Setting Win Percentages to Make Money With Skill Cranes.

Cranes and merchandisers are an important game category in the amusement game industry. This games group currently accounts for almost 20% of my company’s annual gross game revenues.
That is fairly significant and why I have continuously honed my knowledge over the past 47 years, learning from the crane “masters”** and now passing on these five little nuts of wisdom to you. Our cranes are not rigged and a lot of effort goes into giving our players a high win frequency. Winners make players!Elaut Top Quality Entertaining The World AMUSEMENT & GAMING

** Four such crane “masters” I’ve been fortunate to have as mentors are: Elaut founder Achiel Verstraeten (Eric and Helga’s dad), Richard Oltmann (Enchanted Castle/Family Fun Companies), Steve Shoemaker (Wedges & Ledges) and Clarence Mabe (M&P Amusements).

FrankTalk0716

Crank’s Crane Story Chart

“The Story”

People like to win, but they also like to be challenged. We, as the world’s crane and merchandiser operators, were put on the planet to provide fun to our players while they use their skill to win a desired prize. We, in turn, get to make an honorable living in the process. That is pretty much the premise that begins the story told through the following 5 steps.

Step 1: We start off with a popular prize that we can purchase in a wholesale cost range that has a perceived value of three or four times what our customers would pay for it at a retail store or online. This prize must be attractive and appealing, and its size and weight must be compatible with the size of our particular crane or merchandiser bay or compartment. Our actual wholesale cost for this prize must fit into one of the cross sections of the vertical and horizontal axis’s ranges on the “Crank’s Crane Story Chart” that I’ve put together for you. So far so good.SIbanner

Step 2: We need to determine a base price/pay. This could be 25 cents, 50 cents, $1 or just about any amount that is reasonably consistent with the price/play of the other games in our game zone. Of course, this base play amount will be discounted for group packages like birthday parties, but we can get to that later. For now, let’s keep it simple for this example and choose a price/play of $1.

Step 3: We have chosen a prize, and know how much we paid for that prize, and can easily add an average shipping cost percentage and sales tax rate (if any in a particular State) and come up with our total purchase cost. For this example, let’s assume that this licensed prize cost us a total of $4 and we see that $4 is a cost we can use according to the chart (above).

Step 4: We need to choose a cost of sales (or what I named years ago as the “Win %”) that’s fair to both the player and our business model. The “masters” already taught us that for cranes and merchandisers, a fair Win % ranges from 25%-30% (based on the competition within both the marketplace and within our game zone). For our example, we chose a 30% Win %.A & A Global Banner

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Step 5: Figure out how many theoretical plays (X = # plays) are needed to result in one win so we end up with a 30% Win % (% cost of sales). This was simple math in my day and probably 3rd-grade math today. Rather than try to do these calculations in your head, let’s write down the two formulas it will take to solve for X:

  • A. Gross Crane Revenue = X (# of plays) * $1
  • B. Gross Crane Revenue * 30% (0.30) = $4 (Divide both sides by 0.30.)
  • Therefore, Gross Crane Revenue = $4/0.30 = $13.33
  • $13.33 = X * $1 (Divide both sides by $1.)
  • 13.33 = X = Number of Plays needed to result in one win. [This is an average over hundreds of plays]

Hooray! We have just learned what “Hit Frequency” is!
The 6th-grade math calculation we just performed is the actual definition of “Hit Frequency”: The number of tries it takes to get one win, any type of win. It doesn’t matter if we win, for example, one ticket or 100 tickets playing a redemption game. A win counts as one win. Another example is how many times on average can you pick a diamond from a standard deck of cards? There are 13 diamonds in a deck of 52 cards so the answer is 1 out of 4 tries. The hit frequency is 1 out of 4. It seems as though I’ve studied hit frequency since I was 5 years old because I have always been fascinated with mathematics, especially statistics.

FrankTalk07161My Hit Frequency Story Taught Me About Cranes & Girls

At 10-years old, I was very shy and one of the youngest in my 7th-grade class. It was the first week of junior high and our school was a combination of kids coming from the other elementary schools.

There were many new classmates who were strangers, especially lots of new girls. There was a dance and I wanted to go and it took me as much courage as I could muster to ask one of the new girls. “Would you like to go to the dance with me?” I asked. She replied, “Sorry, I am going with Peter.” In baseball lingo, that’s zero for one, and a strikeout to boot. I then proceeded to go to the other side of the room and ask another girl. She also said no. Up and down the aisles I went until I had asked 11 girls and each of them said no. That is 0 for 11 –– quite a slump and pretty frustrating. However, on my 12th try, one girl actually said “Yes”! A big smile came to my face. That’s 1 out of 12, better known as 1:12. It was a weak batting average of .083, but a hit is a hit even if it’s a single. Getting to first base counts.

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Even today, I fondly remember this very special girl who said yes. I often tell her that I was at my wits end and don’t know if I would have ever asked girl #13, instead staying home and not going to the dance. It did teach me that at least for my generation, a hit frequency of 1:12 was tolerable, but it would have been a lot more exciting with a higher one!160222_RaFECR_PETS_ToyFactory_468x90_Banner_300

Hit frequency is a very important aspect of human nature. Think about how many times you would try something and how many times would you continue if you weren’t successful in a reasonable number of attempts? When there is a line at a bank or a store checkout, how many people standing on line does it take before those at the middle and end of the line start talking to each other about how inefficient and inconsiderate the business is to let the lines get so long? (The answer is five and it gets worse as the number of people on checkout line increases.)

Okay, back to cranes. In our example, we come up with a hit frequency of 1:13.33 (round to 1:13). With experimentation, I have learned that a range of 1:10 to 1:12 is a good hit frequency range for cranes. So once you choose the price/play, you pretty much have a good idea of what cost range of prizes you can choose. If the cost of the prize is slightly higher, the hit frequency “ratio” will be higher if you still want the Win % to come out at 30%. If you want a lower Win %, then you will end up with a higher hit frequency “ratio.”

By now you can easily understand why as the hit frequency “ratio” increases (it takes more tries to win), the player gets frustrated and often stops playing and has a bad experience. For cranes, that means that our cranes will gross less revenue if they are too difficult for our players to win.

FrankTalk07162What Have We Learned?

People all over the world react similarly to hit frequency. What is still baffling to me is that at different periods of time in history and with different age groups and different demographic categories, the hit frequencies can vary widely. For example, high-end merchandisers with prizes valued at say $500 require a hit frequency of 1:1666 if the Win % is to average 30% over 10,000 plays. Yet players will take a few attempts at $1/play to try their skill at winning a $500 prize. Perhaps they feel that the reward is great and $1 is not much so pay in their economic world. Just to make sure you understand this: A high-end merchandiser would need to gross $1666.00 with a player winning one $500 prize for this game to have a Win % of 30%.

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Through years of experimentation with hit frequencies, I have learned that most people will really enjoy playing when the hit frequency is 1:3 and that’s how I set up my Tickets-Tickets-Tickets crane. I recently had the privilege of hearing Dr. Mark Griffiths of the Gambling Studies University of Nottingham, U.K., speak at the EUROMAT Gaming Summit held May 26 in Barcelona, Spain. Mark is an expert in the field of hit frequency. He told me that in his hundreds of experiments, he concluded that the most efficient hit frequency in the gaming industry is 1:3.3. That is slightly more difficult than how my Tickets-Tickets-Tickets crane is set up and shows me that perhaps I can lower my 30% Win% to 27% and the gross revenue will slightly increase and stay that way. (I find that hard to believe, but perhaps Mark knows something that I haven’t yet learned or noticed about human nature and game play. Hmm!)

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What About The Prizes?

Understanding the above formulas is the easy part when compared to being an expert at picking the most popular prizes. That is where I leave it up to our veteran professional wholesale merchandise suppliers. They spend much of their time watching Saturday morning children’s cartoons and going to toy stores and merchandise shows around the world to be on top of this.

Today the top crane prizes are the hot electronic items, accessories and licensed plush toys related to newly released movies. These items are listed every other month in my Redemption & FEC Report including item numbers, prices and the companies that sell them. RePlay does an excellent job of keeping its readers (hey, that’s you) up to date with the latest prize trends.

Conclusion

Once you zero in on a hit frequency, it is now time to adjust the other crane settings as you play hundreds of test games and record your hit frequency and Win %.
In a future article, I will go through all of the various crane difficulty adjustments, that once set for a specific prize item, only requires slight tweaking each week, as we all know that our repeat players improve their skill over time. The good news is that a good operator will change the prizes at a frequency of at least every three months, and the above five steps must all be repeated as well.

[Editor’s note: For a first-time read or a refresher, Part One can be found in the February 2016 issue, Part Two in March 2016 and Part Three in June 2016. All are available online at the RePlay website: www.replaymag.com/current_issue/frank.html.]

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Amusement Entertainment Management, LLC, we offer a full range of consulting services, including early-stage feasibility analysis, business plan development, funding assistance, and conceptual design and layout services.

 

RePlay Magazine – July 2016

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