How a Loyalty Program Took GameStop to the Next Level
About 60% of GameStop’s online traffic comes from consumers using mobile devices. They visit the site to see if a particular game is available in stores, to find out the trade-in value of their old games and consoles and to check on their stockpile of points as part of the chain’s PowerUp loyalty program.
But one thing that very few mobile visitors do is actually buy games or accessories online. “It’s really just the door to the store,” said Eric Oria, GameStop’s senior director of marketing strategy. He was among the speakers at the 2nd Annual Customer Centricity Summit in San Francisco this week. The event was organized by Knowledege@Wharton, Momentum Event Group and the Wharton Customer Analytics Initiative.
The lack of interest in online purchases was initially a “tough pill to swallow for the executive team,” Oria said, but there was a clear payoff in the move to focus the mobile site on customers’ key desires. In 2014, the spending by loyalty program members rose 8%; in 2015, it’s up 10%. The website has seen a 68% bump in active users and “for every $1 of actual sales on mobile, we were influencing 10 times that amount in the store.”
Customers’ mobile shopping habits were just one of the discoveries the Texas-based chain made after launching PowerUp in 2010. Before then, the company wasn’t collecting any data about the customers who visit its 4,000 U.S. stores and the 2,000 located internationally.
“When I first joined GameStop, there was no interest in this area,” Oria said. “We had a lot of transaction data from customers that we kept because [legal authorities] in many markets required us to hold onto it for people trading games. But we weren’t tracking it.”
“Where the world is going, we’re going to have to be held accountable for every single dollar spent. We can’t do that unless we know the customers.”
GameStop, which began life in 1984 as Babbage’s, is a $9 billion company that is the number-one seller of video games in the world. In addition to gaming stores, GameStop is the parent company of Kongregate, a site for browser-based online games, and the Game Informer video game magazine. It also owns about 700 AT&T and Cricket wireless stores, Apple products reseller Simply Mac and online retailer ThinkGeek.
The news hasn’t been all good for GameStop: Shares of the company declined 24% in November, and its third quarter revenue was $2.02 billion, a 3.6% decline from last year that missed analysts’ estimates by $120 million.
Prior to launching PowerUp, GameStop had a previous loyalty program called the Edge card, which had about 1.9 million users at its peak. “It was really just a magazine subscription,” Oria said. “There was not a lick of connection to what people were purchasing, we were completely blind…. Where the world is going, we’re going to have to be held accountable for every single dollar spent. We can’t do that unless we know the customers.”
Points, Perks — and Valuable Insights
The PowerUp program, which took about a year to develop and launch, has 40 million members worldwide, about 30 million of them in the U.S. — and at least one fan who has tattooed his loyalty card bar code on his wrist. The program allows customers to amass points and perks, but “ultimately for us, this was about how do we gather information about you as the customer to make your life better and connect with you in a meaningful way,” Oria noted.
Today, the program, which includes a free tier and a premium tier that costs $15 a month, drives 71% of the chain’s sales. Oria said GameStop focuses most closely on the six million paid members. “Pro members beyond any doubt are our most profitable — just the jump in annual spending from the free tier to pro tier is in the hundreds of dollars,” he noted.
Using PowerUp, GameStop personalizes the e-mails customers receive, calling them by name and featuring products based on their past purchases. The company’s real estate team uses the data to help figure out where to open new stores.
“Back in the day, we wouldn’t start talking about a new game until a month before it came out,” Oria said. “After we launched PowerUp, we were able to start that nine months before the game comes out and start layering that in … based on whether you bought the game or you model someone who might want it. We can tell a much larger story, and those who don’t want it don’t see this.”
“Ultimately for us, this was about how do we gather information about you as the customer to make your life better and connect with you in a meaningful way.”
Store employees were also heavily involved in developing PowerUp, Oria said, which was important for gaining buy-in to significant changes in how they were doing business. “I can’t tell you how many stores we visited, how many people we flew in, how many times we had store managers and hourly associates sitting at the table making decisions with us, asking them what the core benefits should be, what should go in the catalog” he noted. “We got them involved to the point where they felt it was their invention at the end of the day.”
Taking Local Global
Today, GameStop’s consumers have technology constantly at their fingertips, and many of them are digital natives who expect to be better informed about products than store employees. “Millennials are our biggest group of customers,” Oria said. “They are a huge part of the PowerUp customer base. They’re also a big part of our field management organization — 18% are millennials. For store managers, it’s 67%. That’s who is in our store actually having a connection with our customer.”
Despite this demographic’s clear interest in technology, GameStop found when it started collecting data that when customers are actually in the stores, they want an experience closer to that of an old-fashioned butcher shop — to interact with people who know them and what they like, rather than a device.
“Our first attempt to stay relevant was with a kiosk” that customers could use to research games and other products, Oria said. “It was a massive undertaking — but nobody used it, and store employees hated it.”
To describe the preferred ideal experience, Oria gave the example of Tim Brooks, a GameStop manager from Philadelphia who was profiled in a Bloomberg story earlier this year. As a reporter from the magazine watched, Brooks greeted each shopper who came into the store with personalized knowledge of what system each one owned and what games they were playing.
In order to implement that across 4,000 stores, “we wish we could hire 4,000 Tim Brooks; for him, it comes naturally,” Oria noted. “For us, the question is how do we duplicate that? How do we use data to facilitate that for our 100 million-plus customers?”
What the company did was put a device in the hands of employees instead — the chain is in the middle of rolling out a program that arms each one with a tablet that can be used to scan membership cards and pull up loyalty plan information. “We can see your history: what you bought, whether you trade or buy pre-owned games,” Oria said. “Are you a Madden player? Would you touch FIFA? These are things we need to know before we waste a precious touchpoint on you.
“Back in the day, we wouldn’t start talking about a new game until a month before it came out. After we launched PowerUp, we were able to start that nine months before the game comes out.”
The tablets are one of the new initiatives piloted by the chain’s GameStop Technology Institute, which focuses on a group of test stores in Austin, Texas to pilot new programs.
Not all of the ideas tested by the Tech Institute have worked — beacon zones that send personalized messages to customers’ mobile phones when they are in certain areas in the store proved to be time-consuming to enable, and they carry “a little bit of a creep factor,” Oria said. “We just didn’t see the lift and that ‘ah-ha’ for the customer, at least the way we set it up. We’re trying to figure out if we just have the wrong approach.”
An idea that did catch on was encouraging store employees to reach out to customers with localized deals, releases and promotions using social media.
“As we roll out these initiatives, the story that we’re trying to get employees to echo in the field is that working in gaming, it doesn’t get much better than that,” Oria said. “For a lot of people, getting their first gaming console is a huge, huge deal.”