Mark Achler Shares Redbox’s Secret to Success

Charles Perry

May 22, 2013 · 4 minutes read

Uncategorized

Mark Achler thought Redbox was a stupid idea.

How can a company invest all the time and money necessary to manufacture, ship, maintain, and stock big kiosks full of DVDs all over the country—and only charge customers a dollar a day per movie?

Before an audience of startup founders and employees at Catapult Chicago last month, Mark openly answered this and many other questions while riffing on his career path as a serial entrepreneur—which included, as it turns out: SVP of Strategy, Innovation & New Business at Redbox.

He made it clear there is no secret formula for building a concept and turning it into a multi-billion dollar business. But there are a number of open secrets he holds dear that absolutely anyone can use.

Think Weirdly

Everybody can be innovative, but it takes practice and it takes time. Sitting out on a back porch at night with a beer really is the kind of place where billion dollar ideas are born. Obscure connections, forgotten lessons learned, and untapped markets start to become apparent when people allow their busy brains to shut off the incessant chatter of Twitter, Gmail, networking, dinner, and deadlines for an evening.

New experiences will also start to seep into and change old assumptions, which is one of the ways thought leaders stay ahead of the power curve. So whether it’s in the car, club, kitchen, or bathtub, find your beach and think weirdly while you’re there.

The original thought experiment for Redbox started with a bunch of unrelated questions that turned out to be very connected indeed:

  • What markets are full of unhappy consumers and ripe for upheaval? (movie rental late fees are the stuff of legend)
  • Where do people travel close to their home regularly already? (the grocery store)
  • Where are shoppers accustomed to making impulse purchases? (near the checkout line)
  • What price is everybody willing to pay for a night’s entertainment? (a dollar a day sounds pretty reasonable)

It’s trite, but it’s true: The only dumb question is an unasked one. But once an idea is implemented, broad brainstorming has to be replaced with exact execution.

Test Yourself Half to Death

An idea isn’t good if your target audience doesn’t think it’s good. So the importance of exhaustively testing how customers use a new product or service cannot be overstated. And pay attention to what they do rather than what they say. Not many movie goers would list Kevin James as their favorite actor. But according to Redbox, he’s the King of American Cinema.

Thorough testing also clarifies and improves a business plan. The second trip customers have to make to return a movie, for example, allowed Redbox to negotiate a rent-free relationship with national grocery chains.

Make no mistake, early testing and iteration is the least glamorous, most difficult part of building a business. Assembling marketing & development teams, analyzing market trends and user feedback, and securing investment is old fashioned hard work. But that’s how big ideas become big companies, and there are a growing number of national organizations and events like Startup America and Startup Weekend that help entrepreneurs turn million-dollar ideas into millions of dollars.

Trust the Plan

Once a business is proven profitable and scalable, the necessary level of investment reaches a level that’s difficult for those who aren’t neck deep in private equity to comprehend. There are now about forty four thousand rental kiosks in the US, and each kiosk costs around fifteen thousand dollars to manufacture.

This means that growing rapidly enough to stave off competitors required a $660 million dollar investment, in a product for which consumers typically spend a maximum of a dollar a day.

But it paid off. In four years, Redbox has gone from a hundred million to two billion dollars in revenue, and four hundred million people walk by a kiosk every week.

Stay Weird to Stay Agile

Like with natural selection, the company that succeeds in the long run isn’t necessarily the biggest or strongest—it’s the one most adaptable to change. When Redbox launched, DVDs were ubiquitous, but they’re already on their way out. What now?

One option would be to milk the DVD rental space completely, and then just as flash drives and streaming media take over, shut everything down and sell everything off.

Instead, Mark poured himself a gin and tonic (I’m guessing) and thought about what Redbox is, what it could be, and which facets of the entertainment industry were ripe for innovation. Then, he decided that rental kiosks were actually discovery destinations for leisure time, and launched a completely new product: tickets to live events.

But you better believe the development team at Redbox did their due diligence before stepping into the overpriced world of convenience fees Ticketmaster has so carefully crafted. And what did they find? An unimaginably high percentage of tickets to live events in the US go unsold. Forty motherloving percent. Sounds like there may be some room for improvement, right?

Do your Thing

So think weirdly, test like crazy, invest with abandon, and don’t forget to stay weird. Your billion dollar idea depends on it.

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