Why are You Still Charging for Coffee?

Why are You Still Charging for Coffee?

James Sandrini 1st December 2017

Free coffee? You’re crazy.

Bear with me here. Coffee makes money. It is a low cost, high margin product that might be the sole reason a customer frequents your business or a valuable part of your spend per head. And here’s why you want to stop charging for it and start offering free coffee.

I Said Bear With Me!

Ok, so this doesn’t mean that every bar and restaurant should suddenly start giving away free coffee. Oh, and if you run a café, go and read some of our other articles because we’re probably going to divorce if you keep on reading this one. (Then look at our work and we might just become friends again).

However, if your entire business is not reliant on the revenue coffee provides, then I want to break down a few walls with you.

You Just Said That Coffee is Low Cost and High Margin

Exactly. You can knock out a latte for somewhere between 15 – 20p, cup and saucer and sugar included. Add in the labour and you might be hitting about 60p.

So, is your 60p best spent making £2.50-odd, or is that 60p better spent providing a customer with a reason to spend a bit (or a lot) more?

Stop With the Riddles!

My bad. What I’m saying is: would it be worth giving coffee away for free if it meant that people responded in the following way:

1. By returning more often

2. By spending more on each visit

3. By telling other people about your free coffee

Sounds a Bit Fanciful Mate

Let’s try that again:

– Guests will come back more regularly because they know they will get a free coffee.

Now, we’re hoping that they do more than just drink that solitary cuppa, obviously, but a decent selection of cakes and snacks might help, as would the kind of service and ambience that turns it into their preferred destination for meetings and a quick bite, thereby increasing footfall and revenue (minus the coffee, clearly).

– Guests will spend more on each visit as a result of already feeling like they’re getting something for free.

Guests that come back more often spend more money – fact – but we’re ignoring this in favour of a bit of behavioural psychology: If a diner thinks they’re getting something for free, in their mind, they have saved money. Some will drink the coffee and leave (as noted above) but many others will spend money on something they might not have done, often to a greater value than the cost of the saving.

And now we have people drinking coffee, eating cake and grabbing a juice on the way out, giving you more opportunity to show off how frigging great you are and further ensuring that these happy folks find their way back again.

– Guests will share the promotion positively with their friends.

What, you don’t think people are going to tell their colleagues, family and pals about the free coffee space? There’s some free, effective marketing with a clear message that people can easily verify. You just gained a bunch of new fans that, if they follow the behaviours we have set out above, are in line to make you money.

And Another Thing...

You don’t charge your employees for coffee, do you? I mean, they’re offered free coffee, right? Wait, do you? God. Stop. Immediately.

Disclaimer: Don’t Start Giving Away Coffee for Free Tomorrow

But you just said…

I did. But you can probably be a bit smarter about this. Maybe you do this at a strategic time, like Kimpton did with their free wine giveaways. Or perhaps you don’t do this with coffee, like….well Kimpton…whatever. Just follow the logic to the point where your expenditure works as hard as possible for you.

And that could mean not charging for coffee, at least not when I’m popping by for a flat white. Or a latte.