As the eCommerce director for Buff City Soap, Sanjay Jenkins grew the DTC business by over 1200% during his tenure.
Today, Buff City Soaps operates over 80 brick-and-mortar stores across the United States. As part of their store rollout strategy, Buff City developed a capability of deploying vending machines into a region ahead of the launch, both to warm up the potential buying audience and to acquire eCommerce customers along the way.
Sanjay was kind enough to write down some of his thoughts around vending, and some of the lessons learned from an eCommerce perspective for brands looking to experiment during a highly volatile market, when competition is fierce, and channel marketing efforts are becoming stale.
Vending machines, from our study, can do one of two things.
- Acquire customers/Build brand awareness (intentionally together)
- Build EBITDA
Your end goal primarily decides the type of activation you create. Everything from what it looks like, how it functions, and where you put it needs to be determined by whether it is a marketing piece or a sales generator.
There is overlap, always; especially the more novel your product/category is for a vending machine. Regardless, your first primary choice is between these two paths.
If you choose the customer acquisition/brand awareness path, your machine design should push the envelope for novelty within the form factory.
An example of this would be Snapchat’s Spectacles Vending Machine.
While the general vibe of a vending machine exists with this machine, it is still a standalone brand activation more so than a place to create consistent transactions.
Your rollout strategy needs to be deliberate about selecting locations to place the machine that will maximize the likelihood of earned media.
The best acquisition/awareness machines drive a ton of earned media. The more you design for that, the higher the chance of getting media coverage.
Going down the acquisition/awareness path is particularly useful if you’re trying to expand a concept in a new geography.
At Buff City Soaps, the plan was to set these up in major cities where we would open a ton of stores in a short time. The presence of vending machines gave us two advantages. Firstly, it is a functional activation of billboard space. But most importantly, it warms the audience to our brand, passively, without having to pay through the nose in high-competition channels.
That’s not to say that vending is inexpensive; on the contrary, it can be both highly competitive and costly. As with any customer acquisition effort, it’s quite easy to throw away money on bad placement and low foot-trafficked areas. High-traffic venues are more expensive than you’d think and require lengthy terms to activate.
Earned media and awareness of the brand would set up the new stores; bam, bam, boogie, you’re selling to a warmer audience.
To build EBITDA, you have to place your machines in a place where your product has the highest chance of delivering contextual utility. That’s a bunch of fancy words to say this: make sure you put your machine in a place where people really need your product.
Examples of this include the Best Buy vending machines in airports, soda machines at highway rest stops, etc.
The second decision to make is if you’re going to build/own your own machines or lease a unit.
For example, the Buff vending machine was designed initially to be an EBITDA generator with a little bit of novelty tied to it. We wanted to test it out in malls and airports.
We went with the former option. We had our lead designer come up with a very simple vinyl wrap and shipped the design files off to a manufacturer in China.
8 weeks later, we got a vending machine delivered to our office, for $2,800 landed. Wow.
I stayed up a few nights to translate the Chinese UI into English, just so I could start redesigning the UI to fit soap and not the default — orange juice — but we got a functional vending machine for less than what we’d pay a performance marketing agency for a discovery session.
Payments in vending, especially digital payments, are a world apart from eCom or POS. Setting up payment processing through Nayax was trickier than anticipated. I think it generally isn’t too bad, and my circumstances made it more painful than it needed to be, but could still be a slow-down for some who lack the internal authority or technical expertise.
Looking back, we learned a lot. If I had to do it over again I would pay a firm to build out a custom machine that is fully ready-to-go, and lease it over the course of 18-24 months. This would give us the option to rethink the investment over time and make a go/no-go decision based on the environment.
This is especially useful if you're building a brand awareness machine, where the buildout could be $15k-20k. These lease companies front the buildout expense. Win-win.
In conclusion. Two lessons to learn from our foray into vending:
- Pick whether or not you’re doing customer acquisition/brand awareness vs. building EBITDA. The strategies and implementations are highly product and customer-dependent, and how you activate the machine matters. A lot. More than can be said here.
- Pick how you’re going to get the machine made, delivered, and how you’re going to manage it as a business after the launch. This asset can quickly become a liability if you’re not careful.
The rest figures itself out along the way.