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Saturday, January 15, 2011

Core & opportunity customers: never the twain shall meet?

I came across this sign in a Panera Bread yesterday afternoon. It’s a great example of a business attempting to manage the variations in service demand.


In my area, Panera is a highly patronized workplace / hangout for corporate escapists and the self-employed, likely more so than the local Starbucks. Wi-fi access is free and unlimited, excepting the period between 11:00 AM and 1:30 PM, when it isn’t available at all.

Why?

11:00 AM to 1:30 PM is the lunch rush. Its prime time for the core service experience of preparing & serving sandwiches and soups to diners - who likely don’t want to compete with businesspeople nursing a coffee for an hour and a half.

Panera knows that their business runs on the mealtime rushes, particularly lunch. But it also knows it can improve profit by increasing demand in the “off-peak” times, and to attract them, it offers a business-friendly environment to people looking for a place to have a coffee and do some online work (or non-work).

Yet it is interesting that while they accommodate the coffee & wi-fi crowd when they have capacity to spare, they make it clear that this business is not preferable to the full meal purchasers that come for lunch. The steps they take – making the restaurant uninviting by turning off free wi-fi – sends a clear message to the as to their relative value as customers.

My questions are these: As a strategy for filling off-peak hours with incremental demand, Panera’s use of free wi-fi seems a good fit. But by clearly rejecting this group in favor of diners during the meal times, do they damage their experience to the spurned segment, and by extension, do they do their brand and long term damage? On the other hand, is this segment preference forgivable by the people who use the coffee and wi-fi experience? If it isn’t, should Panera care?

11 comments:

Lee said...

I can't say I disagree with this decision. So many times I've walked in to a Starbucks, unable to find a table due to the number of people using it as their office. Laptops, books and papers spread out, nursing a cup of coffee; can't imagine it's profitable.

Lee Silverstein
Twitter: ldsilverstein

sharlene said...

I've actually pondered this very thing. I think that as customers we have a responsibility: sitting in a busy restaurant (what it is!) when you aren't eating anything, taking up a table while others wait is, well, impolite. I have to wonder: where are our manners? I pick up and leave if the place starts to get busy.... it's just the right thing to do for Panera and my fellow customers. I want them to stay in business, btw, and realize my patronage alone won't do it! That the place of business has to remind us to be courteous is rather embarrassing.

I don't think it's bad of them to post a sign, but they might want to make it a bit friendlier, reframing it around courtesy toward fellow customers at any time of day.

On a side note, the last time i was in a Panera i sat in a counter top seat where one man had his nose in a newspaper while his coffee, laptop, phone, etc was all strewn about taking up 3 spaces. When I sat down he didn't even budge. I finally moved his laptop for him! Ironically, that experience didn't make me want to return to Panera either and it wasn't really even their fault.....

So, all cases reflect on the brand.

twitter: sharlenesones

Mike Brown said...

Chris -

I get why they're doing it, even though it ignores the fact people at lunch might want to use wi-fi and patronize Panera for that reason.

A couple of alternatives:

1) Recast the sign with when wi-fi is available. Make it seem like a benefit when it's there rather than highlighting when it isn't. This may have been easier to do when they first introduced wi-fi, but it still seems an opportunity.

2) Print out a passcode for wi-fi on every receipt that is good for one hour. Then everybody gets the first hour, IF they buy something (and keep buying if they want further access). Could actually contribute to revenue from the morning crowd buying lunch.

3) Incorporate wi-fi into the new frequent diner club Panera has introduced. That way they recognize good customers who may be freeloading occasionally without penalizing them in the same way that someone who never really buys anything gets punished. If you keep up your purchase activity, you get unlimited wi-fi.

Of course, turning it off and putting up a sign is probably a lot easier : )

Mike

Michael said...

Mike Brown definitely has some great suggestions as far as giving the impression that wi-fi is a benefit they're supplying rather than a 'right' that they're taking away at certain times.

As a freelancer who frequents local coffee shops, I can still recognize Panera's need to do this. Occasional meetings are fine but these places aren't alternatives to a "proper" office. Coworking locations now offer all the amenities of a office/workspace/meeting area when you need them without the overhead of paying for them all the time.

Panera, like any business, needs to cater to the needs of their patrons. And at lunch time, those patrons need a place to sit and eat their lunch.

Rags Srinivasan , Iterative Path said...

Coincidentally I saw a similar sign at Panera yesterday. You make a better observation than the thought I had.
The segment that stops by lunch hour is hiring Panera for a different purpose than the one that visits them during off hours. Regarding your question, I would like to believe they have looked at their usage pattern before deciding on the restriction.

My recommendation would be to not restrict the usage but charge for it during lunch hours.

-rags

Chris Reaburn said...

I really appreciated the comments from the group here – some great issues that you’ve brought to light, and some innovative ways to solve them.

While it a simple sign, it brings up key issues in marketing, business strategy and service operations management, namely how to deal with dramatic fluctuations in demand (considering capacity to serve doesn’t flex that much), how far beyond the core to look for customers to supplement the base at times of low capacity, and how to manage the inevitable when core customers and opportunity customers begin commingling and impacting each others’ experiences.

I like the suggestion sharlene made about using communications (signage) more effectively by appealing to customers’ sense of fairness in an attempt to persuade them not to displace diners. Educating customers on their role in an effective experience is an effective strategy that could be employed here.

Similarly, Mike’s suggestion to recast the approach to wi-fi so as not make it feel like a penalty when it is not available, but a benefit when it is, could be effective, and could be paired with sharlene's. Casting it as an exclusive benefit tied to the frequent purchase card might even have a long run impact of creating more satisfaction for those that receive it.

Rags’ suggestion to not restrict it but rather charge for it during that span is an interesting one, in that it might be the most effective – creating an additional revenue stream and managing (reducing) the number of customers using the wi-fi service during prime dining hours. But it also carries an additional risk, where charging may have the opposite-from-intended effect. Aside from the potential negative customers may feel from being charged today what was free yesterday (Sadly, I think of Southwest Airlines’ “Bags Fly Free” commercials every time this topic comes up now), there is the chance that you may have many willing payers that now feel they have the entitlement to stay as long as they like and not make room for incoming diners. By paying, they perceive (perhaps correctly) that they have the right to stay and spend as long as they want without regard for people looking to sit down to a meal. The net may be that you trade a strong dining revenue stream for a weaker wi-fi revenue stream. Of course, that might just depend on how much (or little) you charge for it.

It’s a tough spot – how to bring in customers from outside your core to support the viability of your service operations at times when core demand it otherwise low. What makes it more difficult for service businesses is that at some point, as has been mentioned, those customers have direct contact with each other, and each will impact the experience of the other – for good or bad.

The strategy of separating the groups by temporarily deteriorating the experience for wi-fi users may not be the wrong one for Panera. The alternative might be to diminish the experience of the core customer group. What does seem clear, aided by the comments, is that the approach to the separation of the groups could have been handled in way that might concurrently be gentler, more explanatory, in its message while being a net benefit to the service operation, and maybe even the revenue stream.

Great comments all, and thank you!

Chris Reaburn said...

I really appreciated the comments from the group here – some great issues that you’ve brought to light, and some innovative ways to solve them.

While it a simple sign, it brings up key issues in marketing, business strategy and service operations management, namely how to deal with dramatic fluctuations in demand (considering capacity to serve doesn’t flex that much), how far beyond the core to look for customers to supplement the base at times of low capacity, and how to manage the inevitable when core customers and opportunity customers begin commingling and impacting each others’ experiences.

I like the suggestion sharlene made about using communications (signage) more effectively by appealing to customers’ sense of fairness in an attempt to persuade them not to displace diners. Educating customers on their role in an effective experience is an effective strategy that could be employed here.

Similarly, Mike’s suggestion to recast the approach to wi-fi so as not make it feel like a penalty when it is not available, but a benefit when it is, could be effective, and could be paired with sharlene's. Casting it as an exclusive benefit tied to the frequent purchase card might even have a long run impact of creating more satisfaction for those that receive it.

Rags’ suggestion to not restrict it but rather charge for it during that span is an interesting one, in that it might be the most effective – creating an additional revenue stream and managing (reducing) the number of customers using the wi-fi service during prime dining hours. But it also carries an additional risk, where charging may have the opposite-from-intended effect. Aside from the potential negative customers may feel from being charged today what was free yesterday (Sadly, I think of Southwest Airlines’ “Bags Fly Free” commercials every time this topic comes up now), there is the chance that you may have many willing payers that now feel they have the entitlement to stay as long as they like and not make room for incoming diners. By paying, they perceive (perhaps correctly) that they have the right to stay and spend as long as they want without regard for people looking to sit down to a meal. The net may be that you trade a strong dining revenue stream for a weaker wi-fi revenue stream. Of course, that might just depend on how much (or little) you charge for it.

It’s a tough spot – how to bring in customers from outside your core to support the viability of your service operations at times when core demand it otherwise low. What makes it more difficult for service businesses is that at some point, as has been mentioned, those customers have direct contact with each other, and each will impact the experience of the other – for good or bad.

The strategy of separating the groups by temporarily deteriorating the experience for wi-fi users may not be the wrong one for Panera. The alternative might be to diminish the experience of the core customer group. What does seem clear, aided by the comments, is that the approach to the separation of the groups could have been handled in way that might concurrently be gentler, more explanatory, in its message while being a net benefit to the service operation, and maybe even the revenue stream.

Great comments all, and thank you!

Chris Reaburn said...
This comment has been removed by the author.
Chris Reaburn said...
This comment has been removed by the author.
Chris Reaburn said...
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Chris Reaburn said...

Sorry all. Managed to post my follow-up 4 times. Deleted 3 of them, just didn't wan't anyone to think I was (too) into self-censure.