With Mobile Gaming Gaining Steam and Rumors That Microsoft, Sony Could Kill the Used-Game Market, Retailer Focuses on Data to Drive Sales
GameStop's business model may be challenged, but the retailer is making moves to secure its place in the fast-moving gaming category.
Most digital sales happen in real-world stores, given the difficulty of perusing titles online.
As consumers become increasingly preoccupied with social and mobile gaming (where games are often cheap or free), sales of consoles and physical video games are under pressure. And rumors have circulated that Microsoft and Sony could kill the used-game market by unveiling new Xbox and PlayStation consoles. According to reports, those consoles may use one-time codes that make trading -- GameStop's bread and butter -- impossible.
"Regardless of what Xbox does next, regardless of what its console does or doesn't look like, physical games are huge, with over 100 million installed consoles," said GameStop CMO Mike Hogan. "While physical games won't necessarily experience robust growth, they aren't going away anytime soon."
Still, the retailer, which in the most recent quarter saw sales decline 3%, to $3.58 billion, is evolving its business model and working to ensure its place in a digital future. It's positioning its stores as entertainment centers for discovery and using data to personalize service and drive sales.
The PowerUp Rewards program is at the center of those efforts.
Loyalty programs are ubiquitous in retail as a tertiary tool to retain customers. But Mr. Hogan has gone beyond the traditional points program, incorporating PowerUp into every aspect of the business and making it the focal point of his marketing strategy.
Establishing PowerUp was one of Mr. Hogan's first orders of business when he became CMO in February 2008. At the time, GameStop was focused on aggressive store growth. But when Mr. Hogan -- a veteran of Dean Foods and Frito-Lay -- joined, he saw an opportunity to get to know customers on a more personal level.
GameStop had the technology in place to track the hundreds of millions of transactions it processed annually and identify when they occurred, Mr. Hogan realized. It knew what items were sold and how big the sale was, but nothing about the customer. If 10 transactions were recorded, for example, it wasn't clear if 10 people had each bought one item or if one person had bought 10 items, Mr. Hogan said.
He began developing PowerUp in 2009 with agency Brierley & Partners, which created some of the first loyalty programs, for American Airlines and Hilton Hotels. The program was tested in the spring of 2010 and rolled out nationally that fall. Just a year and a half later it has more than 17 million members, tracks purchases of new, used and trade-in products, and offers members reward points for buying video games and downloadable content.
"We are using PowerUp to understand the consumer and what they want, and provide them with complementary purchases," Mr. Hogan said.
The rewards program also has an online library that lets members keep track of the games they've purchased, whether from GameStop or another retailer, and create a games wish list. That provides a bigger and more complete picture of customers.
"When Mike joined, his vision was to ride the growth mode, but he also wanted to develop a one-to-one consumer database and saw an opportunity in collecting data," said Amy Barnett, head of strategy at Brierley. "He resisted the temptation to make PowerUp simple. A lot of loyalty programs have no voice and only one value proposition. PowerUp is constantly evolving and adding new features, deals and experiences for members. READ FULL ARTICLE HERE.