Not counting beverages, the four most popular products sold in American vending machines are, in order: the Snickers, peanut M&Ms, Doritos, and Cheetos.
While nos. 2-4 may be unexpected (or even disconcerting), it sort of goes without saying that the number one bestselling vending machine product—and most popular chocolate bar of all time—would be the Snickers. That nutty, nougaty, pleasantly plenteous Snickers. Anyone could have guessed that.
So why, in spite its utter dominance among snack foods, do vending machine operators tend to—and I’m not making this up—under-stock that particular treat? That is, why do they supply their machines with fewer Snickers than consumers demand?
(It may help to know that the above info. comes from a friend who works with a Harvard professor of economics and industrial operations whose current research is focused, inter alia, on the vending machine market. So think economicsly.)
Answer: The Snickers bar drives people to vending machines like no other snack: thanks in large part to some truly excellent advertising by Masterfoods USA, hungry people who need food right now think Snickers. And they know where to find it.
But—and here’s the key to the whole operation—the Snickers bar actually has a relatively slim margin: for the operator, a Snickers brings in less profit than even the gum and mints that sit on the lowest shelves of the machine.
Hence the under-stocking. Hungry people who go to a vending machine in search of a Snickers won’t just leave if there are none left—they’ll buy something else. Something with a higher margin, like the cookies. (Machine operators clean up on those cookies.)
Which means it’s actually in the operator’s interest to stock the machines with just enough Snickers to get people thinking they could find one there, but not so many that they always do. It’s their tricky way of driving sales to more profitable substitutes.
Update: see Sharon T.’s comment below for clarification. (Sharon was my source for this story.)
peanut m&ms are so delicious. :)
Better solution: put up the price of a Snickers.
It’s a bit of a market failure, though, isn’t it? If the people really want snickers, the vendor should be able to charge more for it so that the seller and buyer are optimally rewarded. Why doesn’t that work with Snickers?
No, if they charged $1.50 for snickers, people wouldn’t get up from their desks because they would say that the snickers that they desire is too expensive. Once they have already lumbered down to the vending machine, however, they are much more likely to buy something, even if they snickers isn’t available.
It’s called “bait-and-switch” and is a well known marketing technique employed by small to major retailers.
What’s the name of this sales trick?
It’s called “bait-and-switch” and is a well known marketing technique employed by small to major retailers.
@Joel: What if they the operator lower the price of the snicker to $1.10 to lure in the people to buy other snack bar ?
I think saying that vending operators do this on purpose, at least knowingly, is a bit strong. This is something that my professor observed as occurring–i.e., people tend to substitute for higher margin goods and hence it might be good to purposely understock snickers. Now, that it occurs is not [at this point] necessarily intentional. However, like many economic concepts, often times businesses have unwittingly been putting into practice something that ‘worked’ without really thinking about it or realizing why it ‘worked.’ So, perhaps machine operators have been subconsciously not stocking enough snickers because it yields higher profits but they don’t really know why/notice it (perhaps those operators trying to meet demand actually yielded lower profits and couldn’t compete–an evolutionary model of an IO equilibrium (maybe)). As another example, advertisers have been heeding the advice of many behavioral economists for years before behavioral economists made this advice. That’s because to advertisers it wasn’t a peer-reviewed study that confirmed hypothesis X; rather, hypothesis X is a rule of thumb. That make sense?
Otherwise, really enjoyed it. Generally spot on and conceptually accurate. I am only a but anxious about your wording because I wouldn’t somehow want to be responsible for misquoting the professor.
So? Who cares?
It’s basic commerce, it’s the cornerstone of our entire economy.
Seems like the most pointless research and then write up I’ve ever encountered. The thousands of $ that professor is paid might be better spent on research into something useful… like… I dunno, the economy and how crap it is, and how to make it not crap.
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Perhaps “understocking” Snickers bars in vending machines is a misleading description. How about “they ran out” because the bars are the most popular items, so they sell out faster, and the restocker optimally comes when most of his products need replacing. If the margins on Snickers bars aren’t high enough to warrant a higher percentage of vending machine space, or the Snickers people haven’t paid more for space than their competitors, Snickers will run out simply because it’s popular. Restocker simply maintaining most efficient schedule for his truckload.