Debit Card Moneyball
With this month’s focus on debit card systems, I think it’s really important to remember that these systems are about a lot more than just an alternative way to turn cash into game credits and redemption points. Like the popular movie Moneyball, where a baseball coach uses data analysis to develop a winning team, FEC operators can use debit card systems to gather and analyze data to craft a winning and more profitable entertainment formula.
Debit card systems offer so many additional benefits, which unfortunately many operators are not utilizing, beyond facilitating payment transactions. In fact, the real point of a system is to generate a wide range of accurate numbers about your business and its customers and to eliminate human errors that occur in transcribing all of these numbers.
Why do so few locations utilize these various features? A lot of it is culture. Few people who work in most FECs seem to care much about the numbers, unless perhaps the owner is directly involved in operations and gets people focused on understanding what the numbers mean. The only numbers that most people seem to be focused on is how much revenue the individual games and attractions are making.
In order to have a real grasp of their business, FEC operators should be analyzing many additional factors including per capita spending, visitation frequency, game category performance, ticket and merchandise game payout percentages, price per play, individual player patterns, and perceived value per guest visit. All of these figures are important to understanding the profitability of a center and to help you devise ways to increase repeat visits. Just looking at income data can be very misleading, especially if you aren’t looking at that figure in context of other important data points.
The first place to start is to look at price per play and make sure you are giving people enough time and value to ensure that they come back again. In most cases, limiting per capita spending to the range of local competition can actually increase visitor frequency. Creating a standard formula to establish a ticket value is critical to ensure that all of the rest of the numbers aren’t meaningless. In some centers, owners will instruct staff members to put a point value on a redemption item based on how much they think they can get away with in an attempt to reduce merchandise costs. I call this the ‘greed factor.’ They have no specific point formula, nor do they know what the proper formula should be; many of them don’t even understand the concept of ticket value or payout percentages and how these comprise the foundation for revenue generation.
The same thing is true with technicians not properly setting balanced price/play ranges, which is also crucial to understanding the per capita spend vs. perceived value vs. time proposition of your operation. When you don’t engage in this kind of analysis, then you are missing the true concept of redemption and limit yourself to only one way to increase volume and that is the bandaid of reducing prices.
We see locations where they are trying to mark up the value of prizes and limit the amount of tickets paid out, which essentially works against the whole idea behind amusement redemption. A manager will get worried that too much is being paid out, but they don’t really even know what the value of those pay- outs are.
Fortunately, a debit card system gives you all the tools you need to analyze these complex equations, all the more powerfully if you can get people to register their cards. The value of registration allows you to both grasp the numbers and pick up a better understanding of the emerging trends like, for instance, how much time does a customer spend in your facility and even get a good estimate of how much of that time is actually spent playing games and participating in attractions.
Getting a player to register also gives you a lot of valuable information: email address, in some cases cell phone, birthday, gender, where they live and what times of the week and month they come to your facility. When you are trying to analyze an FEC’s operation, it’s crucial to know how often your customers return. As we’ve discussed in the past, 100,000 visits a year might actually be only 25,000 individual people who come three times a year or more and 20,000 who only come once.
If you realize that many thousands of people are only visiting once and you never see them again, there must be a valid reason why this is happening. There’s a good possibility that they had a bad experience or they feel they have been ripped off. If this is the case, you have a very serious problem that needs to be fixed. Bad news travels many times faster than good news. It’s important to know how many people came two times, three times, four times, and you can use this data to try to figure out how to get people in each of those categories to come back even one more time.
Too many FEC operators spend too much time and effort trying to attract first time customers even though new customer acquisition is very expensive. The key goal of an FEC operation is to have a legion of repeat customers who also help attract new customers. The good news: A debit card system –– used properly –– gives you an excellent tool to create repeat business.
So how do you get people to register their debit card? In our operations we use several different successful strategies, including:
VIP programs –– A small percentage of your customers visit four or more times and you probably know them by sight or even on a first name basis. A VIP program is initially set up and promoted whereby a registered card holder can become a VIP after spending, for example, $500 cumulative and then be entitled to a 10% discount on all future purchases. After a few years we now have approximately 3% of our customers as VIPs and they make up 20% of our revenues. But you have to be careful not to put too much more emphasis on this group category because they can wind up overcrowding your facility during peak periods.
Permanent Discount –– A location we work with in Vietnam (Helio Center) offered a 20% discount for life for card registration. We adjusted the price/play ranges slightly at the front end to accommodate that aggressive promotion under the assumption that a large majority of the first time customers would register their cards. That said, you cannot raise your prices too much because people always know (instinctively) whether they have received value or they got ripped (that’s been my basic philosophy about this business for the last 50 years).
Incentives for New Customers –– These provide discounts for existing customers encouraging them to bring in new first time customers and getting the new customers to register. Essentially you are setting up an army of recruiters. The parameters are quite simple: The next time a newly registered guest comes back and brings a friend who also registers their card with a minimum of $10, the returning guest receives a $15 credit on their debit card, which is going to cost the FEC only $3 in prizes. The new customer will win an average of $2 in prizes. So the FEC receives $10 and incurs a cost of $5 and nets $5 which can be looked upon as the cost of getting a newly registered customer. And of course, each of the two customers may spend additional money during their visit and both will also have opportunities to bring in additional new customers and get them registered. And so the process builds upon itself and replicates as a square function.
When I am teaching courses at Foundations University or talking with AEM clients, I am pushing the point that if you are an owner, you need to be focusing on all of these very specific aspects of your business. You need to understand how it all comes together for the good of operating a profitable long-term business. Nobody else is ever going to do it if the owner does not get behind it. As an owner, you’ve got real skin in the game to really care about how to maximize value and profits.
In the future, debit card systems may delve even deeper into data analyses, possibly even creating promotions and text/email alerts for new games based on the playing habits of registered players a la Netflix recommendations. Today, debit card systems already provide us with a powerful tool to better understand our business so we can maximize value and increase profits.
For further information, please email me at email@example.com. I make a great effort to respond to all questions.
Frank Seninsky is president of Alpha-Omega Group of companies, which includes a consulting agency, Amusement Entertainment Management (AEM), and a nationwide revenue sharing equipment provider, Alpha-BET Entertainment; all are headquartered in East Brunswick, New Jersey. Along with industry consultant Randy White, Seninsky also heads up Foundations Entertainment University. During his 41 years in coin-op, Seninsky has presented nearly 250 seminars and penned more than 1,000 articles. He has served as president of the Amusement and Music Operators Association from 1999-2000 and is a past chairman of the International Association for the Leisure & Entertainment Industry. Seninsky can be reached at 732/254-3773 or by email at firstname.lastname@example.org and www.AEMLLC.com.
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