How Blockbuster Lost its ‘Place’
How Blockbuster Lost its Place
Blockbuster Video will go down in history as a tragic marketing misstep in the digital revolution. Its mistake was being in the wrong ‘place’ for its customers.
In my 4 P’s of Marketing article, I talked about the importance of defining your Key Marketing Issue and then examining it in relationship to Place, Product, Promotion and Price. Of those, Price is the one upon which you should avoid competing, because it’ll force you into a commodity game.
The irony of Blockbuster is that ‘Place’ had long been the company’s competitive advantage. At one time, it boasted that 80% of the population of the United States was within a 20 minute drive of a Blockbuster location.
That type of competitive advantage was extremely powerful. Blockbuster could reap great return on its marketing investment because it could advertise almost anywhere in the country and reach a significant number of its target consumers.
When Netflix started to creep-in on Blockbuster’s territory, Blockbuster made the tragic mistake of focusing on ‘Price’ and ‘Promotion’. Rather than think strategically about what mattered to its customers, it eliminated late fees to compete with Netflix. Not only did that not have the desired effect of stopping the exodus of its customers to Netflix, it significantly hurt the company’s top line revenue.
If it had looked forward, Blockbuster would have seen that the digital revolution was arriving, albeit ten years later than the tech bubble of the late 1990′s had promised. By converting its brand equity into an online presence, Blockbuster could easily have been the leader in online movie rentals.
Despite its recent public relations setbacks, Netflix has done very well with it’s flat-rate video streaming service. Rather than compete with Netflix on price, if Blockbuster moved its $4.99 two-day rental business model to the Internet, it would likely be a thriving business today. Instead, Apple saw an opening left by Blockbuster and moved into the rental business. Apple now commands a 68% market share of a high-growth market while Blockbuster Video has gone bankrupt.
The lesson that marketers must take away from the Blockbuster tragedy is that ‘Place’ is a key component of the marketing mix. Tread carefully if your strategy is to to ignore ‘Place’ and focus on ‘Price’.
Chris McPhee, MBA
Email: Chris.McPhee@Marketing-Matters.org
Great post. Do you think Blockbuster missed the mark based on ingnorance or arrogance?
That’s a great question. I speculate that it was almost certainly not ignorance. My guess that Blockbuster likely saw the move to online video coming, but didn’t consider it a real threat until it was too late. Their big advantage in ‘place’ likely worked against the move to online video, because they would have seen online video as cannibalizing their store-front locations. The same structure that caused them to be so successful prevented them from responding quickly enough.
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