always have worthy random give aways that anyone can win, even a beginner. So any money spent is not "dead" money.
that's how we do it.
but, i also believe in payouts should be worthy or travel and time and top performers should be awarded accordingly.
We give away a classic pinball machine for the winner of classics divisions at Richfield rollapalooza which we hold in the summer annual.
the entry fees don't even rise up to the value of the machine, but we still do it.

If you pay too far down the chain, it can make a tourney not worth attending if its not local.
make sure 1st- 4th is hefty enough of worthiness. Smaller percent past that if any (like a 30 player or less event).
The random door prizes will handle anyone else.

Obviously, it pends how large the event is and how large the buy in is. many variables.

Even if you have a charity event with no payouts, you can at least have nice prizes for the players who take their time to travel and donate. You can get prizes from local businesses and pinball companies if you are having a charity event without having to pay out of pocket for the organizer.
Players always deserve it IMO. We always give away tons of random prizes and earned prizes at our events.
We also do not keep money from the pot. We pay out all of the entry fees or if its a rare occasion with fixed payouts, those are mentioned upfront. no guessing games.