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Why Free Wi-Fi Would Benefit Starbucks

From an article on Wi-Fi in the New York Times earlier this week:

"There is a lively debate going on," [said Alan Reiter, publisher of Wireless Internet and Mobile Computing, an industry newsletter based in Chevy Chase, Md.], "over whether Wi-Fi should be free or not."

He pointed to examples of some chains that have decided to use the service as a loss leader. Evidence supporting the powerful attraction of Wi-Fi comes in reports that both Schlotsky's Deli and the Wyndham hotel chains have recently claimed that free Wi-Fi has measurably increased business.

By the same token, because more than 60 percent of Starbucks' business comes before 9 a.m., he said, the company may be able to use Wi-Fi to help lift sales during less-busy times of the day.

"They have plenty of room after 9 a.m. and they think they can use Wi-Fi to drive traffic," Mr. Reiter said.

Come to think of it, why isn't Starbucks using demand-based pricing for its Wi-Fi service? They should lower the price (possibly to zero), perhaps in conjunction with a purchase during their slower hours -- say, from 9:00 to 11:00 AM, and again from 2:00 to 4:00 PM (I'm guessing here).

To answer the obvious objection that this strategy will leave money on the table when it comes to people who are using Starbucks as their office during the day, would a 30-minute voucher for free Wi-Fi with a purchase really make that much difference? If you're using Starbucks as your office, then you're probably going to spend more than 30 minutes on Wi-Fi, unless you're a writer who doesn't need Internet access or can pick up a free Wi-Fi signal from elsewhere. In either case it wouldn't matter. Meanwhile, Starbucks is selling more coffee. I presume coffee has a very low variable cost, so Starbucks' overriding interest has to be to sell as many additional cups of it as possible.


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