Why Do Customers Engage?

Ways to Keep People Feeling Good About Spending Money With Us

Howard McAuliffe

by Howard McAuliffe, Partner, Pinnacle Entertainment Group

The retail industry is being disrupted with many stores are going out of business, while others are shifting their business models to “experiential retail.” Both of these phenomena are creating opportunities in our industry.

Bankrupt big box retailers are providing a plethora of empty real estate and landlords are offering very favorable terms to FECs, which is a major opportunity. Other retailers are looking to create experiences so consumers have a reason to visit their stores, besides purchasing goods which can be done online. As an example, Bass Pro Shops is looking to our industry to recreate their shopping experience by adding bowling and arcades.

Whether it is a few games in a bar, a small game room in a restaurant, or a 200,000-square-foot FEC, we have always created experiences. Increasingly, arcades are a true attraction and not simply a way to get a few extra dollars out of customers’ pockets. This is an important concept for operators to understand, internalize and improve upon if we want to be part of the retail revolution.

One basic area where our industry falls short is when vendors sell –– and operators purchase –– games based on a single data point: weekly sales. This ignores the fact the customers come to an FEC and pay for the overall experience, rarely coming for just one new game. Remember, with debit card systems, the customer is directly buying a card that allows them access to the experience.

Recently, when reviewing sales numbers from 80 locations, we noticed the proliferation of ticket dispensing games. We have found clear data that shows the sales numbers on these games can be misleading.

Ticket cranes have been great earners for years, and with the invention of the RFID reader, they have become even more valuable because of the ease of tracking payout and reducing fraud. There are several versions of ticket cranes, as well as games like Tower of Tickets and Zombie Snatcher, which also use tickets as a prize. All of these games are top earners in nearly every location we track.

However, the data is telling us there is a very clear saturation point for these games in arcades. This saturation point varies by location size and venue, but when the tipping point is reached, the sales from the other machines in this category drop off drastically. While the newest version is typically the top earner, the other games (which had been top earners) drop lower in ranking while the overall room earnings don’t increase. While the newly added game is often the top-performing game in the room, the problem is that its sales are just coming from the other games.

This is where remembering that we are delivering an experience to the customer is essential. Adding a game that does $500 a week, $450 of which is coming from other games, is not as good an investment as the addition of a game (that costs the same), but does $100 a week, generating the income from a demographic that was not previously served or was under served. The best operators are constantly trying to understand the customer experience and provide a game and attraction mix that provides value that generates repeat business and an increased spend. It is easier than ever –– though still not easy –– to track the customer spend and frequency of visits with card systems.

This sophistication to measure the customer experience and work to enhance it is valuable. It is clear that out-of-home entertainment is merging with retail, providing a major opportunity for our industry. However, cookie cutter approaches will not “cut it.” (Sorry, I couldn’t resist). In order to evolve our offerings into a significant part of the retail revolution will require another level of innovation and sophistication than even the best operators currently offer. That being said, I firmly believe that some in our industry will evolve and begin profiting from the immense opportunity being presented in the retail industry.

Howard McAuliffe loves to imagine and implement new products, business models, and ideas, and is a partner in Pinnacle Entertainment Group Inc. He’s an industry veteran who got his start in the business when he was just 16 and has 20 years of expertise in product development, as well as FEC and route operations. Howard’s wife Reem and young son Sami are the center of life outside of work. When he’s not working, Howard can be found enjoying the outdoors, hiking, fishing and mountaineering. Traveling anywhere new or to old favorites like the American West is a passion. Readers can visit www.grouppinnacle.com for more information or contact Howard at [email protected], he welcomes positive as well as constructive feedback and counterpoints.