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Starbucks makes a smart move: Free WiFi

09 Friday Jul 2010

Posted by in About Reno, Branding, Communication, Customer Relations, Customer Service, Information Technology, Internet, Lessons of Life, Management Practices, Public Relations, Re-Imagine!, Relationships, Rotary, Social Interactive Media (SIM), Social Media Relations, The Tipping Point

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by Paul Kiser
USA PDT  [Twitter: ] [Facebook] [LinkedIn] [Skype:kiserrotary or 775.624.5679]

Customer Loyalty: Paul Kiser in Starbucks style

Today I’m dressed like a Starbucks employee to honor the wisdom of the decision-makers at the famous coffee company to team with AT&T to offer free WiFi to all. They started it on July 1st. It is a smart move…a very smart move.

Why? There is one common aspect of every successful business and it is simply to give your customers a reason to love you. That’s it! Customers who love a service or product is an absolute ‘must’ if you want to build customer loyalty and business referrals. You can spend millions of dollars in advertising and not get the return that a company gets with requited love from their customers. With free WiFi Starbucks has found a way of creating value-added service that will cause many people to love Starbucks.

If you have a ‘butts-in-the-seats’ type of business and you want customers to: 1) frequent your location, 2) spend time and money in your business and, 3) be loyal to your business then free WiFi is one of the best ways to make it happen. Here’s what will happen for Starbucks over the next 12 months.

  • Starbucks will see increased traffic of laptop users (a ‘small’ market of people who will buy almost 200 million laptops in 2010)
  • Starbucks will see more repeat business
  • Starbucks will be more visible to more people
  • Starbucks will not need to spend as much on advertising and will get more social media publicity

All butts-in-the-seats organizations would like to experience these four outcomes in their business, so why don’t more places offer free WiFi? In brief, the answer is ‘accountant-think’, which is always short-sighted. The common rationale is one of two issues. First, instead of seeing free WiFi as an inexpensive way to add value to their service the accountant-think business people try to make it a revenue source. In Reno, Nevada the major hotel/gaming properties have been known to charge as much as $500 to ‘turn on’ WiFi in their convention areas and most of the properties charge around $13/day for guests to have access to WiFi. The result is that technology conventions go elsewhere rather than be charged for a service that they can get for considerably less (or free) in another market. The Reno gaming properties have boxed themselves in with contracts or dependence on the revenue source from WiFi, so they are now in a death spiral of losing more and more business or give up a piece of their dwindling revenue.

Last year I was in Las Vegas on a business trip and stayed at the South Point property. They charged a fee for WiFi, so I went to Starbucks to get online (my home account is with AT&T, so I’ve always had free access at Starbucks.) Afterward I picked up dinner at the Outback Restaurant next door and took it back to my room. South Point didn’t get me to stay on property, nor did they even get me to eat at in-house, simply because they didn’t offer Free WiFi. Is that a smart business move on their part? Nope, just good, solid accountant-think.

The second rationale accountant-think executives is that WiFi customers don’t have a revenue impact. In August of 2009, Erica Alini wrote an article for the Wall Street Journal (NOTE: the Wall Street Journal or WSJ is a historical archive of old business trends written by accountant-think reporters) that declared, “Coffee Shops Pull the Plug on Laptop Users.” For her article Ms. Alini cites three examples in New York that discussed limiting or eliminating laptops at a cafe or coffee shop. The most common problem seemed to be too many customers … what a tragic problem … and that some laptop users were purchasing minimal product. However, Ms. Alini admits that some places were using laptop users to ‘make the place look busy.’

A deserted restaurant is cause for people to avoid the business, so having customers, even minimal revenue producing customers, can mean more paying customers. My question is how much would a coffee shop have to pay people to sit and look like customers? Free WiFi is a small price to pay. I spend $10 to $15 per day at my Home Starbucks on Keystone in Reno, NV, USA. It will not make me a shareholder, but it is money I would not spend in one place, except for the fact that I am a captured customer. I also always meet with people at a Starbucks, so I bring in additional customers. The major factor in my customer loyalty is the access to free WiFi.

Starbucks has made a very smart business move with making free WiFi a value-added service for all and the return on the service will reap big dividends in customer loyalty and increased traffic (butts in the seats.) Starbucks customers have a new reason to love Starbucks and that is key to survival in today’s world. But don’t try telling that to the accountant-think executives running other stores and restaurants. They just won’t understand it … and I’m sure that’s okay with Starbucks.

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