Managed Dissatisfaction

Did you know that Blockbuster used a business model called managed dissatisfaction? E.g. late fees were a major contributor to Blockbuster’s DVD rental revenue. At one point they amounted to $200 million. What this led to was that rather than looking for ways to help their customers avoid late fees, the company started to prioritise ways to optimise the revenue they get from this. In fact, when Blockbuster’s CEO John Antioco wanted to get rid of the late fees in trying to compete with Netflix, this attempt got him fired.

Open your eyes and you’ll see instances of managed dissatisfaction everywhere. Our local supermarket opens cash registers only when waiting times are longer than 10 minutes and closes them as soon as they drop below 10 minutes. Support hotlines collect data about how long they can have callers waiting before they become too angry. News websites balance the degree of annoying and interrupting ads on their website.

What happened if these companies managed customer satisfaction rather than dissatisfaction? When they tried to delight their customers to a degree that they wouldn’t even consider the competition?

This requires empathy. Investing in a relationship. It starts with how you speak and – in turn – how you think about your customers. A great first step is to not call them target groups but to imagine real humans.

PS: Amazingly, the last Blockbuster video rental store is still open in Bend, Oregon. It’s the last bastion of a chain that once ruled the world of video rentals and went bankrupt 11 years ago.