Today we're very excited to publish a guest post by Joe Nichols, second-generation owner of A & M Vending Machine Sales.
Before we can effectively discuss compensation for account placement, we need to discuss the qualities of the account market. Have you determined the type of company you will be selling to? What type of people are the decision-makers in these accounts, what are their purchasing habits, when do they buy? Create a sales strategy and implement that strategy in a sales program that targets the decision-maker’s habits.
Remember the law of cause and effect. For example, if your desired decision-makers are concerned only about price, your concern should be profitability. If you can obtain placement by lowering the prices of your products – but your company cannot make a profit – there is no reason to place the account, because no profits means no cash flow, which means the business isn’t sustainable. You can grow your business by lowering prices. If your goal is to sell 1 million units and you achieve this goal by lowering prices – but you lose $1 per unit – you are now $1 million in debt. Not a great business model to follow.
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The vending machine industry is an established industry. An operator that has been in business for 5 or more years has seen what does – and doesn’t – work. Don’t fool yourself into believing that you are innovative and that your new system is going to take the market by storm. Very few ideas are new and somewhere (probably closer than you think) someone has tried to implement it that same idea. Keep thinking, but find an experienced operator with whom to discuss the ideas. You might be surprised by the answers you receive.
I personally did just this with an idea that I felt would give me a huge advantage in the vending machine business. I discussed it with my equipment supplier, who informed me that the concept had been tried by 3 other companies that he knew of – and that all 3 failed for the same reason (a possibility that hadn’t even occurred to me). He saved me thousands of dollars and hundreds of man hours for 20 minutes of conversation; it was one of the best returns on investment I have ever made.
But what about paying for placement?
Paying to place machines is a type of sales program and is a subset of your marketing effort. What are you trying to achieve with this type of sales program? What are the implications of your actions, and why are you doing this action? What are your sales and marketing alternatives? What will this program cost? Will it be profitable? What type of vending accounts will it generate? How do successful operators become successful?
Experience has taught me several lessons about this type of program. There are particular industries and companies where this is a common practice. Shortly after a sales discussion is started, the decision-maker asks what’s in it for him. I have found that these particular locations change vending suppliers frequently, and some companies have no ability to have vending services unless they find new operators.
The law of cause and effect works here, too. If you replace a qualified vending machine operator because you offer the decision-maker a cash bonus for changing, you set a precedent allowing that decision-maker to change again when a better offer comes along. Unless you have a signed contract, you will not recoup your initial investment.
I know one vending machine operator who lost $1000 and never placed the equipment. The decision-maker took the $1000 (cash), told the vending machine operator that he was getting the account, and retired the next day without telling his successor that the company was changing vending operators. The vending machine operator was truly in a no-win situation: The unscrupulous decision-maker had stolen his money and he had no recourse.
While this is an extreme scenario, offering cash incentives to replace vending machine operators gives the industry, as a whole, a bad name. It also creates a level of expectation in customers that implies it is normal.
Concentrate, instead, on good service, quality products, and an enjoyable experience. Those are the best ways I know to ensure low account turnover, higher profitability higher and stable cash flow.
About the Author:
Joe Nichols is the second-generation owner of A & M Vending Machine Sales, a family owned and operated business, for over 40 years. A & M ships new vending machines and used vending machines all around the world.