Compass Tests Cashless System

Mike Buzalka

Compass Tests Cashless System

Online declining balance account also offers customer loyalty incentives.

The employee selects a bag of chips from the vending machine but instead of fumbling for change, he waves his keychain over a sensor on the machine.

In less than 15 seconds, the transaction is completed. The customer receives a discount on the purchase that is automatically credited. Future purchases are also eligible for promotional discounts and incentives. Details will be available the next time the customer checks on his account over the internet.

A bit of science fiction? Ten years ago, perhaps. But in this case, it happens daily.

The system is called FreedomPay, while the vending machine is operated by Canteen Corp., the vending division of Compass Group North America. Canteen, which has exclusive rights to the technology in the full-line vending channel, says it plans to install FreedomPay on some 35,000 vending machines nationally.

Compass is also piloting FreedomPay in a handful of its manual foodservice operations this summer, according to Tom Kearney, vice president of strategic initiatives for Canteen.

The draw of FreedomPay is not just the convenience associated with cashless transactions, Kearney says. "It’s a cashless, cardless payment solution that also encourages repeat customers by providing immediately tangible incentives. We see significant applications in B&I environments for something like this."

"FreedomPay is the first time we have found a system that does three key things," adds Tony Gagliardi, Canteen’s president. "One, the economic model works. Second, the customers love it because it’s fast and convenient. And best of all, you can use it to personally market to the individual consumer."

Gagliardi adds that the system also allows cross-brand promotions. "If Pepsi wanted to cross-merchandise with Frito Lay in two different machines, you could do that," he notes.

The potential of the system for cross-channel promotion is being gauged in the Boise, Idaho, area, where FreedomPay is being tested in both Canteen vending machines and some McDonald’s units.

"We’ll see if people who work at our locations and go to McDonald’s will cross over and take the incentives to also use our vending machines," Kearney says. "If they do, there are numerous opportunities for cross-branding, promotions and incentive programs."

FreedomPay works through declining balance accounts that customers establish when they sign up. They are then accessed over the Internet when a purchase is initiated. Customers can also log onto the FreedomPay website (www.freedompay.com) to check account balances, see purchase histories and get information about promotions.

Typically, an account contains only about $20 and can be replenished from other accounts or a credit card (or by writing and mailing a check) through the system’s website (using a personal password ID). Another option is allowing automatic replenishment from a credit card whenever the account reaches a minimum balance.

Credits, discounts and incentives are automatically credited to an account, providing immediate gratification when a qualifying purchase is made. The account is accessed either through the keychain wand or by entering a personal identification number.

Compass began discussions with FreedomPay about a year ago and set up operations in five test sites, including Compass’s own corporate offices in Charlotte, North Carolina, last November. The results have been more than encouraging.

"They were outstanding," Kearney enthuses. "Half our employees signed up for accounts, and sales in the machines not only increased 30% but stayed up even after six months, when any novelty factor should have worn off. Three-quarters of vending sales over this period were cashless."

And it wasn’t just company loyalty. Results were similar in the other, non-Compass test sites, encouraging the mass rollout.

Canteen’s goal is install the system on some 500 machines over the next few months, and on all 35,000 by the end of 2002. It retrofits on existing units, so existing machines won’t have to be replaced.

Canteen is shooting for a 20% same-store sales increase and is already thinking of how to use the novel feature to gain new customers.

"It gives us a unique selling point and also provides a way to communicate with our end-customers to give them information about incentives and promotions available from our manufacturer partners," Kearney explains.

"Prospects are lined up," he notes. "There seems to be a pent-up demand for this kind of system. Just the sheer convenience increases participation, and when you add the discounts and incentives, the potential is through the roof." fm