As a Netflix subscriber I was impressed by the service, but in this era of immediate gratification the 2-day turnaround for movies required too much planning for the weekend. Blockbuster launched an ad campaign that wasn’t overly creative but communicated their value proposition clearly: Get 4 movies by mail and trade them for in-store movies, as often as you like for $20 a month.

It was an embarrassment of riches. I switched immediately.

Sure enough, for the first few weeks we enjoyed 8 movies in the house at once. We plowed through season after uninterrupted season of 24 with a combination of late night visits to the store and queue updates. The movies came faster than I could consume them. On top of it all, I had monthy coupons for a 9th movie or game rental.

Then, it began.

I showed up one day and the clerk said the words that would become the Blockbuster mantra for years to come: “Have you heard about our new policy?”

I’ll do my best now to chronicle the words that followed with each subsequent visit over the next several months:

• Week 1: “Now you can only trade in 4 mailers a month, the rest are coupons for $1.50 in-store rentals”

• Week 3: “We’re raising the price by $2 a month”

• Week 6: “All movies in the store are $.99 except for new releases”

• Week 8: “No more late fees or due dates, but you have to have the movies back within one week of their due date or we’ll charge your card for a purchase.”

• Week 10: “We’re going down from 4 mailers to 3 mailers to keep your $22 price”

• Week 13: “If you become a Blockbuster Rewards member for $20 a year, you get a free rental for each 4 movies you rent outside of your mailer exchanges”

• Week 18: “You have to tell us each time that you are a Rewards member to get credit towards your free rental. Otherwise we won’t know.”

• Week 22: “No more online coupons for movie rentals, but we print receipt coupons good towards one movie per month.”

• Week 23: “The receipt coupons are only good on no-new releases, which by the way are now $1.99 instead of $.99, except for family movies.”

• Week 26: “We no longer ship you mailers with movies from your online queue when you trade them in until you return the movie you traded.”

• Week 27: “You should have mentioned you are a Rewards member. That could have been free.”

• Week 29: “There is no due date on these movies since you used a mailer exchange. Other movies also don’t have a due date, but we still charge you full price if you keep them beyond the return date grace period.”

• Week 30: “You have a hold on your account because we charged you for a movie and you returned it after the second grace period.” [hands me my un-returnable copy of Paul Blart, Mall Cop]

• Week 31: “The reason we don’t send you any of the 30 movies in the top of your online queue is that they are in high demand. That’s why you keep getting Season 3 of McGuyver.”

• Week 33: “Blockbuster Rewards also allows you to get a free non-new release with every new release you rent at full price, but only on Sunday through Wednesday. Those may or may not count towards your one free rental after four paid rentals in a 30-day timeframe, excluding mailer exchanges, which still don’t have a due date, but we will charge you full price if you are late.”

• Week 39: If you show up in a yellow jumpsuit on any 1st or 3rd Wednesday, with one mailer that includes a disk from McGuyver season 3, and buy our candy and soda combo pack (featuring movie theater pricing even though you’re in a Safeway strip mall), and bring your coupon receipt, you can get up to two non-new release movies from the family section with no due dates of any kind (for up to 1 week).

• Week 40: “Welcome back to Netflix, Mr. Steele.”

Like the longest, most agonizing death scene in movie history, Blockbuster has been killing me slowly for months. As a marketing strategist, I came to realize that the real entertainment wouldn’t be found on the discs, it was behind the counter and worth every penny.

Why did they do this? Netflix seemed to send Blockbuster into a panic a few years back and Blockbuster responded with an unsustainable model to stop mass defections. Then, very gradually, they tested their customer’s resolve on a path back to profitability. They probably counted on the pull of investment (I don’t want to re-build my queue at Netflix so I won’t switch) and immediacy (2 days is too long) to overpower the weekly micro-pains they delivered in their unending new policy messaging.

My advice to Blockbuster? Understand that your store employees have been delivering negative, confusing messages to your customer base for years (how are those attrition rates?). Build a business model that is sustainable and has the flexibility to adapt to competitive threats without eroding value.

When you take something away (which you should only do very rarely), give something back. Adding unexpected value will increase retention and word-of-mouth, maybe even revenue. Some ideas:

• Introduce a premium membership product and give customers a free month with the additional features and a compelling offer to upgrade.

• Consider a coupon for $X off a previously-viewed title for sale as a “thanks” for understanding a “policy change” while driving incremental revenue and clearing out inventory.

• Include a free downloadable movie (no disti costs) to drive trial and up-sell a new service.

Once they re-set the value proposition, I’ll gladly come back.

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Tags: Branding, customer communication, Marketing, price setting