Consumer Research Calls For Change

The vending industry has a big customer education job to do in order to improve its growth opportunities. That much is evident from the results of a recent consumer survey sponsored by the National Automatic Merchandising Association and conducted by Harris Interactive. The results were presented at the recent NAMA expo in Orlando, Fla.

The research revealed that consumers are generally unaware of the healthy offerings currently available in vending, largely unaware of technological advances, and generally hold vending in low esteem in terms of value compared to other retail venues.

While much of this isn't news to operators, Mike Dabadie, research vice president of Harris Interactive, believes there is a lot operators can do to improve the value proposition they bring to the table. The first step is understanding how consumers define value. Once they do this, they will recognize that they can meet consumer expectations by better positioning themselves.

The research covered vending consumers' perceptions, expectations, usage patterns, and habits. The findings also included insight on barriers, pricing, and alternative payment methods.

The complete results are available to NAMA members at the NAMA Website, www.vending.org. This article includes a small sampling of the total results.

NAMA members can access "cross tabulations" and "research tabulations" at the Website. This type of information will allow a member to sort and dig deeper into the entire report in order to apply the research to their company.

Survey Metrics
The objectives of the study were to understand the drivers of vending use, evaluate the barriers to vending use, explore areas for increased vending use, measure the awareness of healthy options in vending, and determine ways to create a healthier image.

Researchers conducted 15-minute interviews with 2,223 consumers, age 14 and above, over the Internet. This resulted in a sample in which about three quarters (73 percent) are vending users and the balance are not users. The researchers believe this sampling reflects the U.S. population.

Key findings are as follows:

  • Positive perceptions of vending include convenience and ease of use;
  • Negative perceptions include lack of fresh and healthy products, poor selection and low value;
  • Use of branded products is key to sales; 70 percent decide what to buy after they browse; if a known product is not there, the sale might be lost;
  • 60 percent of consumers are eating more healthy food;
  • The level of awareness of healthy snacks in vending is low;
  • Most consumers recognize individual responsibility to make healthy choices, but think the industry has a role to play;
  • Users express high brand loyalty;
  • Promotions are a good way to introduce new products;
  • Non-users buy most snacks at grocery stores;
  • Non-users feel vending is not a good value;
  • Users feel vending prices are generally high;
  • Convenience, price and variety are why consumers bypass vending for other snack sources;
  • Only 15 percent of consumers are aware of new vending technology to assist purchases;
  • Technology ensuring product delivery increases the likelihood of purchase;
  • An opportunity exists to increase vending appeal through credit card purchases.

Consumers rate water high
The researchers asked consumers about their own eating habits and found that the majority (53 percent) are consuming more water than three years ago. Water led all products in consumption gain, followed by fruit (36 percent) and healthy snacks (35 percent).

Asked what products they are consuming less than three years ago, candy, cookies, cakes and donuts topped the list at 40 percent, followed closely by regular soft drinks at 38 percent, ice cream at 31 percent and salted snacks at 30 percent.

These findings indicate that the strongest sellers in vending are among those products consumers say they are eating less of. This presents an inherent problem in seeking to appeal to healthier eating habits.

Asked specifically if they have noticed vending machines carrying healthier products, most consumers did not believe strongly one way or the other. (See chart 2.)

Poor vending image equals low usage
The survey explored the different perceptions of vending among consumers who expect to use vending more often and those who don't.

Among those who expect to use vending less often, most were unaware of technological advances, most believe vend prices are higher than other outlets, and most believe vending is a poor value.

Non-users pay more attention to nutrition facts panels and ingredient statements on food labels than users.

If nutrition labels were easier to read in vending machines, more consumers would buy them. (See chart 4.) While only a minority, 23 percent, said they expected this would make a difference in their purchasing, this is not an insignificant number.

More consumers indicated freshness information would increase likelihood of a vending purchase.

Lack of healthy or fresh products topped the list of reasons why consumers will decrease their vending use. (See chart 7.) At 27 percent, this clearly outranked price at 18 percent, the second biggest reason.

Non-users' perspective
The reasons for not buying were very similar to the findings of an earlier consumer survey. A Frito Lay survey, conducted by Elrick & Lavidge in 1996, was based on 2,500 person-to-person interviews at glassfront machines.

The 1996 survey found that 54 percent of consumers believed vending is not a good value for the money.

The 1996 survey found the following reasons for not using vending machines:

  • Not a good value for the money
  • Poor product selection
  • Unrecognized brands
  • Poor freshness perception
  • No healthy alternatives.

Changing the habits of non-users will be difficult because the top reason they don't use vending more frequently is that it is not seen as a good value. (See chart 9.) Value contains several elements.

The brand really is important
The need for improved point of purchase activity was revealed in the finding that most consumers (68 percent) browse the machine before making their selection. Only 32 percent said they typically know what they want before they go to the machine.

This finding indicates that consumers are spending more time browsing the machine than they used to, based on the findings of an earlier consumer study.

The 1996 survey found that 43 percent of all vending purchases were planned ahead of time. While only a minority said they know what they want before going to the machine, the majority of these users (59 percent) indicated they don't make a purchase if their desired product is not available.

The 2006 Harris Interactive survey confirmed the findings of several other surveys in reporting the importance of branding; close to 70 percent said that the brand is either always or sometimes an important part of the vending purchase.

A minority, 31 percent, said that promotions would influence purchase decisions, but this is not an insignificant number.

Vending competitors' advantage: variety
Several questions addressed why consumers patronize competing retail outlets. Here, there were some differences between users and non-users of vending machines.

Users of vending machines were more likely to patronize competing retail outlets on the basis of convenience than non-users. (See chart 11.) Users were also more likely to patronize competing outlets on the basis of variety. Users were less likely to patronize on the basis of price.

Consumers strongly perceive vending prices as higher than other retail outlets. (See chart 13.)

This finding is consistent with the Frito-Lay survey 10 years earlier, in which 63 percent of consumers said convenience store prices were lower than vending prices.

Consumers want cashless, but not aware of it in vending
The 2006 Harris Interactive survey found that consumers overall are very comfortable using cell phones and credit cards.

However, 85 percent are not familiar with technology that can assist them with vending machine functions.

The survey also indicated an opportunity in cashless vending; 28 percent of current users and 10 percent of non-users said they are willing to make a credit card purchase at a vending machine. While this represents a minority even among current users, it must be kept in mind that most consumers have never seen a credit card reader on a vending machine.

Many more consumers indicated new technology will increase their use of vending machines.

Industry partially blamed for childhood obesity
The survey also explored consumer attitudes in general about combating child obesity. Many believe that food marketers should consider investing in innovative partnerships with organizations that focus on increasing the activity level of kids and their parents.

Dabadie offered the following suggestions:

  1. Demonstrate the value vending can give consumers.
  2. Develop a retail store mentality to drive sales.
  3. Be aware that the perception that vending and healthy don't go together is damaging the industry, and it is incorrect.
  4. Freshness and nutrition information in an easily accessible format will help change consumer perception and broaden the appeal to non-users.
  5. Incorporate the latest technology. Consumers do not know about it. It can expand vending usage.
  6. Expand the variety of ethnic offerings.

Industry experts respond
Dan Mathews, senior vice president and chief operating officer of NAMA, said the less than excellent rating on vending reliability shows that the vending industry has not explained the benefits of guaranteed product delivery, something that most new machines now offer, particularly to non-users. "There's still that fear from the older days," he said.

Mathews was also surprised by the extent to which consumers are eating less candy, cookies and salted snacks in favor of healthier options.

Industry observers have long questioned the reliability of responses to health related questions. Many believe consumers aren't fully honest when answering these questions and tend to exaggerate their healthy habits.

Nevertheless, Mathews thinks the industry needs to continue to respond to health concerns. He is alarmed by the fact that 80 percent are not aware that vending offers healthy products.

Mathews was surprised by the high number that said they would purchase more from vending machines if they could read freshness and ingredient labels. Nevertheless, Mathews thinks it is important for operators to improve in this area. "I think freshness dates are important," he said.

On the positive side, Mathews said the public is more accepting of vending in middle schools and high schools than many might think, based on the way the media has covered this issue.

Mathews believes the fact that 25 percent said they would use credit cards in vending machines proves there is a growth opportunity.

One finding that Mathews thinks operators need to understand better is the percent that walk away from the machine if they don't find what they want. This survey isn't the first to indicate that a sizeable number of consumers are doing this.

Many operators tend to purchase based on rebates or product costs rather than on focusing on consumer needs, Mathews said.

Survey methodology issues
Mark Bruno, president of Boston, Mass.-based Service America Group, is interested in seeing how the survey respondents were solicited. He questions whether or not the results are "totally reflective of the population in total," considering that it was an Internet-based survey.

Nevertheless, Bruno said there could be some interesting findings by "drilling down" deeper into the results. He said the results could shed light on how likely the buyer would be to use vending in the future if they experienced not finding what they wanted
in a machine.

The finding that consumers view vending prices as high led Bruno to wonder whether it would make sense to educate the public that the vend price includes sales taxes and bottle deposits. Educating the public about this could raise the value perception of vending.

"It (the survey) does underscore the need to market ourselves better and do a much better job in offering products that consumers want," Bruno said. "Many times, the offerings are influenced by rebates and global plan-o-grams rather than customized offerings. We have precious, expensive real estate that we sell too easily to our suppliers for short term gains while potentially sacrificing longer term customers and buying patterns."

Mathew Marsh, president of First Class Vending Inc. in Los Angeles, also questioned the way the survey was done. "I don't know that our customer is someone that goes online and fills out surveys," he said.

Marsh suspects the sample base did not reflect the vending customer base. Based on the finding that many respondents did not view vending as having a good value, he suspects that the sample might have been comprised of people who were more familiar with machines in public locations, such as hotels.

"Every location is so different," Marsh noted. He said it would have made more sense to isolate a group of B&I customers rather than mix customers of all different types of locations together.

NAMA officials maintain the sample base reflected the customer base.

"This study was Internet based, but the participants are part of a huge audience of specially selected Harris Internet panel members interviewed on average for 15 minutes," said NAMA's Mathews. "These are not simply people going to a website and taking a survey. The data was properly weighted to reflect geography and population."

Operators must balance variety and price
Jim English, general manager for vending at Masterfoods USA, which sponsored the study, said the findings were not surprising, but it nonetheless helps to have goals clarified. "Balancing the needs of consumers with those of vending operators is a big challenge in such a competitive industry," he noted. "Masterfoods has long been aware of the need to promote more product variety in vending. It's a matter of finding solutions that deliver against consumer needs while allowing operators to make a fair profit."

Several observers noted the survey confirmed the consumer perception that vend prices are higher than other prices. Many view this as an ongoing problem.

"You would think that over time that would change," said Cliff Whitehead, vice president of the vending division at Flowers Specialty Group. "It surprised me that that perception has not changed."

"Why doesn't the consumer get the value of the vending machine?" asked another manufacturer who did not wish to be identified.

This individual said it might be time for operators to start posting signs on bulletin boards comparing prices at the vending machine with the local convenience store. This would also address the need to direct consumers to the vending bank, which in many locations is not known to everyone on premises. "They (operators) should tell people on these same posters where the vending machines in the facility are located," he said.

The need for more point-of-sale promotions also poses a challenge, Flowers' Whitehead noted. He thinks that new technology will create some ways to enhance point-of-sale activity.

Technology issues
Michael Kasavana, Ph.D., the NAMA endowed professor at Michigan State University, said interactive touch screens could provide a solution to the need to provide more information about product ingredients and freshness at the point of sale. By enabling the customer the opportunity to "drill down" and retrieve information about a product, the consumer could glean information such as its expiration date, nutritional composition and additional information. Kasavana authored an article on touch screen technology for vending machines that appeared in the November issue of Automatic Merchandiser. "There's a lot that can be accomplished through two-way, bi-directional communication with a vending machine," he said. "Prices could be managed remotely, video files could be downloaded, and product files could be easily updated."

As far as educating consumers about guaranteed product delivery, Kasavana said one possible answer could be to highlight successful product delivery with an audible ringtone. Ringtones have become commonplace, and there is no shortage of available options. Sound could also serve to heighten the customer experience.

Kasavana said one of the biggest challenges facing technological advancement is the fact that a large portion of the industry has been reluctant to implement DEX and MDB, platforms necessary for remote machine monitoring and cashless vending. This lack of wide-scale adoption is likely attributable to a range of variables, not the least of which is an absence of a proven technology standard.

The appeal of a Windows-based architecture with USB interfacing, in place of DEX and MDB, is worth consideration, Kasavana said. He noted that the constantly increasing presence of self-service kiosks, which are PC-based, not DEX-based, presents an additional incentive. He feels the vending industry might be interested in adapting newer technologies more rapidly if they were developed using architectures accepted in other industries.

He also believes that such a move would result in enhanced consumer awareness of gains in vending technology. Kasavana said it would be wise to consider developments in the related self-service kiosk industry since there is a strong potential for linkage to vending equipment. This is especially appealing as self-service kiosks continue to emerge in application areas like airports, grocery stores, banks, hotels, retail stores, and related businesses.

Cashless use increasing quickly
Jim Turner, vice president of intelligent vending at USA Technologies Inc., said the results confirm what other surveys have found about consumer willingness to use cashless tools. He thinks that the faster the industry accommodates cashless transaction capability, the faster it will grow.

Turner noted other research has found that credit and debit card use are projected to continue to increase rapidly, particularly debit cards, which are used for smaller value transactions than credit cards. "Vending is a perfect application for this," he said. "The trend toward cards is accelerating, particularly for smaller transactions."

Turner was impressed by the finding that consumers are comfortable using cell phones to make credit purchases.

He was also intrigued by the finding that 28 percent said they would use credit cards to make vending purchases and another 30 percent indicated they had no problem doing this.

Quarter of non-users enticed by cashless
Equally if not more importantly, Turner noted, is that among non-users of vending, one fourth don't use vending because they don't have the right change or because current machines don't take credit cards.

Turner said other research has found that card purchases are typically 32 percent higher than cash purchases; the increase is driven by both multiple vends and higher ticket purchases, in almost equal measure. "I think it makes a very powerful story for the future direction of the industry," Turner said.

Randy Parks, president of ProStar Services in Carrollton, Texas, said the survey was helpful because it reinforced the need to change the way the industry does things. "We have some problems, but we have some opportunities," Parks said.

"We agree that there is a need to better educate consumers on some of the benefits that vending has to offer - convenience, ease of use, healthier products, value, brands, price and variety," said Kelly Carioti, vice president of vending, PepsiCo Foodservice. "In doing so, we believe that an opportunity exists to clear up some misconceptions about vending and to draw in new users to the industry."

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