A Study in Profits

June 3, 2012 No Comments

Examining the Audience to Succeed with Redemption Games

For operators to be profitable with redemption games, they have to know the market they serve.  Games and prizes that work well in taverns and bars might not bring a sufficient return on investment in a venue that targets younger families. Operators, who understand their demographic, experience success, which is the true prize.
Seven months ago, Jon Backlund joined Donivan’s Vending Services, Inc. of Eau Claire, Wis., to expand their redemption game offerings. The company owned a few plush cranes and candy cranes, but Backlund saw the potential for machines that offer higher-priced prizes such as MP3, MP4 and MP5 players, watches and remote control cars.
“We have over 200 locations within a two to three-hour radius, but not all have redemption games, but that number is growing.” said Backlund, who is a pastry chef by training. “We service the machines once a week to make sure that they do not get low on inventory.”
Backlund sees a great deal of potential for redemption games down the road as the demand for video and arcade games diminish.
“It’s a hard time for video games with so many people having sophisticated game systems in their own homes,” he explained. “But we all want a prize, and we are now a society that wants a prize right away and the redemption games, especially games like the three-level stackers that dole out prizes of increasing value as a player’s skill level increases, give people the opportunity to take home something special from their dinner out or time spent at the local tavern.”
Backlund works with owners to place the games in high-traffic areas, but he admits that spacing is the big issue.
“The games have to go where they fit, but we do try to keep them in an area where customers see them easily.”
Brought up in the vending industry, Mike Merritt has owned Sydney, Nebraska-based Frontier Music & Vending for 35 years. His company operates all types of machines including redemption games throughout the Nebraska panhandle as well as in areas of Wyoming and Colorado.
“I was brought up in this business so I have seen a lot of trends come and go,” Merritt said.  “I operate machines in bowling alleys, bars, hotels, factories and business parks.  I don’t have redemption in all those places. As an operator, I have to know my customers and the demographic they serve and then we can place the appropriate machines.”
Merritt knows firsthand that operating redemption machines is labor intensive and service is important to their success, but he also sees the value in redemption machines.
“Everyone, both adults and kids, love to play these machines and get prizes.  The better the prizes, the more they want to play,” he noted. “We offer a variety of machines with both expensive and inexpensive prizes. We do not do ticket machines because we would have to have a person there all the time in our locations who will hand out prizes. An operation like that is too tough to maintain when you are not around any cities. I travel up to 2 1/2-hours one way to get to some locations and I try to service them at least once a month, so I have to have prizes that will keep people interested in playing and games that do not require me or an employee to be there all the time.”
Merritt offers cranes and some ball dispensing games, and he will mix up prizes between the machines to keep merchandise fresh.
“I want to always have quality prizes that will keep the attention of those who come to the bars and other venues,” he said. “When operators do redemption right, it can make them good money. One has to know the business, the customer and the patrons of that customer, and an operator has to understand good service.”
Located in the heart of Lake George, N.Y., Fun World is home to a 7,000-square-foot arcade and the only Laser Maze game, an interactive game requiring players to work through a maze of laser beams, in the northeast. The company also operates prize redemption games in about 20 locations in the Lake George and Warren County area including hotels, restaurants and family fast food venues.
“Redemption games are very big here. We are a family tourist area,” explained owner Douglas Coon. “Kids love to get tickets and prizes so that they have something special to take home after vacation.”
Popular both in the arcade and his locations are games such as Angry Birds and Angry Oranges that offer expensive prizes such as iPads, iPods and hi-tech remote control cars.
“We try and place the machines where they are easily seen, but there is only so much an owner of an establishment can do, plus it is amazing how kids can find them without much trouble,” added Coon.  “I think they work so well in the family establishments because the kids truly get something good for playing the game. The prizes are never wasteful and the games are challenging and fun.”
As owner of Amuse Me Games & Vending of Cedar Rapids, Iowa, Steve Bray has only one type of Redemption Game in his tavern and bar locations in his 15-mile service radius of the Cedar Rapids area.
“I offer only a slot machine redemption game in locations that allow customers age 21 and over entry,” he noted.  “I know it is a narrow audience but it is state restrictions. Iowa is the only state in the union that allows redemption slot machines.  They are popular but they can only be in certain businesses.”
By state law, Bray can operate two redemption slot machines per location unless it is a lodge or organization venue such as a Moose Lodge. Those sites are allowed up to four machines.
“Years ago, the only redemption ‘gambling’ game allowed was video poker but that was outlawed in favor of the redemption slots.”
With redemption slots, players can win prizes or tickets that are redeemed for food, drinks, gift cards or candy depending on the establishment.
“This is why they are in the 21 and over bars. You can’t be handing out vouchers for free drinks to people who cannot drink legally. I like the slot redemption games because they are not as labor intensive as the other redemption games.  I still service them often, but when you have a lot of redemption games out there, the service part of the business is time consuming.”
Jon and Cindy West have owned Eastern Amusements Inc. of Wilmington, N.C., for more than 30 years. The couple houses redemption games in their Carolina Beach boardwalk arcade and operate other types of vending and amusement machines to bars and restaurants throughout the Wilmington area.
“The redemption games are labor intensive, so it made more sense for us to have them under one roof in a family oriented area such as Carolina Beach,” explained Jon West.  “With the games being in one arcade, we also can experiment with placement.  The kids love to come in and win prizes. They have a blast and their parents know that they have a place to have fun.”
West notes that the most popular games are those that offer the most expensive prizes, from iPods to remote control cars.
“Everyone, especially kids who are technology savvy, know they want a good bang for their buck, so we offer great prizes for challenging games.  The better games we have, the more customers we get and in a family beach resort, that is everything.” -

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