News

Why do most kiosk programs fail?

Adam Parker sounds off on some kiosk programs that haven't quite made it in the marketplace, and a few that have. He says deployers should focus less on the bottom line and more on the less tangible benefits of kiosks.

October 24, 2002

Editor's Note:Mr. Parker's opinions are entirely his own, and do not necessarily reflect the views of the management of KioskMarketplace.com. This column first appeared on the Web site

Kiosks.org.

Have you noticed how, despite the generally poor history of kiosk deployments -- their lack of any lasting success in the marketplace -- certain industries and individuals continue to display a cautious interest in the technology?

Why is that?

Now, to be fair, there have been some successes: airline ticketing kiosks have seen growing usage (at least until 9/11 shut things down for a while); some informational kiosks, like the ones governments occasionally deploy, have received a respectable share of touches; and 7-Eleven is experimenting - and enjoying a fair degree of success -- with its Vcom program (though it relies on souped up ATMs, not proper kiosks). Other projects were briefly successful before being snuffed out for lack of funding, or costs that were higher than expected, or regime changes. I can think of a Minnesota Twins ticketing project, a city of New York project, a city of Boston project, and a credit union project right off the top of my head. You can no doubt think of more.

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But generally speaking kiosks promise much more than they deliver. Or perhaps a better way to phrase it is to say that kiosks may indeed deliver what they promiseÂ…the problem is no one's there to receive the delivery.

I visited a Borders bookstore in Philadelphia recently. The first thing I saw when I walked through the great double door was a Title Sleuth kiosk (equipment furnished by Kiosk Information Systems Inc (KIS), software provided in part by NetKey Inc.). So that it could better compete (with Barnes & Noble, with Amazon.com), Borders devised a strategy that employed a kiosk solution in order to retain customers. If the product isn't on the shelf, so went the strategic thinking, don't leave the store to go somewhere else - go to Title Sleuth and order it.

When I was there, the store was not overrun with customers, but it was relatively busy. I stood there for a while, watching the device from a short distance. I hoped to ask a Borders customer if he liked the kiosk, the service it provided, the user interface, the functionality, the ease of use.

I didn't get the chance. No one came near the thing.

Editor's Note: At the Interactive Self-Service in Retail Conference in Phoenix Oct. 17, Borders' director, retail convergence services, Robert Edington, said the Borders Title Sleuth kiosks average 1.3 million searches per week across a network of nearly 400 stores.

Big Apple Blues

I worked on a big project for the city of New York, called CityAccess. We deployed 25 transactional kiosks throughout the five boroughs, enabling the city to accept debit and credit card payments for parking tickets, and debit card payments for real estate taxes, for the first time in its history. We facilitated other payments too, and we presented a host of agency information, accessing five distinct back-end hosts. The project cost the city at least $2.5 million over three years. Despite the expenditure, the program was never promoted by the people who commissioned it. But through chance, word of mouth, and our own modest P.R. efforts, we managed to ensure that at least some New Yorkers actually used the machines. The city, when it saw the statistics, and witnessed the high level of service we provided, declared CityAccess a wild success. As the initial term of the program drew to a close, the managing agency, DoITT (Department of Information Technology & Telecommunications), prepared and issued a proper RFP. But it had gotten cocky; it had decided that it should own everything, generate lots of income, and avoid paying for the quality service it was receiving from me and my colleagues.

No one responded to the RFP.

So the city, determined to leverage the so-called success of the program, revised the RFP and issued Version Two a couple months later. But nothing substantial had changed and again no one responded.

Then came Version Three. (This had become a joke by now.) Version Three said, in essence, "Okay, we give in, configure your proposal as you see fit, just make sure we make some money, and please stay within these basic guidelinesÂ…"

So North Communications (the author's employer at the time), together with American Express, crafted a lovely three-part proposal, showing the city how we could work to present a suite of features (not just government-related), generate some extra bucks, and share them with the powers that be. But DoITT hadn't really learned its lesson from its RFP fiasco: it continued to doubt our good intentions, demand an unreasonable share of the revenues, and question our capabilities - all this despite the proven successes of the pilot program.

It will come as no surprise to hear that the deal fell through and the so-successful CityAccess project was eventually terminated altogether. So much for the self-service revolution, so much for bringing government to the people.

The harsh reality is that kiosks always cost money, and they rarely make money. So if you conceive of a kiosk program as a profit center for your business, you will most likely be disappointed.

But there's a subtext to this little story. The real reason the city decided to demand so much was because we (North Communications) were betrayed, betrayed by our own kiosk brethren. Another vendor participating in the program, ObjectSoft, used its contract with New York City as an excuse to go public. Flush with funding, and thinking it would ride the technology wave, it figured that tons of money could be made through advertising revenue (even though no advertisers were signed up) and through multi-tenancy (even though no tenants were signed up). The assumption, widely held at the time, and still maintained by some, was: "Deploy and they will come."

Thus dollar signs flashed before the eyes of DoITT, and even though we tried to convince DoITT not to do it, it did it anyway. It figured it could be a player.

A little later ObjectSoft was de-listed from the Nasdaq. The third vendor, Golden Screens, turned its attention to another brilliant initiative - the installation of info/e-shopping kiosks at transportation hubs (airports, rest stops, etc.), kiosks that no doubt generated untold buckets of revenue. And this year, after much struggle, North Communications finally shut its doors, permanently.

Oh, the trials of the good-intentioned.

Moving on

Several reputable kiosk companies, in their efforts to re-align strategies, took a look at the marketplace a few years ago and decided that the financial services sector was where the money was. To hell with this hand-to-mouth, project-to-project way of doing business, an approach too dependent on limited government contracts and pilot programs, they thought. It's time to Â… to Â… to reinvent the ATM! Ah, the ATM - that clumsy dinosaur of a machine, that proprietary software and barely supported operating system (OS2 for God's sake!).

Kiosks are flexible, scalable, web-enabled, connectable, transactional. Kiosks can vend, scan, read, display, capture, store. Kiosks can be the next-generation ATM! Brilliant idea.

Problem was that these kiosk companies failed to do their due diligence, they forgot to evaluate the ATM industry and marketplace. They didn't notice that the ATM business was unable to deploy kiosk devices and kiosk technologies. The kiosk industry's solution for the ATM industry wasn't the next best thing; it proved, instead, to be white bread, white bread that got very moldy very quickly.

The reasons were twofold: First, no matter how antiquated the ATM equipment already deployed in the field was, the cost of replacing it (thereby enabling advanced functionality) was very significant. Second, taking on the burden of that capital expense was not justifiable since no revenue-generating products and services were immediately available. And even if they would have been available, they would have been unproven and therefore deemed too risky.

The kiosk companies figured, wrongly, that the banks, credit unions, and financial service institutions would be jazzed by the potential represented by their solutions, and that they would seize the chance to upgrade. But potential does not a new Mercedes E-Class procure.

So then the kiosk industry was faced with a real dilemma: Government wasn't the answer, and it became clear that banking wasn't the answer either. So who would buy these damned kiosks? Who's left? Retailers?

But that's just a teaser, because my next article will consider the retail sector and its tentative foray into the weedy, rooty realm of the self-service rain forest. For now, let's turn our attention to usageÂ…

The Vision Thing

Why is kiosk usage so low? Where are the once-predicted queues? To answer this we must ask another question: where are the kiosks? For herein lies the secret.

Unwritten Rule: The kiosks that are more visible are less used; the kiosks that are less visible are more used.

Kiosks that get deployed in large public access locations, like shopping malls, airports, and city streets typically offer services unrelated to their location. The airport kiosks inside the terminal, for example, let you send and receive web-based e-mail; the shopping mall kiosks function like their own mini mall within the mall. Sure, you're more likely to bang your knee against one of these machines than against a kiosk installed at the car rental facility, but your less likely to use the thing. Kiosks work best when they offer a service that is specific and that complements the services provided by the location at which the machine is installed. But the implication is that the kiosk program ought to be treated as a cost center, not a profit center, as a marketing tool, as an automated service desk. Sure, it may cost money to maintain the network, you'll have to be willing to tell your customer, but the network will help to support the larger business enterprise.

So reconcile yourself to this reality; it will spare you grief.

For a while, everyone was looking for the next killer app (see my article "In Search of the Next Killer App"); many were sure that the next-generation ATM concept was it. Others figured that a self-service shopping mall - a multi-tenant utility deployed at every Wal-Mart or United States Post Office was the answer.

Wrong.

The answer is simple: build a modular solution that can be customized by/for any potential client and that can be deployed to support the client's existing business. Stop trying to invent a new business model, stop setting high expectations, stop promising an "end-to-end" money-making solution (since you can't know if the money will, in fact, be made). Focus on solving specific problems with cost-effective solutions. Look at the business in question and figure out how to improve it. Demonstrate how expenses can be reduced.

Imagine the level of customer satisfaction!

The harsh reality is that kiosks always cost money, and they rarely make money. So if you conceive of a kiosk program as a profit center for your business, you will most likely be disappointed. But if you reconcile yourself to the necessity of investing in a self-service program for the better good of the larger enterprise, well, then you've got a shot at success. Kiosks are fundamentally meant to help you do something bigger. Kiosks ought to be low profile and high output.

They are a means to an end, not the end itself.

Adam Parker, now completing his tenure as Director of Product Development at Amicus, the electronic commerce division of CIBC, is turning his attention to DeLuque Media Group, his consulting business. Mr. Parker has spent the last ten years navigating the terrain inhabited by the self-service device. He began his career at Muze, a leader in the kiosk industry, moved on to North Communications where, among many accomplishments, he managed a large kiosk project called CityAccess for the City of New York. Then came the short walk over the footbridge that led to the similarly shaped but less forested landscape occupied by the ATM. At American Express he assumed the role of developer of new business, a role in which he continues to serve today at Amicus. Mr. Parker has overseen the deployment of at least six large kiosk networks, and he has managed the delivery of several new ATM initiatives. No small feat.