Case Study – What to Do When a Large Competitor Shows Up on Your Block
Who Doesn’t Like A Little Competition?
There’s not a product manager out there who doesn’t dream of the day in which their product is the only show in town. Man – wouldn’t that be great? You wouldn’t have to worry about any real competition, you’d just be spending your time working to grow the market. And then you wake up.
The new-kid-on-the-block firm Redbox who has taken the DVD rental market by storm with their low-price, limited selection kiosks that have been popping up everywhere. For the longest time it looked like it would be a Redbox vs. Netflix battle. However, things have changed.
There’s a new gorilla in town: NCR. Just a little while ago NCR purchased Houston-based TNR Holdings which was a smaller player, but they were in the kiosk DVD rental business also. This wouldn’t be all that remarkable if the product managers at NCR hadn’t done something else interesting: gotten into bed with Blockbuster.
The NCR product managers have somehow talked Blockbuster into licensing its brand to NCR. This allows Blockbuster to take a cut of rental revenue from the kiosks. Hmm, I had sorta thought that Netflix had Blockbuster on the ropes. Is this a way for the Blockbuster product managers to stage a rebound ("don’t call it a comeback")?
Mosquito Productions has a BigBox DVD kiosk that contains between 2,000 – 3,000 DVDs compared to 500 for Redbox and 950 for Blockbuster Express.
In a business with very low barriers to entry, Redbox needs to anticipate that there will be even more firms like this showing up over time.
What All Of This Means For You
What the Redbox product managers are going through should serve as an example for all of us. It’s great to be one of the first entrants into a new market and to be successful for awhile. However, we all have to remember that success is like blood in the water and it will attract other sharks soon enough.
Once competition heats up product managers need to shift some of their focus from growing their market share to holding on to what they already have. This means that they need to find ways to differentiate their product.
This might be a great time for Redbox to start to develop a "frequent renter" program in order to allow customers to build up "credits". This could help customers decide to choose a Redbox kiosk over any others when they have a choice.