How to sell cashless into your accounts and minimize your costs.
During my visits with operators regarding cashless solutions invariably the word “cost” comes into the conversation. “How can we absorb more costs when our current bottom line profit is so small?”
First determine how you can make more money in your accounts with a cashless solution.
- Price increases
I have been told that the average reduction in unit sales after a price increase is around 15% to 20%. I have seen time and time again when a cashless solution is implemented at the same time prices are increased, unit sales stay the same. As an example, you have a beverage machine that sells 100 units per week at $1.00 with a 6% sales tax and 10% commission and a case price of $15.00 (62.5 cents per unit). You raise the price to $1.25 and lose 20% in sales, you will gain $650 in annual profit. If you take the same scenario but install a cashless solution and maintain unit sales, you will see a $775 increase in profit after all the costs for cashless are taken into consideration. You will see an increase in profit of $940 if the account absorbs the processing and monthly service costs.
- Sell higher end items
I have visited operators who are using one machine to vend traditional beverage and snack items and other machines to sell higher end items such as energy drinks and teas and higher quantity snack items. By “mixing up” the pricing structure in a category, the price increase process becomes much easier as all items are not priced the same. Simply add new higher end items to maintain margins. Cashless will help you guarantee that you do not lose these high end sales due to the fact that the customer does not have the cash in their pockets.
- Have the account pay for part of the cashless expenses.
Many operators and bottlers are selling their accounts in such a way that the account picks up part of the expense for the addition of cashless to their machines. But the account must believe that there is a benefit for them to have a cashless solution on their machines. During the “price increase” meeting, explain to the account that we must go to $1.25 on our beverages. The convenience store down the road is at $1.39 plus tax., we only want to take price to $1.25 including tax.. We know how hard it is to buy something from a vending machine when the price is over $1.00. We have been thinking of installing a cashless solution using debit and credit cards for your employees (students, visitors). How do you think this could be of benefit to your employees (students, visitors)?
An answer you might get is that we have a young work force and they do not carry cash. Another might be that we would like healthier items in the machines but we know they tend to have higher prices. Another might be that we depend on the commission dollars and that a credit / debit card solution will allow you to sell higher priced items thus higher commissions for us.”
Your answer is “You are absolutely right in that this would benefit your people in these ways. Let me share with you our costs associated with implementing such a program. First the hardware cost is $???, the card processing fee is a certain percentage and our supplier charges a certain dollar amount per month for the cell phone and card settlement capabilities. If we pick up the hardware cost could you pick up the monthly fee and the card transaction fees? With the price increase, your commission dollars should stay at the same level if not go up after all the costs are taken into consideration.”
I know it is easier said than done, but I personally have been on these calls and I have seen it work first hand. Let me know if I can help you achieve the same results.
September 5th, 2008 at 4:47 pm
You offer great advice. As someone who has a lot of experience in this field, you offer a lot of truthful and down to earth advice.