PITTSBURGH - Best-selling candy and snack brands are among items that commonly are priced higher in colleges and universities that in any other class of vending location. This finding is one of many based on a study completed by Management Science Associates here, using "VendScape" syndicated data.
The study evaluated the third-quarter 2000 data period, and illuminated differences in product pricing by location. It was conducted by analyzing spiral-level sales information collected by vending companies that participate in Validata Computer & Research's "VendScape" program.
The findings indicated that "Colleges and Universities," on average, generate higher gross profit margins per item than "Office" or "Plant and Factory" locations. This, combined with above-average sales velocity, appears to make colleges and universities the most profitable kind of vending location, MSA reported.
Of the 209 items in distribution across all location types, 63 percent (133) were offered at a higher price in college and university venders than in machines in offices, plants and factories. The pricing differential averages seven percent, but can be as high as 22 percent, the MSA study found.
This may seem like "small change," the market researchers observe; but the results of this premium pricing can add up quickly. For example, MSA suggested, imagine a vending operator with 25 glassfront machines in college locations. Each of these machines surely will stock "Snickers" from M&M/Mars. The average price of this item in a college vending machine is 15 cents higher than its average price in a factory location. If each machine moves 15 "Snickers" bars per week, the annual yield is $2,925 in incremental profit , from that one item alone.
The researchers noted that this pricing differential appears to result from several causes. A primary one is the "captive consumer" concept in pricing, which is not an uncommon pricing strategy. Typically, a product reseller , a convenience store, a hotel gift shop, a vending operator , will price merchandise based on two interrelated factors: convenience and competition.
Consider the "mini-bar" in a hotel room. "We all have purchased a 12-fl.-oz. soft drink for $2.50 from this device, at one time or another. Why? Because we were thirsty, and it was convenient," MSA explained. "The alternative was to go outside in the middle of the night, and we were willing to pay the premium to avoid the inconvenience."
This is a real consideration in the campus environment, the researchers observed. In many cases, there isn't enough time between classes to leave the campus, or even to run to the cafeteria, to grab a snack or beverage. And, even if time permitted, the effort involved would not be worth the dime or so the student would save. He or she is not disturbed by paying 10 cents more for the item, but rather is glad that the vender is there when needed.
Other factors certainly are at work, as well. College sites often require the placement of vending machines in low-traffic areas, as well as high-volume ones, and the investment and cost of service that this entails can require the operator to obtain a higher vend price in order to maintain an acceptable net profit. The institution's objectives in contracting for vending services also may be different from those common to business and industry sites, which can affect commission structure and, thus, vend pricing.
Some colleges have contracts affording a local bottler the exclusive right to sell cold drinks on campus. In such cases, a contract vending operator does not enjoy the high gross dollars generated by cold drink sales, and may have to negotiate higher vend prices on the items he or she is permitted to sell.
Other costs, such as maintenance and repair, may be higher in a college location than in an office building or a factory. That, too, can mandate higher prices.
Even so, candy and snack machines run by contract vending operators on college campuses enjoy higher "velocity" , average dollar sales per machine , than the national average. By location type, if the velocity index for all vending is 100, the index for colleges is 105. By way of comparison, the index for offices is 62, while that for plants and factories is 107. Colleges, on average, are high-traffic locations, MSA has found.
The ability of the vend channel to obtain a premium price by providing quality, branded merchandise quickly and conveniently, when and where it's wanted, is more evident in college and university sites than it is in other vending locations, MSA emphasized. Campus vending thus can be very good business for an operator , and the vending industry might want to find out why its 24-hour, 365-day convenience is not as highly-prized in other types of location.
A great man once said, "Our job as an industry is to convince the world that there is nothing about a vending machine that allows it to sell anything for a nickel less." The college and university market evidently has been convinced.
Management Science Associates, Inc. has been a leader in the development of analytical software and information-based systems since its formation in 1963. It has worked with Validata Computer & Research (Montgomery, AL) to develop "VendScape," a sales analysis tool for operators, and "Vscan," a vending market analysis service available to product suppliers. Headquartered in Pittsburgh, MSA maintains branch offices in New York City, Boston, Chicago, High Point, NC and Toronto, Canada, as well as in the United Kingdom and Malaysia.
Information on MSA products and services can be found at the company's website, www.msa.com.