Quote:
Originally Posted by Th3 Omaholic
Does Nordstrom offer the cheapest clothing?
Does Zappos offer the best rewards program?
No, but what they do offer in unparalleled customer service, and I think that's the brand David is going for, my biggest concern is scalability.
Eventually your business will come to a point where you can't answer every question in a thread. I'm sure you've anticipated this; what's your plan for this scenario, and overall continued growth and scalability of Hero Poker?
I like that you're willing to credit users the $12 WU fee, and $15 checks fee, but how long are you willing to extend those gratuities?
Online Poker sites, like banks, and gyms, etc., they do two things particularly well, they'll say anything to get you in, and prevent you from leaving. My question is, what are you going to do for us "in between" per se?
Like I mentioned a few posts ago, I've signed up for Carbon, then RPM, and then I see this thread, am WOW'd by your responses thus far and despite RPM having the better promotions, I'm very interested in signing up and depositing at Hero. That's because customer service goes a long way with me, and a ton of other poker players as well.
Positioning your brand w/ CS is tough, and a ton of companies fail to execute. I LOVE what you're doing so far -but scalability is my biggest concern. What's your response to that?
PS. I mentioned Zappos earlier, just based on your responses (and not because your Asian ) you remind me a lot of Tony Hsieh, Zappos' CEO. If you haven't read his book, I'd check it out, it's called Delivering Happiness.
You're absolutely correct on all levels and I'm happy to reply to this post as it gets me excited to reply to a business strategy/growth question than to other type of questions (all equally important, but these questions I enjoy more).
1. Scalability: completely agree. What is going to happen is that we will set up a private community or communication channel for our currently active players by Aug/Sept and each area of our different divisions: Farmer, to Spartan, will have their own dedicated divisional host.
2.Current Commitment: But I know the current model is unsustainable if we grow about 2 more times that where we are at. While most people during the day don't actually work every minute of the 8 hour day, I pretty much work nearly every minute of a 16 hour day, so that probably puts my productivity at about 8 support staff alone, pull the fact that I do not need to wait for authorization to make a decision probably makes me about 10 people's worth of support ability. That being said, if we continue to grow along with the network, it is unrealistic for me to keep up this pace. But I do so because for me, let's say I owned the best steak house in the world or even ran a Four Seasons hotel or a chalet in the Swiss Aps; even if I were a billionaire owner or top chef, I would still greet my customers in person and sit them, and if they even needed a glass of water, ensure that they go it or that I got it for them. Now, I'm a firm believer in setting the tone, so during training for my divisional support leaders, they will need to read through all of the forum posts that I've done and really understand where the standard is at. But I'm well aware and prepared for the ramp up.
3. Still going for boutique site: Our strategy hasn't changed, some other sites might be going buck wild right now with visions of grander, and, more power to them, but after reviewing things on many levels and having the experience I have for both live, tournament tour, and online from the market leader to a start up, I feel that boutique is what I want and what also fits in with being part of a network.
No for the most part, site are on networks because unless you are in a regulated markets, its pretty nuts to start from scratch cause you can't do mass advertisement. So lets say 1M players join your site but all at different times, then the net effect on your network is zero, just never kicks off, where as with mass advertisement, chances are that simultaneously a thousand players will log on at the same time and presto, insta network (not that easy of course, but you get the point..) But If we can provide a good range of players for the network (player composition from regs to casual) then we can also benefit from the network's great liquidity. So there isn't really a burning need to continue to grow at a breakneck speed and I think we add value to the network by being a boutique brand. So as nutty as it sounds, I won't put growth over this idea of quality and interaction.
4. Continued Promotions: I guess the biggest thing is, and what it is really difficult to explain right now is that, as a boutique site, the automated rewards system can only be a base line for rewards at our site. As you mentioned, like a bank or gym to sign you up on a membership, really do not do promotions in between and more often than not expect that the cost of switching services is enough to keep you with the service. Now, how sustainable are taking care of the fees etc, they are actually quite sustainable providing that the user base is consistent and loyal. Because if I were to calculate the value of player on a short term basis, meaning 3 months or less, then it is highly unlikely that I would recoup any marketing investment. But if I were to calculate the value of a player for the next 3 years, then it makes sense.
All sites have this term called 'player churn' and it means, that every month X% of a site will lose it's player base and the worse the service, the more the turnover/churn rate is, just like at a good place to work or not. As long as I can keep my churn rate low and my player activity high, then these transactional costs are more than reasonable, should I am able to ramp up to this model within a 2 year period and maintain it for the next 3 years. So that also depends on the corporate strategy of our company, are we in it for the long term, have we allocated capital to prop up this business model until it can run on it is own. And yes, this was always the plan, black friday never changed it, it just accelerated our promotional schedule.
Honestly I would have never engaged twoplustwo for at least a year until everything was fully up and running, can you really imagine me coming here pre-black friday and having anything I say taken at all seriously and if it was, it would be, 'Dave that is nice, but I like Stars, but you seem like a good guy, gl!' I'm not complaining that we're here now but I'm only able to use words to describe some future possible event rather that being able to show you concrete examples like I planned to do originally.
So, corporate strategy wise, yes, we can continue to provide what we are doing, but what about going above the base line of automated rewards?
5. Actually Giving More: I think this really depends on operation margin, much like Stars, they have enough margin that when there is a big event like the 10 billionth hand, then can afford to give way hundreds of thousands of dollars or a 100k freeroll every month etc. In much the same way, instead of being for just the Super novas, we'd like to do that all our divisions. Obviously the higher division the better benefits, but not necessarily a higher frequency.
Also as the composition of our user base becomes better known, we can also target our promotions so that they are meaningful. But this is all possible because we have a better margin, not to hold as profit but to give back to the player base.
Now this will range from Freerolls, valued added tournaments, reload bonuses for a group, and then also live event packages, etc. But as a boutique site, I do want to approach the additional rewards as part of more a lifestyle oriented angle. Example: when we have an event, sure we are going to go into a live tournament, but before we get there I want us to go on tour together as a group. And if that group is only 10 people, then 20, then 30, then great. For most poker players, poker takes up a lot of time, and why not get to know the people you play against/with and why not get more out of poker than just a chance at millions but rather a really cool travel experience because of poker. And that isn't that difficult to set up (helps that I've done as well at Stars), but I want to take it to the boutique level and that includes merchandise that I want our members, when then get to certain level to get that merchandise at no cost because they are our loyal members.
I don't to get too much into before it is actually in place as everything will be unique, but the way I think of it is as. Now this entire model only, only works, if our churn rate is low and our loyalty is high, basically word of mouth should be sufficient in the long run and we may need to even limit membership via invitation (lol, I wish right!?!) but that is where we are headed. Is it the most monster profitable? No. Will it make the investors hundreds of millions? Sorry likely not! ( lol. Don't fire me please! We already talked about this and you guys agreed). but will we have a stable company in an uber highly competitive market that can continue to develop? Yes and for me, my first love has been business strategy, and damn it if I don't love a challenge.
And the results isn't with the bottom line, its part of it, but the results is making a sustainable and high value company in a highly competitive environment: meaning I enjoy getting in there with the best of my fellow corporate bastards and think I'm damn good at it. And that is my sincere passion to really compete on that level and I hope it translates into also what I prioritize as long term value for both the players and company. In this type of competitive market, expectations need to be reasonable and achievable. There will never be the rise of another Party, PS, FTP or Paradise again, it is going to all be about the small deliberate steps from now on.
6. Execution issues: Execution is normally 99% of any business, and in a highly competitive situation, about 97% of any business. Strategy, for what it's worth, only gives an edge if it is completely executed properly.
When I left Stars, which was in March 2010, people were saying, 'wow, Dave did a great job for Stars'. Now in May 2011, people say, 'Ah Dave really didn't do a great job for Stars, cause they are still growing in Asia and it really wasn't just him, or else it would have just fallen apart'. And I love to hear that, I love to hear that things are better than where I left things because it means my strategy did work, that I did set things up with a mature business mind set with execution that was part of the system in mind. That I gave the right training to my staff, I set the right priorities. And that actually gives me more confidence in what I do now.
7. Concluding remarks: Zappos is a great example and I've never picked up that book actually, but I'll give it a read though, but I'm very familiar with the case study of it. But what makes poker an inherently more difficult environment is that everything with serious poker players is 'EV' related and it is extremely hard to quantify what this 'boutique' value is until it is fully running, but to keep it all simple, I think if our players can be proud to associate themselves with Hero, then I think we're on the right track.
But very very valid points which really cut into the heart of our business, but the short of it is, if Hero can achieve a low churn rate and high loyalty of active players, even if the over all volumes is no where close to mass market levels, we can do all of the above in spades.
Cliffs cause people demand them (And I'm wordy as hell!):
1. Likely by Sept we're gonna staff up hardcore on the communication support staff on the promotional side
2. I am a workaholic and have an addition to working and I need help, but right now things are workable with our current user base.
3. Being on a networks works for Hero to not have to worry about player liquidity and focus on existing players and we love Merge (shilling!)
4. We still are going for a 2 year ramp up investment period over all
5. Our promotions will be more lifestyle poker based over all
6. Execution is a major issue and strategy wise have it covered, but we'll have to wait and see if don't drop the ball and can really execute properly
7. If player are sincerely proud to be associated with us, then we'll be able to deliver the goods.