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How To Rethink Your Sales Strategy As Cord Cutting Accelerates

In This Rapid Shifting Landscape of Internet Usage, The Pressure Is On For Providers To Pivot

If you ask most people to name their go-to activities for getting through the pandemic, it’s likely that watching streaming services like Netflix, Disney+, or Amazon Prime Video will rank high on the list. With people forced to stay home during COVID-19 and looking for ways to cut costs, the trend to ditch the cable box in exchange for on-demand video streaming services has accelerated faster than ever.

While 2020 saw record-breaking cancellation rates of 15%, a recent survey by The Trade Desk predicts cord cutting will accelerate even more in 2021, with a staggering 27% of households saying they’ll cancel their pay-TV package by the end of the year.

While more competition in the market for inexpensive, niche video streaming is great news for consumers, it presents a big challenge for service providers.

Given the explosive growth of cord cutting over the last year, it’s worth considering how companies can rethink their sales strategy to pivot and retain customers.

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Factors driving cord cutting

The term “cord cutting” refers to the decision to cancel or forego a cable TV subscription or landline connection in exchange for an internet-based or wireless service.

The movement has been on the rise for at least as long as popular, on-demand streaming and affordable mobile phone packages have been around – that’s well over a decade now.

Cord cutting is primarily driven by price sensitivity and the promise of significant cost savings. But consumers are also drawn to on-demand and live video streaming services – including Netflix, Hulu, Disney+, Amazon Prime, YouTube TV, and more – because they offer more variety, personalization, and flexibility.

The acceleration of the cord cutting trend is truly the nail in the coffin for pay-TV subscriptions as we know them – especially considering members of Gen Z have grown up without cable TV and have no concept of what it means (or why you’d ever want) to watch video programming on a schedule.

Impact on sales

With cord cutting options easier to manage, more readily available, and in many cases a cheaper alternative, legacy video products are becoming more difficult to add onto customer orders.

According to ibex customer data, the impact on legacy products over the last three years is telling. When looking at sales across all lines of business, the percentage of internet sales has increased to 60% while video and landline sales have dropped 11% and 3% respectively.

Impact of cord cutting on legacy products over the last three years

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Cord cutting has also impacted internet, video, and voice attach rates considerably over the last three years. ibex customer data shows that, while internet is attached to over 90% of all sales, the video attach rate has gone down over 20%. Meanwhile, the landline voice attach rate has decreased 13% and is almost on par with video.

Impact of cord cutting on attach rates over the last three years

 

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How providers can pivot

As our customer data shows, the rise in cord cutting translates to an increase in internet as the primary product customers are purchasing. This is a significant departure from the old process in which internet was an add-on to video and landline sales.

In this rapidly shifting landscape, the pressure is on for providers to pivot. Here are some strategies forward-thinking providers are adopting to shift their approach and continue driving sales.

  • Lead with internet first – Rather than selling all three services, companies are focusing on driving internet first and promoting the benefits it can have on additional products.
  • Promote bundling discounts – As they position internet as the inelastic utility, companies are hooking customers with opportunities to discount services by bundling video and/or landline voice as add-ons.
  • Offer add-on streaming – Many providers now offer cheaper streaming options as an alternative to legacy video (e.g., AT&T TV Now, Spectrum TV Choice, Cox Contour TV, Dish Sling TV). Customers that sign up for internet service have the option to add video streaming to their subscription.
  • Sell the need for speed – In order to offset the reduction in products, companies are offering a range of different internet speeds to accommodate increased speed requirements for streaming services.
  • Promote other internet-based services – More providers are offering other services that require an internet subscription, such as home security and wireless services. As cord cutting impacts video and landline attach rates, ibex customer data shows an increase in these types of add-on products from almost zero to 8% of the total products sold over the last three years.

Home security and wireless services, percentage of total sales over the last three years

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The future of cord cutting

While consumers are increasingly turning to streaming services to meet their entertainment needs, the price sensitivity that’s driving them away from cable TV continues to impact their purchasing decisions.

Households are feeling the pressure of the pandemic’s economic impacts, and the majority of consumers (72%) prefer free or low-cost ad-supported TV over ad-free and more expensive options.

Going forward, spending resistance will be a key factor in how companies price their subscription bundles and add-on streaming options. As in most other household purchasing decisions, factors like value and convenience will win the day.


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