Why You Don’t Want Your Business to Be the Next Blockbuster: Focus on Value, Not Revenue
I’m really passionate about the idea of creating value for customers in business. Too often, I see companies get caught up in the chase for revenue rather than building something of true, lasting value. They try to squeeze customers for every penny, thinking that will lead to more growth. Ironically, that’s the fastest path to failure.
The cautionary tale of Blockbuster illustrates this well. Remember back in the day when Blockbuster video stores were everywhere? They were the place to rent movies on VHS tape. You probably remember two not-so-fond things about Blockbuster:
- Late fees: Forget to return that tape a day late, and you’d get hit with a charge.
- Rewind fees: No time to rewind the movie before rushing to the store? They’d charge you for that “service” too.
What did those fees really do? They generated more revenue for Blockbuster…but they also made their customers dislike the company.
Then Netflix came on the scene. They were all about convenience, no late fees, and later on, the whole streaming model. Sure, Blockbuster had the opportunity and passed, but the core reason for their downfall wasn’t just missing out on a good deal. It was that they were focused on revenue tactics over providing real value for the customer.
The Lesson: Value Always Wins
I’ve even seen this firsthand. A friend of mine, also in the fitness industry, had the “clever” idea of switching his monthly billing cycle to every four weeks. It meant an extra billing cycle per year, and therefore more revenue.
He got the extra revenue, alright. He also got the backlash. Customers were not happy and he lost a bunch of business. He ultimately had to apologize and switch back.
This stuff matters. If you’re trying to grow your business, your guiding star shouldn’t be “How do I make more money?” It should be “How do I offer more value?” When you offer true value, you build a happy customer base that will naturally lead to more revenue.
Create Value, Charge What It’s Worth
Don’t misunderstand me, you should definitely charge what your services or products are worth. But constantly thinking up fees and extra ways to bill customers when you’re not adding extra value? That’s a sign your business is already dying, even if you don’t see it yet.
Someone down the street, a competitor who truly focuses on the customer experience, is going to eat your lunch. You may not like it, your customers probably won’t even tell you why they left, but it’s the inevitable result when you lose sight of value.
If you want to grow a sustainable, successful business, it’s time to start thinking about value creation above all else.
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Time-Stamped Show Notes
- 00:30: Introduction
- 01:00: The story of Blockbuster and Netflix
- 03:00: Why customers hated Blockbuster’s model
- 04:30: Example of the four-week billing cycle strategy
- 06:00: Focus on creating value, not just revenue
- 07:35: The bottom line
