Growing in the Escape Room Industry in Today's Market
As requested by some of our customers, this is an editorial created to share my perspective on the industry today and why some businesses have issues with growth while others aggressively expand.
I've been in the industry for almost 4 years now and I've been at every trade show since the Niagara Falls Escape Room conference in August 2017. I've talked to a lot of business owners, many that are no longer in our industry.
After long conversations with owners that are trying to find a way around their marketing dilemmas, I've a few things to say on the matter that may help others gain a little perspective on the issues they may be dealing with.
Today mom-n-pop stores are struggling to grow while multi-store organizations are aggressively expanding
It's true. Now let that sink in. The larger organizations are doing something right and it's working. For the last few years I've tried to model Escape Games Global's featureset after those differences because if it's a solvable problem, I want to be the guy offering a solution for it.
Since I've had a decent amount of time to digest the problem and how the larger organizations are solving it, I thought I'd share my views on the topic. This is what I've come to understand and how it applies to you.
Larger organizations ask more questions
The larger, more organized businesses care about data. A lot. They pay people to analyze that data, they ask a metric ton of waiver questions and they formulate their business decisions on that data.
Have you ever gone into an escape room, filled out their waiver and said "ugg, this a lot of questions" and you may have actually turned to your friend and complained about all the questions. Well that business is probably doing something right. I've not gone to an extremely well oiled escape room that didn't ask a ton of questions on their waiver. I've also never played a room I liked and then thought back to the annoyingly long waiver and said "well, I had a great time but those extra 4 questions ruined it for me!" Nonetheless, your data is very valuable
to a well-run escape room company.
Now I'm not saying that you should just ask ask your customers a million questions, what I am saying is that the smarter organizations have people in place to analyze that data and to help them make more informed business decisions. For Escape Games Global I have web stats, network stats, financial stats, customer adoption stats, lead lifetime stats, advertising stats, stats, stats, stats. All these stats and I don't have the bandwidth to pay attention of the vast majority of them. It's perfectly normal to put these tasks on a lower priority than your other more-pressing business concerns but the better funded organizations usually hire an individual to collect, watch, advertise and make informed business decisions based on these stats. The rather useful thing is, the larger organizations can divide that employee's wages between x amount of their stores. It's a lot easier to higher an $80k employee if 8 stores are paying for it and therefore that employee helps drive business to all 8 stores.
Stronger Marketing Approach
One thing that I learned in my first year as a vendor in this industry is that the larger organizations just ask different questions and from different people. In one instance I was talking to a larger franchise and I was interfacing with their Marketing Director (which was already largely different from talking directly to the business owner) and he was asking me more educated questions than I was regularly asked. For one, he understood that Escape Games Global was inherently a marketing platform (or at the time, a precursor to a marketing platform) and the questions were all focused on the metrics in which we could pull from the customers. Most business owners would ask things such as "Does it post your photos on Facebook? Can we see who referred them?" (all completely normal and understandable questions) but the Marketing Director would ask questions like "How do you collect your buyer's profile and how does it differ from the customer's profile?" At the time I hadn't even pondered these things (which meant I was in dire-need of some education as well). All in all, after the conversation was over I realized that out of the 50 or so stores I had talked to, this guy had a MUCH firmer grasp on what was actually important.
That being said the cost of hiring a well-educated Marketing Director isn't cheap and being able to centralize that cost is one of the amazing advantages that a larger organization have. There are ways around that though, which we'll get into later.
We'll, just for a moment, touch base on Groupon. Groupon has a place for the larger organizations as they understand it's value. Essentially Groupon is a means to introduce your business to a different subset of customers (aka marketing). To smarter organizations groupon isn't a crutch but a marketing avenue (of which they have many). You may see these organizations open up Groupon promotions for their slowest days of the week on specific games, at specific times of the year just to get new customers introduced to their business. They typically don't include all of their inventory and they keep the Groupon away from weekends where they fill their time slots more consistently. To a larger organization groupon is a marketing avenue that can be utilized but it is not their primary marketing strategy. Groupon should NEVER be any business's primary marketing strategy.
Email Marketing is a massive priority
I've been involved with internet businesses for 20 years now and I've been a part of failures and successes. With any business-to-customer model though, email marketing plays a huge part in the marketing strategy.
Email marketing is going to be your lowest cost per lead available. Hands down. It's cheap to send a bad email that may get a few leads, it's slightly more expensive to do a strong email that will get many more leads. Your profit vastly depends on your offering and your email content.
At every escape room convention I exhibit, I always ask the interested party "How much email marketing do you do?" I'm not exaggerating when I say that 90% or more say the same thing (after a slight shuffle in their feet) "Well, I should be doing more". Which, after questioning, means they are doing a season email here or there. This blows my mind every time but it's so commonplace. We are an industry that is more than half a decade old, it's starting to get really competitive and most businesses aren't doing the cheapest spend they can to make money.
To dig a little deeper on why, I have a friend that is an amazingly good artist and does art festivals. He's extraordinary and he even won first prize at the big art festival in California that got him internationally known. Despite his clearly validated and quantified talent, he hasn't met with the success he should, given his accolades. I one time asked him what his marketing efforts was and he shuffled around a bit and said "Man, I really just want to focus on my art and that's it". Escape room owners are no different. Your games, your puzzles, the "cool" stuff that you show to the customers is only refinable until a point and then you focus your resources on marketing which turns into an ongoing, attention-required process. It may not be fun but working on your marketing (or paying someone else to) will net you more revenue than further refining your puzzles. While you may have been in love with the room concepts and the puzzles, you've gotta break away and work at your marketing or share the same fate as my amazingly talented artist friend.
Larger organizations collect so much data so they can create email campaigns with a better understanding of their demographic. At this point I'm sure you're saying "well I know my demographic, I've been doing this for years" to which I'd counter "the marketing people study people in your industry, know that demographic better than you and they still actively pursue learning more on a daily basis". I don't necessarily mean the people who come in and play your games, I mean the people who pay for people to come in and play your games, the organizers. Those are the ones that you want and marketing people know this and strive to market directly to them because that will validate their job. Marketing people are stats people, they are all about validation.
Furthermore, you should aim for at least 4 emails a month to your customers. If you're concerned about spam, don't be. Think of an email as a billboard. As I've played at hundreds of escape room businesses over the years, I'm on quite a few mailing lists and I see the difference in frequency of emails from individual owners versus franchises (which is to say I barely see any emails at all from non-franchises). I've unsubscribed to to plenty of emails but the businesses I liked, I didn't unsubscribe to. I may eventually go back and play and everytime I see that email come into my inbox it's basically a billboard reminding me that business is still an option for the following weekend. In addition, I don't think my spending habits have really ever been derailed because a business sent me too many emails but I know I've spent more money on businesses that reminded me that they exist from email marketing.
A formulaic expression
A lot of the well-oiled organizations understand that making money comes with the investing of money. That's why they pay for marketing services, advertising, email marketing and such. It's a formulaic expression that if they put x money in, they'll get x money out. They've just taken the time (and money) to get a good baseline of how that formula looks for their business based on their regionality. Then they just apply that same formula that they've worked to adapt over the years to every new store they bring to market.
A successful business largely depends on getting to the point where you can make a formulaic expression of your actions. Large companies (not necessarily in our industry) will have a multi-million dollar business, be doing very well and they'll opt for investment. They'll give away 20% (or some arbitrary number) of their business for funds to simply advertise. That's it. With the $10,000,000 investment (once again, arbitrary), they'll just pour money into advertising. Why would they do that if they were already profitable? Because they figured out their business's formula and they know that if they put $1 in, they'll get $3.55 back. So instead of advertising with their initial budget and it's gains, they'll put in $10,000,000 and get $35,500,000 back. This is very common, it happens all the time.
That's one of your basic goals as a business: to break everything down to that equation so you can put money in and get money back. Be it in 3rd-party services such as marketing, software (like EGG), advertising, etc. The larger organizations know this and advertising and marketing is no longer a question of "should we do it?" it's more like "we don't bid on this keyword past $2.75 and we need 4 marketing emails written this week due to seasonality". It's an ever-learning machine to create that formula. The marketers are paid to refine it.
Revenue over Creativity
It's not necessarily all about the larger, more well-structured organizations, there are just smart business owners that have found the ability to expand while applying these fundamentals. There's a gentleman I know who does quite well and has a tendency to expand into new escape room venues by focusing more on the revenue than the creative. I realize that sounds anathema to some of us but he's just figured out his formula and it works well for him. He opened up an escape room business and within a few years, owned several more in the state because he refined their formulas. Let me clarify a few things here. His games are fun, the puzzles flow very well, there is next to no tech and people love them. His room budgets are also vastly
lower than what most people pay.
The primary difference is he didn't get wrapped up into the passion & creativity of the stores around him but he is a very business-minded individual and he, like the larger organizations, are now aggressively expanding one store at a time.
He knows where to apply his spend. He tells me every time we're on the phone "your service is such an easy decision" (I'm not kidding, every time, it's very flattering) because he says it saves him time and he doesn't need to focus on that aspect of his business anymore. Being that he's doing so many things right, it's nice to hear a compliment from someone that spends money wisely. He spent money to free up resources and values those freed up resources more than the cost of my product. I've no doubt he does the same on his marketing efforts.
So I realize this is a lot of information and probably leaves you with some answers but no obvious path forward (or perhaps you knew everything and you're just humoring me as you read on).
But the stark reality is that you're either working on
your business or in
your business...very rarely are you able to do both at the same time. Working in
your business encompasses refining your games or getting a new screen for the game masters. Working on
your business includes creating a marketing strategy or improving your customer cost-of-conversion. As a business owner, it's your responsibility to ensure someone is always working on
the marketing side of the business. It can be you or a trusted marketing advisor, but make sure someone is driving the marketing ship.
Almost all of the above points come down to one thing: having a solid, industry-specific marketer behind your business. Since the larger organization's stores centralize this hire, I figure so can we.
Here's the main benefits:
- An industry-specific marketer would already know your business's demographic and wouldn't need much time to "get up to speed"
- You'll be able to leverage the marketer's success with other escape room customers
- You only need this expertise for a few hours a week (depending on your rate of growth) once things get routine
- A good marketer would already know what email content converts in our industry
- A good marketer could help you formulate a better path forward
- A good marketer could fine-tune your Groupon offering
- You wouldn't have to write your own emails anymore
- You can designate to do as much or as little as you want to work on (there's a lot of problems a good marketer can solve)
- You can focus on what you love working on: your escape rooms
- Can put a value to your data
- They can help you determine and refine your formula
All that being said, I've been looking for an individual to work with me for this purpose. Someone who's already in the industry working with escape rooms.After months or preperation, conversations and just getting a good feel for the man, I believe I've found him.
He's worked with escape rooms in our industry (some of which are customers of EGG) and we've worked out an array of services to specifically combat the above problems.
I believe we've created a strong solution that can help your business have more of a competitive advantage against the larger organizations and other stores in your area. If you'd like to hear more, please reply to this email and I can help get things rolling.