By: Howard McAuliffe
The three terms “payout, “tickets redeemed,” and “cost of goods” sold are often used interchangeably but they refer to very distinct measurements.  This is important because the relationship between these measurements helps a manager to understand their operations.  We’ll define these terms, and then explain how to use them in your arcade.
Payout- The dollar value of the tickets out of the machines.
Tickets Redeemed- The dollar value of tickets redeemed at the redemption counter
Cost of Goods Sold- The actual costs of the products purchased from vendors.
A chapter of a book could be written on why these three numbers are useful, but here are a few common issues that can be spotted by understanding these numbers.
  • Tickets Redeemed are nearly equal to Tickets Issues: If this is happening consistently there are likely one of three causes.  Your facility is in a tourist area, and customers don’t save tickets because they are not coming back soon.  You have primarily young customers, kids 6 and under typically spend all of their tickets.  Finally, you don’t have a good assortment of middle and higher end redemption product that customers want to save for.  The first two are difficult or impossible to fix, the last is a simple fix.
  • Tickets Redeemed are higher than Tickets Issued: If tickets redeemed are higher than tickets issued it is time to ask the manager why.  It’s possible, a big customer has saved up for months and redeemed her tickets for a high-end prize this week.  However, if this is consistently happening, then perhaps employees are giving away tickets.  If you have a ticket crane without RFID or a pusher with card sets that can be saved like Wizard of Oz or Spongebob Pineapple, then employees have the ability to add tickets to cards manually.  Some employees with be overly generous with this ability and some will use it to steal.
  • Cost of Goods Sold is Higher than Tickets Redeemed- If your actual costs are higher than the items being redeemed there are one of three likely issues. Employees are not diligently scanning items out of the counter, so more product is being given out than is accounted for.  Your inventory is building up, either a vendor is loading you up with too much product if you have auto-shipping or your buyer is over ordering.  If your inventory level has not increased and employees are scanning out all items, then product is missing.  Either there is a theft issue, or inventory is misplaced somewhere in the building and not being counted.
By understanding these key measurements, and what the typical ratios are for your location, you will quickly see when they get out of balance.  You won’t know the answers specifically, but you will know possible issues and certainly where to start asking questions and investigating.