The Blockbuster Effect defined: when we trust that what is working now will always work.
Everyone remembers those stores that rented thousands of movies housed in blue boxes. They seemed to be on every corner, yet this once-booming company filed for bankruptcy in 2010. As a marketing professional, I’ve seen many examples of this seismic fizzle after years of success.
Often a new solution, product, or platform enters the market with a technological advantage. Recently I spoke to two entrepreneurs who launched a new company after a successful exit based on a solution that was created in their first start-up. Initially, the venture had a significant technological advantage which resulted in rapid sales growth leading to the close with a few major health systems. As technologists, the focus was on continuous improvement with the platform adding features as clients asked and offering dynamic proactive service.
All good right?
Sort of. They didn’t invest in sales and marketing. While they retained a competitive and pricing advantage for several years, a good thing—relying on referrals based on lengthy careers and vast networks worked well until it didn’t. Resting on their laurels, they didn’t build brand awareness, they didn’t share great client success stories, and they didn’t invest in thought leadership and positioning the company as the go-to source for what they do. They relied on themselves and their personal brands rather than creating value in the company.
After a few failed efforts to bring in marketing support, they gave up and created an echo chamber where they simply believed that they would remain on top with little or no challengers. They also believed that their relationships and superior service would protect their existing customer base. After a few competitors began to snag clients or show up in RFPs they tried inside sales and initiated cold calling. It too failed and was stopped cold turkey after a few months and they defaulted back to the original posture of relying on themselves.
Eventually, their largest anchor client terminated for a company that had a significantly higher price point. The moat was breached, and the castle fell. Once they lost a competitive tech advantage, even discounted pricing was no longer attractive as they were viewed as too “small” and relatively unknown to compete with bigger better-capitalized companies. Because they did not build their brand and didn’t invest in the right marketing and sales mix to generate rapid growth to drive market share, the opportunity to exit at the apex of their maturity was lost.
Starting a company with innovative healthcare technology is a superhuman feat. It’s not for the faint of heart. It’s scary, grueling, and demanding. Even when you’ve done it before, as part of a successful team, each product, and company has its own unique set of challenges. Being conservative and cautious about investing in sales and marketing is wise, but completely forgoing it and relying solely on historic relationships and personal networks is dangerous.
Strategic marketing support includes paying close attention to shifts in the market, new entrants, and offerings and continuing to find ways new ways to create competitive advantages. Building the brand can feel like a waste when there isn’t a direct ROI, but it’s critical to appear as solid and successful as you are in reality concerning your digital footprint. Not investing in the brand saves money in the short run but can create a negative perception in the mid-term and significantly devalue the company in an acquisition. From a sales perspective, building share across enterprise and mid-market clients to balance risk as well as introducing channel partners to drive additional sales, is helpful to build consistent revenue.
I don’t miss Block Buster because the world has moved on. Don’t let that happen to your organization.