The Netflix Attack on Blockbuster: Blockbuster Online is Useless

Netflix is a great brand. Strategically, the founders got into the action and pre-empted a move into the web video rental space by Blockbuster or emerging efforts by Amazon and Wal-mart. Intelliflix and Peerflix are also on the rise, but none of these competitors will hold a candle to Netflix.

Netflix was first. Blockbuster was second, and as some argue, better. Amazon and Wal-mart have little hope of competing strongly in this niche and can only hope to gain the share-of-customer with those already loyal. I don't expect many non-Amazon and non-Wal-mart customers will all of a sudden subscribe and become first time Amazon or Walmart buyers because of a DVD service.

By getting out of the gates early, Netflix grabbed the most critical share of all - the enthusiasts. These were the people who were visiting Blockbuster and the movie theatre on a regular basis and now found themselves a huge time saver. Existing Blockbuster customers had something new that was a little more refined than the ill-fated "no late fees ever" campaign launched by Blockbuster, which was lame because everyone got the point that they would be paying the same fee just in a different fashion. These early adopters cemented the Netflix hold on the market as the leading brand and unless they implode with an Enron-like scandal, Netflix will always rule this space.

Where does Netflix go from here? Netflix the brand should stay just that: digital entertainment and getting the next experience to you as fast as possible. Blockbuster will keepcoming hard because it doesn't have a choice, either they succeed at the service model or they die. Blockbuster was once a hot brand. And it will do things like the current campaign allowing service customers to return DVD's to their stores and get free in store rentals. It will not be easy for Netflix, but it's theirs to lose.

Blockbuster = Great brand for video rental STORES
Netflix = Great brand for video rental SERVICE

Dynamite idea? More mainstream brands should established newly branded services (not line extensions like Blockbuster Online) in order to capture the imagination and not dilute the brand. People might tell you Blockbuster stands for entertainment, but for the mainstream is stands for movie rental. If Blockbuster had moved into the newly developing niche concept of video rentals over the web, and branded that new service a different name, the stock would be hot and no one would be in their league. Too bad for them. New brands are born in the niche. Need more proof? Think Kodak in digital cameras. They should have seen the revolution, created a newly branded product and annialated everyone. But that would be too easy. What's too easy is the brand extension.

Blog Brand of the Week: Joystiq

It's hard to find a great blog brand. In the blogosphere, it's trendy to think of some cute, clever names instead of a great brand name. Another thing it's trendy to do is to forget about focus. Broad topics seem to be popular. Great blog brands are focused and have a sharp brand name related to the topic. That's what the Blog Brand of the Week is all about.

This week's Blog Brand of the Week: Joystiq. Part of the Weblogs, Inc, Joystiq has two key attributes of great blog branding: Great name, Great focus. The name Joystiq has seven letters and instead of being called 'Video Games Blog,' or 'GamerBlog,' the founder figured it would be smart to choose a key component of the gaming experience, the joystick. Then, they twisted the end of the word to make it stick out, keeping it to seven letters or less. Just 'Joystick' wouldn't be nearly at compelling or attractive as Joystiq.

Is that all? No. Joystiq foqused. Go to Joystiq and find something (other than paid advertisements) that does not reinforce the video game focus. Gamers go here to find out the latest for one reason: great content on the subject they love.

Keeping the Company and Product Names Separate

Of all the mistakes a business can make, this one will not affect you until it's too late. Your product or service needs a name and that name should be different than the company name. Furthermore, you should not use the company name + product name together. When doing so, it implies that the latter is generic, when in fact you want the brand name of the product to stand out and be distinctive. If a product/service brand is distinctive, it doesn't need the company brand name to support it.

In consumer markets, successful brands often do not need to have the corporate endorsement. Other brands rely on the strength of the company's reputation. Proctor & Gamble does not use its corporate name as leverage to sell Tide, or any of the hundreds of consumer packaged goods it sells successfully. Kellogg's uses a similar model with its brands, except the Kellogg's name is a little more prominent in some cases, such as Kellogg's Frosted Flakes and Kellogg's Frosted Mini-Wheats or Kellogg's Rice Crispies, key brands developed in house over the years. The best brand names that Kellogg's developed itself were Apple Jacks and Pop-Tarts, which have the capability to stand on their own without referencing Kellogg. Acquired brands such as Lender's and Eggo also do not need the Kellogg's name. Beverage manufacturers have learned lessons in bridging companies with products. Coca-Cola did make a collasol branding mistake by reverting its popular '80's diet cola brand Tab to Diet Coke. Al Ries discusses this error in the 22 Immutable Laws of Branding. In the consumer goods market, P&G has one of the best product brand strategy, none of which has to do with advertising. On the flip side, Service Brand International, Inc. manages a portfolio of service-based franchises, including Molly Maid, Mr. Handyman, 1-800-DryClean, Certified Restoration Dry Cleaning Network and Ductz. The individual service brand that I like the most here is Ductz. Certified Resotration Dry Cleaning Network is too long and too generic. Ductz is short and sweet. The Service Brand International strategy, containing a few solid individual brands is likely more lucrative and valuable than if each brand carried the SBI name. If you provide services, divide them down as far as you can and brand everything individually.

B2B's often attempt to leverage the company name as part of its product branding strategy. The reason this concept gets so much traction is that in B2B, the customer places more of an emphasis on the company and the decision to buy is often equally company and product/service dependent. B2B corporate acquisitions often times transition the use of corporate names into the use of product names. Microsoft Windows is an example of company/products kept together. Windows doesn't need the Microsoft name. When IBM acquired Tivoli, Rational and Lotus, each was previously used as a dual corporate-product brand, but came to be a product line brand post-merger. Now, IBM markets the product brands keeping the namesake of the former company as the brand.

Small businesses usually do not consider the difference. In business infancy, the product or service is the basis for the company. There isn't a lot of harm here, but if the entire business is focused on one product and the names are intertwined, it often makes it difficult to launch seperate, distinctive product or service brands. This leads to poor market performance as perception of the company/product/service appears to be diversified, and the jack of all trades brand never wins. When you keep the company and product/service separate, and giv ethe products AND services distinctive brand names, the business adds value. The brand is an investment in the value of the business.

Branding -101 (that's a minus sign)

Take a step back. Why did you select the name(s) of your company, products, or services? Did you even consider branding a service that you offer? Most entrepreneurs I know have a couple of reasons why they picked a brand name.

1. They selected the brand name(s) because they needed a name and it was the 'most logical name.'
2. A clever idea provided by themselves, a friend or a relative.
3. They thought forever and could not come to a conclusion, so they just gave it a name.

A business needs a good name. It's important. Opportunity may be knocking and you feel that you need to have a name to pursue something. Just as serving each of your customers to the best of your ability is important now and in the future, your brand name is important. But the only thing that could be more important than a brand is what it stands for. What is unique about the company? The products? The services? If you are lacking in differentiation, you are lacking the foundation of a brand. So, before you can select a brand, you need to know what it stands for. The brand's value is what should actually be communicated. Without it, there is nothing you can establish about the brand.

Big business examples usually do not work when you are branding the small business. But there is a recent campaign where a big brand got in touch with its value. Allstate. Before the campaign, Allstate was in my mind (and many other minds I am sure) just another insurance provider. Many small businesses that are not as successful as they would like to be might take a lesson from the Allstate book. Allstate took a portfolio of services inside of an insurance policy and explained to the customer why those services were important to Allstate's identity. Further, they took standard services that many are commonly familiar with and set an expectation about the services.

Here are examples of how Allstate chose to brand services they offer within an insurance policy:

* Accident Forgiveness
* Deductible Rewards
* Safe Driving Bonus
* New Car Replacement

Posturing the brand's value in such a way will help you towards one of your primary goals: gaining new business. It will also help in two other ways not often considered, but incredibly important - delivering continuous value to past or existing customers and becoming the 'backup' choice in the category. The backup brand is the one which you would choose if you were not satisfied with your current provider. Being the next brand of choice is key in winning future business as you can give your prospects comfort that they have a confident provider. More on being the 'next brand' in a future post...

In closing, make sure that your brand offers value first. If not, it may not deliver value where it counts. Your pocket.

Assignment: Think of 25 things you do or could consider doing to deliver distinct value to your customers. Then, think like the customer. What are the top five most important things to be considered when making this purchase? Did those five make your top twenty-five? If so, ask yourself if delivering these values are truly something you can provide. One rule: price doesn't count. Quality doesn't count. So don't bother including them in your top 25 and in no way should they be part of your top 5. More on that in a future post...