About me
Bookshop

Get new posts by email.

About me

Improving coffee loyalty schemes

Hold up!

See that little date above?

This post was published years ago.

My opinions have changed over time: I think it's quite fun to keep old posts online so that you can see how that has happened. The downside is that there are posts on this site that express views that I now find offensive, or use language in ways I'd never dream of using it today.

I don't believe in airbrushing history, but I do believe that it's important to acknowledge the obvious: some of what I've written in the past has been crap. Some of it was offensive. Some of it was offensively bad. And there's may be some brass among the muck (you can make up your own mind on that).

Some of what I've presented as my own views has been me—wittingly or unwittingly—posturing without having considered all the facts. In a few years, I'll probably think the same about what I'm writing today, and I'm fine with that. Things change. People grow. Society moves forward.

The internet moves on too, which means there might be broken links or embedded content that fails to load. If you're unlucky, that might mean that this post makes no sense at all.

So please consider yourself duly warned: this post is an historical artefact. It's not an exposition of my current views nor a piece of 'content' than necessarily 'works'.

You may now read on... and in most cases, the post you're about to read is considerably shorter than this warning box, so brace for disappointment.

There are few things that are further from my area of expertise than coffee retailing, but here’s a thought that occurred to me last week, and that’s been festering ever since.

All the major coffee shop chains and many local coffee shops have loyalty schemes these days. These are often of a particular type: buy X coffees and received the Yth coffee free. The generosity of such schemes varies widely: X=5 at McDonald’s, X=9 at Caffe Nero, and X=15 at Starbucks. Some chains do something slightly different – Costa, for example, gives points equivalent to 5% of the customer’s spend to be redeemed on future purchases, but let’s set those alternative schemes to one side.

The thing that links all of the common schemes is they are effectively fixed ratio reinforcement schedules. That is, they entice customers to buy more coffee by promising a freebie every X visits. But a wealth of literature from psychology reveals that this isn’t really very effective in getting people to form habits, not least because their motivation to consume drops off immediately after claiming free coffee Y.

A far more effective method of getting people to form habits is to build a variable ratio reinforcement schedule. As with gambling, this means that the punter / customer never knows when the win / free product is going to materialise. This keeps motivation consistently high.

In practice, what I’m suggesting is that the ratio of visits to free coffees is kept the same (X+1:1), but that the free coffees are dispensed at random. This would appeal to me: I’d love to come to pay for a coffee and be unexpectedly told that this one’s free. An infrastructure change would be necessary for some coffee shops – stamp cards wouldn’t really work well for this – but, for example, Starbucks already uses swipe cards which could be made to work this way fairly easily.

Alternatively, instead of randomising at the individual customer level, the tills could be set to randomise across all customers. Or, to make it even simpler, with every coffee purchased, each customer could be given a scratchcard with a 1 in X+1 chance of winning a free coffee. The latter might even be preferable, as there would then be two “special” visits: the one in which the customer wins, and the one in which they redeem their winning scratchcard. The customer would feel rewarded for their loyalty twice as often at no extra cost to the vendor.

If judging on cost alone, why would I visit retailer A, where there is no chance of getting my drink for free on a particular visit, when I could visit retailer B, where there is a 1 in X+1 chance? Economic discounting would probably play against traditional schemes: I’d probably rather have the chance of a free coffee today than the certainty of a free coffee after X visits.

Of course, retailers would have to be careful about how they presented this scheme: it would likely be to the detriment of any brand to associate themselves with gambling. Yet this seems like it should be a minor point, which should be easily overcome.

So here’s the thing: this idea appeals to me as a consumer, a wealth of literature suggests that it could increase trade, yet (to my knowledge) no-one uses it. Why not? Where’s the rub? What have I overlooked in my assessment? Tell me why I’m wrong!

This post was filed under: Miscellaneous, , .

Recently published posts

Weeknotes 2022.03 / 23 January 2022

Weeknotes 2022.02 / 16 January 2022

Weeknotes 2022.01 / 09 January 2022

Five links worth clicking / 07 January 2022

31 things I learned in December 2020 / 31 December 2021

What I’ve been reading this month / 27 December 2021




Random posts from the archive

Me, Bill Gates, and seven Vistas / 19 September 2005

Kids on Porn / 22 November 2003

Terror alert: Prescott leads, airlines profit? / 11 August 2006

About Mr Howard / 12 February 2005

Swing Update / 15 April 2005

What I’ve been reading this month / 01 August 2016





The content of this site is copyright protected by a Creative Commons License, with some rights reserved. All trademarks, images and logos remain the property of their respective owners. The accuracy of information on this site is in no way guaranteed. Opinions expressed are solely those of the author. No responsibility can be accepted for any loss or damage caused by reliance on the information provided by this site. Information about cookies and the handling of emails submitted for the 'new posts by email' service can be found in the privacy policy. This site uses affiliate links: if you buy something via a link on this site, I might get a small percentage in commission. Here's hoping.