Coffee - the "wonder drug" for loyalty programs everywhere!
There was a time here in the UK when we didn't care much for authentic coffee, we were a nation of instant coffee drinkers, boiling our kettles and pouring hot water over powdered coffee and adding a splash of milk.
It's not that we didn't like coffee, we were just largely happy to drink instant coffee. We still invited our friends over for coffee and at the end of a date we hoped we would be invited in for a coffee (for the younger generation that was our language for Netflix and Chill).
Coffee was big business and manufacturers competed fiercely for our custom, knowing that if they could just get us to drink 375g of their brand of coffee, our tastebuds would acclimatise and we would yearn for their specific brand of coffee in the future.
In fact, entire mini love stories were created around TV commercials which used to have the nation on the edge of their seat to see if our "coffee lover" actors would... or would not.... have Netflix and Chill.
In the mid to late nineties this new coffee craze - of having a half decent / authentic cup of coffee with your friends spread like wildfire from the US and the first coffee chains as we know them started to appear in numbers on our high streets. Coffee consumption moved from an in-house to an out of home experience.
Friends, the American TV series is often attributed to the growth of this culture, with this new wave of coffee retailers mimicking the relaxed theme of Central Perk, the coffee shop in the show, with soft furnishings, warm lighting and of course a menu that you could personalise to your own individuality.
So here we are 20 years later and coffee shops are entwined in our culture. Instant coffee is largely a distant memory and where you buy your coffee and how you personalise it demonstrates where you are in life. In house coffee consumption has also been healthily revived by the introduction of capsules that coupled with their coffee machines can create authentic, good quality coffee both quickly and consistently.
In the nineties, young professionals wishing to demonstrate their stature had to have their Filofax with them at all times - today, you're upwardly mobile audience are on their iPhone queuing up for a personalised choca, mocha, caffeine free, venti - with skimmed milk - extra hot - please. Of course - we've really cracked it in life, if we can pay for our daily coffee with our app and Apple Pay! Or if the Barista remembers our name each day an automatically writes it on the cup without even asking.
Coffee shops don't just appeal to upwardly mobile, self conscious professionals. They have become a place to work or to hang out with friends. They are nice, comfortable, welcoming environments where you can enjoy a hot drink, snack, sugary indulgences or artesian themed lunches. They also have "times of day" and different audiences just like restaurants do.
So, forgive the long introduction, but that's why loyalty programs love including coffee within their reward offering. A reward with mass appeal, that is a little indulgent, brightens up your day and is often "Friends" orientated.
The dilemma for program owners, however, is that coffee shops aren't short of customers.
During peak times the biggest problem they have is how to manage the queues so the customer still has a good customer experience in their shop.
Also, these brands don't particularly need the brand awareness that your program might give them. They also probably have far bigger numbers of active users than your program can provide, so even if you have millions of members in your program - they will have more queuing up each day.
Hence, I'm pretty sure that in 99.999999999% (we can probably safely round that up to 100%) of cases - loyalty program owners pay for every cup of coffee that they give away in their programs. But not all loyalty programs can sustain giving away endless free cups of coffee.
Any currency or points based program can add coffee to their program in the same way as they do other rewards like gift cards. As they are a currency based program the points / or currency will be able to cover the cost of redemption every time a customer choses to spend their points on that reward - with no risk at all to the program owner.
However, there are plenty of non-currency based programs that also like to offer up a free coffee to their members - but as they have no currency to cover the cost of the reward, they have to treat it as a tactical surprise and delight and budget accordingly based on the potential uptake and redemption. This model works perfectly well as long as it doesn't over redeem. Or become more popular with your audience every time you use it - making it financially unviable.
Depending on your program structure, there are many ways in which you can add coffee to your reward offering, it's become one of the most popular rewards when developing programs and for the foreseeable future it is likely to continue to be a good lifestyle reward to enhance the feel of your program, not to mention a reward that has great distribution, is highly relevant to pretty much all socio economic / age groups and enhances a members every day life a little.
But any reward that can be bought, in the same way as a gift card, is a commodity and not going to be unique. Coffee in some shape or form is creeping into every program in some sectors. Of course a brand could chose to "own" coffee by having an exclusive relationship but that would be hugely expensive and with so many coffee chains and independents out there - coffee is probably not own able in the same way as brands can and do own cinema.
As a reward the value of coffee lies in it's relevance and in the way that coffee is entwined in our society, it certainly doesn't have a high perceived value - consumer perception is probably that its a £2 /£3 reward. So it isn't as cheap compared to other incentives with a higher perceived value and possibly lower cost. But it's relevance and engagement value often far outweighs the downsides.
The irony of course when it comes to loyalty, is that most coffee chains reward their customers with a free coffee for every 10 they buy - but then they can afford to.
Personally, when it comes to coffee, I've been spoilt - as a native Venetian, while the coffee we drink in these chains in the UK has improved vastly - the best coffee still comes from home - if I could export the way they make coffee in the Grand Viale in Italy (simply the best cappuccino's I've ever tasted) - I'd be made for life.
So here is a quick summary if your'e thinking of using coffee as a reward or incentive:
High relevance with members as a low value every day treat
Appeals to all social demographic / age groups
Good distribution / redemption network
Reasonably easy to partner with a brand based on a commercial relationship where you are buying coffee from them
Can be easily integrated into a currency based loyalty program
It's not unique - most brands will be able to source this incentive for their program
It will no doubt have a per unit cost - which is not an issue for currency based programs but might make it an expensive option for a surprise and delight campaign which may carry an element of financial risk
Continued successful use of coffee as a surprise and delight might make it unaffordable long term
Compared to other alternative incentives or rewards, it isn't a low cost / high perceived value alternative
Coffee still won't be as good or as authentic as it is in say Italy (and other parts of Europe that have always had an authentic coffee culture) :0)