a RedBox video rental kiosk located on the eas...

(Photo credit: Wikipedia)

When Netflix raised their prices, we dropped their DVDs by Mail service in favor of RedBox. (Which, on a side note, was a massive savings for us. With all taxes and everything, a full price BluRay rental from RedBox is $1.61 per night. We never keep them more than one night so we’d need to rent more than 7 movies a month to make Netflix the cheaper option. Considering we rarely watched 1 DVD a month with Netflix, it was a no brain-er. We were paying Netflix $11.99 a month for 1-out-at-a-time BluRay rental every single month, now we only pay $1.61 or less, as we’ll cover in a moment, when we actually have time to watch a movie.)

RedBox works two ways: Either you can select a movie ahead of time online and reserve it for pick-up later or you can just go to the machine and see what’s available. There’s no extra charge for reserving ahead of time. It’s the same price either way. 

They are very generous with promo codes. They email out 50 cents off, rent one get the second one free and even free movie codes all the time to their mailing list and their txt list gets a free rental every month. When I first signed up, I wondered how they made money with as many free rentals and discounted rentals they gave out. Now that we’ve been using it for a while, I think their coupon strategy is really clever and I wanted to highlight it from a seller standpoint because they’re some great lessons to learn from it.

If you use a promo code and keep a movie for only a single night, they lose out on some profit. But the first part of their strategy is that they expect people to forget to return the movies or games and to pay for an extra night or two. Regardless of what time you take the movie out, you don’t have to return it until 9 PM the next day (meaning you can have it for more than 24 hours and it still only bills as one night) but I’m sure many people just forget to return their DVDs on time and that means an extra payout for RedBox. Giving the customers the first night free or discounted is a gamble but one that probably pays off more times than not when they pay for extra nights. The coupons almost always apply only to the first day so any additional nights are always a boost in profit for them.

But let’s say that, like me, you always faithfully return your DVDs after one night. They’ve figured out how to get profit from me too. There are no restrictions on what you can use the free or discounted rental promo codes on: any movie or video game, no matter how new, is fair game but you can only use them at the kiosk, not for DVDs you reserve online ahead of time. Here’s where their strategy gets really clever. While I can use a coupon on any transaction, I end up choosing to pay full price when I really want to see a specific movie no matter how many coupons I have.

Here’s an example: We wanted to rent Captain America this weekend so we were all caught up to see the Avengers when it came out. Five of the RedBox kiosks near us were out of the movie (since everyone had the same idea, no doubt). When we finally found a kiosk with the movie we wanted, we sure weren’t going to risk that it was still there by the time we drove over so we reserved it online. Because you can’t use promo codes online, we paid full price for this rental which seemed fair to us since we really wanted to see this specific movie. But then, since we were going to the kiosk to pick up our reserved movie anyway and we had a discount we hadn’t used yet, we used our promo code and took out another random movie we’d wanted to see from the selection in the queue. This has happened multiple times since we started using this service.

I love the cleverness of this. Even though we had a coupon, we were willing to pay full price for the convenience of getting the exact movie we were in the mood to watch. Then, since we had the coupon anyway, they effectively upsold us into renting a second film when we otherwise would have just gotten one. Making us take a second movie out increases the chances that we’ll forget to return one or both of the movies for an extra RedBox profiting night.

To me, this is the brilliance of their strategy. They give their customers plenty of coupons and, if you aren’t picky about what you want to watch that night, you can almost never pay full price for a movie. But if you want a specific movie, you’ll find yourself paying full price anyway to reserve online and then sometimes getting a second movie just to use the coupon.

I’ve seen people cry foul over not getting to reserve the hottest movie ahead of time and rent it free this but, to me, this is perfectly fair to customers and just a smart coupons strategy. They give their customers so many coupons, the option to never pay full price is there and they just keep their fingers crossed that you forget to return the movie to profit there. But the system is devised so that their customers themselves often choose to pay full price when it means they’ll get be sure to get that specific movie they wanted rather than take a chance on whatever’s left in the kiosk. Unlike companies where their coupons have a million restrictions and make you feel like they don’t want you to use their coupons, they have almost no restrictions and just offer an extra benefit to paying full price.

And, best of all, the decision to pay full price and not use a discount is the customer’s choice, leaving us with no ill will towards RedBox.

They’ve come up with a way to make me opt not to use a coupon, pay full price for their service and still feel nothing but goodwill towards them for it. That’s pretty darn impressive! As a seller, I want to figure out how to emulate this in my business.

What do you think? What other clever coupons strategies have you seen? How could we apply this idea to our businesses?

PS: I didn’t even think to add this originally but if anyone is new to RedBox, you’ll get a free rental with this referral link. I guess that was a blogger fail on my part that I didn’t think to post that in the first place. 🙂