The Death Spiral

The Death Spiral

posted in: Articles, Mindset | 0

The dreaded death spiral. The downward slide into oblivion. Before we get into that, though, a story is in order.

Not so long ago…

A few months ago I walked into a restaurant I had never been in before. I was looking for something yummy to fill my belly with and the place looked like it could do the job.

Don’t worry, this ties back into the games business eventually, I promise.

Now, this restaurant had been around for a while and it always seemed to be on the empty side. It was your typical mom and pop restaurant/diner/dive place. But when you’re really hungry, anywhere that can potentially satisfy your rumblings is fair game.

I walked in planning to order a sizable meal for myself and my wife Kelly, thereby preventing our impending starvation. I was at least a $40 order, probably more with tip.

After waiting a few minutes in the empty restaurant and loitering by the counter for a bit, the guy behind the counter acknowledged my presence. He asked what I wanted after I perused the menu for maybe thirty seconds.

I asked for the lamb chops (for my wife). He said something along the lines of “No lamb chops for you. I can’t sell lamb chops at that price so I don’t buy them anymore.”

I frowned. This was not how I expected the transaction to go.

I ordered the fish and chips, received an acknowledgment grunt in return and was left to stand next to the register as the guy went into the kitchen to cook my food.

I was still the only customer in the restaurant by the time he came back.

I waited. 20 minutes later, with a bag of super greasy fish and chips in my hand, I paid for my meal. No “thanks for coming in”, no nothing. Just a desperate, angry silence as cashed out.

I left a small tip and walked out, never to return.

The takeaways

Many of us have seen game stores go out of business, some have personally experienced it. Typically the process starts well before the actual day you close the doors on your shop. It may have begun the day you opened up for business.

There is a common convention in retail, that if your business isn’t growing, it’s shrinking. Every time you’re on the downhill side of the graph and your sales are slowing down you’re in danger of entering a death spiral.

Here’s the thing.

The guy who owned the restaurant was obviously having a tough time. He probably invested a ton of money into his business and it was crumbling around him. Sales were stagnant, his costs were too high, he couldn’t get any customers in the building to fill up his empty seats. Whatever the problems he was facing, however, one thing was true.

He had a chance to make me his best customer ever.

This is true of every customer that walks in your doors and should be the goal of your customer service all the time, but that’s beside the point here.

When things suck, that’s when you need to step up the customer service game even more. Falling into the trap of complaining about your situation or desperately squeezing your existing customer base is a bad idea.

The below are four mistakes that store owners make when times get tough:

They get frustrated

When business isn’t going well, it can be a permanent mental burden. Even when things are going well, there is probably some corner of your mind ticking away thinking about it. We tend to fixate on the negative things in our life.

The trouble is this starts to come out in unexpected places. When you’re frustrated with the way your business is going, your relationships with your employees, your family, and your customers will suffer.

You get snappy or grumpy like the restaurant proprietor above. Not only do people generally dislike being working around unhappy people, they don’t want to spend their money or time with them either.

They lower prices/have a sale

This is commonly known as the race to the bottom. While discounting your stock may be good for your sales numbers in the short term, it’s disastrous in the long term. Not only are you training your customers to expect lower prices (and lower margins for you), you are in a sense eating your seed crop.

The cash generated from selling your products at a discount will buy less restock than it would otherwise. If your lower prices are the norm, the cycle repeats itself as the other costs of the business pretty much remain the same. In the end, you’ll end up eating into whatever savings you had and whatever stock you had on the shelves until both are bone dry.

They raise prices

Wait a second, weren’t lower prices a problem? How can higher prices also be a problem?

The issue with raising your prices in desperation is that your customers will eventually get wise to what you’re trying to do. Basically, instead of adding more value to your customer’s life you’re just trying to squeeze them for any extra cash you can get.

Gamers and hobbyists are already a very price-sensitive group. Increasing your prices in a bid to pump up your margins and cover costs will only serve to drive them away faster.

death spiral solution

So what’s the solution?

I alluded to it earlier in the post. The solution is to provide better customer service to add even more value to your existing customer base.

This is really more about prevention than it is a cure. If you’ve already driven away the majority of your customers, serving the last few really well may only delay the inevitable. But even then there is a chance to make a comeback.

The time is now to take action and make customer service your number one priority.

There is a saying:

“Treat someone as best you can the first time you meet them, and then treat them as they treat you.” 

I’m not telling you to bow to every whim of a discount-hungry, bully of a customer who just wants to use your game space, fill up your garbage, and generally take advantage of your business. Those customers you should fire as quickly as you can since they poison the atmosphere for the rest of your players, the real customers you should actually be catering to.

This is about making an awesome first impression and then following through with better customer service than your competitors.

Chances are more than 70% of your business comes from referrals and word of mouth. Creating an excellent experience is how you earn those referrals and word of mouth.

And grow a business you can be proud of.