by Abco | Nov 20, 2012 | Technology, Vending Business Show
Future Vending Technology ROI An interview with Mike Bunt, General Manager of Corporate Marketing Equipment of the Buffalo Rock Company
Future Vending Technology ROI The future of vending as it relates to sales and service is a topic that lots of vending operators are interested in but may not be able to evaluate from an operations point of view. Some of the hot topics today are healthy vending, interactive displays, campus id cards, mobile commerce, and micro markets. Have you evaluated any of these or similar opportunities in vending for Buffalo Rock?
“You must be careful on the new technology, we are, there’s a lot of it out there we call ‘foo foo’ technology that really is a marketing ploy today to those who like all the gadgets… but if it increases service calls, we have to be careful not to get overly involved with it.”
“We look at up front costs, then increased sales or decreased service calls and a lot of times it’s easier to come up with a decrease in cost of lifecycle than pin pointing an increase in service calls.”
Mike gives several examples of what he calls a win on technology, listen to the podcast:
EPISODE TRANSCRIPT:
Future Vending Technology ROI Tom Shivers: This is Tom Shivers with the Vending Business Show, here with Mike Bunt of Buffalo Rock, general manager of corporate marketing equipment of the Buffalo Rock Company. Thanks for being here, Mike.
Mike Bunt: You’re quite welcome.
Tom Shivers: Today we’re going to talk about the Future Vending Technology ROI and especially as it relates to sales and service because it’s kind of a popular topic today among vending operators, and sometimes it’s hard to evaluate from an operations point of view. Some of the hot topics today are healthy vending, interactive displays, campus ID cards, mobile commerce, and micromarkets. Have you evaluated any of those or similar opportunities in vending for Buffalo Rock?
Mike Bunt: Yes. Buffalo Rock is always looking at new technology. As a matter of fact, I attended the NACS trade show in Vegas and brought back six new pieces of equipment for testing. When we analyze equipment, we look at it from two points of views. One is the sales side and the other obviously is the service side of it. There’s all kind of new technology in the trade that is exciting. However, does it bring a value to the customer or to the company, and that’s what we have to look through.
Mike Bunt: For instance, LED lights. They claim to increase sales, which is a hard claim to back, but it does present the product in a much better light. However, we know LED lights last longer than the standard lighting and we know it’s going to reduce service calls, so the upfront cost of the LED is a no-brainer to us because we know we’re going to save service calls down the road.
Mike Bunt: And everybody must be careful on the new technology. We are, and there’s a lot of it out there what we call foo-foo technology that really is a marketing ploy to the youth today that likes all the gadgets and the gizmos, but if it increases service calls, we have to be careful not to get overly involved with it.
Tom Shivers: Yeah, for new vending technology, how do you go about weighing the cost versus benefits or say return on investment?
Mike Bunt: Well, we look at it from the standard ROI procedure. We look at the upfront cost and then we’ll look at increased sales or decreased service calls, and a lot of times like I say, it’s easier to come up with a decrease in cost of life cycle than pinpointing an increased service call. For instance, a few years ago everybody migrated to the electronic boards on equipment, and one of the things we noticed is that we were going to a lot of vending machines just to reboot the boards in the machines. Well, talking with the manufacturers, we convinced one, Vendo, to build a reboot chip if you will that basically just checks itself on all its boards, and if it senses a loss of connectivity, it reboots itself automatically. The boards that we were in test with, it drove service calls practically out of it for won’t take money calls, so that would be what we’d consider a win on technology. Now the consumer never sees it, but they enjoy the benefit of it because every time they go to the machine, they can buy a drink.
Mike Bunt: The interactive display boards, to me that’s more of a marketing ploy to the youth. It does draw excitement to your machines, but then you look at the cost of the doors versus the increased sales, and the placement potentials on those are very limited because you can’t just take an interactive vending machine and place it anywhere you have a vendor, so down the road, if we invest capital in equipment like that, we have to be very smart because you’re only going to be able to put in specific locations.
Tom Shivers: Are there any other examples that you have for evaluating vending technology?
Mike Bunt: We tested the [dex 00:04:52] project, where [dexing 00:04:56] was a huge technological win for Buffalo Rock is that you’re able to minimize routes on the streets, you increase sales, you reduce spoilage or outages of the machines, and that’s a huge cost to the company to get into [dexing 00:05:15] on 20,000 machines, but we know the payoff’s gonna be there through the efficiencies that the program’s gonna bring.
Mike Bunt: The MEI recycler, for instance. The big question is credit cards versus recyclers, and every machine that goes out into trade gets a changer and validator on it, so the upcost of the recycler, we have done tests on equipment where we put recyclers, and we’ve seen 30, 40, 50%. On a military base, we’ve seen 200% increases on machines for adding a component onto a machine that was already there operating, so that was a huge impact for us on sales, the return on investment was minimal, and it’s not like every machine doesn’t get a validator anyway.
Tom Shivers: Mm-hmm (affirmative). Well, it sounds like you’ve tested a number of products, perhaps several of the MEI products, and it sounds like the LED lights tend to pass the ROI test as well. Are there other features or ideas that are being touted today that make you wonder what the ROI might be for some of these?
Mike Bunt: Yeah. Right now, telemetry is a hot spot along with the interactive equipment, and the one challenge you have with telemetry is sales signal, and I don’t believe there’s anybody in this country that’s ever been on a cell phone that didn’t drop a call or it lock up. Well, that’s the same type of opportunities that you have when you put telemetry on your vendors. However, there’s a value to telemetry because it does allow you to preload your trucks, it can alert you for service calls, and I think once the technology is perfected and the calls droppage reduced, I think that you’ll see a lot more telemetry in the trade. You just have to weigh out the cost, the monthly fees versus the value of what you’re getting out of the system.
Tom Shivers: Mm-hmm (affirmative). Well, do the telemetry manufacturers allow for a testing period before making a decision?
Mike Bunt: Yeah, I would imagine they would. Again, that would be up to each company that’s selling the system, but like with most equipment, they’ll let you evaluate it and analyze it.
Tom Shivers: Well, thanks, Mike. Tell us about Buffalo Rock.
Mike Bunt: Well, we’re one of the largest privately owned Pepsi bottlers in the country. We have over 2000 employees and around 90,000 assets in the trade in Florida, Georgia, and Alabama.
Tom Shivers: You’ve been listening toFuture Vending Technology ROI at the Vending Business Show, a production of A&M Equipment Sales. More Vending Business Blogs USA Technology G10-S EPORT Telemeter & Credit Card Reader
by Abco | Jun 29, 2012 | Vending Business Show
Push Beverages Higher Vending Margins An interview with Dave Mandella of Push Beverages
- What type of beverage products do you produce for the vending industry?
- What features does your product have over the others?
- How do you position Push Beverages to sell in locations?
- What do I do if I have bottler equipment?
- Why has Push Beverages been successful with vending operators?
- What areas of the country is Push Beverages currently being distributed?
Listen to the interview:
Episode Transcript:
Push Beverages Higher Vending Margins Tom Shivers: I’m Tom Shivers, with the Vending Business Show, here with Dave [Mandela 00:00:15] of Push Beverages. Dave, thanks for being here.
Dave Mandela: Thank you. Thank you for having me and spreading the word to many operators in the country.
Tom Shivers: What type of beverage products do you produce for the vending industry?
Dave Mandela: Well, Push Beverages, actually, four years ago we created this product, actually, as a vending company, to help us with our profit margins. And we produce a line of 20 ounce soda. We have nine flavors now. We have two bottles of water. One is a purified water, and the other is a raspberry flavored water. And we also have a line of 20 ounce teas called Tribe, which are a higher price point. But they’re excellent product. It’s a real brewed product. There are five flavors of those. Those are specifically made to be used in vending machines. And it’s done well so far.
Tom Shivers: What features does your product have over the others? Push Beverages Higher Vending Margins
Dave Mandela: Well, first of all, we made sure when we created the product, we didn’t create a no frills brand. What I mean by no frills is that you go into a supermarket, and you see value brand X or value brand. We made sure we put the best flavoring in these products. Over one year, we used focus groups and mass sampling to ensure that we had a national brand look and taste. And we didn’t make it a value price product. And we also had these other little features. First of all, all of our products have less sodium, about 50% less sodium than an Orange Crush or a Fanta Orange. And that’s really important. All of our products are gluten free. Our bottle itself, it’s a thicker bottle than Coke and Pepsi would have. Whether it’s Coke, Pepsi, Canada Dry, whatever flavors they use in the marketplace … We also have very high pressure cap, which keeps the carbonation in that bottle. Therefore, instead of having your typical three month shelf life on a product, we have an eight month shelf code where we guarantee that product. Talk about savings and in your vending world, flavors don’t sell as much as the core stuff, like Coke and Pepsi and Mountain Dews and Dr. Pepper, but people should have flavors for variety. And nowadays, instead of having a three month shelf life, you’ll have an eight month shelf life. So you save a lot of money right there.
Tom Shivers: Well, how do you position Push Beverages to sell in locations?
Dave Mandela: Over time, we’ve seen some operators, especially in the southeast, they go and use what they would call a value brand and slot it cheaper than your current price. In this day in the vending industry, where you need to get that $1.25 or $1.50 for a 20 ounce soda, you just re-slot this product, and it’s going to sell as good as the product you pulled out of it, because of how the product tastes and how it looks. Don’t lose those margins, because margins is a thing that’s killing the rest of us these days. And in the vending industry, I’ve seen pricing as low as a dollar, still, and as high as $1.50, $1.75, depending on where you are. But to compete and to keep that margin out there that you need, keep that price. If your Coke’s $1.25, put this in at $1.25. Why lose that margin?
Tom Shivers: What do I do if I have bottler equipment?
Dave Mandela: Well, that’s the key question. Fortunately, some operators have their own equipment or own their own equipment over time. And you want to talk about building equity in your company? There’s actually a program through A&M Equipment in Lithonia, Georgia. Everybody knows Joe Nichols, I’m sure. Where you can get equipment from him, a push-fronted machine that costs $1495. Now, that’s not very expensive. And that equipment is fully ready, it works. He gives you his warrantee on it. In addition to that, it comes with mech invalidator. And with that you get 23 free cases of Push beverages with that. You net down to $895. Now, for $895 to get a piece of equipment that you don’t have to be loyal to Pepsi or Coke, and bring your margins back into your business is a very good price. And some areas of the country, you can also get some of your bottler equipment, they allow you for two, three slots to put other product in there, too. Over time, if you build your equity up, you have leverage power with Coke and Pepsi, too. Because we all know, at the end of the day, we do need to use some Coke and we do need to use some Pepsi to stay competitive and to keep variety in those machines.
Tom Shivers: Why has Push Beverages been successful with vending operators?
Dave Mandela: Well, I’ll give you two scenarios. First thing, there’s a company in northern New Jersey that went ahead and re-slotted their machines. They basically kept … They were a big Pepsi buyer. So they kept Pepsi, Diet Pepsi, Mountain Dew, and Dr. Pepper. The rest they eliminated. They eliminated the Orange Crushes and they eliminated some of the other flavors. And they saved five or six dollars a case. Now, the sales after initial period, when they saw the product was good … And it takes a couple weeks to get people acclimated to it. My gosh, there’s a new product in the machine. You know what? They had no complaints from their customers whatsoever. What’s this orange soda? What’s this brand? So on and so forth. Again, if it looks good and tastes good, people will buy it. After the initial sales period, which was about two weeks, the sales rebounded. And it went 7% above the sales point, 7% more than they were making before with an Orange Crush or a Fanta Orange. And no customers complained at all. Actually, at that point, they were getting calls from people saying, “Where do I find this product?” Actually, in that year, in 2009, the company that I’m talking to, they have about 20 routes. And they saved $167 that year just by re-slotting Push. That’s a significant amount of money, if you ask me.
Tom Shivers: Great. What areas of the country is your product currently being distributed in?
Dave Mandela: Okay. Right now, currently, you can find the product in the Mid-Atlantic region. You can find it through Vistar in the southwest, out of Vistar, Georgia. That will cover the states of Georgia, Alabama, South Carolina, and parts of Tennessee. And, also, we’re in Chicago. Concession Services carries the brand. And they cover four big states: Michigan, Indiana, Illinois, and Wisconsin. Right now, those are our three main distribution points. Now, we’re also going to be adding two distribution points: one in Greensboro, North Carolina. That’ll be within the next six weeks. And, also, Memphis, Tennessee. Basically, you’ll be able to find our product anywhere along the eastern seaboard coming west to the Mississippi River. And we’re excited.
Tom Shivers: Well, Dave, thanks for sharing. How can people reach you?
Dave Mandela: They can reach me. My email is [email protected]. We also have a 1-800 number. It’s 1-855-PUSH-B-E-V. And they could call A&M Equipment, Joe Nichols. He’s down in Lithonia, Georgia, if they’d like equipment. But if they want to know more about the brand and anything that goes beyond it, just give me a holler. I’d be more than happy to talk to them.
Tom Shivers: You’ve been listening to Push Beverages Higher Vending Margins at the Vending Business Show, a publication of A&M Equipment Sales.
by Abco | Jun 1, 2012 | Vending Business Show
Bill Recyclers Mean Profits An interview with Chuck Reed, Director, Marketing and Sales at MEI
Why was bill recycling developed?
Bill Recyclers Mean Profits On average consumers do not carry exact change; most carry one or two dollars in coin and bills and then a five and a twenty dollar bill. The consumer has alternatives with convenience stores and so they change their behavior. If a vendor does nothing more than enabling $5 dollar bill acceptance it can save sales up to 10-15% and it goes up if they enable higher bill denominations.
What has MEI’s experience been working with operators?
Operators have not seen fraud to increase after installing bill recyclers. They have seen sales across a wide specturm of placements increase by 10-20%. Bill recyclers also enable operators to win new accounts. Bill breakers go away.
What locations benefit the most from bill recycling?
Locations where consumers are not coming on a daily basis with exact change.
Listen to the interview:
Tom Shivers: I’m Tom Shivers with the Vending Business Show. Here with Chuck Reed, director of marketing and sales at MEI. Today, we’re talking about new technology and bill recycling. Chuck, thanks for being here.
Chuck Reed: You’re welcome.
Tom Shivers: Why was bill recycling developed? Bill Recyclers Mean Profits
Chuck Reed: Bill Recyclers Mean Profits Well Tom, a couple of years ago a couple of business companies decided it looked like there was a problem in the vending industry in terms of enabling higher bill denomination acceptance. There was a concern by the operators that if they started accepting 5s, 10s and 20s that the changer would starve. It was a real concern understandably by the operators that that could result in exact change or sold out situations in the vending machine, that’d be a problem. A couple of companies got together and created what was new for the industry, called a bill recycler. Which is a product that is like a bill validator but stores, instead of just in a cash cassette, stores onto a drum a quantity of bills. Typically up to about 30 bills, although the operator can decide how many it is.
Chuck Reed: The operator can decide to store either one denomination, typically they’re one dollar bills or five dollar bills, one or the other, not both. That technology’s advanced now for the last couple of years. MEI of course in the bill recycling space and has deployed well over 30,000 of these devices now. We’ve moved well beyond just a niche product into something that really does work for an operator. What we find operators telling us is that you know in the old days the line was if the machines cleaned, filled, and adjusted you’ll get the maximum amount of sales. What we’re finding is is that there’s a surprising large number of sales that an operator is missing. Because today a lot of consumers don’t carry a lot of exact change on them.
Chuck Reed: In fact we did a study about two years ago and found that on average about half of us carry the equivalent of about three, one dollar bills or the equivalent in coin. Only about, and most of us have at least one dollar bill on us. The large majority of what people carry on them is say one or two dollars in coin or bill and then a five and a 20. If the vending machines only taking a one dollar bill and some loose change, a number of consumers, in fact as many as half, won’t be able to make the purchase at the vending machine.
Chuck Reed: I think it’s been a surprise to everybody involved. What happens is the consumer has an alternative now. They go to a convenience store, a kiosk, whatever it may be. The operator not only loses that sale for whatever that product was going to be, but they lose a larger percentage of sales because a consumer changes their behavior. If the stores closed more often, the vending machines not able to take their money, then they start changing their behavior.
Chuck Reed: What we have found is by looking at what the consumer is carrying and enabling a higher denomination in bills the vending operator is able to capture a larger percentage of sales. In fact, what’s interesting is if the vending operator does nothing more than just enable five dollar acceptance in a vending machine, which is often times enabled through a dip switch on most bill validators today. They can see sales lifting between 10 and 15%, which is pretty dramatic for doing nothing more than just enabling five dollar acceptance. The number goes up even higher than that if they enable 10 and 20 dollar acceptance.
Tom Shivers: What is MEI’s experience been working with operators?
Chuck Reed: What we found is there was a lot of concern among operators early on about enabling this higher denomination bills and would that result in consumers claiming fraudulently that they had put a 10 or 20 dollar bill in the machine and indeed they hadn’t. Then trying to get money back from the operator. What we have found, that really hasn’t been the case. Operators have not experienced any kind of, see increased fraudulent activity with people claiming higher denomination bills being cheated from the vending machine.
Chuck Reed: What they have found, most operators, is that indeed by enabling five, 10, or even 20 dollar acceptance, they’ve seen sales lifts of 15, 20, 25% or even higher. What’s also interesting is that many of the operators that have a large number of recyclers deployed have seen the sales lift across a wide spectrum of product placements, location placements. Car dealerships, hospitals, amusement parks, locations particularly where there’s a lot of transient activity and people may not have exact change on them and they walk up or they may have a family of four that all wants something to drink. The vend prices say $2.00 each. At that point they have say, almost $8.00 of product to buy. The consumer would prefer to put a 10 or 20 in versus trying to find the equivalent of $8.00 in loose change or dollar bills.
Chuck Reed: We have seen significant increases or operators have seen significant increases in sales and they have also not experienced any kind of dramatic reduction and reliability. Bill recycling today is a very reliable technology, particularly the MEI product. We see very, very little on the way of jam frequency. Operators are increasingly confident in putting recyclers out across a wide spectrum of locations and seeing the benefit of the sales lift. Operators are really thrilled about that as an opportunity for them. It’s also enabled them to win new accounts by being able to go into a new account and talk about taking higher denomination bills, which everybody inherently knows is what they’re carrying them on when they’ve gone to an ATM recently.
Chuck Reed: All in all it’s been a really good experience for most operators. Good sales lift as well as seeing some new placement locations for them. Another thing to point out, which a lot of operators like to point out to me, is that they’ve also been able to eliminate a lot of bill breakers out of their banks. The bill breakers that we use to always have in a vending bank can go away with bill recycling because at that point with the bill recycler, you don’t need to worry about changing out a 5, a 10, or a 20 dollar bill for change. You’re able to accept that bill right into the bill recycler and pay back in bills and coin, just like they would in a retail experience. A lot of operators are excited also about the ability to take bill breakers out of vending bank and save that equivalent amount of capital deployed across a large number of vending banks.
Tom Shivers: I know you mentioned in several locations there, but what locations benefit the most from having bill recycling?
Chuck Reed: Tom what we find is you want to find locations where consumers aren’t necessarily coming to that location every day and therefore would have exact change for the 1.25 drink purchase or the 85 cent snack purchase. Locations where there’s a fair amount of transient activity. Like I said, we find that hospitals tend to be a good location. We hear a lot of good things about them. What we find is that operators are telling us that they haven’t found many locations where recycling doesn’t work. Hospitals, shopping malls, theme parks are wonderful location where you’ve got large families gathering and at some point during the day needing either a drink or some snack product. You have to think about the vend purchases more than just a single vend price. For example, if the drink is $1.50 out of the vending machine and they need four of them. That’s not $1.50 vend price to them, that’s a $6 vend price. That’s the way they treat it and that’s the way the operator needs to treat it. In that case, as I said earlier, since most of us don’t carry that amount of exact change or coin on us, it’s important that you’re able to take a 5, 10, or even a 20 dollar bill. That’s really what the consumer has on them and they consider that $6 vend worthy of putting in a 5 or a 10.
Chuck Reed: I think we’re all past the days of lamenting about how customers wouldn’t put in a higher denomination bill into a machine. I think we all go to a store wherever we live and we put into the self-check kiosk 5, 10s and 20s already. Consumers are well trained on putting in larger denomination bills into a machine and fully expecting good reliability. Again, wherever there’s a large group of people that gather where they may not necessarily have exact change, you’re going to find bill recycling’s a great alternative way to enable higher denomination acceptance. Not worry about the changer starvation and really capture the sales you otherwise would have lost when the consumer simply wouldn’t have the means to make that purchase.
Tom Shivers: Well, Chuck thanks for sharing. Any little thing you want to share about MEI with us?
Chuck Reed: I think MEIs excited about introducing some of these alternative payment technologies. Obviously, we’re here to talk about bill recycling today but we also provide cashless products to the operator base as well. I think what’s important for the operator to understand is that MEI has a proven track record of developing very robust, reliable alternate payment technologies. I think operators need to take the time and take advantage of what’s been developed and try to change up their offering to marketplace so they can capture new accounts, retain the accounts they have, and more importantly capture some of the lost sales that are otherwise are walking away and going to a convenience store, a kiosk, wherever else a consumer has to go to make that retail oriented experience.
Tom Shivers: You’ve been listening to Bill Recyclers Mean Profits at the Vending Business Show, a publication of A & M Equipment Sales. For more Vending Business Blogs USA TECHNOLOGIES ePORT G9
by Abco | Dec 16, 2011 | Vending Business Show
AN INTERVIEW WITH LARRY TOWNER, VENDING CONSULTANT.
Larry is a veteran vending operator who has had success in all areas of the vending business and in choosing a vending machine product. Listen to learn why it’s important to have the proper selection of products in a vending machine:
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Know the number of times a product turns in a year
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Know the difference between large and small profits
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Most vendors shoot to turn once every 2 months
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You want inventory to turn as fast as possible
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The key to profits is product selection
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Rotate products thru a cycle (the steak flavored potato chip)
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How to maximize product turn
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The McDonald’s McRib sandwich
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When users know what’s there all the time they tend to ignore the machine
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What’s new this week?
EPISODE TRANSCRIPT:
A VENDING MACHINE PRODUCT TURN CONVERSATION
Tom Shivers: I’m Tom Shivers with the Vending Business Show, here with Larry Towner, who is a vending business consultant. He’s been in the vending business for many years, and not too long ago sold the majority share of his vending business. Thanks for being here, Larry.
Larry Towner: Thanks, Tom.
Tom Shivers: In the last show, we talked about marketing at the machine level, and you pointed out a lot of interesting things. For example, which products sell best, product placement, presentation, setting the machine up, and then … a lot of other things that come into play there as well. Even another one was making the machine look fresh.
Tom Shivers: Why is it important to have proper selection of products in a machine>
Larry Towner: Ah, the magic question, why do you want the right products in the machine? Well, the basis of machine level marketing, or planograms, or whatever you want to call them, planograms is actually the picture of how your machine looks and where everything is placed, gets into a couple of different things, but the biggest issue there is to essentially give the people what they want, which in turn is going to give you what we call product turn. Product turn is the number of times that you sell a given product in a week, month, year, day, whatever it happens to be, but generally, it’s referred to as the number of times that a product turns in a year, and most businesses look at turn as being critical. Turn can be the difference between making large profits and making small profits.
Larry Towner: The key to machine level marketing is to make sure that you put the right products in there so that you can get enough turn to justify having the product in there, and when we say turn, what we mean is that if you sell a product … Just for example, if you sell one product, and you sell six columns of it, say, six full columns or 12 selections each, whatever, however you want to look at it, let’s just say you sell six versus selling 12, if your margin is the same, of course, you’re going to make more money selling 12 versus selling six, and that’s what we consider to be turn.
Larry Towner: Most people consider turn to be how fast you turn your entire inventory, and most vendors shoot to turn their entire inventory in, I’d say a figure of about six times a year, or once every two months. If you look at your dating on your products and things, that’s really where those figures come from. The figures come from the fact that most of our products have about a two month date one them, roughly, if you look at potato chips. Pastries, of course, are a little shorter, and any fresh food you do, of course, would be much shorter.
Larry Towner: But that gets to be the critical issue, is that you want your inventory to turn because you make more money when the product turns, or sells, basically. If you can turn your entire machine … If you take, and you take a 40 select machine, and you turn the entire inventory over six times a year, if you can make it turn seven times a year, that’s like adding another two month cycle into your year, so that’s like having your year be 14 months instead of being 12 months, and that can be significant money. The key to product selection and marketing at the machine level are giving your customers what they want, when it’s all essentially the same thing, that’s where it becomes critical, because to get the extra profit out of it, it adds up to some very, very serious money.
Larry Towner: At one time, I did a little study. I said, “If I can get each of my machines to turn one column more per week, that I would average,” on average it was something like, “an extra $5,000 a week in income,” and that’s significant in a small business. It’s significant in a large business. If you can get one more turn, you get an extra $5,000. So that’s why turn is so critical.
Larry Towner: Kind of interesting, isn’t it, Tom?
Tom Shivers: It is, it’s fascinating. It’s like you’re optimizing the whole business around the products that are selling in the machines that you have, though it sounds like you really have to experiment, perhaps, to find out which products turn the fastest or the best.
Larry Towner: Yeah, you actually, you do, you know? You want to try new products. New products always sell well. They always tend to turn pretty well, but the question is, do they have longevity? What eventually you’ll learn is, you learn at each given account what really sells, and what kind of cycles you can rotate things through.
Larry Towner: We rotate our products, or we always rotated our products through kind of in a cycle, and when I say that, I mean, we would give a product … I don’t know if I have a hard example, but an optional chip, we call them optional chips. It might be, say, a steak-flavored potato chip, and we would run those about every three to four months, just for example. We would find that when we would put them in, they would get snapped up and purchased very, very quickly. What we would do is we would watch to … at a point where they started to slow down a little bit, then we would take them out, and we wouldn’t run them for another four months.
Larry Towner: The best example I can give you of that kind of thing is McDonald’s, and I say it because right now, as we sit here, I know that McDonald’s has their infamous McRib back out in the stores, but they don’t run the McRib all year long. They only run it every so often, and when they do, they tend to get pretty good sales out of it, and so that’s a different kind of example, but it’s the same example. We always try to do the same thing with some of our optional chips.
Larry Towner: You’ll find that some of your chips will sell all the time, and when you get those chips, you leave those in, and they sell consistently, day in and day out, but your other chips, candy bars, it doesn’t matter. It all has its cycle, and you can cycle it through, and that gives you maximum turns, and so that’s how you get maximum turns.
Larry Towner: If you go … I’ll give you another example. Tom, have you ever had vending in any of the businesses you’ve ever worked in through the years?
Tom Shivers: Sure.
Larry Towner: When you walked up to the machine, and it was the same stuff in there that you saw for the past two months, were you real excited about buying any of it?
Tom Shivers: No. I mean, you know what’s there, so you just kind of ignore it, I guess.
Larry Towner: Yeah, you kind of ignore it. See, that’s … When you get at machine level marketing, that’s what we always try to not have happen, because we realize that … The difference is, see, a vendor goes to the machines, let’s just say, he goes once a week, or even if he goes on a daily basis, as a vendor, if you go to the machines, and the machines look stale and boring, and when I say stale and boring, it’s like, “The same stuff, the same blah, blah, blah,” it’s time to change the machine. Just change how it looks. Move stuff around, maybe add some new product.
Larry Towner: That way, what happens is, is people go to the vending machine. My goal, anyway, was always to have people go to the vending machine and say, “Hey, what’s new here today?” Or, “What’s new this week?” Pretty much every single time … We did the majority of weekly accounts, so every time we went, every week we went, we would try to add something new and take something out, so that the machine always had something different in it that people could look at and try.
Larry Towner: I’ve been in and worked in too many places in the past where nothing ever changed, and you just kind of got to the point where you’re like, “Yeah, whatever.” And so, that’s what our goal is, is to maximize turns, is to keep rotating things around and changing things up.
Tom Shivers: Yeah, it makes a lot of sense. I mean, you definitely want it fresh, like you said, and kind of like you were talking about the McDonald’s McRib sandwich is kind of a scarcity play, because you never know when it’s going to be there and how long it’s going to be, and then when it’s gone, it’s gone for a while.
Larry Towner: For a while, right. But they do tend to cycle it and bring it back, so you know it’ll come back sometime, and they sell it and that, and we do kind of the same thing, because we have, essentially, 40 selections or so, 32 to 40 selections, most of our machines are 32 to 40 selections, and drink machines run anywhere from five to 10, but even with the drinks, we tended to rotate drinks around a little bit. We’d always add a couple of optional flavors in that were … and I say optional in that pretty much our planograms had Coke, Diet Coke, Mountain Dew, Dr. Pepper, Pepsi, and then usually another … we would have flavors and things like that, but we would rotate the flavors around too.
Larry Towner: We’d run orange for a while, then we’d run grape, and then we’d run … Warm months we’d run tea, and then we’d run non-carbonated stuff in the summer, maybe chocolate drinks like Yoo-hoo or something like that in the wintertime. That way, you always had something that’s fresh and new also, even in the drink machines, because while people want what they want, they also do like to try new things, so that’s kind of the concept of turn, and that’s the way that you, or it’s the way that I’ve found that maximizes turn really well.
Larry Towner: That’s why we do it, and we do it … If you take and run the numbers sometimes, you’ll see it can add up to significant in money.
Tom Shivers: Yeah. Well, thanks for sharing, Larry. Tell us about your consulting business.
Larry Towner: Well, what we do is we do consulting. We give you tips like this and a whole lot more, just depending on wherever you’re at with your vending business. We work mostly with startups, or people that have been in business and are looking to get bigger, and/or are struggling with their business, trying to figure out what are they doing, how are they doing it, and how can they become more efficient?
Larry Towner: Efficiency is something that’s absolutely critical in the vending business. It’s probably a topic we need to talk about for another show, but efficiency comes out to how you make the decisions on which product to buy, and how you actually operate your business, how do you walk into the business and do your job when you actually get accounts? How do you, right down to the nuts and bolts … If we can save you minutes, we could save you dollars, so that’s what we do. We do analysis and we can help you with sales and marketing. We can help you with all kinds of things, all aspects of the vending business.
Tom Shivers: All right. You’ve been listening to the Vending Business Show, a production of A&M Equipment Sales.
by Abco | Mar 4, 2011 | Start A Vending Machine Business
Vending Business Accounts Effective Selling How do you effectively sell vending machine accounts? That’s the million dollar 
question, the solution to all of your problems, right? I hate to break it to you, but more accounts will not necessarily solve your problems. In fact, having more accounts could exacerbate your problems and even quicken your business’ demise.
So let’s define effective selling: Vending Business Accounts Effective Selling Effective selling is obtaining profitable business, developing a working relationship with the accounts so the situation benefits both you and your customers.
Anyone can obtain new accounts by offering lower prices, bigger commissions, new machines, or sandwich/frozen/cold food machines. You might find that your competitors offer all of these. But this is not effective selling. Your challenge is to focus on profit and profitability, and let your competitors create their own problems.
One of the biggest challenges in selling vending accounts is deciding what makes a good/profitable account. Let’s look at a couple of scenarios.
You obtain two leads: one is a small business (25 employees, one shift) in an industrial park you are already servicing, the other is a very large facility (350 employees, 24/7 operations) that is across town.
You learn that both companies currently have vendors in their locations now, but are considering change. You set appointments to meet with both.
What now? Your goal is to make an objective assessment of the locations, determine their expectations, and decide if you can meet their needs profitably. Information is key, and this is the best (and easiest) time to gather any information that could be valuable in your endeavors. I strive to ask questions like:
- Who is servicing the account now? What do I know about this company? Are they reputable, good people? Do they generally provide good service? Do they effectively service the area and account in question? Are they using bottler’s assets?
- Why is the account considering changing vendors? Ask the question and let them talk, find out all you can about how they are being serviced now, what they like and dislike about their current service, what they would change.
- What is their expectation for equipment and for service scheduling? What are the hours of operation and/or access to the location?
- What is the pricing and do they expect commissions? Is the account open to a different pricing/commission structure?
- What is the distance from the truck parking to the machines, first floor, second floor, elevator, stairs, and dock? How quickly can it be serviced?
- Number of expected patrons? How many people have access to using your machines? How much indirect competition do you have (fast food restaurants or convenience stores within walking distance)?
- What are the demographics of the account? Age, gender, cultural and ethnic factors all relate to sales of product. What are the environmental conditions in the account?
- How easily is equipment moved into the location? Look for narrow hallways, large steps, short doors, tile and hardwood floors – any factors that could affect the move or that might induce unexpected liability.
In our scenario, you find that the 25-person account is being run by an operator you don’t know. He has told the customer that he is a part-timer who operates “blue sky” machines out of his garage. The customer relates to you that the machines are unreliable and that, while he makes a good effort to repair them, they just don’t seem to be fixed. The customer likes the selection offered, and the machines are full most of the time (mainly because the operator is out every other day to fix the machines and he restocks while he’s there). The customer has had several conversations about the reliability issue, but has had no solution to the problem.
You notice that the machines are in a small break room, down a narrow hallway, and they dominate the break room. You also notice that the demographics of the account are largely young males working in a warehouse with no climate control. There are 20 warehouse workers and five office staff. The warehouse ships and receives freight, and you notice a couple of truck drivers waiting in the warehouse. The operating hours are from 7:30 am to 9 pm (warehouse 7:30 am to 3:30 pm and office staff till 9 pm). The dock has a drive-up garage door, as well as 8 dock facilities. The building is in the middle of an industrial park; the nearest restaurant is a little over a mile away. The customer indicates they don’t want commission, just good service with machines that work.
Your visit to the 350-person account finds an account that is run by a local independent vendor you know. They run a tight operation, provide good service, and are generally very difficult to remove from accounts. The operation runs 24/7 and you notice that the current vendor has equipment that is 2-3 years old, and are using bottler’s assets. The location is in a secured facility, with a security checkpoint at the entrance and a pass card at the door. The break room is on the second floor, accessible by elevator. The facility is a service center for a large insurance company and is staffed largely by older women. There are several restaurants within walking distance and you notice delivery brochures in the break room. The break room has ceramic tiled floors.
The customer indicates that they are looking for a new vendor because the machine never has the healthy snack items that they want, and they are not servicing the machines quickly enough when there’s a problem. You ask about the service issue, and the customer responds that the drink machine took someone’s money last fall, and the vendor, arriving 2 hours later, could not find the problem with the machine.
The vendor pays a 25% commission – pricing is in your low range – and you learn that they are tardy in paying their commission payments, which they get on the 15th of the month. The customer really thinks their pricing is too high; they go to Sam’s Club and see that their current vendor is making too much money. You discover that their current vendor is the third vendor they have had in five years.
For those of you not experienced in the vending business, these are actual cases; if you’ve worked in vending for awhile, you’ve probably just pictured several of your customers.
Which account is more profitable? You be the judge. Both have their positive and negative factors.
For the first account, I would suggest putting full-size vending machines in the warehouse area close to the dock door. Free up the space in their break room (you wouldn’t want to move or service equipment in there, anyway). I would put in refurbished older machines, properly set up and maintained with perfection. I would set their service schedule at two weeks with the understanding that they can call anytime for service within 24 hours. Pricing would be on the high side, with an explanation that “professional service” is more costly and that the need to raise prices will be far into the future.
The second account, I would be blunt. I would offer new equipment with premium pricing, offering coffee service as commission. I would stress a high degree of professionalism, and if they want the best, they will have to pay for it. I might offer a second option of leasing them equipment and letting them have an employee take care of the machines; they could keep the profit. This type of account is what I refer to as a revolving door account; they have a new vendor every year, have no loyalty, and do not value service.
My goal with this article is to get you to ask the pertinent questions, to analyze an account for all it’s worth. Don’t be fooled by numbers alone. While large numbers are generally better, there are many factors that determine profitability. Understanding the various factors involved with operating a vending route can be the difference between success and failure.
If you have not read the previous parts of this series, I suggest you do so.
Together, these articles present a comprehensive overview of the vending business, so each article shows only a small cross-section of the business. Success in any one area does not mean your business will be successful; it’s important to understand the dynamics – the relationship between the various activities – to be effective.Vending Business Accounts Effective Selling
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