Account retention, now more than ever!

Vending operators are confronting three major issues in the current recession: 1) how and what costs to cut; 2) which, if any, investments should be made in technology to improve productivity; and 3) how to maintain and increase sales at current accounts.

In response to this situation, most operators have concentrated on reducing costs. This makes sense, as a company must survive. Reducing costs, however, does not set the stage for improved service, increased productivity, retaining accounts, and increasing sales.

Many articles and proposals are currently circulating regarding how item-level data, remote machine monitoring, and cashless payments can improve the service and productivity of a vending company.

These technology solutions involve substantial investments, not only in hardware and software, but also, and more importantly, in changes in vending operations and personnel. Determining the return for such an investment is complicated and the implementation time consuming.

However, operators should take the time to review how they maintain and increase sales at existing accounts.

Connect to your base

Recently, in an article in The Wall Street Journal, Rick Braddock, the chief executive officer of FreshDirect, the online delivery grocer and vending operator, described his company’s policy of improving relationships with its existing customers rather than targeting new customers during the current downturn. Creative approaches in this area can bring immediate results with investments that can be carefully controlled and measured.

Most operators consider customer outreach as a cost to be minimized.

In companies seeking to cut costs, customer relations is one of the first areas they consider. One reason is that operators do not see this as an area that has a measurable return on sales.

I have known many companies that at one time in the past sent out a customer newsletter. In time, they lost interest in doing it. They see the recurring cost, and they question if the newsletter is really helping them in any way.

Another reason most vending operators fail to invest in customer relations is they are in the habit of focusing on obtaining new customers, not improving their sales and relationship with their current customers.

The reason that customer relations is not seen as generating a good return is that it is not given enough attention in the first place. That newsletter that I referenced above is not doing much good because it was assigned to someone who did not have the motivation or the skills to keep it interesting.

Be proactive, not reactive

Generally speaking, customer service in vending is reactive, not proactive. Operators wait to hear a customer complaint before taking corrective action.

Most operators do not compensate personnel for being proactive. Moreover, since many operators have automatic renewal clauses in their contracts, there is not even a contractual reason to contact existing accounts.

The time has come for a change in thinking. Innovative changes in communications with an operator’s current accounts can result in increased sales.

Given the current situation in our industry, operators should be investing more in customer service and less in new account acquisition. They need to revise their sales, customer service, compensation and procedures.

Industry consultant Jerry McVety pointed out in a feature article in this magazine in January of 2008 that Federal Express has a client retention goal of 99.9 percent.

Elliot Maras, editor of Automatic Merchandiser, noted in his Oct. 13 blog, “Staying Under the Radar? It’s a Dated Approach to Customer Service,” that most operators hold a long-held belief that “the best vending service is when the customer doesn’t have to be involved in any way.”

Operators should concentrate on developing an account retention and development program. First and foremost, in this day and age, each operator should have the contact person, phone number and, most importantly, the email address of every account. Depending on the size of the account, email and personal contacts should be made on a regular basis.

The policy of most vending companies is that the only reasons an account is lost is if the account moves, goes out of business, or is not profitable. This is simply an incorrect assumption, seeing that studies have found that only 6 percent of dissatisfied customers

will complain.

Do you take ownership?

Customer service must be proactive. And a proactive program will only succeed if there is a person at your company who has “ownership” of the program. Many companies have already designated customer retention specialists. These are individuals whose sole responsibility is to communicate personally with accounts. The companies that do this tend to be large since they have the resources.

But companies do not have to be large to have an aggressive and effective customer relations program. Especially with opportunities offered through email and social media.

Medium-size vending companies can even consider a part-time employee operating from their home.

In most companies, there are lots of things that have the potential to excite existing customers if they are presented in the right way (or presented at all).

If your company has item-level sales data, share this information with your accounts. You can email the sales reports showing the product changes you will be making to improve customer satisfaction and sales.

Customers want to know you better

Even if you do not have item-level data, every operator should establish a seasonal program of product changes based on the number of machines and annual sales of each account.

If you are planning on making technological changes to your machines, such as adding a $5-bill acceptor or recycler, highlight the new premium products you will be vending at $2.50 and more in these machines.

There should be special seasonal products for Halloween, Christmas/New Year, Valentine’s Day, Spring and Summer. Speak to your product manufacturers and coordinate such promotions with their programs. When was the last time you reviewed your beverage selections and emailed your accounts about the new products now available in your machines?

Coffee is a hot button with consumers today, so promote both the quality and value of your coffee. Set your coffee vending machines for free vends one day each quarter.

Bring extra value directly to your customers! Buy sets of “tickets” for local sporting events, college and professional, entertainment events, local theater and movies, and iTunes downloads. Place notices on your machines informing customers that have a chance to win such “tickets” by purchasing products from the machines. Randomly affix “You Have Won!” labels on certain products the machines informing the customer how to redeem the tickets.

Steve Danzig, a veteran operator and beverage distributor, wrote an extensive article on how to do vending promotions in the April 2008 Automatic Merchandiser. This article can be viewed in the magazine’s archives on its Website, www.vendingmarketwatch.com.

Pay sales people to retain accounts

It is also important to involve and compensate your sales personnel in such a customer relations program. Sales personnel are often only paid for new accounts, not renewing contracts and increasing sales with current accounts. This makes no sense when you consider it is more expensive to acquire new accounts that to retain and develop current accounts.

In his above mentioned article, consultant Jerry McVety quantified such approaches by stating that “for every piece of business you lose, it takes approximately three new accounts to cover the financial loss.”

Sales personnel should be compensated for account retention, for example:

1. Renewal of a contract with price increases; and
2. Re-surveying current accounts resulting in either placement of additional machines, removal of non-profitable machines and sale of new services, e.g. OCS.

The Internet has created new ways to reach out to customers. This is how accounts communicate; the investment is minimum; the benefits are only limited by your creativity.

Your Internet Service Provider (ISP) can launch promotional emails for a fee. All you need to do is provide the content about your promotions, news about your company and other information you want to share, and the ISP can send this to your email list.

A lot of ISPs also have graphics capabilities to enhance your mailings.

Use social media

Social media is another way to promote your business to existing customers. This is a new and evolving communications medium, and many businesses are embracing it. Utilizing social networking takes time. To do it successfully, a business has to allocate the responsibility to someone.

The Wall Street Journal has reported that small businesses can effectively use social networking Websites. The article noted these sites are inexpensive and have the potential to produce far reaching “viral marketing” when there is a high pass-along rate among users.

A report in the January/February 2010 Automatic Merchandiser on the vending industry’s use of social media further noted that social media activity helps improve a company’s ranking on Internet search engines.

Not every vending operation can justify a big investment in social media, but keep in mind that the younger generation of consumers are using Twitter, Facebook and LinkedIn.

The bottom line is vending operators need to let customers know they exist, what value they provide and that they are looking to improve their services. In the current recession, this is a more cost effective way to sustain sales and profits than investing in new sales.