July 08, 2010

Blockbuster: A Multichannel Business

For the past decade, we've been taught how critically important it is to be "multi-channel".

Intuitively, the concept makes perfect sense. Maybe I want to rent a movie. Theoretically, it makes logical sense that I'd drive four minutes to my local Blockbuster store to pick up a copy of, say, "Idiocracy", because I want to see the movie now, not in two days when Netflix delivers it to my home.

Go visit the Multichannel Merchant website, and browse the hundreds of articles that have been written about Blockbuster multichannel strategy over the past decade. You'll be riveted by the strategic choices that Blockbuster made, choices that any pundit would laud:
That's a lot of multi-channel strategy ... bricks 'n clicks and promos and CRM and co-branding and channels and freebies and segmentation and even loyalty programs. And yet, last week, Blockbuster was delisted, as the brand struggles to make interest payments on more than $900,000,000 in crippling debt.

Be honest with yourself, especially if you promote multichannel strategies:
  • Why do you choose Netflix over Blockbuster?
  • Why do you choose Amazon over Barnes & Noble or Borders?
  • Why do you choose Zappos over Nordstrom?
If you can answer those questions, you've solved a marketing riddle that escaped the multichannel generation of business leaders.

(Hint #1: A good part of answering the riddle involves prudent financial management of a business. It doesn't matter if a customer can order a movie and return it in a store if a business chews up half of all profit dollars or more on interest payments, does it?).

(Hint #2: Focus on merchandise and service and product delivery before you focus on channels and CRM and loyalty programs and promotions and co-branding ... maybe that is the true answer to the marketing riddle of why multichannel marketing doesn't work).

6 comments:

  1. Hi Kevin - I scribbled something on this topic a few days back. Would love to know your comments!!

    http://digimantic.blogspot.com/2010/05/real-time-market-hypothesis-how-real.html

    ReplyDelete
  2. Interesting, thanks for forwarding the link, I appreciate it!

    ReplyDelete
  3. Interesting post, Kevin I think it's a leap to pin Blockbuster's problems all on their multichannel strategies. Based on your hints, It seems you're recognizing Blockbuster and other established businesses have problems competing with Intermet pure plays for many other reasons. I completely agree that companies should nail the basic customer experience before delving into new areas, but this day and age some aspects of the basics may involve some level of multichannel integration in order to meet customer expectations. Netflix, Amazon and Zappos all created business models that the established retailers you mentioned could have created and dominated had they the foresight and willingness to change rather than stubbornly defend the status quo until they lost large shares of their markets to the start ups. Had they seen the possibilities earlier and recognized the need to maximize service and efficiencies, they might have been able to develop customer pleasing services that leveraged the strengths of each of their channels.

    ReplyDelete
  4. I'm not blaming Blockbuster as much as I am blaming a generation of marketing experts, conference organizers, and industry consultants who promoted theory over practice.

    That being said, there is a quote in one of the links from the CEO who said that Blockbuster would prevail because of their multichannel strategies.

    You attend any major industry conference ... and the online conferences are falling right in line now ... and you will hear talking points based on theory, not practice. What you hear sounds good, it is intoxicating, and it helps sell $1,000 to $1,900 tickets to a conference, so we all know who benefits from the intoxicating message.

    Let's just say you don't hear a lot of discussions about Monte Carlo Simulation techniques, techniques that actually drive profit ... that doesn't get a person to a conference. Multichannel psuedo-strategies and social media, now that gets people to attend a conference!

    ReplyDelete
  5. I'm in complete agreement with you on conference content and general promotion of theory over practice. Of course, we have to blame conference attendees, too (me included). If we demanded more talk about Monte Carlo simulations, organization structures, incentive plans, usability, etc. we might get more of it. It's sort of like how we keep electing the politicians who promise tax cuts and spending increases and then wonder how we got such huge deficits.:-)

    I, for one, would love to hear more details about how successful companies handle some of their basic blocking and tackling.

    Good discussion.

    ReplyDelete
  6. The key is to focus on the basic blocking and tackling. Too many companies focus on being smart vs. producing results. We all hear great stories but rarely see the data behind the success and thus the challenge. Having multi-channel strategies can be good but you need to be able to measure the benefit and most people can't.

    ReplyDelete