Your decision as whether to purchase a kiosk will ultimately come down to its potential impact on your bottom line. Our consultants can help you through the investment decision.
The following comments are designed to help you through those steps and help you plan a successful investment project.
The concept of “return on investment” helps you tell whether you will be satisfied with the project. It evaluates the payback on the time, effort and funds you inject into it. Some of the key financial questions to ask are:
1. How will the kiosk build sales?
2. How much revenue will the kiosk generate?
3. What does the kiosk cost, and does it offer other savings?
4. There are also some less tangible aspects to consider, such as:
5. Does it give me a competitive advantage?
6. Does it drive footfall which creates repeat business in other areas?
7. Any evaluation must also assess the risks, and plan contingencies.
How will the kiosk build sales?
You will need to make your customers aware that you have a kiosk, to get them try the service. Siting and signage are very important.
Think carefully about where you will site it...ideally where it can be seen by as many potential cutomers as possible. Think about signage that can be deployed to direct consumers to it. Our North American friends have an excellent phrase for this: "Make sure you lead the dog to the dog food"!
You could also ask your staff to recommend the new service to customers. We produce a highly attractive consumer leaflet just for this purpose.
Our customers find this a useful trick: while a chip and pin transaction is being authorised, the member of staff asks the customer if he or she has either a digital camera or camera phone. If the answer is yes, the customer is given an information leaflet, and the member of staff indicates where the kiosk is located in store.
You could run a launch event, use staff as demonstrators to host the kiosk during special promotions.
You can also drive trial with promotions, such as free prints and trial prices.
You might want to invest in advertising or leaflets.
Once consumers have tried the service, if they like the quality and the experience, and feel it is good value, they are likely to come back again.
Have a think about what to invest in launching the service to your customers. There are plenty of proven, low cost techniques available.
How much revenue will the kiosk generate?
Survey prices in your area. “Instant prints from digital” is very much a convenience driven purchase for consumers, so the key advice is to focus on other retailers in your locality.
Generally, prints are priced in bands, according to how many are ordered in their transaction. In our local shopping centre, we find that for INSTANT print orders less than 50, consumers pay about 40p per print, and for larger quantities, the price is around 25p per print. Check yours out.
Then assess the mix. Instant prints are generally priced at a premium over other services. Common sense says that the majority of orders will be 30 prints or less in size, where the absolute saving from a long wait is small. Conversely, the proportion of very large orders is likely to be small. The UK average instant print order is reckoned to be around 24.
Use a spreadsheet to create a “weighted average price” and an “average order size”. In the UK, remember to divide the retail price by 1.175 to remove the VAT.
Remember to add the revenue of other services, such as CD’s, Frienship Prints and Index Prints, making an estimate of the number of orders that will include them.
When you have done this, you can then calculate the average revenue (return) per transaction.
You will need to make an estimate of likely demand.
Begin by assessing the number of customers that will see and walk past the kiosk in your store every day (the siting and signage are very important). Then assess how many will have a camera phone, and how many a digital camera.
Ownership of camera phones is increasing everyday, but not everyone uses them to take pictures. We have seen market research surveys that tell us that picture taking on phones is concentrated in the 18-24 age group, where it is very high. We believe that as cameraphones become easier to use, and as they feature better cameras, and features such as flash and zoom, they will become increasingly popular. In the UK, a large majority of households have at least one camera phone capable of taking good quality pictures. We believe that by 2009, about two thirds of all pictures will be captured on a phone.
For digital cameras, industry consensus is that just under two thirds of UK households have one.
The typical "instant print loyal" customer is reckoned to make 24 prints every six weeks.
Holidays and family occasions that will drive the requirement for prints.
Our consultants can help you with this assessment, but you must always use your own assumptions.
What does the kiosk cost, and does it offer other savings?
Your supplier can tell you the cost of making a print and of other consumables such as writeable CDs. Just as you created a weighted average price and an average size, you can create a weighted average cost. Taking average cost away from average price (remember to remove the VAT), gives you the average cash margin. If your kiosk is not self service, remember to factor in staff costs. Some kiosks can be used without payment being collected first, so, if this is the case, allow something for shrinkage. Remember PrintPod kiosks collect and authorise payments without the attention of staff, and only make the prints when sure the consumer has funds.....so no worries here.
Your supplier can then tell you about the fixed costs. These are normally hire purchase or rental payments, plus payments for maintenance. Some rental programmes can attract tax allowances. In fact, after tax allowances, some three year leasing programmes, can feel as if they are "interest free". Ask the finance company about this.
Armed with this information, you can assess how many orders you will need to cover the fixed costs….the break even, or the number of orders or time required to repay the capital cost. You can also project the level of profitability at different levels of business.
Does it give me a competitive advantage?
The “prints from digital” category is widely forecasted to undergo dramatic growth. You may choose to take a longer term view which says that if I order a kiosk now, I will be the first in my area, and my competitors will then not proceed with such an investment. I can make a little money now, but a lot of money in subsequent years, as the category explodes.
Does it drive footfall which creates repeat business in other areas?
If you can persuade customers to pop in regularly for their prints, you have an opportunity to sell them other products. It is not normal to factor this in any calculations, but it can be used in support of the business case.
Do customers prefer self service in this category?
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There is a lot of anecdotal evidence to suggest they do. Self service, where payment is collected at the kiosk, saves bags of time.
Risks and Contingencies.
The seven deadly sins of kiosk implementation are:
1. Lack of a plan!
2. No signage.
3. Kiosk in the wrong location.
4. No buy in from store staff.
5. Machine not always switched on.
6. Kiosk too complicated to use for mainstream consumers. (Pay particular attention to older customers who may be unfamiliar with computers).
7. Kiosk screens are not engaging.
Ensure you plan to avoid falling into these traps, to maximise your chances of success.