3 replies to this topic

[coinvestor]

I bought a car dealership location back in January of this year. The vending operator was terrible. The machines were old and dirty, service was irregular, and a call for broken equipment or machines that were completely sold out took 3-4 days to be answered. I gave them great service for 6-7 months and paid back my purchase price for the account. Last month I gave them notice that there prices were going to increase, but I didn't feel right doing this and leaving them with the old equipment, so I told them I would upgrade them. My contact told me instead of posting my price increase letter to just bring in the new equipment with the new prices in it. I will not do this again in the future. This makes it appear that the higher prices are not because of the current economy, but just to pay for new machines.

I did catch some flack for the prices, but that’s normal. There candy was at .60, drinks at .65, and pastry at .70. I increased to: candy at .75, drinks at .70, and pastry at .85. This is still below where I need to be for a 50% gross profit, but for some reason I feel really bad about this account. I have raised prices at all my locations this year and it was just what I had to do. I keep thinking well other vendors in my area are cheaper. They are settling for less profit, why can't I? Am I ripping people off?

The answer I come back to is this. You can buy a used car from a new car dealer. You could buy the same car for thousands less at a "buy here pay here" type roadside dealer. If you took the price on the buy here pay here car to the new car dealer he would explain to you that although the cars are the same it is a different product.

People don't buy used cars from the new car dealer for the price. People buy these cars because they feel they know what stands behind them. They know the service that comes with the car. They know they have someone with reputation and if they call they will be helped. This is what I want to be selling from my vending machines! When you pear through the glass on my machines you should see the intrinsic value in the prices. You should know that you don't have to look at dates because it won't be expired. You should know that it might be 101 deg outside, but that chocolate has not been melted in transport, and if by some chance the machine takes my money I will get a prompt refund with out being made to feel like I'm lying, and the machine will be fixed with in hours of my service call.

So next week when I go back if I'm asked about my prices I will explain the economic pressures on my prices, but inside I will be thinking about the cheaper vendors in town and know that my customers will choose me again and again for a reason.

Sorry for the rant, but this has been bothering me for two days now and I just needed to vent. I don't really have any questions, but you may respond if you like.

JD

[scottgtt]

One thing I do when I raise prices is go to the manager and simply tell him, my candy prices have gone up at the wholesale level by 25% appx. over the last 6 months or so. Tell him that you have eaten (no pun intended) that increase for this time, but just like he has to price up when his prices go up, so do you and your not trying to make more money, just get back to where you were before the price increases. As for other vendors, I would be suprised if any major vendors are in the lower range, that being said, what you said about service is huge. Stay on this and occassionally drop in with a free Coke or whatever and just say I wanted to stop in and see if everything was ok or if you had any questions comments etc... This goes a long way with the person in charge.

[coinvestor]

One thing I do when I raise prices is go to the manager and simply tell him, my candy prices have gone up at the wholesale level by 25% appx. over the last 6 months or so. Tell him that you have eaten (no pun intended) that increase for this time, but just like he has to price up when his prices go up, so do you and your not trying to make more money, just get back to where you were before the price increases. As for other vendors, I would be suprised if any major vendors are in the lower range, that being said, what you said about service is huge. Stay on this and occassionally drop in with a free Coke or whatever and just say I wanted to stop in and see if everything was ok or if you had any questions comments etc... This goes a long way with the person in charge.

Scott,
The letter that I provided to the contact stated everything you mentioned, the problem was that nobody other than the contact read it. In my normal breakroom type locations I just stick the letter on the machines that way everone can read it. In a dealership I ask them if they want me to do that since all of there customers don't really need to read it.

There is only one other vendor in my area that I compete with (other than the Canteens and Aramarks). As far as I know he does not raise his prices on exsisting accounts, only increases the pricing on the machines as they change locations. He runs ~200 machines many of which are still at .40 for 1oz chips, .65 for candy and pastry. Even after he increases the prices he only goes to .50 for chips, .75 Candy and .75 for pasrty. He works very hard to keep all those machines serviced, and should be making much more profit.

Thanks for the response!

JD

[bcron]

When I recently informed one of my locations that I was going to be raising prices, he put it like this: "Profit is not a four letter word." He understood increasing costs and I haven't seen any decrease as a result of price increase.