The SKU report showed that the average monthly unit sales by spiral was 27.2, producing an average monthly dollar sales of $32.55.
The five spirals with premium product sales averaged 24.2 units per spiral, producing an average monthly dollar sales of $53.60 per spiral.
The 121 total unit sales of premium products generated a minimum of $121 in profits; $1 per vend after COG, commission and applicable sales taxes.
The rest of the regular products produced a profit in the range of $0.30 per vend to $0.70 per vend after COG, commission and sales tax at the machine. In some instances, a regular product must sell three to four units to match the $1 per vend profit from the premium products.
You can calculate the number of unit sales your own regular products would need to achieve this $1 per vend profit after COG, your average commission and applicable sales taxes.
Higher priced items make a difference
In one machine, premium products represented 11 percent of the unit monthly sales and 20 percent of the dollar sales.
Overall, for machines in the second phase of the test, premium products sold in the range of 2 percent to 15 percent of the unit monthly sales and 4 percent to 32 percent of the dollar monthly sales. Part of this variance is attributed to the fact that certain machines had only one or two spirals with premium products.
As vending operators increased the number of premium products in the machines, the unit and dollar sales increased in line with the percentages of the SKU report.
In all machines, the premium product dollar profit per vend exceeded that of regular products.
Vending operators participating in the test observed the placement of the premium products brought a new look to each machine; change drives sales.
Consider the packaging of several of the premium products tested; certainly, these premium products would give a new look to your machines.
Most important for each vending operator is that new vend pricing, up to $3.50, was established and accepted by the customers and the locations. There were no complaints by any location as to the higher prices; value was clearly perceived.
Why keep lower price products?
Some vending operators dropped the sales from the gum/mint module to calculate machine level SKU profitability. However, if the gum/mint modular sales are not included, the question is raised: why even carry such products with a vend price at $0.75 per unit? Operators are considering such price points as detrimental to the machine and are placing premium gum and mint products that vend at $1.50.
Scott Meskin, president of Black Tie Services in Baltimore, Md., concluded in reviewing these and similar results: “The placement of premium products provides Black Tie with an opportunity to increase pricing and improve profitability in a wide range of other products in our machines. Having the low price in the gum/mint module runs contrary to our program to provide premium products in all categories.”
Results must be monitored
The placement of the premium products was not successful in every machine. The vending operator must have the SKU level data and machine profitability report to track the results.
In addition, as Michael Cascione Jr., operations manager of CC Vending in the Bronx, N.Y., stated: “CC Vending needs the cooperation and support of the product suppliers such as Kraft/Cadbury to provide the premium products that will sell and to make them available through the vend product distributors.”
Furthermore, the vending operator must carefully manage a successful premium product placement program.
Todd Elliot, vice president of Tomdra Vending & Coffee Services in Tucson, Ariz., observed: “A vending operator must price the premium products correctly at each location to achieve the $1 per vend profit. You can reduce a price if sales are not acceptable; it is more difficult to increase the price. The results of such an approach only add to your bottom line.”
As discussed previously in my other two articles, a vending operator does not have to make any investment in equipment to develop the premium product placement program. Besides SKU level profitability reporting by machine, the operator must consult with such product suppliers as Kraft/Cadbury who are knowledgeable about what premium products sell.