What makes Redbox’s best-cost provider strategy unique? Although best-cost provider strategies utilize concepts of both a differentiation strategy and a low cost strategy, Redbox had a unique advantage in knowing where to place their kiosks. This is due to the knowledge of their parent company, Coinstar.
The two aspects of Redbox’s strategy consisted of 1)drawing in customers with both convenience and low prices and 2)increasing the number of customers they reach by rapidly expanding the number of strategic locations they place their DVD kiosks. Their kiosks are more of a unique quality for reaching its customer base than a niche.
Creating kiosks and placing them in locations that already attract many customers has been even more beneficial because of Coinstar. The idea is to make renting a movie more convenient, instead of traveling to a movie rental store, the kiosks are strategically placed so that customers walk by them in places they frequent more often; such as grocery stores, convenient stores, and fast food restaurants. Coinstar collected statistical data from their kiosks they had around the country to generate ideas on which stores and/or areas to place Redbox kiosks. Some stores that wanted a Redbox kiosk were denied one because the store was not believed to be in a good position to generate rental sales for Redbox.
Redbox was able to offer their customers a low price of one dollar a night per rental. This price was significantly cheaper than rental stores who charged a fixed price for a given number of days. Therefore, if a Redbox customer rented a movie they could hold onto as long as they wanted knowing it was only going to cost them one dollar per night. Even though the price of the rental increased by day, Redbox did not have a return deadline or “late fees”. Also, with the convenient locations, and the ability to return DVD’s to any Redbox kiosk, customers could return their movie in locations they visited more often.
The company’s use and unique best-cost-provider strategy has helped them growth and gain market share in the DVD rental market. Coinstar’s influence and knowledge of kiosk locations worked as a huge benefit.