Free Coffee: More Expensive than You Might Think

by Adam Juda on Friday, December 5, 2014

In order to encourage shoppers to sign up for their store card, an upper class supermarket devised a fantastic incentive: free coffee. Many would praise that plan as brilliant. Preparing large quantities of coffee isn't particularly expensive, and what shopper wouldn't enjoy a free cup of joe?

business of milk
Image courtesy of Wikipedia

Therein lies the problem. The upper class shoppers aren't there to save a few dollars. They're there because they want to be surrounded by an exclusive cadre - their fellow shoppers.

That's not to say that the free coffee didn't attract anyone. Quite the opposite! It attracted the very people the supermarket needed to exclude: price sensitive consumers from lower down on the economic totem pole.

Suddenly the supermarket was faced with two problems: an influx of customers who were only there for the free coffee and a decrease in the number of their targeted customers who were repulsed by the types of customers that the free coffee attracted.

This tale of woe leads to the obvious conclusion: free isn't free. Every tweak to a business model will have consequences on a business', well, business.

If you'd like to learn more about how to price software, you should definitely check out my book. If you'd like some more customized pricing advice, you can contact me directly.