Redemption games are a very important part of any FEC and should be earning a significant portion of the total revenues in some cases as much as 70-75% of total game revenues. If your redemption games are not one of your highest sources of revenue, perhaps you are under the ‘spell’ of one or several of the myths that are ‘cast’ around the FEC industry about redemption games:
MYTH #1 (the biggest myth of all): “You only buy the redemption games ‘once’ for your FEC and they will last forever. All you have to do to keep making money is to change the merchandise.”
This myth goes back to the old amusement park era and the 1950s on the New Jersey Shore boardwalk arcades and is preached even today by some who are in the business of selling redemption games. FECs are a different animal. Eighty-five (85%) percent of a non-tourist destination FEC’s customer base is made up of ‘repeat customers,’ unlike the transient customers who visit large amusement parks and boardwalk arcades once or twice in a season.
People love to visit new places and experience new things. Many FECs are seeing their revenues decline after the first year. The smart ones realize that everything in their FEC must change as often as possible to constantly (every 3 months) bring in new or different redemption games and upgrade some existing models. We should all know that the mix of redemption games needs to be changed (rotated) at a minimum rate of 10% per year. Of course, there are special redemption games that will stay on location longer, but even Skee-Balls and Ice-Balls need to be upgraded every 5 years. The game layout positioning should also be changed as often as possible (quarterly) and customers will ‘perceive’ that several different games have been brought in that they hadn’t noticed before.
It just fascinates me to no end to hear customer reactions relating to ‘change’. For example, in one of our FEC locations that has 110 games, we had just brought in three new games and moved around another dozen games to new positions. When the customers came in we heard comments: “Wow! Look at all the new games that they just put in!” and “There must be 20 new games here!”
MYTH #2: When it comes to birthday party driven FECs, we hear: “Little kids will play anything that dispenses tickets.”
This may be partially true for very young children, but let me pose and important question, “Who is the real customer, the young child or the parent who brings the child?” This isn’t a trick question. Logic dictates that ‘both are the customer’ and ‘both need to have an excellent experience’. Parents are very sensitive to ‘value’ and even if their child is having fun, don’t ever forget that the parents are also evaluating the experience from their own perspectives.
Redemption games need to offer a high ‘entertainment value’ plus a ‘reward’ (combination of the number of tickets and ‘hit frequency’) that are consistent for each game. This translates into the fact that new redemption games (and they keep getting better and better) need to arrive at your FEC on a regular basis. The really old ones whose revenue have declined are certainly not helping the image and brand of your business.
MYTH #3: “I can make a profit on the redemption counter by putting higher point values on the merchandise. The customers will never know.”
What a big mistake! Greed can cause the demise of any business! The whole idea of redemption is to make sure that the customers receive ‘high perceived value’ for their money spent.
“Perceived value” is what a customer feels an item or experience is worth. For example, if your customer can purchase an item in a store for $3.00, they will feel great if they can win enough tickets to redeem that item and spend approximately $3.00 (or slightly more) in the process. Everybody wins! You win because you purchased the item at a wholesale cost of $1.00 (you have $2.00 of gross profit). The customer not only won the item, but received an ‘entertainment value’ also. Your mission is to search for merchandise that your customers desire and has a perceived value of at least three times (more preferably four times) what it cost you.
Why is it then that some FECs have a redemption ticket payout of 15% or less? It is very doubtful that any of you can consistently purchase items that have a perceived value of six to seven times what you pay for them. Do you really think you are fooling your customers? Having them redeem many more of their tickets for the same prize at your FEC than at your competitor’s FEC, is a negative experience that they will never forget.
Let me pass on a very important statistic. If a customer has a good experience on a visit, that customer has a 65% chance of coming back again. If that same customer has an ‘excellent experience’, the chances of a repeat visit just increased to 95%. You can increase your repeat business by 50% by just putting your efforts (and money) into giving your customers a great experience! Understanding redemption and putting that knowledge into practice is a quick and easy step to upgrading your FEC from ‘good’ to ‘great’.
Reprinted and updated from Fun Extra (IALEI), Issue #12, February 1996