The role of distributors and
national accounts in pay phones
[EDITOR'S NOTE: The following are excerpts from a speech made by Gail S~er~an,
vice president of marketing for Cointel Communications at the Buisness Communzcatwns
Review conference June 14, 1985.]
Distributors represent the key to
success for pay telephone sellers
because they are not merely one-time
buyers but are the customers who will
stock and repurchase product.
There are two types of distributors,
the vending distributor and the tele-
phone distributors .... They have re-
sponded quite differently to privately
owned pay telephones.
The vending distributors are facing
a dilemma. On the one hand , they are
anxious to diversify into other product
lines because vending is at best stable
and , at worst, on a decline. On the
other hand, they are very cautious
about expanding into pay phones.
because they are unfamiliar with them.
Though they know the coin-op end
of the business, they have little or no
knowledge of dealing with telephone
companies, regulatory, commissions,
and tariffs. Therefore, they seem to
have adopted a wait-and-see attitude.
The marketing approach to vending
distributors is to build the market
underneath them. That is, to build the
market at the vending operator level.
Vending operators are more willing to
invest in pay phones because they can
do it on a smaller scale and locate the
telephones alongside their other vend-
ing equipment.
By building the demand at the
vending operator level, pay phone
manufacturers and marketers can
show the vending distributors that not
only is there revenue available from
the sale of equipment, but also from
installation, service, parts, and pro-
gramming.
The telephone distributor, which is
to say supply houses and interconnects ...
know telephones and are less cautious
about stocking them.
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It is important to cultivate business
to the telephone distributors because
they will continually repurchase in
order to stock inventory, which is criti-
cal to long-term success .. ..
The supply houses, by nature of
their size, obviously represent larger
volumes. In return for volume, they
want extended terms. Thirty days is
expected; 45 to 60 days is not uncom-
mon. The interconnects , who are
smaller distributors, obviously want
terms, but they are more willing to
accept doing business on a C.O.D .
basis ....
Both supply houses and intercon-
nects ... make their money by reselling
product and , therefore, need the tools
to be able to do that. This includes col-
lateral materials, advertising, exhibit-
ing at trade shows, and to a lesser
extent, public relations and publicity .. ..
On national accounts ... . At this
early stage in the development of the
pay phone industry, two attitudes pre-
vail. One is to allow vending operators
to test pay phones on a small scale.
Greyhound is conducting a test at
their terminals in the Twin Cities, and
another test is being conducted with a
group of 7-Eleven franchisees in the
Chicago area. The other prevailing
attitude is one of wait-and-see.
At this point in time, the general
lack of activity on a natiopal account
level seems to indicate that the wait-
and-see attitude prevails.
But in any case, there are two ways
to market to national accounts. One is
to sell the telephones to them outright;
the second is to arrange a commission
agreement between a national account
and a vending operator.
For a national account, the advan-
tage to owning a telephone outright is
the greater profit that's available by
being the sole recipient of the net pro-
ceeds. In addition, there are the bene-
fits of depreciation expense and , for
the time being, investment tax credit.
The negatives to the national
accounts , in owning their own equip-
ment , is that they take on the responsi-
bility for maintaining, servicing, and
collecting the telephones.
Likewise, a commission agreement
has both its positives and its negatives.
The positives, of course, are that some-
one else maintains , services, and
collects from the equipment, reducing
the labor costs of privately owned pay
telephones.
The obvious negative is that there
is less profit available since t he
national account will only get a per-
centage of the net proceeds. Another
negative is that reliance on the vendor
for maintenance, service, and collec-
tions may result in a less than perfect
operation.
How each national account will
enter the pay phone market will really
depend upon their level of knowledge
and their current involvement with
telephones.
National accounts that have cen-
tralized locations, such as hotels and
department stores, where they already
have PBX or other telephone system in
place, are more likely to choose to own
and operate their own pay telephones.
National accounts with multiple
locations, such as restaurant chains,
gas stations , and convenience stores,
are more likely to choose the vending
arrangement, taking a percentage of
the coin box in return for havi ng a
vendor handle the work involved with
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pay telephones.
PLAY METEP.. July 15, 1965