RSSWhy free Wi-Fi could (help) save Starbucks
By Angela Gunn | Published November 12, 2008, 10:16 AM
Starbucks' wretched earnings report this week may unnerve fans of coffee and out-of-office Wi-Fi, but now there's evidence that keeping customers hooked for free is smart business practice that could get them over this little depression.
Take Seattle. Seattle knows coffee. Seattle knows Starbucks -- they've got hundreds, not to mention corporate HQ sitting just south of downtown. And Seattle knows no limits on its Wi-Fi craving.
Many segments of the Seattle community also know how to squeeze a nickel so hard Jefferson's forced to move out of Monticello. And so the dominant recession-era trend in Seattle so far has been not to cut off Wi-Fi to patrons (our informal Tuesday survey found just one coffee shop that has unplugged its systems altogether, citing overcrowding in the restaurant), nor to require them to sign up with a dedicated provider such as Boingo, but to go with either free or free-with-purchase access.
Which means Starbucks is only slightly behind the times. Early this year, Starbucks announced that it would shift from the T-Mobile daypass and account systems to an agreement with AT&T that includes two free hours of Wi-Fi every day for users of the Starbucks gift card. (Day-pass-style payment options are also available.)
Fine, and there seems to be no shortage of patrons hunched over laptops in any of the several Starbucks stores within a few blocks of this reporter. But a while back, some of the local coffee shops compared notes and noticed something about people who paid for Wi-Fi access in their establishments: They aren't the best customers. They tend to hunker down with one cup of coffee and nurse it, eking out as much time as they can on the expensive Net hookup.
In contrast, the then-few coffee shops offering free Wi-Fi reported that customers in their stores were vacating their tables more frequently -- and, said some owners, spending more on a second or third beverage if they did stay (and stay and stay).
Counter-intuitive? Sure, but Starbucks could have figured it out based on its experiences opening company-branded cafes in Barnes & Noble.
A executive who worked closely with the B&N-Starbucks deal back in the early '90s (who requested that his name not be used) explains it thus: The conventional wisdom held that letting people near your books with coffee was crazy, and letting them plop down with coffee and read right there in the store was doubly so. And in comfy chairs? Madness!
And yet? When tests were done, B&N found that readers tended to go to the cafe area with an armful of books, read partway through one...and head for the cash register with at least some of the armload, where previously they might have pared down their selections on their walk to the register. (So they could go home and read in comfortable chairs with coffee, one likes to think.)
Similarly, the splendid main branch of the Seattle Public Library surprised many in 2004 when it unveiled its majestic main-floor "Living Room" reading lounge, complete with coffee cart. When a reporter quizzed the library staff about the advisability of putting liquids in the library, the press liaison at the time quipped, "Well, we thought about it and realized that we let people check out books and take them home, and they've got any damn thing in those places. So why not let them have their coffee here?" And so they do; Seattle's library system is among the most heavily utilized in the country.
If coffee can boost reading, surely reading (even the sort done on a computer screen) can boost coffee. Since the informal comparing of notes about customer usage patterns, the number of coffee shops and restaurants offering free Wi-Fi in the Seattle area has shot up from a couple of dozen to well over 200. And though many people are cutting back on the purchase of CDs, novelty mugs, barista teddy bears, and the other stuff one finds in a 'bucks these days, in Seattle at least both Wi-Fi and caffeine are basic requirements for living.
With unnecessary expenditures pared to the bone and so many independent and smaller-chain competitors willing to attest that a customer not spending money on Wi-Fi is a customer willing to lay out for an extra cup or two of joe, can Starbucks afford to do anything but try the free Wi-Fi route?
top ten
"ways to save starbucks"
#10) claim coffee is made with spanish flies
#9) claim coffee will make you slim n trim
#8) claim coffee in hand is sexual appealing
#7) claim coffee is a cure for cancer
#6) coffee is made with all natural products
#5) coffee is a health food
#4) coffee after sex is better than a cigar
etc...
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|I've been in many Starbucks in this country and a few abroad and every one had free Wi-Fi except one I stopped into in Waco, Texas. I sat down with my coffee and powered up the notebook only to find out that if I wanted to connect, I would have to pay T-Mobile to access the internet...Way to go Starbucks.
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|You're blaming all of them for the actions of one...
EDIT: It's odd that one place decided to do things differently than the other places. I take it that each place decides what policies it follows?
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|Tim Horton's pwns Starbucks. Word.
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|What might save Starbucks, is:
1 - not ripping me off for a cup of coffee (£3 for a large coffee is just taking the piss [£3 = €/$4.50 or so)
2 - Hiring a full time cleaner - my local starbucks are just thoroughly filthy.
Would I go in if it was free..... no probably not. McDonalds has free wifi and their coffee is pretty nice and it's less than half the price!
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|Netean, I am conviced that whichever country you happen to be in that McDonalds has the best coffee and pretty consistant worldwide too. Free Wi-Fi is an added bonus
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|Before thinking about wifi, maybe (just maybe) Starbucks should first stop making piss and get back to the basics: selling real coffee.
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|their crapaccino's are suspicious.
it's hard to say because they use a lot of whip cream but one wonders what they use for the mocha.
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|You must be an east coastie. We Starbucks fans think the same of your Dunkin Donuts. We had a couple of those here in the Pacific northwest and they had to close for lack of business several years ago. Starbucks seems to be doing well on the eastern seaboard though.
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|Except Dunkin Donuts coffee, unlike McDonald is consistantly bad....Many times old too. I lived most of my life in the Northeast and I have never really cared for Dunkin Donuts. Most are franchises run by foreigneers who have lost total insight to the institution of Dunkin Donuts Coffee along with cheaper ingrediants to make the donuts. Stick with Independent Donut Shops. Better product and who know, maybe Wi-Fi too
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|This shouldn't be news.
This is fundamental strategic marketing. One wonders if anyone has bothered to do a simple SWOT/TOWS analysis!
Sports and arena venues have long known that the greatest profits are not generated by ticket sales, but by concession sales.
That is why so many comp tickets are distributed. In fact, they would do well to simply comp all of the tickets just to fill the seats, as the patrons then spend all sorts of money on junk once they are there.
Debating how to charge folks (for the 'free' service) is a moot point. The cost of Wi-Fi is amortized over the total amount of 'stuff'(product) sold. The cost is minimized per unit to pennies.
The fundamental issue: get folks in the seats.
Free Wi-Fi provides a reason for man to come and lite. In the process, they will most likely buy something. Other patrons who actually want ridiculously priced $3-5 cups of coffee will come on their own.
I can't say that free Wi-fi is the answer, but this should have been a strategic factor from the beginning, not one they are just now considering.
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|Most Starbux i've seen don't have that large of a seating area-- filling it is not a problem.
What they need are things like increased takeout, delivery, off premise catering and more deals for inner space in the establishments of national chains.
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|In my town I have quite a choice of coffee shops with free wifi, and that's where I go. I never go to Starbucks. If their wifi was free I would go now and then, as their coffee is a little nicer (although it's a lot more expensive) than the places I go. As it is, it seems arrogant of them to charge for wifi with the price of their coffee. It's like "Starbucks is so awesome you're lucky we don't charge you extra just for being in such a cool place".
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|BAIGaInTI: Because even Starbucks (as mentioned in the article) are looking for ways to boost their revenue. Charging a small amount for Wifi is likely to satisfy customers, cover the cost, and encourage the right demographic to be taking up tables and buying more coffee... if you give away the wifi for $0.00, it's likely that you'll also get people using it who are spending $0.00 on coffee. $25 for a year for 2 hours a day with $4 for an extra 2 hours is a great, affordable, customer-friendly plan.
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|I agree. You'd have the almost-homeless camping out... to say nothing of a single person who wants to turn a table of four for his own office-- laptop, agenda, papers, brifcase, coat, etc.
Where the wifi "could" work is in places with huge outdoor seating-- like next to transportation hubs, parks and the like.
Starbucks needs to develop delivery, expanded retail & catering options to survive.
It should also develop deals with bank & supermarket chains for indoor outlets.
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|Um, not really AntiochMedia -- the store owners to whom I've spoken say that there is next to no "squatting," as they call it, even if the wi-fi is free. People don't just waltz in and sit down with their laptops. And the two stores that said they had squatter issues nipped them in the bud very effectively by setting up their systems to require a password... which is taped to the register.
Again, it may seem counterintuitive, but most people don't plop down in business establishments and start working the laptop for the same reason they don't sit in the car outside the shop and do the same thing. The people who *do* that... well, there really is no accounting for outliers, and they weren't exactly "lost" customers in any case. As long as they're not perching to ingest mass BitTorrent quantities -- something just one shopkeeper reported, and a quick port tweak cleared that right up -- the network-performance hit is trivial and the upside for customers who *do* know how to behave decently is pretty substantial.
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|horsecharles said:
Starbucks needs to develop delivery, expanded retail & catering options to survive.
It should also develop deals with bank & supermarket chains for indoor outlets.
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Starbucks is located in supermarket chains throughout the west coast; in Fred Meyer, QFC and Safeway stores as well as Barnes & Noble Book stores across the country from the New England States to Los Angeles.
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|you must be special I don't see Starbucks in any supermarkets where I live and I live on the west coast. Besides the aforementioned Barnes & Nobles and a few Target stores, Starbucks doesn't resides IN anywhere else except their own stores and THOSE are everywhere.
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|In all seriousness...
Why don't more companies offer free Wi-Fi all the time? Is it that expensive?
What is the cost associated in doing it right?
Compared to the cost of building and operating a Starbucks, it doesn't seem too difficult to include some wireless hardware and a monthly business high speed internet plan.
Am I way off here?
I realize their would be other costs as well, but I'd be interested to see what some people think the true cost of operating a free Wi-Fi hotspot would be.
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|Not that simple. For one you now may have wi-fi customers that eat up table space, that other coffee-only customers that may actually want to sit and rest may not be able to use. 2 hours for one $1.95 drink taking up x sq ft of retail shop is not necessarily a good idea economically. $25/year comes out to $.06 /day for broadband-level speeds.
Look at the dude that setup his office below this post...
Then you have issues such as technical support for the tens of thousands of hotspots, routers, connections, etc. People will expect the connection to always work, and possibly b**** at the baristas if it doesn't. You have porn issues, bandwidth hogs, security, and then you have the ubiquitous competition from metro wireless and aircards.
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|Let me add to this article -
Starbucks is now offering the 'Starbucks Gold Card'. You can read about it at www.starbucksgold.com.
I've been using Starbucks as the base of my operations for the past month with work as I work from home and have a 2 1/2 year old and an 8 month old. Starbucks provides an upbeat environment to get away from everything domestic and has food and wifi...
I've noticed that Starbucks has had a deal wherein if you have their Duetto (or Starbucks Rewards) Card, you get 2 hours of free wifi a day as well as some marginal discounts. This is a CREDIT card with a bad interest rate (but they donate a portion of all money spent to good causes).
This week, they rolled out something that was a bit unbelievable... the Starbucks Gold Card for $25 including a free drink (so yes, you can get a Caramel Macchiato and sub soy milk, get some extra shots of espresso and the resulting $5 dessert beverage will bring the out of pocket cost to $20 -- if you were already planning on endulging).
The card comes with:
- 2 Hours of Free Wifi Daily
- 10% off Most Purchases
- Discounts on Family and Friend Days
- "Suprise indulgences" - like a treat on your birthday
- Members-only website and insider promotions
- Discounts on almost all purchases
You also get 3 10% off coupons to give to friends - which covers everything from drinks to an espresso machine.
It is an annual fee.
---
Now the two free hours of wi-fi that Gold Card and Rewards Card (The VISA) holders get is NOT specified in EITHER contract. Yes, the Gold Card mentions nowhere that you get 2 free hours of wifi. It's on separate marketing materials - which I assume is a way for Starbucks to differentiate between card entitlement and a special promotion that will last a seemingly indefinate period of time ...
So there's the scoop. This was a good article, but it didn't actually explain what "free" meant. It's not free, but it's extremely cheap and they aren't asking a lot.
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|Keep the stores clean and lower the profit margin on drinks. Offer 2 hours of free Wi-Fi upon purchase of drink for anyone, by utilizing a passcode on receipt.
They have an excellent product and an excellent atmosphere (who wants to sit at MCDonalds with screaming kids beside the playground and sip on a latte?) The price and lack of free wi-fi seems to be the only thing holding many that enjoys coffee back!
Oh and another thing...Please serve something besides Pikes Place for coffee. What happened to Sumatra and Verona. We realize it might save you money to offer one flavor but we are getting tired of only having one choice...give us a choice...we have came to a coffee shop after all!
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