Sub-plans

We are going to test one out starting in Jan and running for three months. I started asking some of my customers yesterday and out of the 16 I asked 15 were excited about doing it.
I figure I'll try it at $35.00 a month for 2 movies out at a time and see how it goes. I really hope it works out because this would really help for the slow months and hopfully bring more people in.
Has anyone tryed a sub-plan out yet and if so what were your results?

[egk61]

I'm not familiar with this concept?  Could you explain...  Spomething like net flix but not thru the mail?

Yeah it's kinda like Netflix. You pay a flat monthly rate instead of paying per rental. No late fees. No due times. You can have 2 movies out at a time and come into the store to exchange them as often as you wish.
It eliminates all the bad things about renting from a store and from renting on-line.

[Hardcopy]

Ok, here is the scoop on subscription plans as I see it. They do not work. Netflix has been inflating their numbers (buy something electronic at Best Buy and you get a free subscription). Subscription plans will take your top 5% of people and have them get a GREAT deal. The people who don't spend that much won't use it, or worse will use it and get angry because they wasted money.

Blockbuster has to try it to stay cutting edge for their investors. One thing though you can do is try it with your catalog movies. They don't make much money historically anyway and it might be a way to make money off a product that is mostly lying dormant right now.

Rich.

I can see why you would think that. To get it to work you would have to get people that normally don't spend that much to sign up. The way you would do that is to show them the other pluses and don't use the money saved as your only example.Tell them about no due times, no late fees, and not having to pay every time you come in. Ask them if they ever rented a movie and had to return it before they got to watch it. If you just asked your customers if they would be interested you might be suprised by how many would be.

So far I have asked 48 people about the sub-plan and if they would be interested if I ran it.
2 said no, they rent one video a month or less
22 people do not spend over $35 a month on movies but would like it because of the freedom it gives.
24 people do spend over $35 a month and also want to try it out. Also take into consideration that they rent more than 2 movies at a time so their spending habits will change unless they pay the regular charge for any additional movies.
So I figure if I can get almost the same number of people from the below and above $35 then it would balance out.

[Hardcopy]

The problem is where the 70/30 rule starts. 70% of your revenue is generated by the top 30% of your customers. It is possible it might work, but that is a big possible.

Good luck.

Rich.

Thanks Rich. I'll post the results of the test as I'm going along.

[Videoquesttom]

I don't think the question is if customer like and will sign up for a subscription plan. The real question is will your store make more money by offering subscriptions.

For many of us our BIGGEST expense each month is buying NEW RELEASE movies. If because subscriber customers keep HOT titles you have to spend more those paper profits could vanish rather quickly.

I'd be very cautious about instituting subscriptions. While your revenues might rise if your NET profits do not you have gained nothing. It's not how much you make that counts...it's how much you keep that counts.

Tom Hannah

[Videoquesttom]

I don't think the question is if customer like and will sign up for a subscription plan. The real question is will your store make more money by offering subscriptions.

For many of us our BIGGEST expense each month is buying NEW RELEASE movies. If because subscriber customers keep HOT titles you have to spend more those paper profits could vanish rather quickly.

I'd be very cautious about instituting subscriptions. While your revenues might rise if your NET profits do not you have gained nothing. It's not how much you make that counts...it's how much you keep that counts.

Tom Hannah

[Ed]

One point of contention I have with doing a subscription plan in a bricks & mortar store is that I loose the time delay that via the USPS provides, so I would be subject to more rentals per month than a mail-in plan.

I thought about doing one with a three day delay between when they return the DVD(s) and when they can take out another, that would put a in-store plan on a more even footing with the mail-in guys.

GMHO what's your thoughts on that wrinkle?

[Shiraz]

But Ed wouldn't that be your advantage? The reason they would give you their $$ instead of the NetFux guys? They can hold something tangible in their hands, look at it, touch it and get excited about it and maybe even watch it tonight. Hell, the sooner out, the potential of sooner back. Right?

The amount of videos they take out doesn't matter. I would rather have them take out 2 different ones every day than keep 2 for a week. You can't look at it as "They saw 20 movies this month so I lost X amount of dollars." The total number of movies out affects you more than the amount of exchange. Keeping the max out lower ie. 1 or 2 is the safest way to control the circulation of the movies.

[Tim]

The solution seems simple:  Just like now, allow the best, most finicky customers to pay more to get more while giving the average customer the opportunity to still participate by paying less for less.  We're not going to get very far if only those willing to pay $35 a month participate.  Since these would be your best, most elite customers, the volume needed would not be achieved and the $35 would probably be, on average, less than such customers pay now.  With sub-plans, the money is in the volume.  I think it's likely that the real profit would be with plan # two.  

Please tell me what you think of the following five plans:

---------------------------------------------------------------------

Any game.  Only games.

1 game at a time for $14.95              
 
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Every rental in the store except 2-day NR
 
2 movies at a time for $19.95
                                                   
3 movies at a time for $24.95
 
----------------------------------------------------------------------

Every rental.  No exceptions.
 
2 movies at a time for $34.95
                                                   
3 movies at a time for $39.95

---------------------------------------------------------------------

For plans # two and three, I am somewhat undecided whether I should use these prices or $5.00 more?  I do know I really like the idea of advertising the $19.95 plan!  Has anyone else who's thought of sub-plans considered restricting 2-day NR's?  

I believe we need lots of brainstorming now on sub-plans.  Even if you currently are opposed to them, they may become a competitive necessity in the near future.  

So, IF you were about to do a sub-plan, how exactly would you structure it?
-Tim    

PS This is my first post.  Thank you to those responsible for this great message board!  I hope it grows fast!

First off let me give you an update on my test sub-plan.

18 people are trying it. $35.00 for 3 months 2 movies at a time out.
All three months paid up front to ensure they stay for all three months.
Of the 18:
1 had spent over $35 for Oct,Nov, and Dec on movies alone.
3 more had spent over $35 two of the three months.
4 of them spent that amount or more for one month prior.
3 of them were new customers in the later part of Dec.
The rest never spent over $35 a month.
Utilization is at 89%
They average less then 2 days per title out before returning them.
The longest one title was out on the plan was 4 days.
People are using it to watch things like Alias and Sopranos.
5 people have rented above the 2 movie max on visits.
3 have rented games.
10 of the testers have taken out 10 titles so far.
One really interesting thing, the day after American Wedding was released all copies were out and the three that were checked out to a sub plan tester came back and rented that night!

I really think we are going to offer more plans full-term in April. These are the ideas we came up with. All prices are figured at the amount of movies per week a person would watch ie. a person that rents 1 movie a weekend would go for a 1 movie plan at just a slight raise in price due to the convenience.

1 Catalog Movie: $15

1 Movie: $20
1 Moive/Game: $25

2 Movies: $35
2 Movies/Games: $40

3 Movies: $45
3 Movies/Games: $50

The top package saves them the most per rental.
I've already had people on the sub-plan ask about a three movie pack so I think that one will be popular. BTW I don't tier my prices on new releases, right now it's $4.00/$2 days NR & $3.00/3 days Old.

I'm also thinking of raising my prices by $.25-.50 a rental when I start all the plans. Gives more reason to join.

[chrisbach]

Thanks. This is really some great information, and I don't even need to join VSDA to participate in the discussion.

It is very helpful for us to discuss issues like this.

I have been very much against sub-plans.  I just don't think they can be profitable.  It is great to see first hand results.

Thanks,

Chris Bach
Music Stop - Movie Time