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Presentation OverviewPresentation Overview

• Improving the consumer payment experience with VNR

• Translating improved consumer experience into sales lift

• Note recycling vs. credit cards

• Operational considerations with VNR

• VNR deployment considerations

• VNR deployment recommendations

Investing in Bill RecyclingInvesting in Bill RecyclingWhy you should careWhy you should care

You can get everything within your control:• Right vending machine• Right product selection in the machine• Right price points for those products• Right service strategy so the machine

is always full

…you’ll still miss out on a large percentage of sales… here’s why –

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Sources of VNR ValueSources of VNR Value

• Regardless of the consumer’s desire for product or the attraction of the machine, the consumer has to have the means to complete the sale.

• The value proposition for the VNR is to improve the consumer experience by enabling vends that otherwise can’t be made with traditional vending payment systems (e.g., coin changers and bill validators that accept only $1 bills).

• Improved consumer experience leads to higher customer satisfaction and sales lift.

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What about your business?What about your business?

• What denominations do you have enabled today?

• Do you believe you are losing sales?

• Do you run into changer starvation?– A recent study showed 50% of machines

were in exact change mode 33% of the time or more!

• How many bill breakers do you have deployed?

• Are you using $1 coins and, if so, do you pay a fee to your bank for them?

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What Consumers CarryWhat Consumers Carry

• Understanding what consumers typically carry highlights the need to alter denomination acceptance:

– Over 80% carry a $1 bill or the equivalent in coins

– Only about 50% carry $3 in bills/coins

– 60% carry a $5 note

– 40% carry a $10 note

– 65% carry a $20 note

• At vend prices above $1, limiting bill acceptance to $1 notes significantly decreases the potential customer base

• Current US bills in circulation

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Circulation

$1 46%

$2 4%

$5 11%

$10 8%

$20 31%

Enabling VendsEnabling VendsSimple example at $1 vend priceSimple example at $1 vend price

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To enable a vend at $1, the consumer must either possess:

$1 in Coins

OR

$1 Note

ProbabilityOf Success *

20%

80%

ProbabilityOf Failure

80%

AND

20%

LostSales16%

(80% x 20%)

*From MEI Survey Data

Current Bill Acceptance and Change

$2.00

Vend Price

$5 inserted

$2.00

Future Bill Acceptance and Change… Bills In Bills Out Bills In Bills Out

$5 inserted $20 inserted

Increase sales by allowing consumers more payment options.Increase sales by allowing consumers more payment options.

Bill RecyclingBill RecyclingValue to vending patronsValue to vending patrons

Observations About Sales LiftObservations About Sales Lift

• The benefits of recycling are a strong function of vend price.

• From a consumer perspective, “vend price” is scenario-based.

• Recycling enables multiple vends and purchase bundling.

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Lift from $5 acceptance 24.1%

Lift from $10 acceptance 6.3%

Lift from $20 acceptance 6.7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

$1.00 $2.00 $3.00

% o

f To

tal

Po

ten

tial

Vend Price

Successful vends from $1 and coins

Lost sales opportunities

• Consumers do not carry a large % of $1 notes or coin. Therefore a significant %

of vends are not enabled by coin and $1acceptance.

• Enabling $5 , $10, and $20 acceptance captures these lost sales by matching the retail experience.

As price increases consumers

ability to make a purchase

decreases

Bill Recycling Value Proposition Bill Recycling Value Proposition

Lost sales

The expected sales lift experienced by unlocking the consumer’s wallet has been confirmed in field trials.

Note: using $1.25 price

Lift from $5 acceptance 12.4%

Lift from $10 acceptance 3.2%

Lift from $20 acceptance 3.5%

15.7%23.0%

33.6%

Improving the Value ExperienceImproving the Value Experience

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Sales Lift by Note and Vend PriceSales Lift by Note and Vend Price

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VNR & Consumer AdaptationVNR & Consumer Adaptation

• Awareness:– The High Visibility Bezel option on the VNR

was designed specifically to promote consumerawareness of recycling.

• Trust:– Designed to reliably recycle notes of all qualities.

– If a denomination is lighted on the Hi Vis bezel, theunit will accept it and make the expected change.

• Experience:– Over time, for consumers that have used the product,

the Hi Vis Bezel signals both higher denomination acceptance and the expectation of success.

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Option 1 VN2700 recycler-

ready, $1-$20

price parity with VN2500

Future-proof investment

MEI ModularityMEI Modularity

Option 3 VN2700R includes

recycler and High Visibility Bezel

MEI ModularityMEI Modularity

Option 2 VN2700HV

includes High Visibility Bezel

Option 4 VN2700 recycler-

ready, $1-$20

4-in-1 cashless bezel

MEI ModularityMEI Modularity

Option 5 VN2700R

includes recycler and 4-in-1 cashless bezel

Option 6 Buy as separate

components

MEI ModularityMEI Modularity

A modular approach allows customers the most flexibility to configure devices to meet the needs of each location

MEI ModularityMEI Modularity

• Both larger note acceptance and credit card acceptance improve the consumer’s ability to purchase.

• Credit cards have a higher cost structure to achieve this similar benefit including incremental capital and transaction cost.

• Credit card acceptance has advantages to note recycling.

• Only MEI can offer note recycling and credit card acceptance in one device.

Compared to coins and $1 bill acceptance

Bill Recycling vs. Credit CardBill Recycling vs. Credit Card

Sales Lift ResultsSales Lift Results2 Case a Week Machine at $1.25 Vend Price2 Case a Week Machine at $1.25 Vend Price

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Sales Lift ResultsSales Lift Results2 Case a Week Machine at $2.50 Vend Price2 Case a Week Machine at $2.50 Vend Price

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Coins RecyclerCapacity Capacity

N,Q,Q,$,$ w ithout recycler

214.35$ n / a $214.35

N,Q,Q,Q,Q with

recycler recycling $1's

$ 100.35 30 bills

max$130.35

$1 up to $10Multi Price

(quarter increments)

ConfigTotal Float Bills Accepted Vend Price

MEI 5 Tube

Recycling Effect on Machine Float

Recycling reduces total machine float with higher bill acceptance.

$84 difference in machine float

Recycling Effect on Coin Funds

• In a normal scenario at $1.25 vend price, accepting $1 bills and coins, there is a positive coin ratio of $0.21.

• Bill recycling enables the acceptance of higher denomination bills without a concern for coin starvation.

• Conclusion: Coin starvation is not a concern when using bill recycling to enable higher denomination acceptance. Bill recycling leverages customer provided bill float and protects coin levels allowing an unlimited number of vends until next scheduled service.

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• Using the same scenario of a $1.25 vend price, accepting $1-$10 bills and coins, but without recycling, the coin ratio now goes negative.

• Conclusion; the addition of dollar tubes absorbs large capital investment ($138) and doubles the maximum # of vends until exact change.

Only bill recycling eliminates exact-change scenarios while enabling higher bill denominations.

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Higher DenominationHigher DenominationImpact on Coin Funds Without RecyclingImpact on Coin Funds Without Recycling

• Note recycling with current MDB requires interpretation in the reconciliation process.

• MDB Version 4 is designed to accommodate note recycling to allow proper reporting of note balances without interpretation. Both the note recycler and the VMC must be designed to work with MDB Version 4.

• The VNR is designed to auto-detect whether a VMC is MDB Version 4 compliant at start-up and dynamically adapt its reporting standards.

Operational Considerations:Operational Considerations:ReconciliationReconciliation

Operational ConsiderationsOperational Considerations

• Adding recyclers to a bank can eliminate bill breakers

• We recommend that at least 60% of the machines in a bank have a recycler

• Increase vend prices through recycling

• Accepting $1, $5 & $10 while recycling $1s has few significant operational consequences.

• By comparison, accepting $1, $5, $10 & $20 while recycling $5s has operational consequences to consider.

• While the $383 in working capital could be reduced in many machines, at a cost of capital of 10%, it is only $38.30 in annual opportunity cost.

• There may be more relevant costs including cash-handling costs (particularly for $1 coins) and added operational controls.

• If a site is already using $1 coins, then $20 acceptance and $5 recycling should be implemented.

Operational Considerations:Operational Considerations:SummarySummary

• Open Site vs. Closed Site:– In early deployments of recycling, closed sites will produce returns

superior to open sites.

• Multiple Vend Sites:– In environments with family experiences that could lead to bundled vend

opportunities, recycling will help unlock the potential of the machine.

– The “entertainment” category in a recent trial produced the highest results: 29% lift for $5 acceptance, 4% lift for $10 acceptance at vend price range of $2.50 to $3.25.

• Site Security:– While $1 recycling doesn’t dramatically change total “cash in machine,”

$5 recycling decidedly does. In less secure sites, credit card acceptance is better.

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Deploying Recycling:Deploying Recycling:Site FactorsSite Factors

Conclusions: Key TakeawaysConclusions: Key Takeaways

• Consumer Satisfaction:– Note recycling first and foremost is a technology

to improve customer satisfaction.

– It enables a positive retail experience for vend patrons.

• Sales Lift:– The improved customer experience translates

directly to sales lifts of 15% or more!

• VNR and Consumer Adaptation:– The VNR and the High Visibility Bezel build

consumer awareness, trust and experience to accelerate adaptation.

• VNR Modularity:– Enables vend operators to maximize investment ROI.

• VNR Deployment Considerations:– Vend Price is the strongest driver, followed

by volume and site considerations.

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