The Secrets To Today's Vending Business Model

“Forget what you’re supposed to offer and dream about the type of service you could be offering.” Those words were said by Donnie Pemberton, president of The Pepi Companies during the NAMA OneShow session “Not UR Daddy’s Vending: The Evolution Of Today’s Convenient Refreshment Company.”  Donnie, and his father, Vic Pemberton, current CEO, have been providing solutions to customers for over 30 years. They represent two generations, but are unified in their approach to the future – focusing on customers, employees and the company.

Be a custom convenient food solution

Finding new customers requires using a mix of old and new techniques. Vic remembers the “old fashion” way of vending was to obtain referrals from customers, suppliers and associates, to read newspapers and magazines and to canvas local business areas. Nowadays, however, the company uses an integrated Web and social media presence in order to gain connections. The new techniques are more interactive. Donnie explains finding new customers today means having a strong Web presence, something that piques the decision maker’s interest. It requires building relationships via social media and electronic means such as texting with good customers.

All of these factors facilitate a face-to-face meeting and it’s in those meetings that the true secret to success happens. One thing the company recommends is for operators to find out exactly what is important to the customer. The Pepi Companies has been able to focus on evolving by using location-specific customer service questionnaires and then changing business offerings and standards based on responses. From years of asking, Donnie explains the top five location concerns are safety, relationship/experience, price/value, service and response time and real/fresh food vs. frozen. “There are no surprises,” said Vic. “It’s what we see.” The difference is the details. He can now find out exactly what the customer needs and then tell them how he will meet those needs.

Measure and use customer perceptions

Something The Pepi Companies uses to measure their status in the marketplace is Net Promoter Scores (NPS). The NPS revolves around this question “On a scale from 0 to 10, how likely would you be to recommend Pepi to a colleague or associate?” “A score of 9 or 10 means they are a promoter,” said Vic. “It means they love you.” More importantly, it means the operator can raise prices at this location. The Pepi companies did just that and Vic reports they didn’t lose a single account.

A score of 7 or 8 means the account is passive – indifferent. It’s the score of 6 or below that is Pepi’s biggest focus. These are the detractors. “They are actively looking for someone else,” said Vic. The Pepi Companies has a special customer service team that targets those customers that gave a 6 or below to try to strengthen the relationship. While each customer gives a score, the company likes to calculate its overall NPS Score. Out of 100 surveys, Pepi takes the percent of promoters minus the percent of detractors. Vic reports his company as receiving 55 percent, which is quite high considering vending usually has a negative NPS and quick serve restaurant (QSR) are at about a 16 percent NPS, 65 percent for some of the top QSRs.

“This will help with account retention,” said Vic. “And account retention will help with profitability.”

Become a breakroom expert

The new vending isn’t just about placing products in machines, but creating convenient refreshment. This includes bright equipment and spaces with more variety, accessibility and fresh food. It means machines that accept payment forms that are in the customer’s wallet. “The customer needs to feel like the products were placed just for them,” explained Donnie. He showed breakrooms that Pepi actually designed to create a customer place for employees to refuel. Oftentimes the location will pay for a breakroom redesign when presented with a rendering of how it could look, but there are times when Pepi took on some of the cost in order to create a place consumers would spend time, including time buying and eating. “We have to create a destination place,” said Donnie. For Pepi, this means round tables, plants, special lighting, the location’s logo and special consideration to coffee where consumers can personalize their beverage.

Vic suggests creating a model where the operator is designing the coffee roast, the logo, the environment. “It builds the personal relationship,” he said.

There are also additional revenue streams beyond the traditional breakroom. For schools, military bases or honor system locations, delivering products on a regular basis to the location is a huge market. “We call it Direct Store Delivery,” said Vic. In additional to charging for food and delivery, Vic suggests leasing out microwaves, ice machines and other equipment that an office might want.

The Pepi Companies were struggling in the school vending market, until they changed their model. They partnered with the school for an open canteen. Instead of offering traditional vending, Vic opened an “oasis” on school grounds where the kids could walk up to a window to buy food and snacks. The oasis was run entirely by the student council or student volunteers, was open for certain hours during the day and became a destination point for both students and faculty. “It’s becomes an educational component,” said Donnie. “We can partner with the school. They don’t get commission, but still make money.”

Reconsider fresh food

Vic swears by food. “You want a competitive advantage, do food,” he said. He calls catering his marketing – it differentiates him for the customer. He has specially developed recipes that locations come to know and love.

The company found that fresh food was a huge advantage in micro markets, because it is something consumers have been craving. “If you want an advantage, offer fresh food and do it yourself,” said Pemberton.

In vending and micro markets, Pepi turns fresh food around if it isn’t selling. “It’s about the consumer,” he said. If an item is not selling in a location, they will take it out after three days and put it in another location.

Add micro markets

In addition to becoming breakroom experts, the company began using micro markets. They discovered that micro markets, though they look like convenience stores, aren’t. “This is a workplace foodservice,” said Vic. “Micro markets aren’t c-stores and you can’t treat them like one.”  He noted that sales increased nearly 30 percent in micro markets.

When it comes to micro markets and vending, the Pembertons urged that the competition is with convenience stores. “Vending companies need to highlight that what they offer is cheaper than the c-store,” said Pemberton. He recommends customizing each micro market and selling branded apparel.

Move to mobile

Cashless is instrumental to the company. That’s why Pepi has gone to 100 percent cashless machines. Additionally, Vic and Donnie stressed the importance of using promotions in vending and micro markets to attract and retain consumer use. The company offers Pepi bucks, which they bundle out of vending machines and consumers can use to purchase products.

They also have a Pepi More card which the consumer can load with funds on the company’s Website. Several audience members were curious about the liability of pre-loaded cards and whether or not the Pepi Co. counted those funds as “sales.” Vic suggested they discuss the liability of prepaid cards with their financial advisors.

The Pembertons additionally discussed getting rid of the physical card and replacing it with a mobile app. “Don’t put the nutrition facts on the machine, put them on the phone, within an app,” said Vic.

Employee satisfaction

The Pepi Companies tries to treat every employee like it’s their birthday. As part of that treatment, the company hires college and high school kids to come and clean and fill route drivers’ trucks so that the driver can come to work and focus on the customer.

The company also asks its employees to take the same NPS survey as their customers. “To build a good team you must put together a team that functions. Are your people in the right seats?” asks Pemberton. The NPS scores help them determine if employees are in the right place and happy.

When customers are happy and employees are happy, it strengthens the operation’s bottom-line. The Pepi Companies have regular meetings to discuss sales numbers, NPS scores and even employee morale. It’s how they have kept the company strong.

The Take-Aways

Vending operators can learn a lot by following the secrets of other successful vending companies. Offering multiple methods of payment, re-creating the breakroom experience, offering fresh food and focusing on high NPS scores are just a few ways in which vending companies can evolve with the consumer and increase profitability.