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EDITORIAL: Machine Sales, Squaring The Circle

Posted On: 1/11/2007

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Why aren't more operators buying more new equipment? Certain manufacturers say the reason is, "We haven't communicated our message to the operator." In other words, they believe the problem is operator ignorance. For example, a top sales pro who represents photo booths says, "Many operators still don't seem to realize that modern digital imaging products no longer involve all those messy chemicals." A redemption game manufacturer says, "Many FEC owners don't realize that redemption and novelty games are a better long-term buy than other types of equipment."

While manufacturers may regularly hear such claims of ignorance from operators, in most cases I doubt those claims are genuine. To me, they sound like the kind of excuses that a reluctant customer gives when he just doesn't want to buy something, period. Every FEC operator I talk to knows that redemption games are superior earners. Every street operator I talk to is well aware that digital imaging equipment -- now 15 years old -- is clean, fast, and chemical-free.

Frequently, operator sales resistance grows not from ignorance, but from lack of incentive to buy. Last year, huge financial incentives helped more than double the installed base for downloading jukeboxes. Those financial incentives included not just low-interest loans, 0% leases, and "buy 10, get one free" offers, but also superior cashbox earnings...up to 100% increases over CD music in many locations.

Not every product can be sold on this basis, of course. At a deeper level, the manufacturers' quarrel with operators is over business philosophy. Leading operators aggressively buy new equipment on principle: they want to keep up the value of their routes. Many non-buying operators cheerfully admit they are "milking" old equipment. If so, then no amount of education, information, or persuasion is going to change their minds. In such cases, weak sales are not caused by failing to get the manufacturer's message out, but by delivering an unconvincing message to customers who are satisfied -- sometimes to the point of complacency -- with their present business.

Rather than trying to convert these operators to a different buying philosophy, a more productive approach would be to ask: "What kind of message would these operators find persuasive?" The obvious, yet unavoidable, answer is that money talks. Demonstrate that a product can dramatically add to the bottom line (or that failing to buy that product will significantly cut into existing revenues), and operators will buy.

Over a decade ago, a certain manufacturer introduced a new-technology product that it believed had great profit potential. Most operators were not interested. The manufacturer began selling its machines to locations and small-time entrepreneurs who wanted a side income. When the product began making serious money, operators protested the factory's direct sales policy -- but they also began buying. For the next decade, this product was one of the industry's top moneymakers, and top sellers.

Today's operators don't like this strategy any more now than they did 10 years ago. At the same time, manufacturers are keenly aware that even digital jukeboxes had to prove (and improve) themselves for nearly a decade before sales really took off. Few manufacturers can afford to wait that long to realize a return on their investment.

How do we square this circle? So long as most operators require two or more years of profitability before they seriously consider buying, we are going to see more direct sales happening. In some cases, it may be a ploy to prod operators to get off the fence. Other manufacturers will quietly decide to target an alternative market where demand may be greater -- and faster.

Understandably, operators don't want to return to the days when manufacturers went out and regularly recruited new customers, even though this was standard policy for the music and amusements industry in the 1930s and 1940s. But unless the trade finds some way to square the circle of sales resistance, certain aspects of that history will probably be repeated.