Introduction
In previous articles, we explored how to optimize costs and increase revenue in vending machines, distinguished the different types of machines and their potential returns, and outlined the basics of financial analysis in this business. Today we're going to dive deeper into the world of vending and focus on the key performance indicators (KPIs) that are essential for this business.
What Are KPIs and Why Are They Important?
Key Performance Indicators (KPIs) are quantitative tools that help entrepreneurs measure the success and effectiveness of various aspects of their business. For a vending business, KPIs are vital because they provide the data needed to make informed decisions, whether it's buying a new machine, optimizing inventory, or expanding to new locations.
Selected KPIs for Vending Business
1. Average Vend Total (AVT)
AVT measures the average value of each transaction. An increase in AVT can be achieved by offering discounts on the purchase of a larger quantity of products or by combining products at a discounted price.
2. Purchase Frequency (PF - Purchase Frequency)
PF tracks how often customers use the machine. Improving this indicator can mean increasing the visibility of the machine or improving its offer.
3. Return on Investment (ROI - Return on Investment)
ROI is a critical indicator of the effectiveness of a vending machine investment. It is calculated as the ratio between the profit and the cost of the machine and its operation.
4. Net Variable Contribution (NVC - Net Variable Contribution)
NVC shows the contribution of individual products to total profit after deducting variable costs. This indicator helps identify the most profitable products and optimize supply.
How to Practically Use KPIs in Your Business
AVT Application: Set a target for average earnings per transaction and then experiment with different pricing strategies. You can offer volume discounts or add value through product bundles.
Optimizing PF: Try placing machines in high traffic locations and watch the PF change. You can also consider implementing loyalty programs to increase repeat purchases.
Increase ROI: Regularly evaluate the performance of your machines. If the machine is not achieving the expected ROI, consider moving it, changing the assortment or other marketing strategies.
Maximize NVC: Analyze sales data to identify products with the highest NVC. Focus on promoting these products and consider limiting or eliminating those that have a low or negative profit contribution.
Conclusion
Understanding and applying the right KPIs can help you outperform the competition and significantly increase the profitability of your vending business. With careful monitoring and analysis of these metrics, you can make informed decisions that will lead to long-term success.
