Subscriber (n=204)
4, 17%
2, 9%
1 - Strongly disagree, 17%
5 - Strongly Agree, 24%
3 - Neither agree nor disagree/Not
sure, 33%
“There are services just like the MVP program that are easily available to you”
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Conclusions
The appeal of Rollover is that the consumers do not lose anything
HV regains better controls over the subscription program thus stopping new subscription members from abusing the system
This initiative is innovative and unique in a mature market
Attract new customers that typically don’t belong to a subscription program
Attract customers that defected to Blockbuster and Netflix that find value in cost savings
Rollover will decrease the effects that our HV subscription plan customers encounters in summer months thus improving rentals in this period as well as stabilizing rentals in all periods
Rollover is easy to communicate to guests using an ‘elevator pitch’
Rollover Movies 19
Recommendations
Open a new job with IT to begin testing the POS system for supporting this new third subscription program
Begin working aggressively with Marketing on POP that supports this program
Begin testing in 2 to 3 districts Do not use MVP tactics to attract
consumers; let them make the decision to join