Consumer Attitudes to Ice.da ice Newcastle

We have been in this vending business since 2006, and to this day it still surprises me what I can still learn. The only way to learn an unknown trade is by trial and error, (and we have made a few errors!).

In terms of analysing consumer attitudes to ice and ice vending, the pace of our learning has been slow.

Ice is a very seasonal product, and as such any new ideas we have in terms of sales and marketing are a waste of time unless they are implemented in the Spring and run through the Summer. Any apparent levels of success and/or failure are then assessed during the Autumn. This means we really only get to try one new idea each year. So it seems with this comparison, our time in this industry is still relatively short.

I would suggest that some of the following behaviour is less extreme in capital cities as consumers there are more accustomed to vending machines in general.

With respect to ice vending machines, this is what else we have observed so far:

The three most important observations I have made which will impact the future of ice industry in Australia are:

ice house machineTypes of Customers

We have found that there are two major types of potential customers for a da-ice® vending machine.

The Tribals

"The Tribals" are our very loyal customers, with some being high users of packaged ice.

The Tribals are educated about the volumes we dispense. They are price sensitive, recognise the value in the price and are loyal to our concept. They love the 10KG Bulk ice for $2.99, and they know they are getting ripped off whenever they are forced to purchase 5KG of ice at a service station.

In Newcastle, (where most machines are located), we already have most of The Tribals.

Tribals know the locations of our machines, and if one is out of service (rarely) they go to the next closest machine to get ice. It's amazing!

Non-Tribals.

The majority of potential customers though only use ice sporadically and maybe even only once a year. I will call this group the "Non-Tribals".

The Non-Tribals can be further split into two, Non-Tribals-CONVENIENCE, and Non-Tribals-PRICE.

Non-Tribals-CONVENIENCE.

Non-Tribals-CONVENIENCE are all about the convenience. They don't really care about the price of ice, unless of course it got to be what I would term "silly money". There are a few of these types of consumers around.

Non-Tribals-PRICE.

Non-Tribals-PRICE shop on price and value, with convenience being a smaller factor. This is the majority of the market, but most only use ice occasionally, but many at about the same time. This makes the pattern of sales "peaky".

In terms of ice pack-size, I have already identified that Non-Tribals have little idea about price and volume. To them "ice is ice" and they most likely shop on the unit price, most of the time. This qualifier is an important factor also; as on Christmas Day you could charge $6 a bag and still get it, although begrudgingly.

Why Smaller Machines Cannot Give a Descent Return on Investment.Kooler Ice Machine

On a normal week in the ice business, 60 - 80% of our weekly takings would be on a Saturday. On these Saturdays, the peak sweet spot of sales is between 9am and 4pm. This is where storage capacity becomes the issue.

We sell 10KG of bulk ice and 7KG in a bag, at most sites for $2.99, and in December on a normal Saturday even we nearly sell out. Small machines just could not maintain the supply. I don't care how big the icemaker is.

We have observed many smaller machines coming into the Australian market in recent years. Mostly the retail price is set @ $4 or greater for a bag of ice at these machines. They do not sell bulk ice.

Well for $4 they probably get some of the Tribals at first, and they may get some of the Non-Tribals-CONVENIENCE depending on the location, but they certainly won't get the Non-Tribals-PRICE, the largest section of the market because they shop on unit price.

The only time you could possibly get the Non-Tribals-PRICE is when ice is scarce and it's likely even @ $4, these machines will be sold out at these times.

Over time the lack of capacity in the smaller machines will also alienate the group Non-Tribals CONVENIENCE, and any Tribals as well, as they will not tolerate a machine that is sold out every time they go to it. The machine just gets a bad reputation.

Current owners of these small machines have no idea of how much ice they could actually sell on the days that they have sold out. The only way an operator can find this out is to not run out - ever. We have come close to achieving this at da-ice®, and this is part of building our reputation as the place to go for ice.

Current owners' of small machines may be happy that their machine is selling out, but this is not a good situation to be in. What happens in the mind of a customer when they go to a machine and it is sold out?

It can be argued that with ice vending, profitability is directly proportional to storage capacity, due to the pattern of sales. Current owners' of small machines should be worried that a da-ice® machine may be coming to their town.

da-ice® can get them all!

$2.99 seems to be the magic price.

At $2.99:

Our job with da-ice® is to educate the Non-Tribals PRICE about pack size get them to use the machine once. Then it is game set and match for the current packaged ice industry in Australia.

This is what has happened in the USA. Apparently the experts call this "brand building"....

Experiments with Price.

When we first started out in the ice business we vended 7KG in a bag and 8KG as a bulk vend. Our starting price was just $2. After about 6 months we increased the price to $2.50. Being a vending concept we were loath to go to a price that included a 50 cents, as this has a significant impact on fault rates in coin mechanism, due to the hexagonal shape of the Australian 50 cent piece.

After about another year the price was again adjusted up to $2.99 - effectively two gold coins. At this time we adjusted the bulk weight up again to 9KG.

In the winter of 2012 we had a special. We went back to $2 dollars for the months of June and July, with a further increase on the bulk ice to 10KG. We have now maintained the bulk vend at 10KG.

The results of these price experiments have revealed some interesting information.

In terms of price reduction in Winter, this had no effect in stimulating sales. All it did was reduce the cash amount in sales while maintaining the same units sold.

It is evident that when we started out and the price was $2, we sold a heap. Sometimes we have postulated that $2 is the magic price, but when you start fooling around with the price too often it can cause consumer confusion with the brand.

We have another trial at one site, with the price being $4, however I suspect this will confirm what we think we already know. This particular site is far enough away from others so cannibalisation is not a factor.

Our ice vending machine ice, versus traditional packaged ice!Strategies to Educate Consumers.

In an effort to educate consumers about pack size, in the spring of 2012 we ran a radio campaign in our home market of Newcastle. Our message was "10KG for $2.99". This did drive traffic to our website, which is optimised for smart phones and gives locations via Google maps.

Success with radio is difficult to measure but I am certain that in conjunction with Google Places, brand awareness is building in the area. The da-ice® brand comes up number one in Google search for that term.

Over the summer of 2013/2014 we are changing our machine signage to remove references to weight. We are simply going to have a large photo of "industry standard 5KG bag", versus a photo of "da-ice® bulk vend" (pictured in a bag).

Another part of our strategy is to educate the consumer that ice is more expensive in peak times.

Busy times (Christmas Day in particular) are an opportunity to showcase the convenience to the occasional user. Mayhem ensues on Christmas Day or New Years eve, and this occasional user comes to the machine because they have "heard we always have ice there".

As such we advertise any price increase as a "surcharge" making the consumer aware that our regular price is only $2.99

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