An Ear For What Customers Want

Redbox’s Mitch Lowe shows that being a visionary has a lot to do with listening and paying attention.
February 22, 2011

Redbox President Mitch Lowe has an affinity for red and a propensity for one-upping the markets he creates.

When Lowe got started in the video and entertainment industry, he opened several video stores in California. Years later, he helped develop Netflix, the online video retailer that forced several video stores—including large chains—to close. Now Lowe is running Redbox, the company responsible for placing 25,000 red video kiosks in grocery stores, convenience stores and fast-food chains across the country.

 

It’s unlikely Redbox will do to Netflix what Netflix did to brick-and-mortar video rental, but the two markets overlap.

 

Though Lowe’s innovations have drastically impacted business models he developed, he doesn’t have a search-and-destroy mentality. He’s just a good listener.

“The most important thing is to listen,” Lowe says. “When you’re creating a relationship with folks, you really need to put yourself in their place.”

By listening, Lowe means not only hearing but also respecting consumers by responding to their needs. When consumers tired of trekking to video stores and paying fees for overdue videos, Lowe, Marc Randolph and Reed Hastings delivered Netflix, eliminating the video store hassle for more than 16 million people.

Though Netflix was a huge success and satisfi ed many people, consumers weren’t fi nished talking. Netflix wasn’t a viable solution for consumers without Internet access or patience—it can take days to get a Netfl ix movie—so Lowe revisited a video vending machine concept he created in the 1980s.

“People were getting value by getting movies in the mail, but we wanted to take that a step further by putting these machines in places where people shop every day,” Lowe says.

Now, for $1 a night, consumers can rent a movie while they’re getting groceries, cashing a check or grabbing a burger. The process is quick, convenient and hits a price point manageable for most consumers. “We’re really excited about that because it’s democratized consumption of film, especially in tough economic times,” Lowe says.

Before joining Redbox, Lowe consulted for McDonald’s business development group, primarily working on the company’s DVD vending machine concept now known as Redbox. Since Lowe joined Redbox in 2005, Redbox locations have expanded from 12 to approximately 25,000. Every single day for the last 18 months, Redbox has opened approximately one kiosk every hour in heavily trafficked areas. Lowe estimates that approximately 200 million people a week walk into a store with a Redbox kiosk.

Redbox recently added Blu-ray options to its more than 200 movie titles and is testing video game rentals in selected markets. A quarter of all movies rented in the United States are dispensed from Redbox kiosks, and in September, Redbox celebrated its billionth rental.

“Every day I’m just amazed with our success in that consumers have really embraced it,” Lowe says.

In a sense, Lowe’s been trying to satisfy movie buffs since he was a kid. A self-described latchkey kid, Lowe and his brother spent hours watching movies in their California home, and when Lowe had money to invest, he put it in entertainment. In 1982, Lowe invested $25,000 in a Marin County video chain. He got an unexpected lesson in business ethics and an idea for what he hoped would be a revolutionary video rental technology.

“I watched these guys as they basically ransacked the business,” Lowe says. “There weren’t any computers, so this was all on paper. I realized then the way to get around that was to build an automated machine… you’d have no loss of product.”

 

Lowe pursued the idea, introducing the Video Droid, one of the industry’s first video vending machines, to consumers in 1982. After selling only 60 Video Droids in the United States and Japan, Lowe sold the Video Droid technology to a Japanese trading company in 1986.

“It failed miserably,” Lowe says. “It was one of those things that looks really good on paper. But people were not comfortable with credit cards, and there were video stores everywhere.”

Lowe reverted to what the market was supporting and co-founded the Video Droid video rental chain. During the next 10 years, Lowe logged about 13,000 hours behind video store counters, watching customers, listening to their needs and observing their rental habits.

By the time the Netflix opportunity presented itself, Lowe knew his customers and formed a partnership with Netflix co-founders Marc Randolph and Reed Hastings.

“They didn’t know the video industry or the entertainment industry, and that’s what I brought to the table,” he says. “The three of us had the funding, the management experience and the marketing genius, and I brought the understanding of the customer.”

Unlike the Video Droid concept, consumers were ready for Netflix, and Lowe was eager to bring it to them.

Whenever Lowe discusses any of his business ventures—the Video Droid, Netflix, Redbox—he deflects attention away from himself, crediting former business partners and employees for company successes.

“You need to surround yourself with people who think completely differently than you do,” Lowe says. “If you do that, you’re much more likely to execute ideas and develop other ideas.”

Lowe constantly reminds himself of this, as his opinions have been known to dominate a conversation. “I often have my own view of things we should do, and I have a hard time keeping that silent and allowing the group to build a consensus for where we should allocate resources and spend our time,” he says.

Lowe builds strong teams that he relies on for product development, innovation and support. From 2008 to 2010, Redbox and several Hollywood studios were embroiled in lawsuits regarding distribution rights, which tested Lowe and his team. “If you surround yourself with really smart people who are passionate about solving problems, you’re going to find a solution,” he says. “You have to stay positive and not give up.”

Lowe’s positive outlook includes remaining open-minded. “I’m constantly surprised by the new things I learn,” he says. “Thinking that whatever’s worked in the past should continue working in the future is far from the truth. You should always be open to new ideas and new ways of doing things.”

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