The status quo: “a small snapshot of potential success”
Customer intention surveys have traditionally been used to determine purchase intent, price elasticity and potential category disruption or market share. While these metrics are remain important to gauge, particularly in NPD and market landscape studies, they only provide a small snapshot of potential success into the very near future.
The problem: “[consumers] can’t see the future, but that doesn’t mean you can’t”
Let’s take blockbuster video as an example. At the height of their success in 2004, an extrapolation of sales from 2003 would have seen Blockbuster growing into infinity. They were the go-to video store and had managed to associate their extremely well-known brand with social, family, relaxing, and generally happy occasions. Their main competitors were not seen as stiff competition, so what else is there that could cause them to be kicked out of their position at the top of the home movie podium? Fast forward to today and we can see this is precisely the problem with expecting consumers to predict the future in traditional intention surveys in order to provide accurate depictions of what they would purchase ongoing. They can’t see the future but that doesn’t mean you can’t.
The signs Blockbuster missed: “they didn’t take into account that someone might innovate and entirely disrupt the industry model”
Blockbuster had the opportunity to buy out Netflix back in 2000 for just $50 million (not much when you consider their net worth was in the billions at the time). Netflix were losing money and Blockbuster just couldn’t see their competitive edge. So how did it happen that Blockbuster would go bankrupt just 10 years later and Netflix would be worth $28 billion, 10 times that of Blockbuster at the height of their success?
Ignoring innovation: in order for video stores to maintain profitability they had to charge late fees if videos weren’t returned on time. That makes sense, each day longer a video wasn’t returned by a customer was a day’s lost revenue. Multiply this by millions of movies and you’d have unsustainable losses on your hands. In fact, late penalties were one of the biggest revenue sources for Blockbuster, meaning they had built a business model on penalising their customers. But that’s okay – because their competitors were doing exactly the same thing, so it didn’t matter if it was a major pain-point for consumers – right? What they didn’t take into account was that someone might innovate and entirely disrupt the industry model.
Ignoring technological advancement: by 2004 the internet was beyond making waves and was being increasingly integrated into our everyday lives. Social media was rapidly evolving into the estimated trillion dollar industry it is today and although illegal, downloading pirated movies online was beginning to prove a considerable loss factor for those invested in film production and dissemination. Internet speeds were on a steep increase and Blockbuster knew consumers were downloading movies online illegally, even with speeds at the time. So with the biggest budget of any home movie retailer, why weren’t they at the forefront of providing legal means to download movies online?
The solution: “In order to innovate, you must take a 360 degree approach”
The obvious predictors of Blockbuster’s demise that have been mentioned in this blog are only a few of the indicators of where the market was going and the impact this would have on the home movie industry. In order for you to maintain a competitive edge, you must look beyond the services and profits of yourself and your competitors, and examine industry trends to consider what impact they could have on your business. In order to truly innovate, you must take a 360 degree approach, examining, social, cultural, economic, technological, and industry trends to consider how your business can integrate the best of all worlds into your offering. Customer intention surveys are just one of the traditional, tried and tested methods TH?NK Global Research have repurposed to determine holistic consumer intent for years to come. We can achieve this by using scenarios that incorporate trends from the 360 degree landscape, obtained through our extensive research in globalization and industry forecasting.
With today’s rapidly changing industry landscapes and the effects of globalization becoming ever more apparent, it’s time to ask yourself: do you want your business to become Blockbuster or Netflix?
Written by Teigane Mackay
If you would like to know more about how you can modify your trajectory to align with Netflix, contact TH?NK Global Research today. We have the answer, even if you don’t know what the question is yet…