www.amonline.com 03.08 Vending takes new role in marketing promotions

www.amonline.com 03.08 Vending takes new role in marketing promotions

Cover Story Vending takes new role in marketing promotions Coupon dispensers in vending machines allow consumer product marketers to reach consumers where they work and go to school. By Elliot Maras, Editor T echnology is giving vending machines new promotional capabilities. As a result, consumer product marketers are beginning to see vending machines as tools to do more than market products for immediate consumption. They are beginning to see vending as an avenue to encourage consumers to buy a wide range of items, including financial services, TV services, vacation packages, and more. In the past few years, technology players have developed touchscreen video screens and coupon dispensers that can be retrofitted to existing vending machines. These devices, on vending machines, enable consumer product marketers to reach consumers in school, at the work place or in transportation and at entertainment hubs. The ability to target a message to a consumer in the at-work environment in particular has raised eyes in the marketing community. In January, Automatic Merchandiser reported on the Quickstore24, a vending machine that has interactive video touchscreens, multiple payment options, and on-site dispensers that give redeemable coupons. This system was developed by a Walker Digital, LLC, a company that focuses on finding solutions using modern information technologies. In February, Automatic Merchandiser reported on another technology solution, the SPIO system, that utilizes coupon dispensers and interactive video touchscreens to give vending machines new capabilities as marketing vehicles for consumer product manufacturers. A customer receives a redeemable coupon from a SPIO dispenser.

The SPIO system consists of a coupon dispenser that is installed in the vending machine. When a vend is made, a promotion is dispensed simultaneously. It can be an offer to receive a free item from a restaurant or $5 off a $25 purchase at a retail store. SPIO provides the dispenser at no cost to the participating vending operator. SPIO provides the operator with coupons, either plastic or paper, in clips that are placed in the machine to be dispensed. The only cost assumed by the vending operator is the labor for installing the dispenser. Innovations offer opportunity for vending All of these innovations are happening at an opportune time for the vending industry, since traditional vending has become increasingly unprofitable due to a shrinking customer base and rising costs and more competition from other retail channels. Innovations such as Quickstore24 and SPIO could give the vending industry the tools it needs to bring a higher level of value to the consumer. Preliminary indications are that this is beginning to happen. SPIO recently completed a successful test with a Chick-Fil-A restaurant in Oglethorpe, Ga. Promotional offers were distributed through vending machines within a 10-mile radius of the store. Consumers redeemed the offer for a free food item. The redemption rate was around 20 percent, which is 10 times greater than most traditional coupon promotions. Chick-Fil-A isn t the only consumer product marketer to see merit in the vending promotion. SPIO has recently signed similar arrangements with Direct TV and Blockbuster. SPIO enhances customer experience It s a pretty effective way to put your ad right in the hands of the consumer, said Chuck Treister, executive vice president of vend partners for SPIO. In addition to lifting sales for the vending operator, the coupon enhances the experience for the customer and the location. It s what it does from a standpoint of customer relations, Treister said. Treister, who has worked in vending operations and equipment manufacturing, said coupon redemptions are not a new idea in vending. However, earlier programs required some labor on the part of the vending operator. A lot of (product) manufacturers have dabbled in this concept, said Dennis Thornton, a partner in Advanced Vending LLC, the Ringgold, Ga. who participated in the Chick-Fil-A promotion. What s unique about SPIO is that the operator doesn t have to do anything extra and the marketing offer is very well targeted to the end user, resulting in a win for every party involved. It s just an SKU that the driver keeps filled, Thornton said. Connie Lee helps introduce Chick-Fil-A customers to the SPIO promotion, which allowed her to market to consumers directly. Chick-fil-a redemption rates surpass industry average The consumer is really liking it, Thornton added. He said in some locations, redemption rates have been as high as 70 percent. The average rate has been 20 percent, which is still high compared to most coupon redemption programs, according to direct marketing industry sources. A key factor in the success of the Chick-Fil-A promotion was the value of the offer. In the promotion, offers were made in vending machines for three consecutive quarters. Consumers received one of six offers redeemable for a free item with the purchase of a snack or beverage. Most offers are worth more than the consumer is paying for the item in the machine, Thornton said. It makes a significant impact. There is no doubt about that. Another benefit that vending offers to product marketers is the ability to tailor a promotion to a location. There are different advertisers that want to be in different venues, Thornton said. SPIO is in the process of introducing a video screen to the machine that will further enhance the promotional effort. I think this is going to be unbelievably successful, Thornton said. Coupon dispenser: a direct connection to consumers Terry O Neal, owner/operator of the Chick-Fil-A store in Oglethorpe, Ga., agreed the promotion accomplished some things that no other promotion has. They (SPIO) could go places where I couldn t

Cover Story O Neal said the more generous the offer, the more successful it is. We had new customers that never ate at Chick-Fil-A ever, said Connie Lee, who was the marketing director for the restaurant when the promotion began. With these venders, we were reaching people we couldn t reach. Lee said that prior to the SPIO project, her options for penetrating schools and work sites were limited. Dennis Thornton of Advanced Vending LLC, based in Ringgold, Ga., said consumers like the SPIO coupons. get my foot in the door to get customers, he said. It walked them in the door. We never expected to get 15 to 20 percent return, but we did. O Neal wanted to get the coupons in the hands of kids in schools. He knew that if a kid got a coupon for a free item, they would bring their parents with them to the restaurant, and they did. SPIO produced the coupons for him. The SPIO promotion delivered better results than the direct mail programs O Neal did in the past. In one instance, ice cream vending machines dispensed coupons redeemable for free ice cream at the restaurant. It was a win-win for both of us, O Neal said. Vending brings marketers a new tool She previously designed nutrition education programs for schools that helped to get the restaurant s name in front of students. In the B&I sector, she approached managers with be our guest coupons for free meals for employees. She even developed inserts for employee paychecks, but this was difficult to get employers to agree to. You can t just walk into a factory and pass out coupons, Lee said. In comparison, she said, the vending machine was wonderful. Dobbin Prezzano, president and co-founder of SPIO, brought an extensive background in marketing and direct mail to vending. These are very high response rates, he said for the SPIO promotions. The average response rate for a more traditional direct mail promotion is 2 percent. At-work consumers: a prime audience for marketers The at-work consumer has become a target market for consumer product manufacturers. Following are purchase habits of these consumers. Purchase coffee close to work rather than close to home Don t decide what they re having for lunch until they re at work Buy lunch at least four times a week Don t eat dinner with their families every night Not sure at 4 p.m. what they re having for dinner Use discount coupons at restaurants Purchase fuel just before, during or just after work Have business related travel booked from office Shop for groceries during the work week Have ordered a birthday gift online Use discount coupons at grocery stores 54% 52% 63% 69% 74% 80% 73% 74% 85% 92% 89% Source: WorkPlace Media employer survey

Vending machine: a consumer destination Prezzano said the vending machine has an advantage for marketers since it is a destination for the consumer. The consumer is making a particular choice to go to that machine because they re getting something else there, he said. In addition to redeemable cards, the machine also dispenses a magnetic stripe card that can be loaded with value for use in a retail store. There is also a patented Website decoder that contains an imbedded code that becomes visible when held up to a Web page on a computer screen. Prezzano, who exhibited the system at the Direct Marketing Association trade show recently, said SPIO is making waves because the direct marketing industry is beginning to focus more on work place marketing. What SPIO brings to the table is being able to interact directly with the consumer. Retailers in particular are learning that work-site marketing, which is also known as alternative print media, is a cost effective way to target consumers with disposable income. In the work place, marketers find an attentive audience for messages that focus on convenience and value. In some cases, employers offer coupons as perks through payroll checks, intraoffice mail or other company correspondence. Work place marketing: an emerging industry Work place marketing experts don t question the role that vending machines can play in these efforts. At-work consumers daily pick me ups Caffeine beverages 43% Coffee Gum Salted snacks Candy bars Cigarettes 10% 19% Source: WorkPlace Media employer survey 28% 25% 40% Dobbin Prezzano of SPIO says marketers in many industries are interested in reaching consumers directly. Work places and vending machines are as natural a pairing as coffee and a doughnut, said Dan Wheeler, executive vice president of WorkPlace Media, a Mentor, Ohio-based company that develops creative graphics and distributes them to selected work sites. When you consider that 83 percent of working Americans rely on caffeine to get them through the day, and another 72 percent rely on some sort of vending machine snack such as gum, chips or candy bars, the value of targeting workers right in their cubicles is undeniable. Where traditional business-to-business marketing has focused on reaching the location manager or account decision maker and relying on that party to communicate information to consumers, the vending machine offers the marketer more direct access to the consumer. What I tell them (the product marketers) is we re going to get them to their consumer, Prezzano said. One example is the financial services industry, which is looking to interact with high school and college students. Vendors must provide location information In seeking vending operator partners, Prezzano said he looks for operators who can provide demographic information about their accounts; this is what the clients want to know. He requires vending operators to provide input on the number of vends per year, what type of business the location has, and how many people are there. The video screen will make the opportunity even stronger, Prezzano said. The video screen has the trackability, he said. Marketers are ecstatic about it.

Barry Frankel, owner of The Family Vending Co. in Coral Springs, Fla., recently decided to participate in the SPIO network. As long as the promotions continue to come with values, the purchase of the drink becomes insignificant, he said. In a previous role as a cold drink manager for a beverage bottler, Frankel saw the ability of on-can promotions to drive sales. One promotion he remembers was $5 off the price of admission to Universal Studies. It was a great promotion for a very large customer; it got you an account and also helped drive sales, he said. We ve got to bring the customer back to the vending machine, Frankel said. This will give us new value. In the meantime, more is being learned about the atwork consumer market. At-work consumer: a target audience for marketers The at-work consumer has a higher level of disposable income than the rest of the population. As busy professionals, they are willing to pay a premium for convenience, often saving time by running errands on office time to stores within a 5-mile radius of where they work. At-work consumers also spend the majority of their day in commercial areas, literally surrounded by hundreds of stores and restaurants. Naturally, they are going to visit these businesses more often than the average consumer often just to take a break from the office. Because the at-work consumer spends 60 percent of their waking hours at work, they are often looking for new pick-me-ups to help keep them focused and alert. Atwork consumers are more prone to making impulse buys. In the past, these highly valuable yet largely untapped consumers had to actually leave the confines of their cubicles to forage for this elusive something. Work place focused, direct marketing companies target this valuable demographic audience and attempt to deliver products to them in the work place. If the recent Chick-Fil-A promotion is any indication, vending machines have a big role to play in not only work place marketing, but in many types of targeted consumer marketing. Vend product manufacturers add value with on-pack offers Vend product manufacturers have periodically partenered with other consumer product marketers to offer vending customers added value. Last year, General Mills Inc. offered $3 off any movie or game rented at Hollywood Video and Movie Gallery on some of its core products. The success of the program encouraged General Mills to introduce another $3 off any movie or game purchased at Best Buy on three of its core products, Sweet & Salty Bugles, Gardetto s Original Recipe and Chex Mix Traditional. The offer is announced in a big colorful label on the front of the bag. There is no work for the vending operator. You cannot pass any amount on the operator or it s a no go, said Charla Sheffield, associate marketing manager for vending at General Mills. Stu Case, a partner in Pacific Brokerage Co. Inc., the Yorba Linda, Calif.-based product brokerage, said the promotion is better than other types of manufacturer promotions that have been done in the past since there is no extra work required on the operator s part. It (the General Mills promotion) has driven additional cases, Case said. For more informaton, contact: SPIO, 866-604-7746, www.gospio.net Electronically reprinted with permission from Automatic Merchandiser magazine March 2008