As prices go, “free” is an interesting one. Dan Ariely plays with the idea in his book Predictably Irrational, as does Seth Godin — and Chris Andersen has gone so far as to suggest that “$0.00 is the Future of Business.”
There are, of course, a lot of different kinds of “free.” Giving away a free razor or a free computer printer in order to lock a customer into buying your razor blades or printer cartridges is one model; giving away free merchandise as a pure marketing play is another.
I have a pair of stories to share about free coffee. The first was sent in recently by a reader, Etan Bednarsh of New York:
Today is Free Iced Coffee day at Dunkin’ Donuts. Attempting to take advantage, I just went on a field trip from work with my boss and co-worker. When we got there, though, the line was out the door — a very long wait. It obviously was not worth the cost of the iced coffee to wait in line for a $3 drink.
That said, we were already jones-ing for iced coffee, so we went to Starbucks and paid for Starbucks iced coffee (which I am now sipping at my desk).
This made me wonder — does the long line incurred by giving out free coffee serve as a reverse incentive, driving Starbucks to do more business on a Dunkin’ Donuts promotional day?
I am guessing that Starbucks in general doesn’t profit much from Dunkin’ Donuts running a free-coffee promo; I am guessing that Etan and his colleagues happened to be in close proximity to a Starbucks and had the time and inclination to change their plans — a sort of free-coffee perfect storm that probably doesn’t strike too many people. But I may be entirely wrong.
The free-coffee experience I had not too long ago also concerned Starbucks:
It was mid-morning and I was walking from the East Side of Manhattan over to the West Side, through the northern end of Central Park. It’s a lovely walk, especially on a cool morning, as this was.
I stopped at a Starbucks to get a coffee for the walk but found, as Etan did, a long line outside: it was free coffee day. In this case, Starbucks was dispensing free “tall” cups of coffee on the sidewalk. Because of the length of the line, and because I wanted a larger coffee than “tall,” I went inside to buy what I wanted.
But the doors were locked. Huh? I tugged again. One of the clerks giving out the free coffee gave me a disapproving look, told me the coffee was free this morning, and I should get on line. Hmm. In this particular case at this particular store, Starbucks proved to be really bad at price discrimination. Here I was, a loyal customer willing to pay good money for a product similar to the one they’re handing out for free, and they didn’t want my business. Was the promotional value of the free coffee so large that it offset the opportunity cost of telling your paying customers to get lost?
As it happened, there was a Dunkin’ Donuts nearby, but since I dislike DD coffee, I made my walk with no coffee whatsoever.
What kind of lesson does Etan’s story and mine provide? Stores should be a little more careful when they throw around free coffee. It may not be making as many people happy as they think.
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Showing up at Ben and Jerry’s Free Cone Day, you had better expect the “cost” of a lot of social pressure – various charities/causes were going up and down the line, hitting up people for donations. Free cone day is only free if you can handle the stigma of saying “no” to Habitat for Humanity.
I’ve wondered about something similar concerning cheap gas. I don’t recall now where but I saw something on the news a day or so ago about some gas station that was selling gas for $0.99 a gallon. People spent the night in line just so they could take advantage of this offer. I can’t imagine that it’s worth the bother. For a 15 gallon tank that would equate to roughly $40 in savings, hardly worth spending the night in the car. I do wonder how much gas these people wasted inching forward in line until they got to the station.
A similar thing happened here in Cleveland recently — Papa John’s Pizza, hoping to remedy a PR disaster of complaining about LeBron James, offered 23 cent pizza for the next game. The lines were so long that we went across the street and paid a competitor full price for pizza, then went home and actually got to see the game.
Three times last week I walked out of a store because the line was too long. Assuming that each customer would spend $4 on average, if the store loses two customers an hour due to long lines, it would be worth it for them to take another $7/hour employee. During peak hours, I have no doubt that they lose at least two customers an hour. Are store owners unaware of lost customers? It makes sense since we don’t log complaints.
Here in the Great White North, a Tim Hortons employee was fired recently for giving out a Timbit (those tiny “donut hole treats” to a kid.
The restaurant said they had a “no free food” policy. The publicity was terrible.
They reinstated the fired employee a few days later, but the damage was done. The employee clearly had a better business sense than the manager.
I’ve also noticed here in Nova Scotia that many businesses keep an ample supply of dog treats to hand out to customers with canines. That’s something I haven’t seen elsewhere.
I have a feeling that banks purposely keep long lines to encourage more use of the cheaper-to-maintain ATMs. Notice they have a separate “speed lane” for businesses.
I have a “free coffee at Starbuck’s” story which is a bit different from Dubner’s.
I went into a Starbuck’s to get a coffee. While I was in line, but before I ordered, something went wrong with their cash registers. I ordered while they were doing something with them to get them working (I guess). They hadn’t gotten them working by the time my coffee was ready. They handed it to me without telling me how much it was. I expected they’d ring the order up manually, and with wallet in hand asked how much it was, but the barista refused … she said, “It’s free.”
Yep … while the registers were out of order, they gave away everything that people ordered. They didn’t want the hassle of manual payments, I guess.
I didn’t stay long enough to find out how long the registers were out (I got the impression the outage would only last a few minutes), but I did see a number of orders placed, yet no one appeared to take advantage of the situation by ordering a lot of stuff that they expected to get for free.
So Starbuck’s did the right thing by expeditiously handling the register outage, and the customers did the right thing by being reasonable.
Overall it was a pleasant experience.
I have to wonder if what the both of you went through was simply the peril of free of the result of management. Individual requests are hard to ‘manage’ as it were, so retailers will corral customers into managable groups because the benefits far outweigh the consequences, of which you and your friend were small consequences of their well managed actions.
Of course they ruined the attempt to make the world for you, but you are too tiny to make a world for, you are not enough mass to satisfy in this instance, after all they had a line to deal with. So rage on against the machine and good luck with that, thanks for calling.