Vending Machine Economics
I wonder if anyone has done a study regarding the total dollar sales per customer based on the price of complementary objects in vending machines. I ask this because the vending machine down stairs sells gum for $0.55. Now if we can overlook the fact that you’re totally getting screwed by that price to begin with (at Sam’s it comes to under $0.25 per pack) you’ll notice something curious. Assuming that I pay with a dollar bill, I will be left with $0.45 in change. That’s less than the cost of the smallest item in the machine. If I’m going to make another purchase in the machine, I have to break another dollar bill.
Everyone is familiar with the idea of keeping prices just below the next big cutoff value. Psychologically, we perceive things as cheaper because we tend to forget about the digits that aren’t in the most significant place. That’s why you see prices for $9,999.95 instead of of $10,000.00. Five cents doesn’t really change the price, but it can change our perception when we look at it.
Anyway, to get back on topic, breaking a dollar is a significant cutoff. That’s a major purchase decision. Getting rid of the change in my pocket isn’t. So if the price of gum was, say $0.50 instead of $0.55, I bet I’d be a lot more likely to buy $1.00 of stuff in the vending machine instead of $0.55. Kind of makes it silly for the vending machine companies to be greedy for that last $0.05.
March 15th, 2007 at 12:41 pm
Good point, good argument. I’ve also wondered about places like movie theatres that charge amounts like $8.25. Seems that they would end up having to make a lot of change.
March 15th, 2007 at 10:15 pm
Yeah, there were other stupid things in this machine. For example, a danish was $1.25 and a bag of chips is $0.85. Prices of most items followed that 1.25/0.85 rule, so there was no way to make the change come out even (at least with a small number of items).
March 18th, 2007 at 4:33 pm
In the case of vending machines, I don’t know if I agree. First, gum is generally the only thing you can buy for less than $0.65, and as you mention, it’s more commonly $0.75-$0.85 for the average snack (chips, cookies, etc.). So you aren’t going to get more than one item for $1.00. Since most people don’t carry around change, they go to the machine with their dollar and probably don’t really care if they get change back or not (those nickels are a pain!). So since the prices are already high enough such that you can’t get more than one item, vending prices will likely continue to rise near the $1.00 mark without much notice by the consumer.
March 18th, 2007 at 4:57 pm
Whoa, hold on there with the California math
You can generally get both mints ant gum for the same price, in this case $0.55.
I agree that as long as individual items stay below a buck, it’s not going to inhibit customers from purchasing things. I do think twice when gum starts to get close to $0.75 for five sticks, though. I will also go through 3 packs of gum a day. So let’s just be thankful that I’m not a smoker.
In this particular machine, a good number of individual items already cost over $1.00, so we’re already breaking the barrier there. In that case, it would just be nice if you could get two items for the two dollar bills most people are going to have to spend for the one item.
Finally, I’d like to argue that there’s a difference here between girls and guys. Girls (at least those that have purses) have a repository in which to keep change and use it at a later time. For guys, you get stuck with annoying change jingling around in your pocket. I don’t have any place to put it, until I get home, where I keep a jar for it.
In conclusion, I can’t say that this would definitely increase sales. I just think somebody should do some economic experiments. It would be interesting to see how the complementary prices influence consumer behavior. If somebody really wanted to get fancy, you could build a combination vending/pop machine and offer discounts for packaged deals. You’d probably get better interactions there, as snacks+beverage are an even better combination.
Regardless, it’s great to hear from you. How’s Google? Are you doing no evil yet
March 19th, 2007 at 11:01 pm
Well, I guess my one defense in reasoning is that I’ve never bought gum or mints or anything near $0.55 and was talking more in general of vending machine prices. We get gum at Google for free… we get all food for free. And lots and lots of Google KoolAid. I love Google. I will serve Google. Google is my… err, things are going great! I agree with the male change problem. If it makes you feel better, I think most girls have an equivalently annoying cell phone problem. Guy’s have big enough pockets to easily fit the cell phone and a wallet (maybe no change, but still a wallet). Girl’s jeans are usually too tight and the cell phone needs to go in the purse, which is sometimes within reach and sometimes the phone is accessible, but more often than not, one of two cases doesn’t hold. Totally random aside. More importantly, I think this commenting discussion can be concluded as follows… you need to start a business in optimized vending machine distribution. Hell, you already have experience with being the Caffeine admin!
June 8th, 2008 at 1:25 am
there is nothing wrong with the candy machine. imagine your last 50 cent. put the money in the candy machine and look at the selection. press the button selection, the machine makes the noise, and the selection get stuck in the machine and don’t drop out the selection. what do you do in that situation? if you had another 50 cents, try it again. on the next try same selection the same thing happens, the selection get stuck in the machine. you get the first food selection and now the second try is stuck in the machine. if you had another 50 cents, try it again. on the the third try same selection, you guessed it, the selection got stuck in the machine. you get the food selection from the second try, now the third try is stuck in the machine. if you had another 50 cents, try it again. on the fourth try same selection, no luck, it got stuck in the machine once again. you get the third food selection, now the fourth selection is stuck in the machine.
what do you do when a vending machine has this type of problem?