In our recent Customer Service Boot Camp Tour, we devoted a great deal of time, energy and focus on critical aspects such as Trigger Events, Cycle of Service, Functional Blindness, Raving Fans, Vigilante Consumers, the Service Triangle, the Knowing-Doing Gap and the importance of Re-framing in today’s competitive, chaotic, and ever-changing business environment.
This year we’ve found a large number of both positive and negative examples to support our many messages. Pause to observe media reports and you’ll gain immeasurable experience and guidance to expedite your journey to success.
For instance, consider the rise and fall of both Blockbuster and Netflix to discover crucial knowledge to benefit your own business.
- Blockbuster began in 1985 as a provider of home video and video game rental services.
- At its peak in 2009, Blockbuster had up to 60,000 employees in 1,700 Blockbuster stores in the U.S. with locations in 17 countries worldwide.
- In 1993, Blockbuster Viacom purchased Blockbuster. Blockbuster separated from Viacom in 2004.
- The company filed for bankruptcy in 2010 and was won by satellite television provider Dish Network at auction for $233 million in 2011.
- Dish soon announced it would only keep 500 Blockbuster stores open. At its peak, Blockbuster had more than 4,000 stores nationwide.
We continue to see this familiar rise and fall of businesses for a variety of reasons in most every industry.
Some say cable killed Blockbuster. It wasn’t cable that’s hurt Blockbuster; it was NetFlix’s rent movies by mail and RedBox’s rent movies by vending machine. (Can you say no labor costs and low overhead?)
Layer in the fact that in the 1990s late fees represented approximately 50% of net income for Blockbuster, which Blockbuster was ultimately forced to surrender, and you can see why Blockbuster was having serious problems.
What Blockbuster really needs to do is 1) forget the past and 2) re-invent itself for the future. Don’t expect that to happen.
Is the same pattern emerging at Netflix?
- Netflix was founded in 1998, offering flat-rate rental-by-mail to U.S. customers. It was originally a single rental service, but the subscription model was one of a few radical ideas Netflix created. Having unlimited due dates and no late fees has worked in a powerful way and now seems obvious (to everyone but Blockbuster).
- Netflix has amassed a collection of 100,000 titles and more than 23 million subscribers. Even if Blockbuster were able to catch up to NetFlix in movie rentals by mail, it’s too late.
NetFlix basically announced through its actions that the DVD by mail business will soon be obsolete, and movie delivery by Internet is its new focus.
Something like 60%+ of NetFlix customers watched at least one movie delivered via the Internet in the past 30 days.
NetFlix recently signed a deal to license movies for Internet delivery for a total deal size of $1 billion for a five-year plan. Initially, that sounds like a lot of money until you consider what Netflix has been paying for postage!
Just as Netflix seemed to have total control of the industry, it announced that subscription prices were increasing, some by as much as 60%, a move which led to reported customer backlash, cancellations, less than projected subscriber growth, and a decline in stock price.
This price hike caused 805,000 paid subscribers to jump ship in one quarter …. the biggest exodus in its history!
Netflix announced that it would spin off its popular DVD business under a new brand name, Qwikster, leading to even more customer and market confusion. Netflix reversed the decision less than a month later.
What happens now? Not even Netflix appears to know, although millions of customers and all investors are watching with interest.
Return now to the first paragraph of this article and consider the true application of our focus in our Customer Service Boot Camp! Trigger Events, Cycle of Service, Functional Blindness, Raving Fans, Vigilante Consumers, the Service Triangle, and the Knowing-Doing Gap have all surfaced in this ongoing chronicle of errors by two colossal players in a major industry. They will affect YOU as well … regardless of your size and status.
If the economy is 30% different today than three years ago but your company has only changed by 10%, it doesn’t take a genius to realize that someone is in the process of being left behind. Take steps today to insure your future!