CHICAGO -- Most consumers have a favorable impression of vending, and members of "Generation Y" are its biggest fans. The new research findings were presented by National Automatic Merchandising Association executive vice-president and chief operating officer Dan Mathews at the 2011 OneShow in late April in Chicago.
Dispelling the traditional widely held industry view that consumers don't hold vending in high regard, the finding shines new light on untapped opportunities, Mathews said.
NAMA commissioned public relations and marketing communications firm Healy & Schulte (Chicago) to conduct in-depth interviews with vending professionals to gauge how the industry views itself, and with consumers to explore their attitudes toward and patronage of vending as a retail channel. Global market research firm Synovate assisted Healy & Schulte in designing and implementing the survey, and it prepared the final data analysis presented to NAMA's board of directors. Based on the findings, the vending association is embarking on a groundbreaking image-building campaign primarily targeted at Generation Y. Called the Industry Growth Strategy, it was previewed at NAMA's annual membership meeting during the convention.
Key among the findings was that 80% of consumers rated vending "positively" or "very positively," contradicting the widespread opinion among operators that their machines are regarded as sources of last resort. In particular, Generation Y (consumers aged 18 to 27) exhibited the highest regard for vending, which is among the many reasons NAMA identified this group as the most likely target for its consumer-focused industry-building campaign.
"You're more loved than you think, and that's something to be excited about," said Mathews. "The industry needs to overcome its unjustified negative opinion of itself, and make the 'front line' more vibrant and exciting. We need to promote vending among consumers as the most convenient form of retailing. NAMA's Industry Growth Strategy, based on what we've learned from our extensive research, is going to help make that happen."
Mathews turned the rostrum over to John Healy of Healy & Schulte to explain in detail what NAMA learned from the research and put it into context.
Healy led off by explaining that Generation Y is comprised of college students and young working professionals. He noted that its predecessor, Generation X (the 28- to 44-year-old cohort), is made up largely of "followers" who watch and emulate what Generation Y is doing.
The "Baby Boomers," who occupy the 45- to 63-year-old cohort, are the traditional consumers that the industry has served for decades and with which it is most familiar. NAMA surveyed both users and nonusers of vending machines in each generational segment to determine the best targets for its industry marketing initiatives.
"The great news is that the predominant view of vending is not negative; people don't think that it's dusty, old and broken," Healy emphasized. He added that while 75% of consumers reported having a negative experience with a machine, 80% still rated vending "positive" or "very positive." Even 50% of nonusers rated vending favorably.
By cohort, more than 85% of all Gen Y users said they view vending favorably. Gen Y non-users said they hold vending in higher regard than Gen X and Baby Boomer non-users, suggesting that Gen Y non-users may be the segment most convertible to vending users.
When asked about their feeling related to the term "vending," more than 80% of users rated it positively or very positively, and nearly 60% of non-users did the same.
Why Gen Y?
Indicating the high regard the younger set has for vending, when asked where they would buy a snack or cold beverage if all were equidistant, Gen Y predominantly chose vending over convenience stores and grocery/drug stores.
Another plus for the industry, the speaker pointed out, is that Gen Yers are heavy consumers of snacks and beverages, regardless of channel. The younger generation is also the most receptive to vending machine technology and innovation, and has an affinity for cashless payment -- which can lead to a higher total spend per transaction, he added.
"Gen Y likes interacting with a machine, understands that a machine will occasionally malfunction, and is not daunted," Healy observed. "And, importantly, Gen Y sets trends that others, including older adults, follow."
Another noteworthy finding gleaned from NAMA's research is that convenience stores are not the primary competitors to vending. When purchasing candy and snacks, both users and non-users said grocery and drugstores and mass merchandisers were their top two choices. C-stores and "bringing from home" tied for third.
Among cold-beverage shoppers, vending users ranked grocery, drug and convenience stores as their top two places to shop. Non-users said they were more likely to visit grocery stores, drugstores, mass merchandisers or "bring from home," rather than purchase from convenience stores.
NAMA's research found that the industry and consumers agree on the five most important factors surrounding the vending experience: cost/value, convenience, freshness, reliability and variety.
All three consumer groups ranked cost/value as their No. 1 concern. And, suggesting an area on which the industry needs to focus, more than half of non-users and a third of users believe that vended products are not a good value for the money.
"We must bust the myth that vending machines are more expensive than other convenience channels, while communicating that using one is easier than bringing from home," Healy emphasized.
Variety is the No. 2 factor influencing consumers' perceptions of vending. The majority of users in all age groups said they rely on vending as a source for an afternoon indulgence, Healy reported. Next to cost, both users and non-users cited "not having the product I wanted" as the primary reason why they didn't make a purchase from a vending machine.
More than half of users and over a third of non-users agreed that they would be interested in shopping at a location that had multiple vending machines offering a wide variety of products and brands.
"It may be worth putting out more machines, switching out product more frequently, making a point of asking customers what they would like to see in machines, and then providing it to address their craving for variety," Healy suggested.
Convenience is the No. 3 concern among Gen X and Gen Y vending consumers, and a cashless purchase option is a key element when it comes to providing it, noted the speaker. "If they don't have the ability to use the machine with the form of payment they have in their pocket -- which is likely not cash -- then it's not convenient for them," he pointed out.
Amplifying this point, Healy reported that more than 50% of Gen Y users and more than 45% of Gen X users said they would use vending more often if they could use a debit or credit card. Nevertheless, the lack of cashless acceptance was the third-most prevalent reason for consumers not making a purchase, behind cost and variety, when the machine is otherwise conveniently situated.
"Gen Y users and non-users are much more likely than Gen Xers and Boomers to favor cashless payments," Healy emphasized. "They are also more likely to avoid vending machines without a cashless payment option."
Freshness and reliability tied for fourth and fifth places among all age groups as concerns when considering a vending purchase. Freshness (or a fresh appearance) is important to users and non-users alike in all age groups, but less than 50% believe that vending products are indeed fresh, Healy said. He emphasized the need to upgrade consumer perceptions in this area.
At the same time, suggesting an opportunity for the industry, the research revealed that 50% of users and 40% of non-users said they would be willing to purchase fresh foods, such as deli sandwiches and salads, from a vending machine. Those consumers emphasized the importance of freshness, and of having date-codes clearly visible.
NAMA's study also found that issues about machine reliability persist. In fact, Healy said, it was the No. 1 factor mentioned when consumers were asked to recall a positive or negative experience related to vending. More than 60% of consumers cited two dissatisfiers -- "took (ate, kept) my money" and "product got stuck (wasn't dispensed)" -- as negative experiences.
"Consumers are generally not aware of technology that ensures a reliable vend, and it's important as an industry to market that capability," said Healy. "Users and non-users also overwhelmingly said they would not use a vending machine if it looked worn or damaged. We have to do a better job of communicating reliability."
The speaker reported that both users and non-users expressed an interest in the latest advances in vending technology, ranging from touchscreen interfaces, interactive screens and self-checkout stores, to "bundled" purchase options and DVD vending machines. Current users surveyed by NAMA said they would increase their patronage if machines were "higher-tech."
"Gen Y and some Gen X consumers are drawn to technology-driven offerings," emphasized Healy. "Using technology in NAMA's industrywide marketing efforts will enhance high-tech perceptions."
Younger consumers are an ideal target, he summarized, because they are heavy snack and beverage users, have a higher opinion of vending machines than older consumers and are open to new machine technology. "They set trends that others follow, and are early adopters of new concepts, especially technology-based ones," Healy emphasized.
NAMA's research also examined coffee consumption habits, and consumer perceptions of vended coffee and office coffee service. The study found that most weekday and weekend coffee is consumed at home, and that most of it is made at home, too. Only 20% of those surveyed indicated that the coffee they drink comes from an office coffee maker or vending machine at work.
Healy reported that 60% of employed coffee-drinkers view free coffee as an employee benefit. Gen Y coffee drinkers are more likely than others to try a coffee vending machine, and 60% said they would buy less from specialty shops if vended coffee tasted better.
Putting the new findings into perspective, the speaker recalled the results of a NAMA consumer perception survey conducted in 2006. He noted that many of the same themes, both positive and negative, prevail, highlighting the areas on which the industry must focus to drive future growth.
On the plus side, the 2006 study found the majority of consumers in agreement with the statement that "vending is convenient and easy to use." On the downside, consumers said vending had too limited a selection of product, and had an unfavorable perception of the value it offered. They were also unaware of the availability of "healthy" and "fresh products," had a negative perception of vending technology, and thus low expectations of its reliability.
The earlier study also explored the value consumers place on branded items, and found that the majority of consumers will walk away if they don't find the brand they want.
"We're still seeing a lot of the same themes," said the speaker, emphasizing that the industry has the power to change consumers' perceptions by addressing their concerns and publicizing its efforts. NAMA's Industry Growth Strategy, he added, is designed to help accomplish this.
Rounding out the data gathered by NAMA, Healy shared research from Mars Inc., conducted in 2010, that examined how consumers select and shop vending machines in public locations and hospitals. NAMA has taken the Mars findings into account in designing its campaign to drive consumers to vending machines.
Only 20% of shoppers in the Mars study said they knew the specific item they were going to buy when approaching a machine. And only 25% of purchases decided upon at the machine were influenced by the presence of a specific brand or item.
More than 60% of shoppers browsed the machine before making a selection, devoting comparable shopping time to many in-store categories. When selecting their product, nearly 50% of shoppers said they switched between items and brands. And 78% of customers said they would not walk away if their preferred item was not available; 58% said they would purchase a different brand in the same category.
The Mars study also found that vending shoppers consider the size of the package before they look at price. A majority bought a single item on a trip to the machine, but almost a third purchased multiple items from different categories.
Another key finding of the Mars research was that 50% of shoppers said they would return to a machine if it offered a loyalty card or credit card system.
Healy applauded the industry's accelerated movement toward adding cashless as a mainstream payment option, citing a study conducted by Apriva of 2,000 operators, 60% of whom said they plan to implement card-based payment systems within the next several months.
Healy emphasized that offering cashless options is one of numerous opportunities that exist to make non-users into users. Other efforts he suggested, based on the research, include boosting consumers' value perception, offering greater variety, and finding ways to assure consumers of product freshness and machine reliability.
Healy wrapped up his presentation by sharing one last finding from NAMA's latest research: many vend consumers agree that machines do not offer adequate "healthy" options. In fact, four of nine reasons cited for less frequent use of vending were health-related. However, the vast majority of vending customers seeks traditional sugary and salty items themselves, rather than supposedly "healthier" alternatives.
"So don't abandon core users who say they visit machines for a sweet or salty treat," he advised. "Most users say they are not necessarily looking for healthy options when using vending machines. And non-users do not identify lack of healthy options as a key barrier."
Healy concluded by assuring operators that the wealth of data NAMA has gleaned from its study has helped in crafting an Industry Growth Strategy that will get more people in front of vending machines, and will assist operators to develop programs to keep them there.
"It's no longer enough to be good. Consumers want exceptional experiences," he emphasized. "They want to be delighted. And we're off to a good start, because Generation Y loves us -- and they typically set trends that others follow. That means efforts that primarily target them will reach Generation X and Baby Boomer users and non-users of vending machines."