I was talking to a local video rental merchant recently and asked if the new “video by mail” programs offered by Netflix and Blockbuster were affecting their business.
“It’s killing us.”
So what are you doing about it?
“I don’t know, but I wish we would do something… What would you do?”
Let me think about it…
This video store is located in a premium retail space in a strip center in beautiful Sylvania, Ohio. I have been a client since it opened under another name years ago. It shares space with a Little Caesars pizza and Jimmy Johns sandwich shop. What do you know, they both offer delivery!
By night fall it had become obvious to me that there were five choices.
The first choice is the most obvious.
Do nothing. This will give you plenty of time to plan the store closing. If a business is not going forward, it is going backwards - towards extinction.
“It doesn’t do any good to sit up and take notice, if all you do is keep on sitting.”The second choice would be to offer delivery.
Hire a couple of drivers like the pizza joint and deliver the videos to the customer. The downside is that offering delivery during all business hours will add substantial overhead that probably can not be supported by the revenue generated. At an average rental of 2.5 videos per transaction times a $3 average rental, $7.50 doesn’t leave a lot of margin for delivery. You could charge for delivery, but how much could you charge to make it profitable, yet attractive to the customer?
The third choice is right on front us! Little Caesars and Jimmy Johns both use drivers, we need a driver, lets figure out a way for all of us to
share a driver. Of course the downside to this is getting three business owners to agree on something when two of them are competitors…
The fourth choice is to make the United States Postal Service your business partner. Print up a box of pre-paid envelopes. Ask the customer to call (or email) you before the postman arrives and you can mail the DVD today and they are guaranteed to have the video tomorrow. Keep a copy of their credit card on file for billing or have them buy the prepaid debit cards and bill the rental to it. (Due to privacy concerns over identity and credit card theft, this will need special attention.) The customer can mail the DVD back or drop it off at the store. There are several downsides to this approach – the most obvious being that Blockbuster and Netflix have beaten you to it and this service is “owned” in the consumer’s mind by them. You are perceived as a follower, not a leader. You could attempt a price war, but assuming you don’t desire a “not for profit” certification, only customers win in a price war.
So the only approach left is to innovate. How can you solve this problem and add a service valued by your customers?
The fifth choice is to “position yourself as a service provider and figure out how to add value to the video rental transaction”. Offer delivery, but develop a marketing program around it that adds value. For starters, come up with a clever name for the program using a movie title – like “Special Delivery” or “You’ve Got Mail!” or “It’s in the Bag”. Then make the service premium and selective.
Ø Call us by 5:00 pm and we will have your movies or games delivered by 7:00pm!
Ø Develop logo delivery bags to use. An offshoot of delivery could be the development of marketing programs with other businesses to include a special offer, free sample or other items in your “bag” to help offset the cost of delivery. Coca-cola may want to participate. Little Caesars and Jimmy Johns in this case.
Ø When the customer calls in for a movie, check the computer stock to make sure it is available.
Ø If the title is not available, suggest a similar title that is currently available.
Ø If the customer still wants the title, log the customers name and phone number and when the title comes back in,
call and tell the client you now have the video they want!
Ø Notice the change from customer to client…
We are transitioning our customers - transaction based - into clients - relationship based - by adding value! Ø “
People do business with people, not businesses”. The business name or brand will bring the customer in the door, but the only way to keep them coming in the door is develop a relationship with them – person to person. This is especially critical in a service based industry where you are selling service, not commodities. One of the current inherent problems in the video rental business is that most of the marketing has been based on price – rent one, get one free! – rather than offering service. Netflix and Blockbuster are attempting to transition to a service based offering (delivery) and are making significant inroads gaining market share because they are innovating and offering services their customers want and are willing to pay for.
Ø Offer other products – would you like a 2 liter Coke and some popcorn with your movies? In selected locations like the one in question, you could offer pizza and sandwiches with the delivery.
Ø Automatically recommend other titles based on the clients previous rentals. The rental history is already a part of their customer profile. “I noticed that you watched “The Prestige”, have you seen “The Illusionist”?
Ø Email special offers
only to members of this program. Every Tuesday new titles are released by the movie studios. Offer to send the “new Blockbuster” to them first.
Ø Develop special discount offers from selected local businesses (pizza and sandwiches come to mind).
Under this scenario you would not need a full time driver; you would know that every evening you need drivers to work from 5:00pm to 7:00pm.
“What do you tell a customer who is standing in the store and they want the title you are holding for a “premium” customer?”
This is always a delicate issue, but I have always found that the truth is the best tactic. I am sorry but this copy has already been reserved for one of our Premier Club (VIP Club) clients. Do you know about our Premier Club program? Would you like to join? If you give me your name and phone number I will call you as soon as another copy comes in…
“Do you charge for delivery service?” This is debatable, but I would lean towards charging a nominal fee. Check and see what other delivery oriented businesses are doing. In Sylvania it is common to be charged for delivery by florists, pizza companies and other restaurants. Offer this service free for the first 90 days, then start the delivery charges – just be sure the client knows up front that after 90 days there will be a small delivery charge.
“How do you find the client’s home?”
Ø Google it and print a map.
Ø Sprint offers a mapping service available by cell phone at a nominal charge. It allows you to program multiple destinations so you can cover numerous households on one delivery run. I am sure other cell phone providers do as well.
Ø Note that you need to set up a reasonable trade area for offering delivery. I would determine this by exporting the addresses of all the current clients from your software and importing them into mapping software like MapPoint. This will visually plot where your clients live. In the automotive service I found that 83% of clients lived within a three mile radius of the service center.
Ø And since clients rarely shop in concentric circles, they tend to group in neighborhoods, making distribution routes easier than trying to cover the entire three mile radius.
“Birds of a feather flock together.”
In essence, never respond to what the competition is doing.
Innovate and offer new services to your customers. Figure out what the customer wants before they know it and figure out how to offer it to them profitably.“This program sounds like a lot of work.”
If it were easy everyone would already be doing it…
“Any suggestions for generating new customers when you don’t have a large marketing budget?”
Sure, instead of renting videos one at a time, rent a hundred videos to one customer.
“Are you feeling OK?”
When I was in the automotive service business I came across an interesting fact. My clients (tier two automotive service) were among the leading video rental per household segments in the nation. This was gleaned from a psychographic (lifestyle) research project that I did in an effort to determine what my clients were doing with their disposable income when they weren’t getting their cars serviced.
Tired of competing on price, I was looking for ways to add value to our services without having to discount our prices. So we ran a promotion where every customer who bought an oil change got a free video rental from a local video store. The video store gave me a great price on the rentals because:
Ø I purchased 100 at a time and gave them away.
Ø We printed the gift certificates with both our logos and addresses on them.
Ø The video manager knew that his average rental was 2.5 rentals, so the one free video (which he sold at a discount) would lead to additional rentals.
Ø By working with us, he would pick up new customers for his store. We were no threat and +80% of all our clients came from within a three mile radius of our service centers, so these customers lived in his trade area.
Ø As an added incentive, we gave him coupons for automotive service that he could distribute to his best customers. $12.99 oil changes (normally $25) or Save $20 on any automotive service. For the two businesses this was a win-win promotion and the customers loved it!
While Business to Business marketing does not seem a natural fit for a video store, with enough thought and lots of hard work it can add to the bottom line of any business. (How about selling blocks of video certificates to local businesses to hand out as employee incentives?)
One last thought (and this may already be in place in this chain)… Technology offers amazing ways to communicate with employees – a corporate intranet could support a marketing blog or company newsletter and address issues like these. More importantly it could provide a mechanism for two way communication which allows the field employees to offer suggestions on how to better serve their customers. Most of my best ideas have been gleaned from customers and employees working with customers! One of my first “success stories” was the development of a “Bright Ideas” program in the convenience store business where a usable, profitable employee suggestion garnered a certificate and small prize for the employee!
I think that is enough rambling for now…