Goodbye Blockbuster: 3 Reasons You Need a Strong Digital Strategy10 min read

Digital Marketing October 15, 2021 7 min read

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Goodbye Blockbuster: 3 Reasons You Need a Strong Digital Strategy10 min read

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How do you go from having 9,000 global stores making $5.9 billion to a single one in a small town in Oregon?

Ask Blockbuster.

Source: GIPHY

Never heard of them? Well, unless you’ve been living under a rock, you’ll know Netflix.

Let’s assume you’re familiar with both. Did you know, Blockbuster once had the opportunity to acquire Netflix but wasn’t interested?

Or why Netflix is now worth $228.60 billion, and Blockbuster is no more?

It’s all down to having a digital strategy.

Here are 3 reasons why you need a strong one:

  1. Your company must keep up with digital transformation
  2. Analytics and digital technology can track growth
  3. Focus on the customer, not the business model

The rise of an empire

The first Blockbuster store opened in Dallas, Texas, in 1985.

David Cook’s company was different from other rental stores. Why? Because it used a modern, digital checkout process.

This meant he had around 8,000 VHS tapes to rent. Other stores at the time only had a couple hundred. You do the math.

Rental video was so huge at the time because once a movie had left cinemas, the only other way you could see it was by buying the VHS yourself.

After some investment and a steady expansion, Blockbuster became the top movie-rental business in the US.

But something was coming…

Here comes Netflix

In 1997, Netflix was founded. In 1998, it launched as one of the first online DVD rental companies.

CEO Reed Hastings initially claimed that his $40 late fee from Blockbuster gave him the idea.

Source: Getty

While it wasn’t yet the streaming site we all know and love, Netflix would send DVDs directly to your house. There were no late fees, either.

After a short time, the mail-order rental subscription was challenging Blockbuster’s bricks-and-mortar system.

In 2002, the CEO of Blockbuster, John Antioco, had the chance to buy Netflix. It would have been one of the savviest digital investments of all time. 

He refused. The rest is history.

No one at Blockbuster could predict the way the retail market rapidly flip-flopped towards digital tools.

Blockbuster went bankrupt. Netflix skyrocketed. 

So, how has Netflix’s digital strategy powered its success? And how can you apply it to your own business strategy?

1. Your company must keep up with digital transformation

One of the main reasons that Blockbuster went bankrupt was its failure to keep up with digital transformation. 

Once people were able to stream movies online, renting them felt really outdated.

In saying that, it doesn’t matter if you’re a digital business or not. But you have to keep up with the times.

Social media provides a lot more opportunities to engage with customers than older methods of marketing. A strong digital strategy involves implementing the right digital initiatives at the right time.

As a company, your ‘digital maturity’ is measured by the value you’re creating with technology.

Think of all the retail stores that don’t include e-commerce? Yes, the supply chain is shorter, but they’re seriously limiting their reach.

Blockbuster’s customer experience remained the same for years – including its infamous late fees. They did eventually scrap those, but it was too little, too late.

Source: Reddit

There was no attempt at digital transformation for a long time.

Netflix was doing the opposite and constantly innovating. They reimagined video rental for the digital age.

In 2007, they introduced video streaming. By the late 00s, they had teamed up with companies like Xbox, Playstation, and Apple – always feeding into the digital ecosystem.

It was also expanding into Canada, Europe, and Australia.

Rather than jump on this digital bandwagon, Blockbuster did exactly the opposite. 

Where did Blockbuster go wrong? No digital strategy

The former UK Chief Marketing Officer said,

“I am sure 99 out of 100 people involved in Blockbuster would have told you the future was in digital downloads and online ordering, but the chief executive had a retail background and his priority was to save the high street business at all costs. Perhaps we would have benefitted from a different perspective.”

Blockbuster did have an online division. But it was completely separate from the retail side and was “almost treated as inferior”.

There were plans to launch a streaming service in 2012, but the board saw it as a threat to physical sales. Hindsight is a wonderful thing, folks.

Because of Antioco’s background in retail, he wouldn’t let the company focus on digital channels. When he finally did, he had missed the boat.

In the end, Blockbuster and its stakeholders had to pay the ultimate late penalty for not keeping up with the digital times.

They paid around $400 million in an effort to modernize and compete with Netflix.

The takeaway? If you don’t continue to evolve, it’ll catch up with you sooner or later.

It’s time to create a digital strategy if you haven’t already.

2. Use analytics and digital technology to track your digital strategy

Blockbuster had a ton of data at its disposal.

Most importantly, customer’s personal data about their purchasing behavior. This could have been used to drive sales by improving personalization.

We are living in the digital age. Any customer-focused strategy can (and should) be enhanced with digital capabilities.

It could be tracking behaviors or even customer-facing AI and machine learning. Whatever stage your current business is at, it’s time to get involved.

Blockbuster failed to keep track of emerging trends. It’s why Netflix overtook them.

Of course, even a decade ago, technology wasn’t as advanced as it is now. But we’re talking about your digital strategy, and this is now.

You can start by creating a digital roadmap. This will include digital initiatives that outline what your business wants to achieve.

Source: HelloSign

Advanced analytics should be involved in your strategic planning because technology can spot things humans can’t.

Especially areas of potential growth like:

  • Acquisition targets
  • New product ideas
  • Segmenting audiences to offer variations
  • New ways to use existing services

Source: McKinsey

Digital solutions should have an omnichannel approach. Find out what you’re doing right and in what area. Then find out what’s not going so well and change it.

Netflix has always been data-driven.

They say so themselves:

“Our analytic work arms decision-makers around the company with useful metrics, insights, predictions, and analytic tools so that everyone can be stellar in their function.”

It’s why they’re still blossoming, and Blockbuster is no more.

3. Focus on the customer, not the business model

All businesses should be customer-centric – especially B2Cs. 

No consumers? No business.

While Blockbuster’s late fees were great for profits, they were widely hated by customers.

Source: Quartz

When it was just starting out as a new business, bricks-and-mortar had no competition. Heck, the internet wasn’t even available to the public.

Blockbuster didn’t need to focus on a digital marketing strategy because it didn’t exist.

Customers went to stores to buy things. That’s what everybody did because there wasn’t another option.

But during its reign, things were changing. The internet blew up, and Netflix kept up by having a digital strategy.

Thanks to the world wide web, it’s now a lot easier for start-ups and strategists to pinpoint their ideal customers. And how to access them. Plus, make them happy.

The Strategy Journey explains why it’s important:

What makes customers sad What makes customers happy
Time-consuming store visits Instant access at home
No personalized recommendations Smart recommendation system
Late fees (shock!) Unlimited rentals for a subscription fee
Expensive VCR machine Available on any smart device

Source: The Strategy Journey

Your customers will shape your digital strategy

Where are your customers?

Are they on social media sites? LinkedIn or Twitter? Are they using mobile apps? Do they rely on search engines or word of mouth?

Hint: SEO writing (search engine optimization) is key to accessing them a lot of the time

Your business needs to pay attention to where your audience is interactive and why. This will shape how your product or service develops over time.

Netflix knew that Millennials were the upcoming consumer generation. Digital media was becoming increasingly popular. 

Duncan Watts is a pioneer in network theory. He told Forbes,

“You have to test and learn as you’re going along, but if you understand how networks work and are willing to invest resources into researching the ones that affect your business, you can significantly improve decision making.”

A successful digital strategy means putting your customers at the forefront of every decision. This includes everything – pricing, marketing, the whole value chain.

Blockbuster put more focus on the business model they were comfortable with. 

But in doing so, they forgot about what they were meant to be providing to customers – an incredible home entertainment experience.

Conclusion

There’s a reason today’s kids will say “huh?” if you ask them about Blockbuster.

They also won’t head to a video store this weekend.

It’s something we couldn’t imagine 20 years ago. The fall of a global brand because they didn’t have a digital strategy in place.

They didn’t keep up with digital transformation, got overtaken, and left behind.

Don’t make the same mistake.

Could a digital strategy improve your business? Have you already got a successful one? Let us know in the comments!

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Goodbye Blockbuster: 3 Reasons You Need a Strong Digital Strategy
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Goodbye Blockbuster: 3 Reasons You Need a Strong Digital Strategy
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What happened to Blockbuster? How did Netflix rise to fame? Learn all about the importance of a strong digital strategy.
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