Upgrade Now:
Capture the Family Entertainment Market

By Randy White

A well-run roller rink once was enough to pull in the customers. Not that many years ago, the horizon of change was way off in the distance somewhere. Today, that horizon is in your rear view mirror, and looking backward gets you nothing but a trip to the emergency room.

So look ahead. Sure, changes whiz by your ears before you know it. No doubt you are faced with more competitors than ever. Kids still love to skate. However, today, kids have many more leisure opportunities, both at home and out of their homes. What you need to do to face this new competition with confidence is build on what you have and make your rink the foundation of a family entertainment center (FEC).

Your competitors know who you are, and would love to pull your market base of young customers out of your rink. So let's turn the tables and look at them.

Out-of-home entertainment competitors include family entertainment centers (FECs) with both indoor and outdoor attractions, such as the Celebration Station chain, Enchanted Castle in Chicago, and the Sports Plus chain; and centers targeting children like Discovery Zone and Jeeper's. Some indoor FECs are as large as 170,000 SF with larger ones on the drawing broads.

Ten years ago, with a few exceptions, the only family entertainment centers were miniature golf anchored outdoor fun centers. Today, even cinema operators are developing indoor FECs as part of their movie complexes. Examples include Regal Cinema's FunScape and Carmike's Hollywood Connection FECs. The FEC industry has grown to include several thousand centers with new ones opening every week. If you don't have one in your town now, it is likely you will in the near future.

These FECs are giving roller rink owners a run for the money and carving out a big slice of the market pie. What is left for roller rink owners? Are crumbs the best you can hope for? Not if you choose your options wisely. You can:

• Do nothing and watch your business whither and possibly die.
• React to competitors after they come to your market.
• Become a proactive market leader by expanding and upgrading to an FEC now.

The option you choose - and doing nothing is a choice - determines your future.

A closer look at FECs

FECs work like shopping malls in which the department stores act as anchors, generating traffic for the specialty shops. Like a mall, an FEC has two or more anchor attractions and a variety of secondary impulse attractions. Major participatory attractions like bowling, soft-contained-play, lazer tag, go-karts, roller skating, miniature golf and children's rides pull in guests for the impulse items of video and redemption games and food and beverages. The scale and mix of attractions create a critical mass and synergy; the FEC's drawing power is greater than the sum of its individual parts.

This strategy works like a one-two punch. While the major attractions are the initial draw, it is the impulse items and birthday parties that generate the bulk of income. The major attractions have timeless appeal, while the games can be updated.

FECs vary greatly in size and mix of attractions. What some people call FECs are really just skating centers with a face-lift. One anchor attraction and a couple of video games do not make an FEC, and that approach will not get you the dramatic expansion of business common to true FECs. While your skating center gives you a great start, it is only one piece of a successful formula.

What you get for your investment in upgrading

If you use your roller rink as the foundation to upgrade to an FEC, you can set yourself up for a whopping increase in business. Here are the specific benefits that a FEC offers roller rink owners:

• FECs can expand your market area. The critical mass and mix of attractions means that your customers will be willing to drive farther to visit.
• FECs increase market penetration. The FEC's mix appeals to a broader range of ages and customer types. This increases your market penetration; defined as the percentage of residents within the market area who are customers.
• FECs increase the per-capita spending of your customers. Because there is more to do, people stay longer and spend more money than they would if their only option is skating.
• FECs increase the frequency of visits. Roller rinks that upgrade to an FEC reap dramatic gains in market area and penetration. Even more significant to rinks is the increase in frequency of visits. The diverse offerings mean that the experience is more interesting for customers, an interest that skating by itself may not generate.

Together, these benefits prepare you to face the future. New competitors will find you have increased customer loyalty by providing better value.

What does it take to upgrade?

Committing to an upgrade is the easy part. To do it right, you have to understand the strategy behind the upgrade. The first phase of work, concept development, is critical to your success. Mistakes at this stage can be disastrous.

Success requires that you address six important elements during concept development:

1. Market research
2. Facility scale, mix, and operating capacity
3. Layout
4. Theming
5. Economics
6. Operations and management

To make the most of the synergy and to increase spending per visit, the skating center should be integrated into the mix of FEC attractions, not left as a separate adjoining component. There is no generic formula that will work for your upgrade. Every market area, every group of customers is different. You ignore those differences at your own peril.

The mix, size, design, service level and pricing must be targeted to the specific customer groups within your market area, and your existing customer base has to be factored into the formula. In addition, all competition, not just other roller rinks, has to be examined closely. With the right mix and design, your rink can be the start of something really big.

First step - Know the skaters

You want to keep your existing customers after the upgrade. The challenge is to expand your customer base using these folks as the foundation. Market and customer research allows you to do that by tailoring every aspect of your upgrade to delight current skaters, and all those others who would show up if only. . .

Market research includes both primary qualitative and quantitative research of your current skaters. The research should include analysis of your customer database information and both written questionnaires and interviews. The written questionnaires should be designed not only to gather statistical information (age, income, profession, and family composition), but should also cover an evaluation of various aspects of your business.

Open-ended questions allow customers to reveal their likes and dislikes, and uncover things you can do to delight them. Since people are naturally reluctant to complain (most days anyway), you can get the same information by asking them to suggest ways to improve their experience at your center.

The questionnaire is mailed to a random sample of skaters' homes. It usually takes mailing 800 to 1,000 questionnaires to get enough responses to be statistically useful. Customers are usually willing to help if they believe it will contribute to change. On one of our company's assignments, we mailed a four-page questionnaire and got a 65 percent rate of return.

In-person interviews, both one-on-one and in small groups, can uncover improvements that will make a real difference to your guests, a benefit that questionnaires rarely can provide. If the budget warrants the cost, professionally, moderated focus groups are ideal.

Not surprisingly, people are more candid when talking to someone neutral. Let's face it, as the business owner, you cannot be neutral, or what is more important, you cannot be perceived as neutral. That means you are the last person who should be mailing questionnaires or conducting interviews. The only way to get the results you need is to work through an independent third party.

Once the questionnaires are returned, tabulating the results can get tricky. They must be examined carefully to assure that they represent a true cross-section and significant sample of skaters. If not, the responses can be weighted. The responses should be tabulated as a whole, as well as within different skater segments to find important insights. The results need to be properly interpreted. Consumers will often say one thing, but behave differently. The results also need to be interpreted within the framework of what actually works in an FEC. This job should be done by someone with broad FEC industry experience and skilled in market research techniques.

Next, find out where your customers live or work

Now that you know whom you serve, it is time to figure out where they live or work - your existing market area, which encompasses about 85 percent of your current customers.

How do you find out your market area? Usually, you would grab a map and protractor, and draw a circle ten miles out. Sure is simple, right? The bad news is that it bears no relationship to the real world. Customers are influenced by where the competition is located, accessibility by car or other transportation, travel patterns, and physical and psychological barriers. A real market area (see figure 1) looks like an amoebae.

Finding the real market area takes plotting the homes or work places of a random sample of several hundred skaters. The next step is to see how the existing market area could be expanded. Maps that show increases in drive time by 5, 10, 15 and 20 minutes are laid over the existing map. Differences are evaluated to find out whether they are an attribute to competition (or the lack of it), travel patterns, natural or psychological barriers, and the socioeconomic/lifestyle composition of residents.

Expanding your market area?

Knowing what you have now gives you a good idea what the future might hold. Your potential market area includes areas and residents your center is not serving. Attracting those potential customers requires more than simple demographics or guesswork.

Market research is important here because otherwise you rely on perceptions - whether your own, your manager's or those of your designer. As we have seen so often, those perceptions are usually dead wrong as you, your manager or your designer are not your customer.

To learn more, people usually go to demographic data. But, that just tells you the measurable characteristics of the population in your trade area, including age, income, and family size. If you stop there, you miss a method that works a whole lot better.

You see, demographic data puts your customers into a clump and gives you the average. This composite profile disguises the true makeup and behavior of a family with middle-aged parents earning $50,000 per year which will vary depending on whether they live in a town outside Aspen, a suburb of Kansas City, or a high-rise in Chicago. Demographics do not reveal those differences.

Socio-economic/lifestyles, on the other hand, draw an accurate, detailed picture of your market area. Socio-economic/lifestyles break the population into 62 household groups based upon their socio-economics and lifestyles - consumer behavior, values, and tastes.

You will not believe what this method can get you. Want to know your market penetration rate - the percentage of residents in your market who skate? Comparing existing skaters' socio-economic/lifestyle composition with the socio-economic/lifestyle data for your potential market area tells you who your current skaters are and what segments of the market you are not capturing. Then, combined with analysis of your competition, the ideal mix of attractions, theme and facility design can be developed to make your center a winner into the next millennium. You are now ready to increase visits and expenditures of your existing customers and bring in new ones because you are giving people what they want, not what you want to give them. A market-driven approach to concept development and facility design can make you a winner.

The rewards of delighting your customer

Pleasing guests depends on everything they experience at your center, and market research tells you what you need to do when you upgrade your skating center to an FEC to make them happy - better than that, to wow and delight them.

Your center will be only as good as the process that reveals your customers' needs, wants, tastes, and expectations. A market-driven process tells you what your customers really want. Give people what they want and you can count on their loyalty and enthusiasm.

Skating gives you a strong base from which to start. Now is the time for rink owners to tap into the memories of baby boomers, who enjoyed skating when they were young and just need a little encouragement to introduce their own children to the activity. Birthday and private parties are already an important part of rink business; upgrading to an FEC assures that your center can offer the level of entertainment that the modern customer expects. With a broader appeal, party business can be dramatically increased.

Excellence makes the difference between eating well and chewing crumbs from a dwindling slice of the youth market pie. With the market and consumer research methodologies and data available, it makes sense to use the best tools on something as important as your business. If you do not, I guarantee it, your competition will.

The second installment of this article will discuss the physical design aspects of growing your skating business to become an FEC: The Story of Dinotropolis.