Wednesday, October 14, 2009

Panera Bread Redux

Panera Bread Redux

Back in late April I critiqued a promotion by Panera Bread (re-posted blog is below). In the process I sparked a debate about whether it made sense for them to give away free product to customers indiscriminately without:

  • Requiring any immediate or future purchase 
  • Determining whether they were giving free product to loyal customers or new ones...
  • Requiring customers to register in some fashion so Panera Bread could engage them and perhaps use it as the impetus for jump-starting a loyalty program or at least a good email marketing list
  • Getting the customer's opinion whether this promotion would impact loyalty and future patronage
  • Having any real and tangible way to measure the effectiveness of the program. How can you prove or disprove your sales increased or decreased with a promotion like this?
Recently, I was back at Panera Bread and this time they were not handing out free coffee. Instead they were handing out flyers asking customers to go online and register to become a member of a customer panel so they can "influence important decisions made at Panera including pricing, new menu items and advertising"
( As an incentive, Panera offered to enroll all registrants into a sweepstakes for cash prizes. I DO like the idea of a customer panel but I DON'T like the idea of rewarding customer participation with cash that can be spent anywhere (including at their competitors) and not a Panera Bread card or voucher that would drive the reward money right back into their own stores?

I commend Panera Bread for continuing to test ways to connect with their customers. However, like many companies entering into loyalty marketing--the executions tend to be disparate in nature without any integration or connectivity to a broader game plan. This is a missed opportunity. For example, with the original free coffee promotion--instead, Panera could have provided a free coffee voucher for the customer's NEXT purchase (thus driving an incremental transaction) in return for registering in a loyalty program or research panel (thus negating the need to promote this later). By doing this they would have gotten a much bigger bang for the buck--and the give/take of the promotion would have probably made more sense to Panera's customers. Additionally, they would be able to calculate how many people redeemed their vouchers/cards--and as a result, determine if the effort made economic sense.

Successful loyalty marketing is rarely about the brilliant one-off promotion. Rather, it's always about choreographing the total customer experience and laying the marketing and technological infrastructure to initiate an effective customer dialog and tracking system that over time will yield results. The companies that do this successfully are almost always the market leaders in their respective categories.


Customer Loyalty One Cup at a Time

The other day I went into my local Panera Bread store (PNRA-NASDAQ) and ordered a cup of coffee. Much to my amazement, the server behind the counter handed me a cup, and told me the coffee was on the house. I looked at her and said, "you're kidding...right"? I was informed the coffee was free all day as a small way to thank Panera's loyal customers. While it's only a cup of coffee it did surprise and delight me. After all, when is the last time you walked into a McDonald's and got a free hamburger, or into a Dairy Queen and received a free ice cream...with no purchase required? It is rare for national players like these to give away their core product--even if for a good reason. So it got me this a good idea or not?

The positives are obvious. It's a quick way to thank customers without having to put a formal program in place. This spontaneous approach also has a genuine and old fashioned feeling to it that appeals to people.

The negatives are also obvious. There is no way of knowing if the reward, (in this case, a free cup of coffee) was actually given to "loyal" customers as it was offered to every customer that happened to wander in that day. There is no way to gauge the effectiveness of the approach as the giveaway was not promoted in advance or seemingly tracked at all. Nor was any customer data captured to enable after-marketing.

After giving this some thought, here is my marketing report card for Panera's effort.

I give Panera an A+ for doing something spontaneous that provides some good will and POSSIBLE loyalty downstream. However, I give them a D- for giving away one of their core offerings without a way to measure what it produced in incremental sales on that day--or later on.

My vote would be to combine both approaches. How about giving away a free cup of coffee when you register to become a member of a customer reward program? That way you gain the good will from the instant reward (cup of coffee) and the downstream opportunity to generate more sales and provide the customer even more value. Why not at least combine the free coffee with a weblink on a card or receipt to get customer satisfaction feedback? You get the point.

Sometimes just the old fashioned giveaway or the loyalty programs on their own don't get people's attention. It seems to me that by combining these approaches it does have both consumer appeal and solid marketing rationale.