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By Ji-Soo Kweon
As the pandemic lockdown threatens the office coffee run, fast casual chains turn to the subscription economy to generate a loyal customer base.
Ladies and gentlemen, meet flat white’s millennial cousin: the flat rate coffee.
Deciding how much one should spend on overpriced lattes is serious business. Is getting through that immensely boring meeting worth four whole dollars? Can one put a price on a caffeine-withdrawal headache? What is the bill of this daily indulgence - an iced coffee there, a quick double shot here - adding up to?
Enter: the coffee subscription. One monthly fee, unlimited coffee.
The first brand to take the plunge into this new subscription model is Panera Bread, an American chain of fast casual bakery-cafes. For a monthly fee of $8.99 USD, customers can use an app or an in-store self service kiosk to purchase unlimited (one drink every two hours during opening hours, plus free refills) hot coffee, iced coffee, or hot tea. Across the pond UK sandwich shop chain Pret a Manger have also launched a subscription scheme this month. For £20 per month customers can have any drink on the menu, up to five times a day, seven days a week.
A woman placing a straw in a Panera drink
The benefits for customers of this new subscription model are obvious - regular cafe drinks available at a fixed rate, with the payment process automated through an app. Although these new schemes launched in the midst of a pandemic, they have reportedly achieved success. By July 2020 750,000 people had signed up for Panera’s coffee subscription, which launched in February, with a retention rate of 90%. According to Panera CEO Niren Chaudhary, guest frequency growth has jumped by a ‘staggering’ 200%; coffee subscribers visited Panera every other day, three times as often as average customers. Panera’s success with this new innovation may mean that subscriptions could be Pret a Manger’s saving grace, as the high street chain has suffered from reduced traffic in London’s business district, and has had to close 30 outlets and lay off a third of its staff. The introduction of YourPret Barista is part of a bigger shift in Pret a Manger’s management as a response to the pandemic after growing ‘too reliant’ on corporate culture in London, which often included expensive daily orders from Pret or large coffee orders for the office. Pret is planning to open more suburban locations, is developing a hot dinner menu, and has opened its first delivery-only kitchen.
For businesses, a successful subscription program has benefits beyond increased foot traffic. Neither Panera nor Pret a Manger are marketed as specialist coffee houses, but instead specialize in dine-in and takeout foods like baked goods, sandwiches, salads, and soups. A coffee subscription increases the likelihood that customers will add a food item to their order, both because frequent visits to these franchises increases the likelihood that a customer chooses to eat there, or because access to cheap, limitless coffee makes purchasing an extra item feel like a ‘good deal’. The Pret a Manger subscription program has only been launched recently, but Panera has reported a 70% increase in food attachments to coffee orders since launching their subscription service. Analyst Natalie Berg suggests that Pret a Manger is hoping for similar results from YourPret Barista; ‘Pret is betting you’ll buy a sandwich with that coffee and it becomes habitual; once you become a member of any subscription you want to get value so you use it more, spend it more. So if you are a member, it’s unlikely you’ll go into Starbucks’. A loyalty scheme is also a useful medium for promotions; Panera announced that anyone who signed up for the coffee subscription by July 4th would receive free drinks until Labor Day, which amounts to over a month of free coffee. And as the world has grown leery of brick and mortar establishments, a customer-facing app allows businesses to engage with customers and tailor services according to their spending habits.
Although the digitalized subscription economy has enjoyed several years of exponential growth in a variety of sectors, new and innovative subscription concepts have been launched in industries struggling with the economic fallout of the pandemic. According to consumer expert Kate Hardcastle, ‘there has been a significant rise in subscription models over lockdown, everything from socks to gin, so people are into the idea’. Chaudhary believes that the convenience of the subscription model is very attractive to contemporary consumers; ‘customers are increasingly getting used to and liking the idea of subscriptions, you just pay for it once and you don’t have to think about it’. Panera’s coffee subscription also works in conjunction with other pandemic-inspired initiatives, such as curbside ordering and delivery, drive-thru, and contactless ‘Rapid Pick-Up’.
A Pret a Manger coffee cup
An innovative subscription model may provide struggling food businesses with a new means of generating revenue, but businesses should ensure that they are providing a high quality product and first-class customer service, as subscription models rely on a sustained, mutually beneficial relationship between businesses and customers. It is also essential for a business model reliant on an app that the app works smoothly, with a pleasant and easy to use UX.
Pret a Manger hopes that their newly launched subscription scheme will encourage customers to see Pret as their default coffee choice, in the same way that Netflix has become the go-to media provider of choice. Although coffee subscriptions are relatively new, it is not surprising that the digitalized subscription economy has taken the plunge into what was once a daily habit for millions of office workers before office culture abruptly grounded to a halt as a result of the pandemic. We can consider the coffee subscription as the 21st century update of the old ‘buy 9, get 1 free’ stamp cards that have encouraged brand loyalty for coffee chains for decades. For the struggling food and hospitality sector, subscriptions may be the saving grace to draw in more regular customers both during and after this storm has blown over.