It’s Contagious?

I’ve spent a lot of time in the last year picking on various airlines for what I continue to feel are misguided strategies surrounding revenue, and I probably shouldn’t have. The fact is, consumer behavior is complicated, and even the scholars who spend their entire careers studying it can’t always account for why people choose to spend money on things that cost more, do less, and confer no particular social or status advantages on the purchaser. Certainly, Sir Richard Branson knows a lot more about running service-industry companies than I do (one of us is a self-made billionaire; one of us is a doctoral student making less money than an exterminator’s helper; you do the math), and if he feels that charging $80 for an aisle seat on Virgin Atlantic flights is good for business (even when people in the linked story are describing a whole section full of empty aisle seats), then I probably shouldn’t tell him otherwise. But you still have to wonder who at Blockbuster thought bringing back late fees was a good idea…

According to the story in the Chicago Business News website, Blockbuster has returned to charging extra for movies kept beyond the first five days. The company had suspended this policy in order to be more competitive with Netflix, which does not have late fees, but apparently they feel they can make enough on the extra revenue from the late fees to make up for the customers they will annoy enough to lose to Netflix. Even more mind-blowing, at least to me, was the note in the story about an “auto-sell” feature: if you keep a Blockbuster movie more than ten days, you are automatically considered to have bought it – which could be really embarrassing, I suppose, if you accidentally forget to return the wrong movie in time…

Now, I suppose the auto-sell feature makes sense; otherwise, you could easily end up charging people $100 for a used DVD that you’d sell them for $10, a deal which makes your customers unhappy and makes you an easy target for class-action lawsuits in any state that doesn’t have California’s iron-clad contract laws. I still have to wonder about the idea of late fees, though. The company insists that the new charges aren’t a late fee, but rather an extension of the rental charge, like the one you would incur if you kept a rental car for an extra day. I have trouble believing that their customers are going to see it that way, however; down on the pointy end of consumer purchasing behavior this looks just like an old-fashioned “I-was-too-lazy-to-return-the-movie” charge, and it’s likely to play right into the competition’s metaphorical hands…

So the questions that remain are, will Blockbuster actually be able to make more money on this new fee structure (as opposed to losing market share by annoying the all-important lazy and stupid customer demographics), and did they get this idea by watching the airlines charging for baggage checking fees, pillow and blanket fees, seat-selection fees, and (my on-going favorite) fees to pay your fees in advance? If your reaction to any of these issues was “Wait; Blockbuster is still in business?” you’ve probably just answered my questions – and raised a few more that the stockholders should be asking whoever the CEO of Blockbuster happens to be at the moment…