Lessons from Blockbuster and Netflix that Are Hard to Ignore

Abel Nunez Entrepreneur Advice, Marketing Leave a Comment

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It’s not uncommon for businesses to become so well oiled and highly efficient that its tight network of systems and processes are poorly suited to let new information in. As an inbound marketing strategist I see and hear this quite often. When talking to business owners the one thing I hear repeatedly is, “We have more than enough business, we don’t need marketing or advertising.” It’s been my experience that this type of mentality is difficult to argue against, and since I’m not in the business of hard selling my services, this is usually a cue to change gears and start talking about how well the Cowboys are doing this season.

The mentality that you don’t need marketing and advertising because “things are going well” is a dangerous one. This is equally as dangerous as failing to adapt as the market changes, or as technology changes, as was the case with Blockbuster.

Failure to Adapt Eventually Leads to Failure

Unlike the business owner that doesn’t believe in marketing or advertising, Blockbuster dominated the competition by building an efficient operation with the help of massive marketing budgets. Blockbuster was a monster in the video rental industry that made the bulk of its profits from charging late fees.

Enter Netflix.

Back in 2000, Reed Hastings, the founder of Netflix, pitched the idea of a partnership to Blockbuster and he was laughed out of the meeting. With time however, Netflix’s subscription based business model became more and more appealing to customers tired of paying Blockbusters’ astronomical late fees. Netflix subscribers would receive their movies through the mail, keep them for as long as they wanted, then return them and choose something else. With the addition of a video streaming subscription, Netflix would go on to become a $28 billion company by 2014. Meanwhile Blockbuster filed for bankruptcy in 2010 and was eventually put out of its misery in 2013.

The Lesson: Netflix’s subscription service disrupted Blockbuster’s business model that was highly dependent on charging late fees, but that was only the beginning. What caused Blockbuster to crumble was its failure to recognize how the rapidly evolving digital landscape could both benefit and destroy it. Blockbuster’s failure to adapt and change its method of content distribution eventually led to its demise. While you may think that your business is immune to the evolution of technology, think again.

Things to Consider: The evolution of digital technology is changing the way we do business, from marketing, to sales and customer service. This isn’t just about online businesses like Netflix, this is about a shift in the mindset of consumers and the way they consume media- that includes marketing messages.

But Wait. There’s More: Blockbuster’s CEO didn’t just sit around laughing at Hastings, he actually recognized what Netflix was doing and set out to compete with them. He started off by doing away with late fees, then by launching Blockbuster Total Access. But it was too little, too late.

Advances in technology and digital services (smartphones, DVR’s, mp3 players, Spotify, Hulu, Netflix, Google, online directories, Facebook, Twitter, LinkedIn, etc.) have changed the marketing landscape and have left traditional marketing channels struggling to keep up. We ALL go online when searching for businesses, products and services. Have you established an online presence for your business? Are you distributing your marketing messages online or are you still hanging on to traditional methods, or worse, not marketing at all?

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