By Elizabeth Boineau

That giant of the movie-rental industry and the largest video-rental company in the world, Blockbuster Inc., has suffered a major blow from the uproar caused by what initially was touted as an incredible breakthrough for the customer and one that was sure to be a setback for the competition: No more late fees!

The “end of late fees” policy was launched in a massive and ultimately highly controversial advertising campaign in early January through national TV, radio, online and outdoor placement. It all sounded good, but when consumers started to test this seemingly amazing windfall and felt the impact on their credit cards, it turned out that maybe this new system wasn’t what it claimed to be.

As a result, Blockbuster is left singing “no more legal fees” and struggling to maintain the brand clout and leadership it had worked so hard to gain.

In a settlement announced March 30, Blockbuster will have to pay $630,000 in legal fees alone to settle claims in South Carolina and 46 other states that contend the company deceived consumers with its campaign.

Anyone who felt misled into thinking they could keep the video as long as they wanted is entitled to a refund of fees. The “not exactly the end of late fees” policy ultimately charged the renter for the price of the movie if not returned by the eighth day and a $1.25 restocking fee (and credit for the cost of the “late” movie) if they returned it later.

All of this started when the company was sued in February by the New Jersey State Attorney General’s Office, charging that the rental chain’s advertising campaign was “fraudulent and deceptive.”

It really started when the company did a poor job of communicating the new policy to its customers. As part of the settlement agreement, Blockbuster will have to “dramatically alter” the way it advertises its late fee policy. The ads showed a small, limited disclaimer: “participating stores only—see store for complete details,” and radio offered only the afterthought of “details at participating Blockbuster stores.” In-store employees did not disclose details either, according to the courts.

I can attest to the latter, as I personally asked a customer service person just after the launch and was told it really was true, no more late fees, and no big deal. How could it be?

Well it couldn’t, and it wasn’t, but it’s apparent that the front-line employees either missed the training or it was not very thorough. So internal communications failed right beside the external ones, a formula for a big and costly brand clean up and recovery.

Nor was I encouraged by the defensive tenor of comments coming from the company spokesperson interviewed by national media just after the New Jersey lawsuit was filed, nor by the tone from the company: “We’ve taken a number of very thorough steps to let customers know how our new program works.”

So what was the marketing strategy behind all of this, and the reason to go to such extreme and expensive lengths to win market share? Blockbuster says it was trying to counter the established base it was losing to video-on-demand, online services like NetFlix and big-box retailers.

In addition to massive brand damage and the costs thereof, the company lost its takeover bid of competitor Hollywood Video, whom Blockbuster was negotiating to buy when “no late fees” began.

Could they have avoided this major knockout by smarter marketing, starting with better communicating explaining the new policy? Definitely. What lessons might we learn from this rental giant’s black eye?

Here are some suggestions:

Think before you leap and test before you launch. This may sound obvious, but it’s still good advice.

Don’t promise what you can’t deliver. It’s all about credibility. What could be worse than seeking to make headlines and paying huge advertising costs to dazzle the marketplace when you can’t validate the claim?

Be certain everyone knows and plays by the rules. Your employees, shareholders, board and other stakeholders need to be on the same page, and they need to know the score well before your external audience gets the big blast.

When you’re wrong, apologize. Perhaps the thing I still find most disconcerting is that Blockbuster won’t concede much when it comes to what they could have done better or differently. If that’s legal posturing, then so be it, but sometimes what we should say (vs. are advised not to say) leaves the public (and the brand) reeling from the misperception that we are unrelenting and non-conciliatory.

As all good marketers know, perception is reality in the minds of the consumer.

Elizabeth L. Boineau runs E. Boineau & Co., a Charleston-based strategic marketing communications and public relations firm. She can be reached at eboineau@eboineauandco.com.

SUBSCRIBE | REPRINTS | CONTACT US

Phone: 843-849-3100    Fax: 843-849-3122