Was this a typical Friday event for you? Would you drive to your neighborhood Blockbuster store, hoping to get a copy of the latest movie release before they would all be rented? And then you hoped you could watch the film within 48 hours, else you would be charged that dreaded late fee?

Netflix versus Blockbuster
Netflix versus Blockbuster

Arrogance and ignorance can be a costly combination

In 2004, Blockbuster had 60,000 employees, 9,000 stores and appeared invincible. At one point in their history, a new store was becoming a Blockbuster every 24 hours. But after being fined the outrageous late fee of $40 on a copy of the movie Apollo 13, Blockbuster customer Reed Hastings decided to do something about it. In 1997, he co-founded Netflix, which would eventually stream movies online, and the days of Blockbuster’s existence began to be numbered. (Ironically, Blockbuster passed on the chance to purchase Hasting’s company in 2000 for $50 million.)

Another example of disregard for the customer experience involved Dave Carroll and his band Sons of Maxwell. On a trip, the band’s United Airlines plane stopped for a layover at Chicago’s O’Hare airport. While the plane was sitting on the tarmac, one of the other passengers looked out the window and exclaimed, “They’re throwing guitars out there!”

Carroll’s $3,500 Taylor guitar had been badly damaged. He persisted with the airline for nine months to have them make the situation right, then in desperation created a song and video about his experience, and posted his story on YouTube. His “United Breaks Guitars” video now has nearly 15 million views.

The experience was a costly public relations and financial nightmare for the airline. According to the Times of London, “Within four days of the song going online, the gathering of the thunderclouds of bad PR caused United Airlines’ stock price to plunge by 10%, costing shareholders $180 million. This would have bought Carroll more than 51,000 replacement guitars.” (Ironically, United Airlines now uses Carroll’s video for customer service training.)

Shifting to your industry

Unless we become proactive, as Blockbuster or United Airlines didn’t, a chilling future reality may await many of us.

Consider BlackBerry, which had a stranglehold on the business smartphone market. As a result, it had the arrogance to dismiss the iPhone as a “mere consumer toy.” However, bring your own device to work (BYOD) helped to change that. IDC predicts that by 2018, BlackBerry will slip to a 0.3% market share.

Could someone like a Reed Hastings come out of the woodwork to do what you do, only better, faster or cheaper? Do it before they do, even if it means cannibalizing your existing sales.

Perhaps because it is the “cable” company with the least to lose, Dish is in the midst of a nationwide introduction of Sling TV, which will allow consumers to stream 13 channels to their favorite viewing device for $20 a month. Sling TV takes away many of the things cable consumers didn’t want, like paying a monthly cable box rental fee, paying for 189 channels when the average consumer only watches 17, and perhaps the most aggravating of all: waiting for the cable installer to show up. (And even if and when he did show up, remember the YouTube video of a Washington, DC-based Comcast technician who fell asleep while put on endless hold by his own company’s help line?) The unique selling proposition for Sling TV that other cable alternatives have not yet offered: live sports. The basic Sling TV package includes ESPN and ESPN2. Might the impending merger of cable behemoths Comcast and Time Warner be a mere formality, like rearranging deck chairs on the Titanic?

Getting mall-ed

As a final example, why would any consumer want to go through the time and effort to travel to a mall or other shopping destination, only to deal with customer service as pitiful as what Reed Hastings or Dave Carroll experienced, when they can now order just about anything painlessly, with just a few clicks on Amazon or other retail websites? Online sales are expected to grow to more than $400 billion by 2018. That is nearly a half trillion dollars of goods and services that consumers will no longer need to visit our brick-and-mortar facilities to get.

As a result, retail consultant Howard Davidowitz predicts that up to 50 percent of America’s shopping malls will fail within 15 to 20 years. He expects that only upscale shopping centers with anchors like Neiman Marcus and Saks Fifth Avenue will make the cut.

Malls which depend on anchors like JCPenney and Sears, which are quickly closing stores, are most vulnerable. “Middle-level stores in middle-level malls are going to be extinct because they don’t make sense,” claims Davidowitz. “That’s why we haven’t built a major enclosed mall since 2006.”

At the time of its opening in 1989, Columbus City Center was Central Ohio’s largest and most upscale shopping mall. Yet, for the factors that Davidowitz mentioned, and others, the mall was demolished by 2010.

If your business offers the same products or services that a consumer can get online, but the online experience can be more pleasant and efficient, and less costly, why would consumers want to continue to patronize you? What can you do to create an experience that your customers simply cannot get from an upstart or anywhere else? How can you avoid becoming a Blockbuster?

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