What you don’t know about crane and merchandiser economics
Finally, a method to the madness.
It’s hard to picture a bowling alley, arcade or family entertainment center without a crane game. Crane and merchandiser games have long been a part of our industry and while they still remain a popular attraction for guests, the economics of these games can be difficult to grasp. How are the costs controlled? How can you optimize gameplay? What should your payout percentage be set to? (Did you even know this was a setting?)
The concept of the crane game has been around for nearly 100 years. These games first appeared as “digger” games mimicking the mechanics used to dig the Panama and Erie canals. An article by Mental Floss says this about the mesmerizing concept of these games:
“The components may have changed, but that hypnotic interaction between player and claw has been going on for nearly 100 years.”
These games quickly entered hotels, train stations, drugstores, and carnivals. They caught the eye of plush vendors and these games adapted more into what we are familiar with today.
Crane games boomed in the family entertainment market because of their addictive traits and easy profit potential. But without proper care and maintenance, they can become a money suck rather than a money generator. These games do not benefit from a “set it and forget it” mentality.
Here are some ways to take control of your crane and merchandiser games. Read on for a break down some basic, but essential, components to running a profitable program. 👇
There are two key elements to managing a successful crane and merchandiser game program.
1 | Quality of the prize
2 | Payout percentage
A better quality prize will make guests want to play, but they will stop playing if they can’t win (low payout percentage). It’s essential to maintain the right balance of the two. In community locations, win rate is an even bigger factor as to whether your players will return to play again.
This is where the importance of managing your Cost of Goods Sold (COGs) comes in play. Your COGs is how much you’re spending on prizes being won versus the dollar amount you’re making on gameplay. You want to optimize what you’re spending on prizes so games have a high perceived value — making players want to play — without spending more than you’re making on the game.
COGs management is important to your entire game room ecosystem. The problem is many people don’t treat it with the priority it deserves. Read how to hone in on your COGs percentage and management.
Luckily, there are some simple equations you can work through to make your COGs game plan in regard to cranes and merchandisers.
Before we talk about formulas, you need to know the definition of some important terms.
- COGS: Cost of Goods Sold — how much you’re spending on the prizes being won versus the dollar amount you’re making on gameplay.
- Win-rate ratio: How many times a guest has to play a game to win a prize
- Payout Percentage: Cost of prizes dispensed divided by gameplay revenue.
To set your crane + merchandiser program up for success, you’ll need to implement proper planning and tracking to discover base-line profitability and potential for improvement. Here are a few examples 👇
Step 1 | Payout Planning Calculator
It’s a common perception that crane and merchandiser games are a “rip off.” Make sure your games are set to the industry standard of 25% at a minimum. That will give you the best bang for your buck, while still allowing winners. The more people walking around with a crane or merchandiser prize, the more people will want to play.
For new cranes or new prizes, enter the price per play, cost per prize, and the standard payout to see how many plays it should take to win one prize.
For this output, you’ll want to take the cost per prize divided by (price per play times your desired payout). For the above example, the equation looks like this 👉 1 / (.5 x .25) = 8
Step 2 | Actual Payout Calculator
Track your true payout percentage according to the actual revenue, prizes dispensed, and cost per prize.
Here, you take the total amount spent on prizes paid out, divided by actual revenue. The equation looks like this 👉 $10 / $100 = .10 or 10%
Maintaining your merchandiser game program is a bit more advanced. There are different price points for the prizes and different machines that perform in different ways.
Track your true payout percentage according to the actual revenue, prizes dispensed, cost per play, and cost per prize. Again, the industry standard is 25% payout.
Again, take the total amount spent on prizes paid out, divided by actual revenue. The equation looks like this 👉 ($120+5) / $500 = .25 or 25%
Winners make players
In community locations, win-rate is a telling sign as to whether players will return to play again. Use the formulas below to discover your current win rate. (It’s fun math. We promise. 🤓)
Remember, payout percentage = cost of prizes dispensed / game revenue
Therefore… Win Rate = Prize Cost / ($ per play x payout %)
Try this example equation 👇
In words: For a game that costs 50 cents to play and dispenses a $2 prize, one in every 16 plays should be receiving a prize payout. This will keep your payout percentage at the industry standard of 25 percent.
It is important to balance the perceived value of the prize and the win rate for the player; because the more expensive the product the fewer winners there will be and vice versa. A player must deem the prizes as “worth it” for the money and chance of winning. If players see other guests walking around with prizes won from a crane or merchandiser game, they will be more likely to try their hand at those games. This is why the industry standard payout percentage is 25 percent.
Don’t want to do the equations yourself? Download our Operational Toolkit and crack open the crane & merchandiser calculator template.
Other self-paced learning resources
- Merchandising 101 — you will have to create a free Pathwright account to access this content. This eCourse includes lessons on both redemption and cranes/merchandisers. It’s a great training tool for new staff or refresher content for veterans. In the course, we break down the 4 fundamentals of a crane and merchandiser program.
- Operational Toolkit — We created this toolkit to help you optimize your redemption program. Like mentioned above, it includes helpful resources like a crane and merchandiser payout calculator excel sheet. It also has a redemption area checklist, a redemption cost of goods sold sheet and more! Access the toolkit here.
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For more topics like this, listen to our podcast — Tchotchke Talk — where we talk nothing about tchotchkes and all about business strategies and innovations within the family and bowling entertainment industry. Click here to listen or find it on all major podcast apps.
Our proprietary Storyboards are a series of pre-designed merchandising layouts, backed by analytics. They’re created with a specific theme or category in mind to engage your guests and make finding the perfect prize a piece of cake.