Choosing Your Markup

By: Sean Silvia

As the go-to person at Rhode Island Novelty for all things EPL-related, I have had countless conversations with customers regarding markups over the years. Whether it was a location wondering if they should change their markup or a new location trying to decide what markup would work best for them, I’ve learned a lot through these conversations. Everyone has a different thought process and there are numerous factors that may influence that thought process when it comes to choosing a markup. Let’s start by putting ourselves in the customer’s shoes:

I want you to pretend you visited my arcade. Below are two scenarios:

1. You spend $10 in my arcade and leave with a ninja sword, a coil spring, galaxy slime, a gummy hotdog, and a Tootsie Roll.

2. You spend $10 in my arcade and leave with a coil spring.

In both scenarios, you spent 250 tickets. However, in Scenario A my location had a 1.50x markup. In Scenario B my location had a 5.0x markup. Which scenario has you wanting to come back more?

I always tell my customers you want your customer to leave your location feeling like they beat the arcade.  Keep in mind in both scenarios you spent $10 in my arcade. In Scenario A, you left with items that cost me a total of $1.67, and in Scenario B, you left with an item that cost me $0.50. I made most of my money off the games you played, not the prizes in the arcade.

With that being said, there are several factors that play a part in choosing your markup. These are some of the most important:

1. What is your game room payout? We find that most arcades payout somewhere between 25-30%. Meaning if I were to go in with $10, I would leave with somewhere between 250-300 tickets if I didn’t get lucky and hit a jackpot. Locations with a lower payout tend to lean toward a lower markup. On the contrary, locations with a higher payout often elect for a higher markup.

2. Is your location in a tourist area? Often, these locations elect to go with a higher markup as they expect customers to visit once or twice during their stay and spend their tickets before heading home.

3. Do you own your games or are you in a profit share? Locations that own their games and are not in a profit share usually lean toward a lower markup. Locations in a profit share typically have a markup higher than a 2.50x markup, but most prefer a 3.00x markup.

a. We recently looked at the markup data in our system. We started by looking at ranges and then focused on individual markups.

b. We found that 63% of our customers use a markup between 2.00-2.50x. We dug a little deeper and found the following information:

As you can see, the most common markup is a 2.00x markup. This was followed by 3.00x, 2.50x, and 1.50x markups.

4. Additional factors to consider when choosing your markup:

a. Do you want to tier your markup? This is great to help make some of your higher-end products more attainable. Rather than doing a 3.00x markup on a $450 PlayStation 5 (135,000 tickets), you may want to consider a 2.00x markup (90,000 tickets). This is a great way to reward your repeat customers who have been saving their tickets for a bigger prize. It also helps move the higher-end product that tends to sit for extended periods of time.

  b. How do you want to round your ticket values? Most customers round their ticket values so they have consistent numbers. For example, you may want to round items under 100 tickets by 5 (25, 30, 35, 40) and items over 100 tickets by 20 (100, 120, 140, 160). You can continue this as you get to higher ticket values and round by 50, 100, 250, 500, or even 1000.

 There’s a lot you need to consider when choosing your markup. Our website allows you to adjust your markup in your account so you can see what your ticket values will look like. This also allows our website to generate your EPL with the markup you have saved on your account. If you ever have any questions about your markup, please reach out to your salesperson or someone on our redemption team so we can help.