I. MARKETING PLAN SUMMARY
This marketing plan aims at providing the best strategies and tools that Blockbuster can use to ensure market growth and success in the future. The changing environment of the video rental business has been considered and therefore the solutions have been tailored to match this environment and are flexible and up to date with the market conditions. If the organisation exercises a proper execution of the plan, growth and success in the future are guaranteed in the perfect time.
II. GENERAL COMPANY DESCRIPTION
Blockbuster is a worldwide organisation that is engaged in video rental services. It operates in more than 20 countries but more heavily in the United States. Its stores are both franchise and corporate owned making it a business that can be found almost anywhere in the countries that it operates. As of January 2009, it operated more than 7,000 stores and reported the revenue of $5.29 billion in 2008. The Ascent:
Blockbuster Inc., originally named Cook Data Services, was founded by David and Sandy Cook in 1982 and its first video store was opened in 1985 in Dallas, Texas. By the early 1990’s, Blockbuster had experienced heavy expansion by opening additional corporate owned stores, franchising, and buying up local video stores. After saturating the national market, it expanded to the international market starting with the UK. The Descent:
Blockbuster started to suffer during the late 1990’s to the early 2000’s. The major reason behind this was the competition that arose from new and more innovative video rental businesses, especially Netflix, which surfaced with better ways for customers to access videos. The most important tool that Blockbuster failed to pick up early enough was the internet and the potential it held in expanding its business. Blockbuster has finally sold its Assets to Dish Network Corp. (DISH) almost a year after filing for bankruptcy for $320 million. DISH is the second-largest satellite TV company right behind DirecTV. Due to the fact that Blockbuster is now under a parent company that has substantial financial strength, it can now exercise endless freedom in terms of innovation and developing new and better marketing ideas that will strengthen the grip it once had.
III. MARKETING ENVIRONMENT AND SWOT ANALYSIS
Given the current condition that Blockbuster is in, it is important to realise that significant changes need to be made to revive its energy. INTERNAL| STRENGTHS: * It is a brand that many are already familiar with * Operates globally * Has discarded late fees * Apart from movies, has a selection of video games * In partnership with movie studios such as Sony Pictures Home Entertainment * Experienced * Multiple delivery methods * Enhanced product availability| WEAKNESSES: * Brand losing grip and market share * Slow response to market changes * Inefficient CEO (Jim Keyes) * Downgraded default ratings * Breach of privacy lawsuit * Presence in only DVD segment * Watch Instantly feature only allows a small selection of DVDs| EXTERNAL| OPPORTUNITIES: * Online access for customers (efficient use of the internet) * Phone App for Smartphones * Cut costs and provide lower prices to strengthen competition * Launch of BLOCKBUSTER OnDemand, Kiosk, by-mail, mobile phone and cable * Growth through partnerships * Pricing segmentation * The international market| THREATS: * Illegal file sharing and downloading * Bootlegging * Netflix * Increased minimum wages in the US would affect the profits * Poor government laws against piracy and illegal file sharing and downloading|
Blockbuster dominated the video rental service for a very long time before competition came its way. Even though it grew mainly due to the strategies and innovative ideas it developed in this industry, the fact that there was an absence of substantial competition also helped propel its success. During its expansion however, there emerged a number of companies that offered most or some of its services and this posed a huge threat to their domination. Some of these companies are Apple, Nintendo, Redbox, and most importantly, Netflix. When Netflix was established in 1998, it shook the whole video rental industry by delivering the services that customers actually wanted. It was not about the movies it had in stock, because these were the same with Blockbuster or any other established video rental business. To them it was about how customers can get the best out of what they had to offer.
IV. SMART objectives:
1. Achieve an increase in the market share to 50% or above in the next 7 years 2. Expanding the international market within a period of 4 years by heavily investing in power economies such as China, India, Japan and some parts of Africa. 3. Cutting down operating costs by implementing a flatter organisation structure and closing down a few stores in developed countries. In these countries, business could be undertaken mostly over the internet which is less costly and easier for both the business and customers. This can be implemented over a period of 3 years. 4. Employing a better and innovative CEO with not only the proper skills and qualifications, but also the required business instincts to know when and how to take action. Jim Keyes, the current CEO, is not that person. His contract will be ending in 2012 and his position will need to be replaced with someone who is much quicker in making decisions 5. Repaying the debt that in 2008 amounted to $900 million. A period of 7 years will be needed to pay half of this amount.
V. STP STRATEGIES (Segmenting, Targeting and Positioning) Before breaking down the STP strategies that Blockbuster should undertake, it is important to first understand the relationship between its market and the products that it should be offering by considering the Ansoff Matrix.
1. PRODUCTS: Blockbuster is already delivering most of the products that it ought to. These products are DVDs, Blu-ray, Video Games and other digital contents. Consequently, these would be categorised under existing products. 2. MARKET: Since one of our SMART objectives is to expand the international market, we will be dealing with both the current market and the new international market. From this information, it can then be understood that Blockbuster will need to focus on Market Penetration and Market Development. SEGMENTING
This refers to the grouping of customers/potential customers into clusters. Individuals in the same cluster should share the same characteristics with one another but the clusters themselves should be distinct from each other in every manner.
Segmenting the market will ensure effective marketing strategies for Blockbuster. There are four options for market segmentation: A. GEOGRAPHIC
This should be considered both national and international wise. In America, where the company originated from, the market is already fairly saturated. At present, there exist huge competitors such as Netflix and Redbox. Considering the Ansoff Matrix, it is more profitable to focus on Market Penetration than the other three options. This can be done through strategies such as: * Bundling
* Lower prices
* Volume discounts
These strategies will help Blockbuster reinforce its brand in America. In the rest of the world however, separate strategies will be needed. The international market is a very potential target. Various economies in the world are expanding and providing a favourable environment for Blockbuster to generate and strengthen its international grip. Examples of such economies are China, India and Japan. Strong economies usually imply that more people are employed and have steady incomes which make it economical to invest in these countries.
This type of segmentation involves the grouping of individuals in the population by carefully analysing their demographic variables. These variables are of various kinds such as age, gender, occupation, education, nationality and religion. These factors vary from one individual to another hence the term demographic variables. Understanding these differences that exist between individuals is vital to Blockbuster when making important decisions such as how to carry out efficient market research. A potential advert, for instance, can have the capability of finding its way through the general mass to teenagers by showcasing a movie that is filled with violence, sex or drug related scenes. However, not all individuals sharing the same demographic characteristics will respond in a synchronised manner. Due to this fact, it is important to understand that perceptions created by Blockbuster will be generalised and may not necessarily reflect the behaviour of each individual in the population. The advantage of this segmentation process is that the information that it requires are readily accessible as opposed to the information needed for other forms of segmentation.
This is a combination of both Geographic and Demographic segmentation processes. It assumes that people who live in the same residential area share the same demographic characteristics. This is an advantage when it comes to setting up local video libraries in different neighbourhoods. Selection of videos can be easily tailored according to the demography of the geographical area. Even though people occupying the same geographical area may share the same traits, in most cases however it is not so. This can lead to miscalculated plans that may cost the company.
D. PSYCHOGRAPHIC AND CULTURAL
It is vital to understand that different areas and different people have distinct cultures. There are some countries, for instance, where it will not be ethical to supply movies or video games that showcase violence or sex scenes. Cultural segmentation will give Blockbuster stronger marketing but it should also be understood that different segmentation processes will be needed in some countries due to cultural differences. TARGETING
This is the process of giving priority to some of the discovered segments in the above four processes. The following factors will play a huge role in this step * Market size
* Potential of the segment in terms of future growth
* Level of competition in the segments
There are three ways in which Blockbuster can target its segments
* Niche (Focus)
For Blockbuster to conduct Mass Marketing (UNDIFFERENTIATED), the product needs to have the same general effect within the public. That is, the whole market acting as one huge cluster. If clusters do emerge, Mass Marketing will not be feasible and therefore DIFFERENTIATED marketing strategies will be the best option. Lastly, at times it may not be feasible to focus on every cluster in the market and therefore Blockbuster will need to FOCUS on those few that will bring the highest benefits to the business. POSITIONING
It is important to understand how Blockbuster is perceived in the eyes of its customers in terms of prices, services, quality and value. To understand this, consider the following perceptual map.
Netflix, who are Blockbusters main competitors, emerged with lower prices and better services therefore they would be considered as a Bargain Brand. It is important for Blockbuster to achieve and maintain high quality products and services but the prices can be differentiated depending on the different market segments. Consequently, Blockbuster will be classified as either a Bargain or a Premium Brand depending on which cluster the individual is in. Furthermore, identifying the competitive advantage is an important step toward positioning the brand in the market.
VI. MARKETING AND THE 7 Ps
The 7 Ps which are Price, Product, Promotion, Place, People, Process and Physical Evidence together form what is known as the marketing mix. These seven elements are what are going to be considered in the campaign aimed at reviving Blockbuster’s business energy. An in depth description of each is provided below: Price:
In most cases, this largely determines the level of consumer demand. According to the law of demand, the higher the price of a product the lower its demand is going to be assuming that every other factor is held constant. There are many ways in which Blockbuster can price its products; useful ones are elaborated as follows. 1. Penetration Pricing
Prices for its services can be artificially lowered in order to attract more customers and gain customer advantage over competitors. Once this is achieved, prices can be carefully raised up to the point where profits can then be enjoyed. 2. Psychological Pricing
This system of pricing will drive customers to pay for a product or a service not from a rational basis but from an emotional impulse. A £XXX.99 system can be a form of Psychological Pricing. 3. Optional Product Pricing
There are “extras” that some consumers may be willing to pay for to improve their personal satisfaction from a product. These extras are not necessarily part of the main product and one may do without them but guaranteeing their supply may help attract potential customers. These extras may be charged outside the price of the main product. Such add-ons may include payment for extra days before return date, faster deliveries, and increasing the limit of movies allowed to be rented at once. Product:
A clear description of every product that will be provided in the market is important. This is because each product would require a different treatment by the business and may also cater to separate customers in the market. In order for Blockbuster to have a precise grasp of this concept, it is important to view the product as something which has three distinct layers or levels.
The CORE is not the actual product but the benefit received from the product. By renting a Comedy Flick, for instance, one would enjoy the pleasure of laughter on a Sunday evening when at home with friends. The Core will help Blockbuster have an understanding of what do their customers actually find satisfying from our products or what benefits are they looking for. The ACTUAL product is the tangible product. This is the vessel that will carry the utility (satisfaction) that our customers are in search for. A kid playing video games will not be able to enjoy this process unless he has access to a physical devise, such as a PlayStation DVD, alongside other equipment. The AUGMENTED product is the non-physical part of the product.
These are extras that will improve customer satisfaction and are not necessarily part of the main product. If Blockbuster were to provide or improve its customer service, warranty, or any after sales service, it will encourage new customers to come and current customers to keep coming. Customer service is very important since the times when it was only about the product itself are changing. Another theory that can be used to understand the behaviour that Blockbuster’s products will be having in the market is the Product Life Cycle (PLC) theory. This theory will help explain the stages that Blockbuster’s product passes through in the video rental business from the point it is introduced in that market. The graph below can illustrate further.
At the INTRODUCTION stage, it will be logical to start with a few products just to “test the waters”. If it is new movies, pricing them will be a matter of popularity and anticipation within the population. This is made easy from the fact that most movies will have hit the big screen before going on DVD and a clear analysis of which movies were most popular can be drawn. However, this is a disadvantage to Blockbuster since most people will have already seen the movies before they are supplied on DVD. To overcome this, these DVDs can include scenes from making the movie, interviews, bloopers, and deleted or extended scenes.
At the GROWTH phase, more people will have started to feel comfortable to spend their money on the products especially if they have received favourable general reviews. At this point, our competitors such as Netflix and Redbox might have realised the potential our new products hold in expanding their businesses as well. To gain the market edge, vigorous advertising will start being important in this stage.
The point of MATURITY will be characterised by the highest revenues that the products will ever generate for Blockbuster (unless, of course, certain variables are changed such as the target market or the product uses).
The products will finally reach a stage where it will experience a DECLINE in sales. This will usually take place after our competitors have realised better ways to deliver the same products to people. Also, it may come about as a result of our customers merely losing interest in those products.
Nevertheless, it has to be realised that not all products will experience this particular lifecycle. Movies that are regarded as Classics may not have declined in sales as movies that had poor reviews. Promotion:
Promotion includes the tools available for delivering the proper marketing communication. It is important for Blockbuster to find the best means to deliver information to its customers about its products and services. The elements that are included in the promotion mix are: * Personal Selling
* Sales Promotion
* Public Relations
* Direct Marketing
Blockbuster should have salespersons who act on behalf of the organisation. It is crucial that they are well trained and skilled. Nevertheless, salespersons should only be employed when favourable returns are guaranteed since they are very expensive. Sales Promotion:
There are different promotion strategies that can be adopted such as the BOGOF (Buy One Get One Free), couponing, free accessories (such as cloths for proper cleaning of DVDs), and introductory offers (such as buy DVDs online and get a free delivery). Public Relations:
It is important for Blockbuster to develop and strengthen the relationship it has with the public. The image that this organisation holds in the eyes of people needs to be improved and maintained. Forms of Public Relations include:
* Financial public relations
* Consumer public relations
* Crisis public relations
* Industry relations
* Government relations
This technique will allow Blockbuster to communicate directly with its customers through means such as SMS, emails, fliers and catalogs. Advertising: This is a very important form of promotion that is aimed at creating an understanding to customers about what the product is and the features it has. The media is a very important tool in advertising. Place:
This can also be referred to as the channels of distribution or
intermediaries such as wholesalers, retailers, and agents. This will explain the options Blockbuster may have in delivering its products to the final consumer. There are a few fundamental options:
* Direct (to consumer) or indirect (via wholesalers)
* One or many channels
* Type of channel used
* Amount of necessary intermediaries between point of distribution and point of consumption * Length of channels
Selecting the right distributor
* The distributor must have a proper knowledge of Blockbuster’s market segment * Different stages at the Product Life Cycle can have separate channels * Compatibility between Blockbuster and distributor in terms of policies and business strategies * Experience of distributor
* How much the distributor will be dependent on Blockbuster
This refers to the experiences that Blockbuster’s customers will be going through in a series of steps over a specific period of time. To better understand this concept, picture a customer entering a Blockbuster store to rent a movie. How will he be welcomed? How will the staff make sure he gets what he wants? Is there going to be any follow up to make sure he was satisfied with the product? Understanding this will be important in improving the customer service. People:
These refer to Blockbuster’s employees and most importantly those who are in direct and frequent contact with customers. It is important that they are well trained and have excellent interpersonal skills. The Human Resources department needs to play an important role in selecting the best staff that will effectively represent Blockbuster’s business policies. Physical Evidence:
This is the material part of a service (proof that a certain service will be delivered or the product exists). Paperwork (such as receipts), brochures, business cards and the building itself can be used as forms of physical evidence.
VII. CONTROL AND EVALUATION
It will be important to understand to what extent the marketing plan has helped Blockbuster in regaining its market control. The following evaluation tools can be helpful. * Tracking the internet statistics and knowing the amount of traffic since the campaign was launched * Conducting surveys to understand opinions of the public regarding the new changes * Comparing the financial statistics before and after the marketing plan was executed * Observing the reaction from competitors. In most cases, when a marketing plan has been successful, competitors will usually follow similar steps in order to keep up with the competition If at the end of the evaluation it is noted that the marketing plan was not successful, strategies are to be taken to draw a better plan or strengthen the effectiveness of the current plan.
Beckwith, Harry, Selling the Invisible: A Field Guide to Modern Marketing, Warner Books, 1997 Caples, John, Tested Advertising Methods, Fifth Edition (Revised by Fred E. Hahn), Prentice Hall 1997 Slutsky, Jeff, with Mark Slutsky, Streetfighter Marketing, Lexington Books, 1994 Ogilvy, David, On Advertising, Random House, 1987