Blockbuster - missing the obvious.

Here is a company that I respect for a few reasons:
1. They pioneered the low cost movie rental business. Something that is still used as a case study in B schools to showcase innovation in deal making and demonstrating win-win concepts in game theory.
2. They took on the threat brought on by netflix and by many counts have done well to survive - even though it took them a while to respond to this new and innovative competition.
3. The ad - no more late fees - was brilliant since that was the main issue that netflix underscored in its campaign.

But now, blockbuster has completely changed face, without preparing its customer base, for the worse. They can easily take this changed strategy and play it to their strength and hence the title - missing the obvious. Let me explain.

Today you can rent from the store a new movie for $1.99 per day or $4.99 for 5 days. An old movie for $0.99 per day or $2.99 for 5 days. Late fees are back and there are variations within it! If I got these numbers wrong, that's my point. I cannot even find a reference to their rental policy and charges online. The ad campaign - no more late fees - are still in peoples mind and the look on their face at the store when the clerk tells them they owe late fees is indescribable. Those are the defining moments when the customer makes up the mind never to show up again at the store and go straight to the competitor. The stores don't even bother to present the customer an option which actually exists and could be a huge win-win that netflix can never match! Let me elaborate.

You can become an member of blockbuster.com and rent 2 DVD's per month with two in-store exchanges. Here is the USP - there is no late fees for instore excahnges - you can keep it as long as you like. The only catch is - until you return the in-store exhange you will not get another DVD by mail i.e. you effectively can have only one DVD. All this in the base plan for $9.99 per month. It climbes up from here where you could have multiple DVD's rented at one time for a higher price.

Effectively, blockbuster is offering a simple subscription model, with the flexibility to either rent online or at the local store. Rather than coming up with a campaign to promote that and convert occassional renters to subscribers they have antagonized them. Worse, at the stores when the clerk tells them about the late fees, they do not even bother to bring up this option and waive the accumulated late fees if they subscribe. This is classic case of not preparing the organization nor the customer to sell an excellent offer that already exists!

Here is how organizations fail. I hope they not continue to let the customer figure out on their own what they offer and make course corrections soon and get rid of the non sensical in-store fee structure. No customer wants to be distracted when they are at the store with their kids, their partners, friends etc. in a good mood to watch a movie and be told or explained a complex pricing structure. At the least make it $1/day for old movies and $2/day for new movies and be done with it.

Netflix, here is your chance to bring back the - afraid of late fees campaign. There is nothing like good old fashion competition to better the playing field for the customers.