In my last post I shared some lessons to be learned from Blockbuster’s rise and demise, and in this follow-up post I look ahead at what comes next for the movie watching industry and how you can apply this information to your own business.
The next huge wave is on the horizon. Consumers are rapidly shifting to content streaming. We’re picking convenience over quality. That, by itself, is curious. We’ve got Blu-Ray technology, surround sound home theater and huge flat screen TVs which offer the best user experience ever, but, more than ever, we’re watching movies on computers and phones.
Netflix will lose some of their traditional DVD model advantages as they try to shift to streaming. Trying to split into two different companies a few years ago was a colossal blunder. Movie studios are back in control of distribution because they can re-price streamed content; instead of selling just one copy of a DVD that can be rented limitless times, they can charge a per-view rental fee for streamed content. Companies like Netflix are in a bidding war to lock down content to lure customers. Consumers are reevaluating which provider offers the biggest library, best cost, highest number of videos that can be viewed during a month, etc. And everyone wants a piece of the action – Hulu, Amazon, Google and Apple, to name just a few.
To win in this environment, Netflix will have to identify their customers’ wants, serve their niche, and be better than anyone else. They’ve already made mistakes. They still have the advantage of being the de facto standard, but so did Blockbuster in its day. Netflix should continue to offer traditional mail rentals to leverage the competitive strength of their huge library, but they need to negotiate some sweet deals with studios to ensure that they can have the largest online library as well.
What about Redbox? Even as customers were flocking to Netflix, some still wanted to make an immediate video rental now and then. Redbox locked down predictable and consistent local distribution to all of these potential customers by putting kiosks at almost every McDonald’s. McDonald’s loved the thought of having all those potential customers only a few steps away from hot, juicy hamburgers. Redbox essentially turned the original Blockbuster concept into a vending machine, slashing traditional movie rental prices by 75%.
Redbox still can’t boast as big an inventory as Netflix, but to counter that, they created a highly useful app with a real-time searchable inventory that allows you to find the nearest Redbox that has your movie and even reserve it. That’s very cool, but not a significant threat to Netflix with its inventory of more than 100,000 titles.
Now let’s make this relevant to you. What’s going on in your industry? Technology is changing how people communicate, gather information, and make decisions. What imminent technology changes might allow a potential competitor to draw away a bunch of your customers who are merely settling for the industry norm but who would race to a better option if only they knew what is was and where to find it? Why not beat them to it?
I suggest you take 15 minutes this week to think about technological changes on the horizon as they relate to your business, and see what you can learn from Blockbuster’s failure and the continuing evolution of the movie watching industry. Here’s a recap for your convenience:
Blockbuster’s problem #1: Doing business with you was too time consuming.
In Blockbuster’s case, it took too much time to get to the store, find a movie and return it. Netflix fixed that problem by letting people create and save an online movie queue and by automatically mailing people their next movie.
People want convenience. They love to eliminate hassles, preserving time for the things they most want to do.
How can you make it easier for customers and potential customers to engage with you when they choose? Remember that people are connected digitally all of the time and are are using smartphones with smaller screen sizes more than ever.
Blockbuster’s problem #2: You punished and irritated customers.
People hated Blockbuster’s late fees. Netflix ended late fees but traded them for guaranteed revenue. Brilliant. If you’re a Netflix user and return only three movies in a month, you probably feel more like you’re not taking full advantage of their service by not renting more, rather than feeling that you’re being taken advantage of by paying too much.
How do people in your industry penalize and irritate customers? Think beyond merely charging interest for late payments; for example, how do you and your competitors handle unexpected surprises, scope of work changes, project additions, change orders, etc.?
Don’t ever punish or irritate your customers. Cherish them. Thank them. Reward them.
Blockbuster’s problem #3: You offered too few choices.
Blockbuster didn’t have a deep enough library at every store. Netflix gives customers access to tens of thousands of movies.
Options are empowering, but there’s a trick to making options a bonus and not a burden, as you can learn from this related post about what happens when you give customers too many options. Options work for Netflix because they allow people to search for their favorite movies and present them with recommendations based on their preferences. Turning the complex into something simple, intuitive, and unintimidating can create unbelievable loyalty.
People want options, and with their new sense of empowerment afforded by technology, they expect to be in control. How can you empower your customers with options but still make working with you easy and convenient?