The temptation of charging $2 to recharge – why it’s a trap you must avoid!
Should my charging station be a free service or should I charge customers? We crunch the numbers and present our findings on which is better for a venue – a ‘pay-to-use’ or ‘free-to-use’ mobile phone recharging kiosks.
When we first started Chargebar, we were awake at all hours of the night doing market research with every business related to recharging consumer’s devices in public venues. We called businesses in South Africa, United Kingdom, Italy, Philippines, Canada, China, Japan and the USA. We also interviewed bar, coffee shop and shopping centres owners around Sydney to see what they thought of the concept for their customers, as well as spoke to consumers who had used the service before.
From our research we found three ways to generate revenue to form a sustainable business:
Vending – This is where the venue is providing the charging station for free and customers must pay $2 per recharge (just like a regular vending machine)
Advertising funded – the charging kiosk is again given to the venue for free and the operator makes money by selling advertising, typically on a digital screen
Charging stations supplier – the venue pays for the charging station as an additional free service for their customers
Below are our findings of the advantages and disadvantages about each style of business model.
Great passive income – deploy the kiosk then just collect coins. There’s no denying this point – it’s essentially money for nothing. But how much?
When consumers pay money for the recharge, they have unrealistic expectations about what amount of battery they will receive and then damage the kiosk or complain about it. There are physical limitations on how much a phone will recharge in 10 minutes (e.g. an iPhone will never charge faster than 12% in 10 minutes – Apple just doesn’t allow it).
Low financial returns – at very best a charging station will generate $200 per month, but on average $50-100
Low usage results in less dwell time in the venue, leading to lost over the counter sales for the venues
Customers do not respond positively to paying for power, particularly when 90% of kiosks on the market are free-to-use. This can be viewed as poor customer service and results in complaints
Advertisers do not advertise on vending machines. There has been countless businesses who have tried and failed. Quickcharge Media, for example, had vending kiosks with screens in Australian Airports –some of the best media space in the world – and regularly no advertising to be seen on the screens
Coin receptacles break or become clogged, leading to complaints to venue owners and out of order kiosk
Typically users request refunds from venue staff, not the kiosk operator
Charging technology changes all the time and needs to be consistently maintained. Majority of vending models are 3-4 slower than a wall charger.
Service is free for consumers to use – the way it should be!
Our research shows that usage is 40x – 50x higher when service is free. This is a significantly larger amount of dwell time created in the venue than vending models – ultimately creating more over-the-counter sales and value for the venue hosting the service.
Generates significantly more revenue than pay-to-use models – if the advertising is sold
Extremely challenging to sell the advertising space. Brands do not like taking risks with new media and have little spare budget free to allocate
Leading brands have strong relationships with existing advertising platforms and partners
Competitive pitch to win business against other out-of-home media businesses, who typically use larger screens
Advertisers won’t risk buying media space on low quality charging stations
You need to be skilled to build advertising proposals, campaign implementation and debriefs
Products must be cleaned and serviced regularly
Digital signage is complex and difficult to manage… and not to mention expensive!
Generates increased foot traffic to the venue
Higher usage from consumers and thus dwell time in venues leading to more sales
The recharging service is free for consumers
Generates good will for the venue
Charging kiosks are typically smaller and less obtrusive
Less hassle – easy and simple model
Needs servicing (repairs, replacing charging tips)
Pricing dependent on model selection
Not associated to charging company to keep up to date with the latest technology and trends
Once upon a time, businesses used to charge people for WiFi, and now people expect it for free. The pay-to-use model is going the same way and will soon be dead. We have seen four mobile phone charging businesses in Australia fail under the vending based business model. The kiosks get damaged by customers who are not satisfied by the technology and service. The payback period on the kiosk is too long for the amount of users who will pay to use it and is unsustainable. Additionally, charging station owners cannot support the maintenance and insurance off the revenue gained from the coins. And no-one, we repeat no-one has been able to secure advertising on pay-to-use kiosks.
Plus the numbers for pay-to-use just don’t stack up. Even if you’re getting $100 in coins per unit per month – the venue will only get $30 to $40 of it. Let’s compare that to free-to-use where on average, 400 people ‘charge’ their phone. If 90% of these buy something (i.e. 360) at $5 each, it adds up to $1800 per month in retail over-the-counter sales. If you’re a venue, which would you prefer – $30 in coins of $1800 in extra sales and a great customer service?
Our Directors have experience in media and we have pushed the advertising based business model for 18 months. We also partnered up with two American companies in our industry which also tried pushing this business model. We had some success, however struggled to compete against larger existing outdoor media and ambient publishers. We weren’t making enough to expand as quickly as we wanted. If a venue is offered a free charging kiosk by a supplier who says they’ll fund their business through advertising, then that venue owner must believe the supplier is capable of selling the ads – otherwise the company will go broke and the recharging station won’t be maintained properly, resulting in customer complaints and reflecting badly on the venue.
However, all is not lost! Venues quickly realised that free-to-use recharging stations were a great way to increase sales and were willing to buy the stations outright, as long as the charging technology was good and the kiosks were of high quality. Due to the huge uptake in smart phones, consumers are now seeking out venues which have public phone chargers and buying products whilst they wait! The payback on investment on the charging kiosk is very short (typically 1 month) and customer service levels improve!