Notes from the Workplace Workshop: Make change an opportunity instead of a liability

Notes from the Workplace Workshop

By Ben White

 

Make change an opportunity instead of a liability

McDonald’s has chosen to replace its wildly successful “Order By Number” system (I’ll have a #2 with a Diet Coke, please!) with a new “dual point” ordering system as part of an overall effort to combat steadily declining sales. The new system was highlighted in a recent McDonald’s television commercial, which showed a young lady happily choosing a McDonald’s meal consisting of a Big Mac, a side salad, and an ice cold bottle of water.

I was struck by the image of her meal sitting atop the standard Mickey-D’s plastic tray. A Big Mac with a salad? Bottled water instead of Coca-Cola? Not a single crispy, golden french fry in site? What a change from the typical meal shown to me in thousands (or tens of thousands, probably) of McDonald’s commercials since I was a kid! McDonald’s overt effort to reinvent itself reminded me of a change that has been occurring in the workplace refreshment industry all across America since the early 2000’s: The diets of the general public are shifting in the 21^st century.

McDonald’s is by no means alone in its scramble to keep up with the paradigm shift of popular eating habits. The Wendy’s hamburger chain announced this week that it is dropping soda as a drink choice from its kids meal menus. I saw a “One-A-Day” vitamin commercial claim in its ad that “83% of Americans are trying to eat healthier”. Clearly a sea change in everyday diet choice is happening right before our eyes.

Fortunately, operators have 2 great opportunities to use shifting dietary preferences to their advantage:

1. Remerchandise sales space to increase volume, and:
2. Reset product margins to create a healthier bottom line.

During my tenure as Director of Operations for a large east coast vending operator, I witnessed firsthand how machine remerchandising can create a very nice lift in sales. Simply rearranging products that have been in the same spiral or on the same shelf for years gets people exploring our store space again. Renewed interest in what products are for sale will often times lead to a purchase. Take a snack machine for example: If I introduce 5 new healthy products on the A shelf, take out 5 items that weren’t really selling much anyway, and re-arrange the perennial favorites to new positions all over the machine – consumers will notice and stop to take time seeing what’s new and different in the machine. Getting people to pause in front of a snack machine is the #1 way to influence an impulse purchase. More staring = more buying, so use the introduction of healthier products to generate interest and revenue.

Secondly, the introduction of new products give the operator perfect license to change excepted value propositions. When 20oz bottles entered the workplace refreshment industry back in the mid-1990’s, smart operators took advantage of the fact that consumers didn’t know what a 20oz beverage was supposed to cost. At the time, 12oz can sodas were generally 50-60 cents. It was difficult to sell a can for 75 cents because everyone knew what a 12oz can was “supposed” to cost. 20oz bottles were different. Operators could create a new price ceiling for 20oz because there were no cost expectations for a package that nobody had ever seen. Margins (at the time) for a $1 bottled soda were fantastic, and consumers were willing to pay a higher price per ounce because of a bottle’s unique features (re-sealable cap, more comfortable grip, etc.)

Today’s healthier products offer a similar opportunity to create higher margins. Whole Foods, Trader Joe’s, and many other health-conscious retailers have proven that consumers expect to pay more for products with higher nutrition content. Operators introducing new, healthier items should plan on setting higher price expectations. It can’t hurt to make more money every time the spiral turns around!

Operators can also take advantage of portion conscious shoppers by bringing back 1oz bags at a 75 cent price point. A 1oz bag of Cheetos at 75 cents may seem more appealing to a consumer than a $1.50 bag of gluten-free sweet potato chips. However – the consumer now has a choice about what to put in their bodies (which makes regulators happy) and an operator can sell a bag of Cheetos at a very neat 200% markup!

Diets, like clothing, are subject to the whims of fashion. I often find it imprudent to stubbornly stand against the winds of change. Instead, let’s use changing tastes to our advantage as we constantly strive for Happy Clients, Hungry Consumers, and a Health Bottom Line.