Friday, January 17, 2014

One Word for GW Corporate: Customers



I posted about the half year results yesterday as did many people.  There are now probably 2-3K comments on blog post and message boards about it.  Many people seem happy about the news which leaves other people confused.  “Why would you want GW to fail?”, they ask.  The truth is very few people want them to fail (I doubt even people at Mantic or PP want GW to go out of business).  The people excited by the news hope that it will get GW to right the ship and find ways to reverse the player base erosion that the game has suffered.  These people are still interest enough in GW to be reading on commenting on blogs about it, so while the ground might be barren right now for them they might still be reclaimable.  I am certainly in that camp.  I had a 3 month period where GW mainline stuff did not get mentioned (other than giving it away).  I am back for 2 days now to discuss it before dropping it again until probably summer when the full year results come out.

GW corporate issues come down to one word: Customers.  If you look through GW’s corporate reports you will not find that word very much.  GW is not Walmart which is really about getting the products to the consumer that they sort of really need at low prices which means lots of interactions with producers and transportation costs.   GW as an enterprise has large fixed costs will low marginal costs hence you see a 10% drop in sales lead to a 33% drop in profits.  This means that producing that next space marine tactical squad and getting it to the store is pretty cheap compared to their other costs of business so it is very important for them to have customers to buy those products. 
GW probably wants to see themselves as Apple with a luxury style product but an Ipad while it actually sells for like 500 dollars  costs a significant amount to produce (say $250 as that is what amazon is selling them at for essentially no margin).  So 50% of the cost is actually for the product.  A 40 dollars tactical box probably costs less than 30 cents for produce the minis.  The probably spend about the same on the boxes as on the models.  GW can produce without problems as much product as they want and since they create it also they can essentially invent new products and do all the time.  So having customers to buy these is really the issue they face.

GW is not a luxury brand or status symbol.  It is the niche product which is different.  It is actual the most mass market product in its niche which is a very good thing since it allows economies of scale if they choose to use them which they have recently to boost profit at the cost of losing market share.  Originally GW stores were about market share and exposure with main street locations and multiple staff ready to help customers with demos and space for gaming.  Now they are focused purely on returns with 1 person usually in out of the way places.  Maybe GW found after the LOTR bubble burst that they had gotten about as big as their niche would allow and shifted focus from growth to profits but you still need to retain and attract customers.

In their last full year report, they said that the biggest threat to the company was its own employees.  It is hard to find people who will do things the “GW way”.   But given that the GW way has led to eroding sales volume and players in recent years that does not seem like it is the real threat.  GW’s current response to the sales issues is to reorganize the sales channels but they seem to be moving more up the chain with all trade run out of UK and the webstore under different management.  This is moving things farther from the actual customers.  I remember I heard something about wave serpents going direct only.  Now if I was in charge of trade I would be very against this as this is taking a good selling product off the shelves of my division.  Maybe the new organization would stop stupid decisions like this, but now trade sales and retail and webstores working in one area are not a unified group trying to boost overall sales but can get incentives for trying to cannibalize the sales from another channel.  Does not seem like a good idea to me.  Sort of like the bad decisions like the embargo for down under.  People could buy GW online from retail sellers and have it shipped in relatively small batches across the world for less than the trade stores could get the product from GW for (let alone have any margins).  That means it is time to look at your pricing model for the region not just “outlaw” the shipping.  Doing both together might have been fine but just the embargo is a bad move as the customers know of the price disparity.

How often does GW corporate brass actually get out into the stores especially independent retailers?   I would guess it has probably been a long time since anyone other than the GW trade sales rep has visited most of their trade stores and I would guess that it probably has been a long time since the reps have been to most also.  If you do not actually interface with your customers and the people who directly deal with the customers, can you really make good decisions about the direction of the company.  It is not like the customers are asking for the company to make products that are physically impossible to make (which happens at my workplace where we get requests for products that violate fundamental physical laws of nature).  It is not like they are seriously technology limited.  The have made great advancements in plastic molding for their products so their ability to produce things that customers might want is fully realized.

A few years ago the former CEO said that he did not know why his customers bought GW’s products.  This is a bad sign for the company that such a person would be in charge.  Could you imagine Steve Jobs saying such a thing?  “I do not know why people would buy an Ipod.”  Ofcourse not.  He would know everything he possibly could about the customers desires for the product.  He would know all the reasons why people would want to buy an ipod at an apple store vs an independent.   He would probably have fired anyone in his company who would say such a thing about their part of the business. This person came from a retail background so maybe the question of why the customer would want the product is less important to him than why they would want to buy it from his company but that is not the case here.   One billion people in the western world are perfectly happy never playing a miniature game but they would probably not be so happy without soap or shampoo or food or clothes.  It is a different type of product.  It is not even a generally social accepted product (ie it is not really cool to play with miniatures as an adult) so each customer really is someone special to you that you need to care about.

The GW corporate stuff never talks about new plans for customer attraction or retention.  They do not talk about their value proposition to the customer or what they bring unique to them.  They have taken their customer for granted for too long mainly based on their very dominate position in the niche at the retail level in the UK and the network effect in the game community.  Sort of like how Apple gets the best apps since they have so many users and have a pretty fixed set of devices, GW was getting the customers because that is what they saw at GW stores and that is what people played at home and in the independents.  Once you start to lose that front of pack position that you spent the 80’s and early 90’s building, it is a whole different world. 

Sorry for the wall of text.  If you read it thanks a ton for listening.



Additional Notes:  Webstore unification is a minor thing.  Bringing forgeworld into more exposure is fine the quality issues of forgeworld products are serious and forgeworld products are not the same margin level as GW plastic so they might add to sales but not as much to profits.   Forgeworld products will probably sell better when shipping costs are not such a major issue to the customer assuming you can get the same free shipping at 50 dollars as you do with standard gw stuff.  Forgeworld and Black Library only represent like 10% of GW sales so they would need to double to offset the drop seen in the last 6 months.

Weekly releases seems mainly like a scheme to get players to the store more often.  This might help sales some with impulse buys and more interactions with salespersons but really is still trying to sell more things to fewer people which is not really the direction they need to be looking at due to the network effect in table top gaming.

Changes to the magazines.  Sounds like they are doubling the monthly content level with 4 weekly and 1 monthly release on average but also sounds like the price for all that is probably going to more than double.  It could be a good move as it might allow for broader content in the monthly magazine keeping it interesting to all the player base each time while you can be more selective on the weekly ones to get those related to your game or faction.  People have been complaining about White Dwarf for years but I do not really see its performance as a major issue given that in most places it is not mass market (ie you do not see it unless you go into a game store) and so much of what it used to be should be digital and most likely free as the cost of production is so low in the grand scheme of things.   Think about it.  How many places charge you for information about what they are selling and how to use their products for normal customers.  My wife is a papercrafter and scrapbooker.  One of the major groups there recently had like a 3 days of like 6 hour webshows about how to use their products.  While they can be downloaded for a price you could watch them for free live and during several replays.

A fully burdened professional workday is probably less than 500 dollars.  Given that the people are already there designing, painting, and playing the games making them craft articles based on what they did would probably cost like 1 man day each.  5 real articles a weak for 52 weeks is like 125K.  Like 1 full time worker and then small contributions from the rest of the staff.   That seems like a lot of money but remember that the sales drop we are talking about was 7 million pounds. So you at the 1% level of the sales drop.   Even weekly must read articles on the GW site would be way better for them than people getting most of their news on the blogs where many negative comments about your products appear.

14 comments:

  1. Really well written post and totally true. You still see gamers at FLGS and buying from them even though the price might be a little higher to support a store where they can play their games. GW used to have a similar model, and that was it's heyday. You are completely correct they don't know enough about the customer and do very little (or many times the opposite) to keep him happy.

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    1. Thanks for reading my thoughts. While you cannot always make all your customers happy, it is still a group to pay attention to.
      They have listened some with faster codex updates but went overkill there.
      The best path is not always clear but it helps to have a light to provide some guide.

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  2. This is particularly interesting to read from a customer perspective. I've always found myself avoiding the front-line staff - customer interaction because I've found the employees waaaay too over-zealous in store. It's actually quite intimidating and annoying when I'm just browsing. That now coupled with the constant price increases...I dunno, as a customer I'm feeling let down and alienated by the company. Near everything nowadays has something to do with Space Marines, which from a company stand-point I can understand - they're the best selling models, but at the same time it's frustrating to see everybody left in the wings wanting.

    The latest release batches have made me really put my foot down with the lazy cash-grab attempts. The £30 Escalation book which was just a copy&paste from Apocalypse for example, it's disappointing to see that they have such a low value on their customer base and that we've been turned into a dot on a graph instead of a consumer group with a voice and relationship with the company.

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    1. The shop employees are in a tough spot. Gamers in general are not the most social lot so just saying hi and asking them if they play can be off putting but it is really the way to start in the normal world.

      Greeting customers is not just polite but helps reduce shop lifter. If the salesperson is going to help you that have to have some idea of your experience level.

      Saying you are browsing should buy you like 5-10 minutes before they come around again.

      If I was trying to sell this stuff to someone off the street, I need to know if they are shopping for themselves or some else. I need to know what level of experience in the games: Maybe interested, new player, veteran, disgruntled former player.

      With that information I can actually try to do my job with the proper touch. Customized sales approach to the customers level and desire is actually their value added proposition. If they are not there to help you with your purchase we should just replace them with only web store.

      This does take some touch though. You should not try to upsell veterans on clippers or the newest white dwarf stuff.

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  3. I had written a similar idea about 5-article weeks online about a year ago--I'm glad other people think it's a good idea! Sort of dubious they can really change their way with the publications after the last failed reboot. If they turn out to be full of actual content now I'll be shocked!

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    1. Really not sure how to divide up the content in the magazine. If they take the content that was in white dwarf and just spilt it up into 4 weekly issues at 4 dollars that will probably go over very poorly.

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  4. I think somewhere in the last 2 years GW became more of a spectator sport for me. It's interesting to see what happens but of little consequence overall.

    Still good post.

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  5. Well written and well said as I've come to know from your site Brad. You're kinda my ear to the ground in all things GW since I've turned from their sphere some time ago, so thanks.

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  6. Nice article, congrats.
    Fully agree on how they simply don't know their customer base, and most of their decisions tend to reflect it.
    Price rise is an issue, but probably not the more important one since as long as their products where hot enough there would always be some way for us to justify the buy. Unfortunately they also seem to find that cutting off on the creative personnel (rules and sculpts) is the way to go.

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    1. I think the price rises are a major issue. I think that most of the player base were very much over buyers before purchasing way more product than they actually need or really used. That extra army or maybe taking a look at a different GW game. Now that people do not see that value in the products that extra hobby money and interest can flow to their competitors which raises their profile and distracts the customers from the GW worlds.

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  7. Just to add a little rant to my previous reply to your post: (only) yesterday I've found out that in 2012 GW has closed down "Warhammer Historical", its publisher branch responsible for gems such as Warhammer Ancient Battles, Warmaster Ancients, Legends of the Old West, Legends of The High Seas, etc.
    All business niches for sure, but each with a very loyal fan base, and that - truth be told- never have been properly advertised except from word spreading by gamers.
    Quite sad to know they've gone, and fortunately I have many of their published works.

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    1. Well there is talk now of GW redoing specialist games as new boxed sets but I almost do not want them. Most of the specialist games rulesets are better than anything GW has done in years. New models would be nice but since the old models are not available anything not in the fulls might just vanish.

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