What A Video Rental Store Can Teach Product Managers

by drjim on January 23, 2012

Can you even remember racing to the video store to avoid late charges?

Can you even remember racing to the video store to avoid late charges?

Not to date myself or anything, but can anyone else remember going to the video store on a Friday or Saturday night? I’d wander the aisles and take a look at every movie on the “just released” rack in order to decide which one or two videos I was going to rent. Netflix and the Internet have pretty much killed the video store these days and so what’s a video store product manager to do?

(Streaming) Video Killed The Video Store

To be a video store product manager in the 1990s was the bomb! Everyone finally had a VCR in their house and the movie studios were cranking out movies, both new and old, on video tape left and right. Your only real problem was trying to get your stock level right so that you could meet the needs of most of your customers.

Almost overnight everything changed. Those darn DVDs came along. Sure, you could start to replace the tapes in your stores with DVDs, but all of a sudden the product managers over at Netflix discovered that you could cheaply use the U.S. postal mail to send DVDs to people’s homes. Oh, oh – now your video store was under threat. There was nothing on anyone’s product manager job description that told how to handle this situation.

As though things couldn’t get even worse, they did. Since so many consumers now had high-speed internet service to their house, the Netflix product managers moved on to the next stage of their game: offering streaming video and making it so you didn’t even have to wait by your mailbox anymore.

Given all of these superior ways to get your hands on the latest and greatest videos, why would anyone still make the trek to the video store and run the risk of incurring late fees? There are some people for whom a weekend video is still a spur-of-the-moment purchase. These last remaining people were vacuumed up when the product managers from Redbox placed their self-service DVD rental kiosks outside of 7-11’s and other stores. That’s it, game over for the video stores.

How Video Stores Are Being Reborn

But wait, all of the video stores have not gone away. Sure, sure – the big chain ones like Blockbuster and Hollywood Video have been closing their doors left and right. However, a number of the independent video stores are still open for business. What have their product managers been doing?

A number of the video stores have changed the products that they offer to their customers. Some have started to offer events. Nicole LaPorte from the New York Times reports that these have included a film studies program, classes on anime mythology, lectures by filmmakers and spoken word events. Clearly, this isn’t your father’s Blockbuster store.

What you’re starting to see is that place that we used to go to rent video tapes is transforming itself into more of a community gathering place or a cultural hub for people who really like films. The video store product managers are positioning their products to be different than Netflix which clearly has no soul: it is both nameless (who is sending me those videos?) and faceless (exactly where is Netflix located?).

Video Store 2.0

All of this “connect with your customers” strategic management stuff is good short-term product manager positioning. However, what should video store product managers be doing in order to prepare for the long-term?

Dr. Peter Fader is a very smart marketing professor at the University of Pennsylvania who thinks that he knows the answer. Here’s the most important point that he makes: as easy as it would be to do, video stores that want to survive must not consider Netflix as an adversary. Netflix is just too easy to use and if you position them as the enemy, then you’ll force your customers to choose and in the long run the video store will lose.

Dr. Fader has a different suggestion. He believes that video stores should position themselves as an alternative to Netflix. Yes, when people want to watch the summer’s latest action flick, they’ll turn to Netflix. However, when they want a film that might not be in the mainstream, one that is a bit harder to find and which Netflix doesn’t have, that’s when the video store can step in.

The video stores’ current efforts to provide film based events at the store is another great way to supplement what their customers are getting from Netflix. Instead of thinking of video customers as having to pick either Netflix or the local video store, instead start to think of the video store as just being a part of a video watcher’s portfolio of video information sources. This is the path to a video store’s long-term success.

What All Of This Means For You

As product managers we all seem to spend our time trying to figure out how we can make our products more successful. We scheme and plan ways to capture another 1% of market share. What we rarely spend any time thinking about is the very real possibility that one day our whole market might just vanish.

Video stores had this happen to them with the arrival of Netflix and Redbox. The video stores that didn’t adapt, are now gone. The ones that realized what was happening and who have transformed themselves are still here. In order to survive in the long run, these stores are going to have to create an entirely new market for themselves and find a way to coexist with the new video delivery services.

Product managers should learn from this story that the game is never over even when your account manager or business development manager starts to panic. The rules might change, the players might change, and how we keep score may be done differently. However, as long as you have the ability to roll with the punches, your product can deal with almost any change that comes along and you’ll emerge on the other side stronger and better for the adventure. Now put that on your product manager resume!

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™

Question For You: If you were the product manager for a video store, how would you hold on to the customers that you already have?

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What We’ll Be Talking About Next Time

I’m sure that any product manager living in the U.S. has encountered one of the Capital One ads for their credit cards at some point in time over the last year or so. What might get lost in the blizzard of Capital One ads and promotions that seem to always be around us, is that the product managers at Capital One are very good at what they do. Perhaps we can learn something from them…

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