Digital Marketing and More | Alex Ikonn

July29th

Starbucks is Broken

Posted in: Improve Your Business

free-wi-fi-starbucks

There are times when you just can’t ignore when a business is doing something completely wrong. A recent visit to a local Starbucks got me thinking – “They just don’t get it!”  And this one aspect of their marketing and business model is completely broken. Corporations in pursuit of maximizing profits often overlook how their clients actually use their product or service. Attempting to maximize profits doesn’t always lead to maximizing profits and instead can lead to losses.

Here is the issue: Starbucks has put a limit of two hours of free Wi-Fi which you access by logging into your own Starbucks account. After that you either have to pay $10 hour or be a customer Bell to get free Wi-Fi; two options that don’t appeal to most people. And who in their mind would pay $10/hour for internet (except for the corporate folks).

Previously, you would put money on a Starbucks card, it would give you access for two hours. Of course, people hacked the system and just put money on multiple cards so that they can have more hours of Wi-Fi access. Starbucks obviously didn’t like people freeloading on their internet. However, they overlook the fact that people are buying $5 lattes at the same time.

starbucks-cakeThe multiple card scheme is not ethical but it worked to some degree and to be honest I personally spent more money when using multiple cards. Spending more time in Starbucks leads to increased spending on not only drinks but also on food (People have to eat!). Create new menu items where you can generate even more profits.

With the new system, I buy a Peppermint Mocha, use the internet for two hours and leave right after except for the times when I don’t need the internet.

Tip for Starbucks: Make your Wi-Fi completely free! It will probably cost you maximum of $169.95 monthly (Rogers for Business Account). This simple step will lead to people spending more time and money at all of your locations. Get real- how many people actually pay you $10/hour to use the internet, SERIOUSLY? If you have stats, I would love to see them.

Small Sample Survey: I am also starting a Facebook group, Free the Wi-Fi at Starbucks, to see what people think on this subject.

Have Your Say: Would you spend more money at Starbucks if they offered free Wi-Fi? And do I have a point or am I missing something?

Image Credit: mightykenny, mandolux

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Thanks for visiting and keep in touch ~ Alex.

  • Victoria
    A very interesting idea about free wi-fi but if Bucks was to implement it they would have to make sure that the service wont be abused in the future. Maybe if they were to offer some collect point system, like buy 5 lates and get so many hours of free wi-fi or something along those lines. I know that collecting points idea have been used by companies for awhile now but maybe its an option for bucks.
  • Daniel
    Wow what a long comment I posted....maybe I should start my own blog =D

    And Alex... Peppermint Mocha = yuck =[ haha jk
  • Daniel
    ... Ian, I don't know about you, but I've never walked into a starbucks because I saw people in line. It's not one of those businesses. It might work for clubs since there is so much choice while you walk down the street, but I would argue most people walk into a coffee shop when they want something.

    Also, the idea for the pods seems interesting, and would work well if Starbucks wanted to give a more techy feel. It would be a far move from their current image and I could see their customer based changing... a lot.

    On the Wi-fi, I would just love to know the official reason for the change. And Alex - I don't think that loading on different cards is unethical - I'm so confident that the folks at the friendly corporate Sbux HQ thought of that before making the change. Feels like there's some other reason. But from general business practice, despite if it's wi-fi, or being generous with sandwich toppings, or helping free setup, CUSTOMERS LOVE WHEN YOU ARE NICE TO THEM. It just gets them in a happy mood and makes the business seem more friendly to them, which in return they will throw more dollars at them. Just makes them enthusiastic.

    Bottom line - regardless of what happens to their profit, Starbucks' image just died a little.
  • Dan Cho
    haha just a random passing thought:

    charge for wifi - free the coffee
  • Ian
    so I think there is a balance here to be found as Dan makes a great point. People are sheep. When they see a line they want to get in it. When they see a busy Starbucks they want to be a part of it. Alex, you free the WiFi and I will make pods. Together we will make Starbucks even more millions and we can pay too much to caffeinate ourselves for free WiFi.

    FREE THE WIFI!
  • Dan Cho
    I am on the same boat with Ian about profits down the road.

    As a coffee shop retailer (even for those with a greater profit margin achieved by successful product positioning as a higher-quality/higher social class endowing brand like Starbucks - over say... a commoner Tim Horton's), Starbucks would ideally want to achieve a higher "traffic." Sure having a full house gives out a message to customers out the window "oh, this is the place to be," but at the same time it's deterring people who also want to sit down.
    And perhaps you are a very reasonable customer buying a latte every hour - but people like me purchases a cup of Grande coffee, and sit there as long as I want to. haha

    I guess that means - all this is happening because of folks like me ;) sorry alex
  • Leyla
    Great, great point, Alex! I couldn't agree with you more! In this day & age, it is absolutely ludicrous to think that you can actually charge $10/hr for Internet? They should Definitely offer Free Wi-Fi as an incentive to draw in more customers. Although, I agree with the previous comment's point - you wouldn't have a lot of "campers" who'd just get a drink or two, and sit for hours, hogging tables... So it's definitely a great idea to re-arrange the layout and make it more Wi-Fi friendly, as well as regular customer friendly... So perhaps having a bar all around the perimeter with high seats would be one way to solve the seating issue...But either way, I think they should definitely offer Free Wi-Fi. They would gain me as a customer for sure (although I usually don't like Starbucks, if they did, I would have a reason to go in now!)
  • Ian
    Hey, so you have a point in that wifi should be a free service... Totally agree. But would it lead to more profits? Not sure. 1 person sits at a table for 3 hours would probably consume 2 drinks and 1 muffin. So that's $4.50+$4.50+$2.00=$11. However that same table could cater 3 groups of 2 people over the same time frame. Clearly more mocha-frappa-moola for the 'bucks'!

    I personally love loitering, but when I want to sit with my wife nothing bugs me more than the sea of computers with 1 per table.

    So, here are my thoughts. Super Mocha-frappa-PODS. Individual sleek pods that have all the geek gadget inputs, put 10 of those in the area you would have 3 tables. Then make the 'sitting area' more conversational.

    Let's maximize the per sq/ft profit per hour vs. Per person. One can only consume so much caffine.

    Cheers,

    Grande Vanilla Lattee
  • ikonn
    Ian: Genius! Super Mocha-frappa-PODS would be a game changer for Starbucks. This might just be the most revolutionary idea that is to hit Starbucks. :D

    Leyla: I can see why you don't go to Starbucks. I personally love the layout and design of Second Cup but they offer zero free Wi-Fi, it is just pay $10/hour or no internet, hence the reason why I go to Starbucks.
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