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Middle of the road is the road to ruin

With the U.S. economy 'in the ditch', as politicians are fond of saying, times are tough for business – and even more so for those that rely on customers' discretionary income. Read on to discover what it takes to survive in an economy headed south.

We live in a world of rapid change.  When our last eNewsletter was published just two months ago, gasoline in the U.S. was $4 per gallon (USD 1.06 per liter) or higher. Today, gasoline prices are less than half of what they were, the stock market has taken a plunge, and we are in a worldwide economic meltdown -- or whatever you choose to call it. These are trying times for any business.

Location-based leisure businesses overall surely will be affected by reduced consumer spending. No one knows how long the recession will last. The real issue is which businesses will survive to take advantage of better economic times, and which will become history.

Most likely, resorts and major vacation attractions, such as those found in Orlando and Dubai, will suffer, as they are in the category of major discretionary expenditures. The increasing price of airline tickets only will add to their misery. Many community-based and more affordable leisure venues, such as the many types of FECs, children’s entertainment centers, eatertainment facilities, cinemas and many hybrids concepts (see story below, The hybrids are coming) will survive to see brighter days, because consumers still will want some out-of-home entertainment. During the Great Depression of the 1930s in the U.S., movie attendance rose as people sought temporary escape from the anxiety of the times. But some venues won’t survive. What are some factors that will make the difference for location-based leisure (LBL) businesses?

Armadillo

There is a whole new logic of competition that is very relevant today. It is simply no longer sufficient to be “pretty good.” To succeed today in a more highly competitive market, a business needs to be the most of something — most exclusive, most affordable, most friendly... you get the idea. A business also needs to be special to its targeted customers. Being in the middle of the road, where everyone thinks all the customers are, is the road to ruin. As they say in Texas, “The only thing in the middle of the road are the yellow lines and dead armadillos.” To put it bluntly, get out of the middle of the road, or expect to become roadkill. This is even more important as skittish consumers guard their purses and wallets, making supply exceed demand more than it did less than a year ago. 

If you have been following this eNewsletter for any length of time, you know how we have continually discussed the need for a location-based leisure business to follow the philosophy of focused assortment. This means offering a mix of leisure highly targeted to a particular market niche of customers and matching their needs, wants and values. This includes targeting a particular socioeconomic category. To put it simply, you need to decide where you want to shoot, and then do it with a rifle rather than a shotgun.

There are examples of successful focused assortment, community-based leisure businesses out there. Consider Chuck E. Cheese’s and Dave & Buster’s. Their 25+ year records attest to the success of their formula.

In these trying economic times, it can be tempting to try to broaden your appeal and change your targeted customer base. Successful businesses recognize that the best strategy is to stick to what they have been good at doing. If they make changes, they only tweak things at the margins to offer an even better experience, giving their customers an even more compelling reason to visit.

Legendary management consultant Jim Collins put it this way, “The signature of mediocrity is not an unwillingness to change. The signature of mediocrity is chronic inconsistency.”

Texas armadillo roadkill

Great companies of all types connect with their customers not only on features and price, but also on identity and emotion. These companies become virtually irreplaceable in the eyes of their customers.

Researchers at Gallup have identified a hierarchy of connections between companies and their customers, from confidence to integrity to pride to passion. Great companies have passionate customers. To test for passion, Gallup pollsters ask, “Can you imagine a world without this product or brand?”

In this current economic crunch, can your customers live without you? If they can, they very well may. And your business could end up just like those armadillos in the middle of Texas roads.

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