Starbucks was bustling for a Saturday evening when I was working out of there this last weekend.  I left to get something down the street and subsequently decided to go back to work at a coffee shop, but found myself ultimately only 2 doors down from Starbucks at Peet’s which looked like a ghost town:

I chose to go into Peet’s cause there was so much room to sit but I hadn’t thought about what could be the difference between the two venues since they both had WiFi (and arguably comparable coffee).  One thing quickly became apparent: the ease of access to the free wireless.

Peet’s basically makes you ask for a WiFi passcode and it lasts for about one hour.  Starbucks doesn’t ask you for any special passcode and it doesn’t knock you off.

As a customer who frequents coffee shops and oftentimes work out of them during frequent business trips, I would say I’m the ideal customer of a coffee chain since I’ll gravitate and spend with a brand I love.  I also would now know to choose Starbucks over Peet’s (assuming distances to be comparable) because of how much easier it is to get plugged in and situated.

With its recent launch of Starbucks Digital Network, Starbucks has shown it cares about the overall customer experience — both online and offline components. Starbucks sees it as a way to retain customers and has worked out deals that could help not only enhance customers’ online experiences but possibly monetize them as well.  They give access to premium digital content for free and may over time even charge for distribution to their audience. As their free content access grows, you almost want to spend more time at Starbucks.  Things are becoming freer there.

Peet’s on the other hand has simply seen WiFi access as a feature no different than providing a cup of water for free if asked.  I’m sure it seemed like a good way to generate table turnover and minimize the opportunity cost of that occupied seat but the overall experience of going to Peet’s is a lot different as a result.  It makes me less likely to go there overall so whatever increase in revenue from higher turnover ability may be muted by lower customer retention or acquisition.

This is the difference between free and freer.  In business, free is just about giving away something to get people to buy more other things while they are there — it values interactions as transactional.  Freer is about delighting customers with free by making it easier to enjoy the experience and more desirable to return to spend more time, which should mean spending even more money — it makes interactions a lot more about loyalty and reciprocation.  

As you get incredibly busy with work and “real life,” you tend to forget to take care of yourself.  I remember times when I used to go days (or weeks) without fresh fruit since the effort and time of preparing them myself was perceived to be too much.  To remedy that situation, I started getting cut fruit from Whole Foods which solved the time problem but introduced a huge cost element.

I put the table above to figure out the various options available and their trade-offs.  Whoever invented cut fruit in a disposable bowl is a genius — some people are willing to pay an absurdly high amount of money to avoid any of the work.  This isn’t too different from the invention of lettuce in a bag (ready to go salads).

I admit some of these figures/judgments are a little subjective but based on reasonable assumptions (see the end of this post for some of the thinking/calculations).  

From the table, I now think that there is a great middle option thanks to to frozen yogurt craze sweeping the nation.  Instead of getting frozen yogurt, you can just scoop up a lot of fruit and pay by the ounce.  Crunching the numbers, you will realize that you’ll save about 20% and have greater control of the ever important ratio of honeydew to cantaloupe in your fruit fix.  I’ll likely be shifting my consumption to this supply of cut-fruit.

It’s interesting to think about how there are (natural or made up) necessities in life that many people will pay a high premium to solve even if the solution is quite simple and do-able.   Coffee and tea are probably illustrative though often times you consume them on the premises to get access to the wifi or general atmosphere.  What else is there?

Figures/Judgments Made:

1. These aren’t apples to apples comparison — hardy har har.  I am assuming the basket of fruits to be the same across the sources but of course individual consumer preference may change what is being eaten.  So just assume this to be an average cost for all fruits consumed by Americans.

2. Explicit cost refers to what retail customers actually pay in money.

3. Implicit cost refers to what retail customers pay in money and time (not including the time it takes to get the items which is assumed to be equal across all sources)

4. Canned and fresh fruit cost per pound taken from USDA figures

5. Gross margin on cut fruit at supermarket assumed to be about 65% based on industry figures on prepared foods.  Therefore, the cost of labor (for yourself) is calculated by subtracting out the likely wholesale cost of the fruit and then multiplying 35%.

6. Canned fruit does takes some work to open and possibly clean up after since you aren’t given the requisite utensils/dishes though you could of course eat it straight from the can.  

7. I assumed that the freshness of the fruit is binary.  Either it is fresh or it is not.  Personally, I don’t think I can do a good job discerning the freshest fruit from the average fresh fruit.  

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