Following three basic concepts of arcade game room layout and design can give your customers the best-perceived value and maximize your profits.
In a well-balanced game room, coin-operated games contribute the largest share of revenue per square foot of the entire facility. Redemption games can easily account for 65% to 70% of total game revenue (merchandisers generate 20%, video 10%, novelty 3-5%). Redemption games average 5 times as much revenue as video games in the most efficient game rooms. Clearly family entertainment centers owners know redemption games are important. The sad news is that a majority of the general public believes that most redemption and merchandise games are a rip-off. You can easily change this negative publiс perception to a positive by fine tuning your arcade game room.
The main concepts of redemption game operation are easily understood but seldom practiced. A finely tuned redemption game operation comes from putting all the concepts together. Just taking care of one concept won’t create happy guests and maximize your profits at the same time. Once operators have learned the redemption concepts and gained a basic understanding of how the customer thinks, they will be able to keep patrons playing and coming back more frequently.
Let’s first dispel the myth “Little kids will play anything that dispenses tickets”. If this were true, there would be little point in learning anything beyond how to load tickets and keep ticket dispensers working. Let me ask, “Who is your customer, the child or the parent who brings that child?” This is not a trick question. The logical answer is “both”, so child and parent both need to have a worthwhile redemption game experience.
However, parent and child view redemption games from totally different perspectives. The parent looks for ‘value’; the child wants lots of tickets. Both want to play a game they instinctively know how to play. Adults and children at play don’t like to read directions. Your job is to satisfy all of their needs and make them repeat customers who will tell dozens of their family and friends about the terrific ‘value’ experience that had at your facility.
Three Basic Concepts of Arcade Redemption Game Room Operations
Concept # 1: The first concept you need to understand is known as “hit frequency”. This is the percentage of times you win a ticket or tickets out of the total number of times you play a redemption game. The same concept applies to merchandise dispensing games.
Hit Frequency % = [Number of Wins / Number of Tries] X 100
It is very important to have a high hit frequency (close to 100%) on most of the games that children play in an arcade game room. ‘Everyone loves to win! In redemption lingo, the phrase “a ticket every time” means a 100% hit frequency. A ‘mercy ticket’ is another term for awarding a ticket for every play. Remember, with hit frequency, we measure the number of wins, not the number of tickets won per win. A win can be 1 ticket or 100 tickets. Either counts as one win.
If you want your Skee-Ball games to have a very high hit frequency, set the first ticket level at 90 points. As long as nine balls go into the target area, the player will score 90 points and always win at least 1 ticket. [It took me a few years to prove that a 33% hit frequency would maximize my ticket crane revenues beyond belief as reported many times in The Redemption & FEC Report and Frank ‘the Crank’ Blog.]
Concept #2: The “ticket payout %” of a redemption game is the [dollar value of the tickets dispensed divided by the dollar value of that game’s collection] x 100.
Ticket Payout % = [$ Value of Tickets Dispensed / $ Collected] X 100
You can also calculate the ‘average’ ticket payout % of all the redemption games in your game room by totaling the [value of all the tickets dispensed during a collection period and dividing that amount by the total redemption revenues for that period] x 100.
A guideline is to set the average ticket payout % for all redemption games combined at 25%, depending on local trade market competition. To maximize revenues, each redemption game model should have a different ticket payout %, which can range from a low of 15% to a high of 35%.
How do we set each redemption game’s ticket payout %? ‘The Golden Rule of Redemption’ is redemption games must offer an entertainment value, plus a reward value (a combination of the number of tickets won and hit frequency) that is constant for each game. These two values have an ‘inverse’ (opposite) relationship. Another way of understanding this important concept is that the entertainment value ‘plus’ the reward value must be the same constant for each game. This is the guiding rule of redemption and is used to establish the ticket payout % on each game. (See chart below).
|Entertainment Value||Ticket Payout %||Game Type|
|Very Low||35%||Older Quick Play Games|
|Low||30%||Quick Play Games|
|Medium||25%||Token Pushers & Kids Games|
|Very High||15%||Alley Games|
The lower the entertainment value, the higher the ticket payout % must be. (A coin pusher is an excellent example.) A game with a very high entertainment value such as Skee-Ball or Ice-Ball of Fire-Ball [Fury] should have a lower ticket payout %. Balancing all the redemption games in your game room in relation to one another so they are all played to their maximum potential, is a delicate art in which entertainment value is combined with hit frequency, ticket payout %, and price per play.
Let me try to explain this in another way. Each game has a unique entertainment value to a customer. One of the main elements of entertainment value is energy level. Energy comes from two sources: customer participation and the game itself (play sounds, flashing lights, game and/or object movement, etc.).
For example, look at Skee-Ball, a game that takes about 30 to 40 seconds to play one game. An average score ranges from 180 to 210 (depending on alley length, bonus pockets, etc.). This game delivers a very high entertainment value, regardless of whether the player scores low or scores high. The hit frequency can be set at 100%. This is why Skee-Ball needs to be on the low end of your ticket payout % range. This is a must if you want games with lower entertainment value, lower player participation energy level, lower game energy level, and/or less time per play to be equally attractive to your players.
If you set your Skee-Ball games at a high ticket payout %, you will certainly see an increase in your Skee-Ball gross revenues. BUT the revenues of many other redemption games in your game room will decrease, and the ‘overall’ redemption game earnings will also decrease. The reason this happens is the Skee-Ball games would offer a huge combination total of entertainment value plus ticket awards and the other games would be viewed as ‘rip-offs.’ Each redemption game manufacturer would like for you to set their games at the highest ticket payout %. Don’t fall into this trap!
Other great games with a high entertainment value include basketball games, such as Super Shot, Super Shot Jr., Full Court Fever, Shoot to Win, and Mini Dunxx [2016 workhorse games in this category – Down the Clown, Milk Jug, Hoop Fever, Street Basketball, Iceball FX, Kung Fu Panda, Milk Jug Toss, Grand Piano Keys, Fireball Fury].
A game such as Rock ‘n’ Bowl or Wheel Em In takes about three seconds to play and does not involve a great deal of action. In spite of the lower entertainment value, these are very popular quick play games that earn high revenues constantly when they are set properly. [2016 update – Wizard of Oz, Sponge Bob Pineapple Arcade]
Coin pushers also have a short game time, and their ticket payout % should be high, but not the highest in the game room. This is because pushers have a high entertainment value. Players enjoy watching all the coins build up on the shelf edges, and their anticipation of having dozens of coins fall off on the very next play is much higher than you might imagine. I have 6-player coin pushers in game rooms that earn $5,000 to $10,000 per week, not only because of how the coin pushers’ ticket payout % is set, but also because of how all of the other redemption games in the game room are properly programmed.
Success in redemption games is a very delicate ‘balancing act’ that requires attention every week to stay fine-tuned – especially when a new redemption game is brought into the mix and/or games are rotated out.
Quite often in this industry a good redemption game doesn’t succeed in the market because those who manufacture it don’t know how to set their average game time, hit frequency, and ticket payout % so the game will have a good chance to earn well. Of course, it is impossible for any manufacturer to know which other games will be in the same location and where and how each game will be set in each of these categories. Manufacturers don’t typically research what other redemption games compete with their games to attract customers, so factory settings should not be relied upon.
You are correct if you now realize that a redemption game’s revenue can be increased by increasing any or all of the major factors. The increase can be long term, if the redemption game is a great game, or temporary if the game is average or even poor.
Setting Ticket Points at Your Redemption Prize Center
Concept # 3: Let’s dispel another myth that states, “I can make a profit on the redemption prize center by placing higher point values on the prizes.” This is known as marking up. What a huge greedy mistake! Greed can cause the demise of any business. The whole point of redemption is to make sure the customers get good value for their money. The key to a successful redemption operation lies in making sure that your game players can redeem the prize they desire without spending more on winning the required number of redemption ticket points than they could purchase that same prize in a retail store.
For example, if your players can purchase an item in a store for $4.00, they feel good when they win enough tickets to redeem the item and spend not much more than $4.00 in the process. Everybody wins! You win because you purchased the item at a cost of $1.00 (earning a gross profit of $3.00). The player not only won the prize, but was also entertained and have fun in the process.
This 4 to 1 ratio in contrasting perceived value to your actual wholesale cost is not always possible to accomplish, but it should always be a goal. Your mission is to search for prizes that your customers want and that have a perceived retail value of three to four times what they cost you wholesale.
Remember, you think and purchase wholesale, but your customers think and purchase retail. Many items are marked-up three times by retail store owners, which helps make your mission goal a lot more reasonable. Your customers know that items they purchase are sold at a price much higher than the storeowner’s cost; they are generally willing to chalk up any ‘slight’ difference in the amount of money spent to win a prize versus their percieved value of that prize to their entertainment experience.
Remember that even if your average game ticket payout % is 25%, you will in all probability only have a ‘redeemed’ % of 20% at the redemption counter because as much as one-fifth (20%) of the tickets are never redeemed. Yes, some of the tickets are saved, but many are lost to the washing machine, garbage can, etc. This also means you can increase your average ticket payout % from 25% to 30%, and still be assured that you won’t actually be redeeming more than 25% (your cost of sales %). Not a bad situation for a profitable business to be in! We should all be thankful that the Golden Rule of Redemption really works.
Family Entertainment Center, 2nd Quarter 1995