Free is good, as any customer will tell you, and fast-casual restaurants are beginning to see the benefits of offering free (or virtually free) coffee to drive increased traffic and revenue.
In February 2020, Panera became the first major chain to offer a monthly subscription to coffee drinkers, charging $8.99 a month, a price the company estimates comes to 30 cents a cup.
“The coffee subscription model was in our pipeline long before COVID took effect,” Eduardo Luz, chief brand and concept officer, told FastCasual, (July 27, 2020). ” Subscription services are table stakes in many other industries, and coffee was a product we saw fitting into that model …”
A CLOSER LOOK AT LOYALTY PROGRAMS
Loyalty programs are not new. Grocery stores have been using them for decades, offering special discounts on specific items. Restaurant chains have long offered free food after a certain number of purchases.
Panera already had one such program, boasting 40 million members. The beauty of Panera’s coffee subscription is that consumers will grab breakfast, lunch, dinner or a snack because they’re already going to Panera for their caffeine jolt. The coffee subscription added 800,000 consumers in Panera’s loyalty program, Luz said.
In an email to The Food Institute, Joe Scioscia, vice president of sales at Vormittag Associates Inc., which provides data solutions for companies, said building loyalty programs into apps not only give companies data to unlock insights into their most loyal customers, but also enables companies to build “trust relationships with consumers,” which in turn will drive sales and growth.
A GROWING TREND
Panera isn’t alone. Grub Street (July 30, 2020) reported Boris & Horton in New York’s East Village began offering unlimited drip coffee and other benefits for $70 a month while the membership coffee shop Fair Folks & a Goat offered unlimited beverages for $25 a month.
Jonathan Treiber, CEO of management solutions firm RevTrax, said such programs will be extremely effective once COVID restrictions are lifted, enabling consumers to once again build daily habits.
“For the retailers, this is a very low-cost way to entice foot traffic and bank on upsell of other products,” Treiber told The Food Institute.
“They can be worth it. For consumers, it’s cost savings for daily habits they would otherwise have anyway. For operators, it’s a money-making proposition with a loss-leader component with hope of capturing additional purchases.”
FORGING CONNECTIONS WITH CUSTOMERS
Tom Caporaso, CEO at premium loyalty program provider Clarus, compared coffee subscription programs to Walmart’s $98 delivery subscription, saying, “Shoppers are willing to pay more for better experiences, regular benefits and programs that make their lifestyles easier.
“Not to mention, our data found that about 25% of millennials are willing to spend up to $100 annually for programs at brands that they already engage with on a weekly basis,” he told The Food Institute.
“Loyalty programs and subscription models build deeper emotional connections and drive visits. The ROI on getting an existing customer back one more time is significantly greater versus acquiring a new customer,” Lisa Miller, CEO and founder of Lisa W. Miller & Associates, told The Food Institute.