Video games are a multibillion dollar industry, thanks to the combined growth of console, PC, and online video games. But video game retailers like face steep competition from online sellers, freemium games, and behemoth brick-and-mortar retailers like Wal-mart.
GameStop is fighting back by leveraging its customer data to deliver more personalized offers and partnering with Alliance Data Systems to offer a credit card aimed at loyalty members. 1to1 Media spoke with GameStop Chief Marketing Officer Frank Hamlin; and Kurt Brown, director of client sales at Alliance Data Retail Services, about GameStop's customer strategy.
1to1 Media: What do you see as a major challenge to engaging customers and driving more sales in the gaming world?
Frank Hamlin: The major challenge is we're a hits-driven industry and you need the hits to drive the traffic. We deliver a fair amount of traffic through our buy/sell/trade ecosystem which has been a huge source of growth for us over the years. But at the end of the day, new releases are what kick starts interest in [video game] categories and so our business is like a movie theatre since we have to look to Hollywood to deliver the traffic. At the same time, we're always looking for better ways to engage our customers.
How are you using data from the PowerUp Rewards loyalty program to better connect with your customers?
FH: We've been doing that in an ongoing way. We launched the PowerUp Rewards program a few years ago and it lets members earn points, get additional discounts on pre-owned titles, and includes other benefits. The program and our app help us keep a record of the titles you own and through that we can do relevant targeting and communications based on your purchasing behavior.
And now we also have our credit card [the GameStop PowerUp Rewards Credit Card], which we launched in September. We have 4,500 U.S. stores and they [store owners] were excited to have this additional opportunity to connect with customers. The card is still in the infancy stage, but we'll be looking at the data to better understand our customers.
We're also in a unique time in the console upgrade cycle which started towards the end of 2013. A lot of people are thinking of upgrading their consoles but these are expensive purchases. We're harnessing that opportunity through our card and customers are excited because it lets them spread out their payments. Also, PowerUp Rewards Pro members who open an account receive 15,000 bonus points that they can put towards rewards, and Basic members receive 5,000 bonus points.
Kurt, what type of analytics do you provide clients and how do you help them better serve customers?
Kurt Brown: GameStop's program is still new, so we haven't dived in yet, but in a typical situation, we're looking at purchase cycle behavior to help our retailers predict when customers might be starting to attrite or accelerate behaviors so they can use that information in conjunction with other data that they have to make their target offers more relevant.
Frank, are you layering third-party data, such as data from Epsilon or Acxiom, over the customer data that you have?
FH: We don't do a tremendous amount of that. We already have rich data in the relationships we have with our customers. Also, our customers are of various ages, where a lot of what you get [with those companies] is focused on adult credit card holders so it's not something we use often.
How do you segment your customers?
FH: Our segment methodology is one of the things I'm working on. Right now our segmentation strategy is based on a "circle of life," which is the extent to which you engage with GameStop. I would love to layer over that some form of a demand-side segmentation. So far we've done some work in quantitative research that helps us understand the demand drivers.
We've also divided gamers into various types of psychographic categories. For instance, there's the type of gamer who predominantly plays alone, and that person displays behavior that's different from someone who does predominantly multiplayer games. And of course we also think about differences in the psychological motivations for a beginner versus an advanced player and our buy-for-others customer segment where the kid is the primary customer but it's the parents who are buying the games.
And how do you compete with online sellers like Amazon?
FH: The way we compete is on three key points of difference. The first is that we are run by and for gamers; the people who work for GameStop are keenly interested in gaming-it's all we do. Every game advisor in our stores is a passionate gamer so customers are getting strong game expertise and a sense of camaraderie. That human connection is important in retail.
The second point is the cycle of savings that we provide through the buy/sell/trade methodology. You come in to sell or trade your old games, giving you more purchasing power to afford the new releases and repeating that cycle helps you save money.
The third point is our stores. Our stores provide locations and events like midnight releases for gamers to gather and have fun.
What's on your road map for interacting with your customers? Are you planning to use more paid media or work with brand advocates, for example?
FH: I think our biggest opportunity is in harnessing the power of rewards data at the store level. We have tremendous foot traffic and our biggest form of media is the store itself. And to me, the real opportunity is taking offers that you would otherwise push through an email or an app that only a subset of people are opening, and delivering them to people when they're in our stores and in a gaming or purchasing mindset.
Another opportunity is extending the knowledge of the game advisor with the customer data we have to provide a richer shopping experience. The customer wants a unique understanding at the individual level and we do a lot of that through electronic channels but the real magic is harnessing that for every customer when they're in the moment, in the store.
How would you do that?
FH: We just overhauled our mobile app making it easier for people to keep track of the games they have, the ones they want, and trade value estimates. We're also testing iBeacons in our stores in Texas. We're getting location awareness and geo-fencing data and the ability to deliver an offer to you right there in the store, so that's exciting.