Improving the consumer payment experience with VNR
Translating improved consumer experience to sales lift:
Expected long term sales lift model
The VNR’s role in consumer adaptation.
Note Recycling vs. Credit cards
Operational Considerations with VNR
VNR Float Level
Impact on Coin Handling
VNR Deployment Consideration:
Vend Price, Volume, Site location
VNR Deployment Recommendations
Why should you care about investing in bill recycling?
You can get everything right within your control:
Right vending machine
Right product selection in the machine
Right price points for those products
Right service strategy so the machine is always full
… You will still miss a surprisingly large % of sales and we are going to tell you why
Sources of VNR Value
Regardless of the consumer’s desire the for product or the attraction of the machine, the consumer has to have the means to complete the sale.
The value proposition for the VNR is to improve the consumer experience by enabling vends that otherwise can’t be made with traditional vending payment systems (e.g. bill validators accepting $1 only and coin changers.)
Improved Consumer experience leads to higher customer satisfaction and sales lift.
What about your business?
What denominations do you have enabled today?
Do you believe you are losing sales?
Do you run into changer starvation?
A recent study showed 50% of machines were in exact change mode 1/3 of the time or more!
How many bill breakers do you have deployed?
Are you using $1 coins and if so, do you pay a fee to your bank for them?
What consumers carry
Understanding what consumers typically carry highlights the need to alter denomination acceptance:
Over 80% carry $1 bill or the equivalent in coins
Only about 50% carry $3 in bills/coin
60% carry a $5 note
40% carry a $10 note
65% carry a $20 note
At vend prices above $1, limiting bill acceptance to $1 notes decreases the potential customer base significantly
Current US bills in circulation
Circulation $1 46% $2 4% $5 11% $10 8% $20 31%
Enabling Vends Simple example at $1 vend price To enable a vend at $1, the consumer must either possess: $1 in Coins OR $1 Note Probability Of Success * 20% 80% Probability Of Failure 80% AND 20% * Note: From MEI Survey Data Lost Sales 16% (80% x 20%)
Bill Recycling value to vending patrons Current Bill Acceptance and Change $2.00 Vend Price $5 inserted Increase sales by allowing consumers more payment options. $2.00 Future Bill Acceptance and Change… Bills In Bills Out $5 inserted $20 inserted
Observations About Sales Lift
Benefits of recycling are a strong function of vend price.
Less consumers can be satisfied with coins and $1 bills at higher prices.
Financially, the incremental margin on the sale is higher.
From a consumer perspective, “vend price” is scenario based.
Consider a mother with two thirsty children that don’t want to share.
A $1.25 drink price becomes a “$2.50” vend price when she buys 2.
7 of 10 can buy both drinks without $5 bill acceptance enabled
9 of 10 can buy both drinks when $5 bill acceptance is enabled
Recycling enables multiple vends and purchase bundling
In the $1.25 drink example, making the second purchase is highly dependent upon higher bill denomination acceptance . The sales lift resulting from the second purchase is:
Lift From $5 acceptance 24.1% Lift from $10 acceptance 6.3% Lift from $20 acceptance 6.7%
Consumers do not carry a large % of $1 notes or coin. Therefore a significant % of vends are not enabled by coin and $1 acceptance.
Enabling $5 , $10, and $20 acceptance captures these lost sales by matching the retail experience
Operators no longer are concerned with change starvation
End customers do not receive ‘cascade of coins’
Bill Recycling Value Proposition Lost sales Expected sales lift, by unlocking the consumers wallet, has been confirmed in field trials Note- using $1.25 price 15.7% 23.0% 33.6% As price increases consumers ability to make a purchase decreases Lift from $5 acceptance 12.4% Lift from $10 acceptance 3.2% Lift from $20 acceptance 3.5%
Improving the Consumer Value Experience As a consumer, do I want to shop at a “store” where I currently can’t buy anything between one in six and one in three visits? Note recycling can greatly reduce those negative consumer experiences.
Sales Lift by Note and Vend Price
The VNR and Consumer Adaptation
The High Visibility Bezel (while an option on the VNR) was designed specifically to promote consumer awareness for recycling.
Hi Viz Bezel = Higher note acceptance
Informs the consumer which notes are accepted.
The VNR is designed to reliably recycle notes of all qualities.
If a denomination is lighted on the Hi Viz bezel, the unit will accept it and make the expected change.
Over time, for consumers that have used the product, the Hi Viz Bezel signals both higher denomination acceptance and the expectation of success.
VN2700- recycler ready, $1-20
price parity with VN2500
Future proof investment
MEI provides the only complete unattended payment solution for vending in the space provided. MEI Modularity
VN2700HV- includes High Visibility Bezel
VN2700R- includes recycler and High Visibility Bezel
Buy as separate components
VN2700R- includes recycler and 4 in 1 cashless bezel
VN2700- recycler ready, $1-20
4 in 1 cashless bezel
Whatever the application MEI has a modular approach that allows the most flexibility for each situation.
A modular approach allows customers the most flexibility to configure devices to meet the needs of each location
Whatever the application MEI has a modular approach that allows the most flexibility for each situation. MEI provides the only complete unattended payment solution for vending in the space provided. MEI Modularity
Both larger note acceptance and credit card acceptance improve the consumers ability to purchase
credit cards provide roughly the same benefit as $5 and $10 acceptance
Credit cards have a higher cost structure to achieve this similar benefit including incremental capital and transaction costs
Credit card acceptance has advantages to note recycling when:
Site demographics ensure high % of credit card holders (e.g. offices, airports)
Telemetry is implemented for other reasons.
High value machines are in less secure locations.
Only MEI can offer note recycling and credit card acceptance in one device.
Compared to coins and $1 bill acceptance Bill Recycling vs Credit Card
Sales Lift Results 2 Case a Week Machine at $1.25 Vend Price MEI Company Confidential
Sales Lift Results 2 Case a Week Machine at $2.50 Vend Price MEI Company Confidential
Business Case - Bottling Analysis at $1.25 Vend See Details Category Cash Only Cashless Recycling Cashless and Recycling Hardware Costs $375 $223 $598 Monthly Fees $9.95 $9.95 Cashless Fees 5% 5% Increase to Sales 16% 15% 20% Annual VPO Cases 104 121 120 125 Cases per Week 2.0 2.3 2.3 2.4 Cost per case $3.10 $1.86 $4.80 Cost per unit $0.13 $0.08 $0.20 % of business cash 100% 77% 100% 90% % of business cashless 0% 23% 0% 10% Payback Period (months) 46 11 42 Annual Sales Lift $507 $470 $615 Annual Margin Lift $98 $235 $172
See Details Business Case - Bottling Analysis at $2.50 Vend Category Cash Only Cashless Recycling Cashless and Recycling Hardware Costs $375 $223 $598 Monthly Fees $9.95 $9.95 Cashless Fees 5% 5% Increase to Sales 32% 30% 38% Annual VPO Cases 104 137 135 143 Cases per Week 2.0 2.6 2.6 2.8 Cost per case $2.74 $1.65 $4.18 Cost per unit $0.11 $0.07 $0.17 % of business cash 100% 61% 100% 87% % of business cashless 0% 39% 0% 13% Payback Period (months) 6 3 7 Annual Sales Lift $1,970 $1,859 $2,349 Annual Margin Lift $745 $929 $1,015
Recycling Affect on Machine Float
Recycling reduces total machine float with higher bill acceptance .
Float reduction plus increase in sales by accepting higher denomination bills creates a great value proposition. $84 difference in machine float
Recycling Affect on coin funds
In a normal scenario at $1.25 vend price, accepting $1 bills and coins, there is a positive coin ratio of $0.21.
Customers will insert more coins than will be paid out
Incidences of exact change result from unique circumstances and not from an expected coin depletion scenario- a machine should not run out of change
Bill recycling enables the acceptance of higher denomination bills without a concern for coin starvation.
The percentage of $5 and $10 notes that could be used for the purchase is calculated to be 15% of the total inserted.
This results in a coin positive balance of $0.10
Conclusion- Coin starvation is not a concern when using bill recycling to enable higher denomination acceptance. Bill recycling leverages customer provided bill float and protects coin levels allowing an unlimited number of vends until next scheduled service.
Higher denom impact on coin funds w/o bill recycling
Using the same scenario of a $1.25 vend price, accepting $1-$10 bills and coins, but without recycling , the coin ratio now goes negative.
Even when using $$QQN tube config, the changer will still go coin negative. There is simply too many coins going out for the 15% $5 and $10 bill usage.
The 15% incidence of $5 or $10 usage results in a $0.62 negative coin ratio limiting maximum vends.
Conclusion; the addition of dollar tubes absorbs large capital investment ($138) and doubles maximum # of vends until exact change.
Only bill recycling eliminates exact change scenarios when enabling higher bill denominations.
Operational Considerations: Reconciliation
Note recycling with current MDB requires interpretation in the reconciliation process:
When recycling $1 notes, for DEX audit purposes, $1 notes are reported as $1 coins when accepted into the recycler or when dispensed for change.
$1 notes that are stacked in the bill acceptor magazine are reported normally.
As long as the companion coin changer is set up to accept any $1 coins to the cash-box, the resulting DEX audit data is unambiguous. It simply requires interpretation.
Recycling $5 notes is reported similarly: as $5 “coins” in the recycler and as $5 notes when stacked in the magazine.
MDB ver 4 is designed to accommodate note recycling to allow proper reporting of note balances without interpretation. Both the note recycler and the VMC must be designed to work with MDB ver 4.
The VNR is designed to auto-detect whether a VMC is MDB ver 4 compliant at start-up and dynamically adapt its reporting standards.
Bill breakers- adding recyclers to a bank can eliminate bill breakers
The impact to capital deployed can be significant
Removal of bill breakers costing $1200 or more; plus $400 float ;plus $400 in cash room for each = improved profitability AND customer satisfaction
We recommend that at least 60% of the machines in a bank have a recycler
Too few recyclers could overwhelm capacity
Placing machines in force vend can also avoid recyclers being used as changers only
Increasing vend prices thru recycling
No longer faced with changer starvation concerns, increasing vend prices is now more easily accomplished. MEI CashFlow coin mechs make it easy to alter tube configurations as you adjust UP your vend prices
Operational Considerations: Summary
Accepting $1, $5 & $10 while recycling $1s has few significant operational consequences.
By comparison, accepting $1, $5, $10 & $20 while recycling $5s has operational consequences to consider:
Need to refill $5’s and $1 coins
As much as $383 in working capital increase in machine
While the $383 in working capital could be reduced in many machines, at a cost of capital of 10%, it is only $38.30 in annual opportunity cost. There may be more relevant costs including c ash handling costs (particularly for $1 coins) and added operational controls
If a site is already using $1 coins, then $20 acceptance / $5 recycling should be implemented.
A two case a week machine at a $2 vend price and a 6% expected lift from $5 recycling acceptance yields almost $300 per year in incremental high margin sales.
Deploying Recycling: Site Factors
Open Site vs. Closed Site:
In early deployments of recycling, closed sites will produce superior returns to open sites:
Superior awareness of recycling via repeat use.
Closed site experience leads to open site experience
Importance of the High Visibility Bezel to “connect the dots” between the closed and open site use.
Multiple vend possible Sites:
In environments with family experiences that could lead to bundled vend opportunities, recycling will help unlock the potential of the machine.
The “entertainment” category in a recent trial produced the highest results: 29% lift for $5 acceptance, 4% lift for $10 acceptance at vend price range of $2.50 to $3.25.
While $1 recycling doesn’t dramatically change total “cash in machine”, $5 recycling decided ly does. In less secure sites, credit card acceptance is better.
Conclusions: Key Takeaways
Note recycling first and foremost is a technology to improve customer satisfaction.
Enables a retail experience for vend patrons
The improved customer experience translates directly to sales lifts of 15% or more!
VNR and Consumer Adaptation:
The VNR and the High Visibility Bezel build consumer awareness, trust and experience to accelerate adaptation.
Enables vend operator to maximize investment ROI
VNR Deployment considerations:
Vend Price is the strongest driver, followed by volume and site considerations.