Thursday, April 30, 2009

Customer Loyalty...One Cup At A Time

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.

Your thoughts?

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