by Hank Schlesinger, Vending Times – Issue Date: Vol. 48, No.3, March 2008, Posted On: 3/27/2008
U.S.A. — Merchandising has always presented unique challenges for the bulk vending operator.
For an industry in which the vast majority of sales are impulse purchases, location-based marketing is critical yet confined by a unique set of limitations – such as the size of signage, which is almost always restricted to a display card. And since customers cannot closely examine merchandise prior to purchase, an operator’s marketing efforts must overcome an inherent sense of risk, particularly with capsule mixes. Lastly, since a large percentage of bulk machines are located near entrances and other high-traffic areas, the machine must stop the consumer in his or her tracks to shop while “in transit.”
When compared with a typical retail impulse purchase, which may boast larger signage, innovative packaging and the chance to examine the product up close, bulk-vended merchandise would seem to be at a decided disadvantage. However, there are steps clever operators can take to bolster sales through merchandising.
“The truth of the matter is, knowing your location is the most important thing,” said A&A Global’s Phil Brilliant. “While the industry is product driven, the operator has to match product to the demographic of the location as part of the locating process. As operators go out and canvas locations, they should also be canvassing the kinds of people who patronize the stores.”
According to Brilliant, location management can play a critical role when it comes to effectively matching products to a location, and it is important to maintain a close relationship with them. “If you have a good relationship with a location, they will help you,” Brilliant said. “However, if you’re just the kind of guy who goes in and services the machine before the store closes, they will never help you. Servicing the customer is just as important as servicing the machine.”
Frequently changing out merchandise is another standard marketing strategy. This is particularly important in locations like supermarkets, where many potential customers are repeat patrons, and is even true for products that may be selling steadily. Sending the signal to potential customers that there is always something new in the machine will draw them back to the rack. Conversely, simply dumping more of the same product in a half-empty machine not only adds to product fatigue, but also eliminates the urgency of the purchase for the customer who may be tempted to buy the product – eventually.
Frequent product rotation, experts say, need not require returning product to the warehouse shelves. Simply shifting product offerings from one location to another keeps the merchandise in play and provides a cost effective means to keep the offerings fresh in any given location.
Indeed, though not yet common practice, some operators report organizing their routes the same way music and games operators do, rating locations according to sales. A highly profitable A location, for example, would receive the newest product first, which over a period of weeks would rotate down to the less profitable B and C locations. In this way, product offerings keep changing throughout the route.
Another profit-limiting temptation operators face is simply refilling machines without attention to details or sales. “Dumping new merchandise on top of old merchandise instead of cleaning out the machine is definitely a mistake,” said Cardinal Distributing’s Danny Paszkiewicz. “Sometimes the new merchandise isn’t even on the display card. But operators will do this a lot of times with a jewelry mix. That’s wrong, they shouldn’t do it, but it happens all the time.”
Paszkiewicz added that operators should also be aware of product placement within a machine. This is particularly important when offering highly desirable feature items. When filling a machine, he advised, bulk operators should arrange product so that feature items are clearly visible to the consumer at the front of the machine. “You might have five or six feature items; put them close to the front,” he said. “That proves the item is in there and gives the customer more incentive to make the purchase.”
In addition to being highly effective, these strategies of merchandise rotation and positioning within the machine are perhaps the least costly tactics, since they don’t require significant additional expenditures.
Also worth noting is one of the most obvious, though often overlooked, aspects of location-based marketing – the condition and placement of the machines themselves. “I get very frustrated when I walk into a location that has equipment that’s empty, dirty, stuck in a corner and completely inaccessible,” said O.K. Manufacturing’s Heidi Olsen-Hughey. “Why would you want to buy anything out of it when it looks like the product is old and stale? It makes me sad, they are operating poorly and they’ve wasted their time and money. Nobody is making money. It’s a complete and total waste. But with just the slightest amount of effort it could be an entirely different situation.”
In Olsen-Hughey’s view, the machine itself is part of the marketing effort. “It’s all about merchandising,” she explained. “You have to merchandise the machine as well as the product. The vestibule is your display case for your equipment. I don’t care if it’s a bulk rack or superball machine – if it’s just crammed in a corner behind a newspaper rack, you’re not doing any service to the customers or yourself in that location. It’s a waste of your equipment.”
Olsen-Hughey suggested that operators take what can be termed as an aggressive approach when placing machines in a location. This means not only situating machines in high-traffic areas, but also taking the time to work with location management for the best possible placement. “A good operator goes into the location and takes a few minutes to re-arrange the lobby area with the manager’s approval,” she explained. “If you place your equipment in a good location where it’s attractive and easily accessible, then everyone’s revenues go up.”
Equipment configuration is also important, she stressed, observing that some operators don’t pay attention to how they set up their equipment. “They’ll go in and just chuck in a new machine,” she said. “The rule of thumb is that the big machine goes in the center and the little ones on the outside, and a lot of time the little machines do very well.”
Another important point Olsen-Hughey emphasized is that operators put their names and phone numbers on equipment. This strategy serves as a small advertisement aimed at other businesses in the area that may be looking for bulk equipment while also offering the customer the sense that someone is accountable. Displaying an operator’s number may also enhance customer service. Locations are more apt to report empty or broken machines if the operator’s number is readily available. Needless to say, in a busy location, this can eliminate machine down time, boost profits and improve the operator’s relationship with the location. “I’ve actually had locations call me at O.K. because they don’t know who is operating in their store or how to reach them,” Olsen-Hughey added.
SIGNS OF THE TIMES
Signage is another critical factor when considering merchandising efforts. “The trick is perceived value,” said Greg McPhail of Actionmatic Ltd. “Up in Canada here, we ask for $1 or $2 for all the toys, so if it doesn’t have perceived value, it doesn’t sell. It’s that simple. And the display card is the single most important factor for adding perceived value.”
While the industry pros are nearly unanimous when it comes to the importance of high-quality “live displays” – those showing the actual merchandise – many operators continue to sabotage themselves with inferior display cards. “I always say the display is the sizzle that sells the steak. If you don’t have a good display, you could have gold nuggets in there and no one would even buy it,” said Brand Vending Products’ Craig Goodman. “You have to showcase your best items through your display. Again, display, display, display sells product.”
Not surprisingly, in the age of computers and easily learned graphics software, many operators have taken to creating their own display cards. While some of these efforts have been quite good, rivaling suppliers’ display cards, many more have dubious artistic or marketing merit. One operator at a recent industry gathering took great pride in the fact that his 14-year-old daughter designed all his display cards. The only problem was that they looked very much like the product of a 14-year-old.
“If you are going to make your own display cards, it’s very important to ask for a second opinion from someone you can trust. Does it look professional, is it colorful, is it attracting the right demographic, are the right products on the display?” said Goodman. “But the most important thing with a display card is that you are true to the mix; you display the mix in some fashion.”
Another key factor, according to Goodman and other industry experts, is that the display card looks “fresh.” In the midst of a long-term trend, it becomes easy for an operator to stop changing display cards while refilling machines. This is particularly true in the summer months, when direct sunlight can prematurely age display cards by bleaching them out. “Change out sun-bleached displays,” advised Goodman. “How much money does that cost? And it only takes a few minutes. But it gives the perception that the product is fresh and clean.”
One relatively recent development in “display-card technology” has been Cardinal Distributing’s light-up display-card holder. The unit, which was introduced a few years ago, features six LED lights mounted on a metal frame that fits into almost every major bulk vender on the market. Two standard D cells will power the blinking lights for as long as eight months. Cardinal has reported brisk sales of the unit, with more than 10,000 sold to date. “Everybody who buys them says it increases sales,” said Paszkiewicz. “Some operators use them for high-end products selling for 75¢ or $1, others run all four machines across the top with the lights – where it gives the best effect.”
Many operators who entered the industry a decade or more ago may balk at this kind of attention to detail, labeling it overly fussy. However, these operators should keep in mind that a decade or more ago the majority of product vended for 25¢ to a very narrow demographic of young children.
Today, the majority of merchandise is vending for 50¢ or more, and is aimed at a much wider demographic. Customers also appear to be more product-savvy and less easily enticed than they used to be. The devil may not be in the details, but the profit can certainly be found there.
Yellow Vending Machine Photo Credit: amboo who?, Flickr