Coffee shops around the world have employed loyalty card schemes for many years, but now we’ve come across an interesting twist on the idea. In Singapore, a collaborate scheme aims to benefit eight of the city’s best independent cafés with the Be Disloyal disloyalty card.
The Be Disloyal disloyalty card — created by digital creative agency Antics, blogger Cortadito.sg and eight of Singapore’s independent coffee shops — was designed to encourage consumers to discover different coffee venues while bringing businesses together to grow as a vertical. From September until the end of this month customers can pick up a disloyalty card from one of the eight participating cafés. The card is stamped each time they purchase a coffee from one of the other seven cafés and, once the card is full, they return to the original café to receive their free coffee.
Competing with large chain brands can be difficult for small businesses, but teaming up with similar smaller companies can create stronger competition. Inspiration here for independent businesses in any industry!
The link is here and for the pointer I thank @amelapay, and more from her here.
Given that the original coffee shop provides the free coffee, I can see it being easy for a shop to ‘cheat’ by ‘not printing enough’ loyalty cards so they run out. And free-ride using the other shops’ cards.
Gossip and social punishment spreads fast in Singapore.
I think what’s most important here isn’t the possibility of cheating; it’s that the first thing you could possibly come up with to say was downright negative. Amazing. And after reading such a positive post.
Very valid point. The way we protected that was to “ration” cards per participating store and stores were only given additional cards once they hit a certain threshold.
But actually it wasn’t necessary at all. Participating outlets were mainly focussed on doing what they do best. Make awesome coffee and provide a great customer experience.
Thanks for the comment Nishant!
I had a coffee in Starbucks once. More accurately, I ordered a Mocha coffee. What I was given was a mug of bedtime cocoa. My God, I thought, 24 years since my first trip to the US and the buggers still can’t make coffee.
*sniff* I asked them to put chocolate in my coffee and it was sweet! *sniff*
Probably orders whisky with ginger ale, too.
Your first trip experiences sound so horrid: bad coffee, bad cheese, bad everything.
Wonder why you bothered to visit again?
Exactly. What with the superb English food at your disposal 24/7, it boggles the mind.
Not for the food and drink.
It was so traumatizing he has to mention it in a post that doesn’t have anything to do with the US at all.
It’s called “triggering”.
http://en.wikipedia.org/wiki/Trauma_trigger
Oh the old Starbucks bashing. I only ever order their regular black coffee and there’s nothing wrong with it. Here in Canada we have this fucking god-awful establishment called Tim Hortons – if you want to experience bad coffee I suggest you take a trip over here.
There are a lot of Tim Hortons where I used to live in Michigan. They were actually very good if you ever wanted a coffee any time besides the morning, because they had some policy to throw out the old stuff and make fresh coffee at least every hour. I guess coffee standards have grown a lot since then…
Yeah but it’s pretty bad coffee. Maybe I was too harsh….I just like black coffee and Tim Hortons is really watery so if you don’t put a lot of cream or milk and sugar in it the coffee just tastes like watery swill. It really has no flavour to it at all.
I worked at Dunkin’ Donuts and the policy was to throw out the coffee every ten minutes.
Actually, I apologise. My sneer above is inaccurate. It was 33 years.
Gwilym Davies (2009 World Barista Champion) was also distributing disloyalty cards in London back in 2009.
http://www.jimseven.com/2009/12/17/gwilyms-disloyalty-card/
Very true. We got in touch with him way back when we had just started and stumbled on his card. He even came to visit Singapore and check out our cards.
Check out more about what Gwylim is doing at: http://www.prufrockcoffee.com/
Cheers!
Interesting competition questions.
You could consider this a coop marketing or joint advertising program–like a bunch of independent stores purchasing an insert in the newspaper to advertise their products, or some car dealers (of the same brand) organizing a tent sale with other dealers.
But, how is this going to be effective? You need to know more: what market share does the dominant and/or non-participating stores have to have for this to work so that the participating stores do not lose more to each other than they acquire from the dominant and non-participating chain? There is a way you can analyze this using a Hottelling model. Basically, you would take the dominant and non-participating firms customer list, identify the marginal customer who would switch to any one of the 8 other stores. Compute the inframarginal switchers of the dominant and non-participating firms and add them up. Then you need to subtract some customers from each participating firm: At the same time, you would take all 8 firms and identify which of their customers would switch to one of the 7 others. Each of the 8 stores is assuming that they will each lose AND acquire the same number from each other. Now, assuming that the dominant and/or nonparticipating store lost customers (the switchers moved to the
AND the switching of customers WITHIN the 8 is neutral (that is, firm 7 loses customers to 8 and acquires customers from 1-6 and 8), then this MIGHT work. NOTE something else however: EACH of the participating firms is reducing the effectivness of their OWN loyalty card program to themselves–they are reducing the value of loyal customers. (In fact, I wonder if they are agreeing to discontinue their own loyalty program during this promotion, which raises additional competition questions if they did agree).
But, here are some problems: 1) the dominant or non-participating firms can enhance their own loyalty program to compete, and because the 8 firms have reduced the value of loyalty to each of themselves, they will have weakened their own individual loyalty program during this program; 2) each of the participating firms have reduced their customer search costs for finding new coffee stores by introducing their customers to a competitor so that when the promotion is over some of the firms may have either lost customers to one of the other participants OR made it easier for a customer to go back and forth between themselves and another participating firm.
A better strategy would have been for the 8 firms to have had a program where they would give credit for loyalty cards issued by the dominant or non-participating firms on a one to one basis: ie, if you bring your Starbucks card and it shows four punches, and you get 2 coffees from us, we will credit our card with the four starbucks punches if you turned starbucks card over to us.
Final note: these 8 firms must be high priced, and are maybe doing this so they don’t get into a price war, between themselves or with the dominant player, if they had played a different game.
All in all, I bet this won’t work, and would be interested in seeing how this plays out as a natural experiment.
At best this seems toned down co-branding. Fly on BA and get miles you can use on American Airlines etc.
Coffee shops in Toronto have been using disloyalty cards for over a year now: http://www.thestar.com/living/food/article/794054–disloyalty-has-its-privileges
You might want to visit some of these stores and report back how it worked.
Also, did they retain their regular loyalty card in addition to adding a disloyalty card?
Sort of side note: I have no studies to back this, but the more I think about it, the more I wonder whether loyalty programs, including frequent flyer miles and all other tools designed to create customer lock-in, should be banned as damaging tools to reduce competition.
You buy something from a business almost at random, because they were running one good sale or you just happened to be near that business and needed the product/service immediately and suddenly you have a loyalty card and the prospect of already being part of the way to a free goodie, a prospect that makes many people act irrationally. How many people take flights that cost $250 more in exchange for $30 worth of frequent flier miles and the chance to sit in the nice lounge? To my experience, lots.
And lock-in devices are everywhere. Banks won’t transfer your auto-bill-payment settings, so switching for better rates takes days, which prevents most people from switching and banks from competing so hard. Credit cards hit your credit rating if you dump one to get a better deal on another, particularly if you switch frequently (so making smart financial moves perversely worsens your ability to borrow). Amazon sells Kindles at a loss because they know they’ll eventually be able to charge you more for books because you have nowhere else to turn. (The company already charges more for many items to Prime Customers because they’re committed to buying from Amazon.) You can’t Friend someone who uses Google+ or MySpace from you Facebook account the way you can send email from Gmail to Hotmail.
Perhaps there are massive economic advantages to society in eliminating churn, but given that we’re now in an era when comparing prices is incredibly easy, I can’t see how all these efforts to reduce price shopping are not hurting consumers and hindering the efficiency of the economy. If I were running the government and looking for ways to spur a sluggish economy, I’d take a long look at regulations banning efforts to lock customers in and prevent price competition at every possible instant.
“…should be BANNED???”
Good grief! Taste Unlimited gives me a “loyalty card.” Each sandwich I buy they stamp the card. After twelve stamps I get a free sandwich. And you want to BAN that because they are damaging competition by keeping me from eating lunch at Subway?
Regulations designed to prevent pricing power and promote competition rank among the (few) large successes for government intervention in the economy. And I’m not saying the government SHOULD DO this. I don’t have the data. I’m saying the government SHOULD CONSIDER this. Markets are only efficient when they’re competitive markets, but and loyalty programs are clearly about circumventing competition.
Scoop, I’m all in favor of competition, but in my wildest liberal dreams I never thought offering customers more for their money was anti-competitive. Previously, I could buy a Taste Unlimited sandwich for eight dollars, or a Subway sandwich for five dollars. Now I can get an eighty cent cumulative rebate on my Taste Unlimited sandwiches, and you call it anti-competitive. You say Taste Unlimited is circumventing competition.
Perhaps in some future world, Taste Unlimited will have the power to FORCE me to stay out of Subway, and to buy only their more expensive Taste Unlimited sandwiches. Until then your logic escapes me.
Ken, There is actually some competitive questions here. 1) Is there an agreement to discontinue their loyalty card program, or is this in addition to their exisiting program–have they agreed to abondon one form of competition to participate exclusively with the their competitors in another form; 2) If their share is large, is their joint venture then a dominant “firm”, is it over or under inclusive; 3) are there spillover effects.
I would have expected to see this kind of program organized by a supplier to the firms–either coffee or equipment–because there is a perverse effect here possibly as well: they will amplify competition among themselves (see my comment above). Usually those types of programs are organized by suppliers to intensify intra brand competition in order to promote interbrand competition. Eg. McDonalds One Buck promotions.
I’m sorry you can’t follow the logic. Perhaps this isn’t the right blog for you. This might get you started but probably won’t. Each one could be book length:
1. Once someone has patronized a business several times, they will keep patronizing it even when it is irrational because your mind assumes that you vetted the options carefully before patronizing it the first one or two times, even when you didn’t. Nice summary in Predictably Irrational.
2. Lot of research that people are irrational on sunk costs. Once they feel they’ve made progress toward a goal (free cup of coffee) they won’t abandon it for another even when it’s rational (the other guy’s equally good coffee is still cheaper, even when you consider the percentage of discount I’ve earned.) Studies too numerous to mention.
3. Subset of 2, but an important one: Lure customers in with a great deal on an expensive tool that requires subsequent purchases and you can make up the money by overcharging for those subsequent purchases when they’re locked into you (because you make your system incompatible with others). The low upfront cost consistently tricks consumers into making the wrong decision and paying you for a lifetime. Examples too numerous to mention from adjustable rate mortgages, to free checking with huge penalties to video game systems to Kindle. Studies on how easily consumers duped by this too numerous to mention. (No, not a loyalty card but a related ploy: do something to create loyalty so you only compete on price once, at the outset, rather than time after time after time, with a customer free to bolt at will the instant a competitor betters your price.)
Oh, the hell with it. I have no more patience to write.
Frequent flyer programs are very different from other loyalty programs. They are aimed at businessmen who don’t pay for their own tickets. They are kickbacks and already illegal.
San Francisco cafés did this last year, inspired by Gwilym Davies’ London program (seemingly the progenitor of this idea), I see reports of cafes in Boston, Seattle, Toronto, and Atlanta doing this too. Are there examples of non-coffeeshops engaging in this same sort of promotion?
A while ago there was a meme about coffee shops going pay-as-you-please. What happened to that stuff? Looks like coffee shops love riding one gimmick wave after another.
Actually, there has been a fair amount written about pay as you wish programs. Work well for low marginal cost items it is otherwise difficult to collect (music) and products where others can see that you did or did not contribute (social pressure).
Cincinnati Coffee shops do the same thing.
Neat. A piece of paper that virtually guarantees a customer will return at least once to my coffee shop. I would be happy to have a shop serve 1/8 of the coffee market here. More than happy.
“Loyalty” is a misnomer. Burger King has no problem with their best customers going to McDonalds a few times a week, do they, as long as they still come to me often enough? I don’t care who buys my burgers or what they do for their other meals. I am not competing with other fast food places, I am competing with other kinds of restaurants, supermarkets, etc.
It definitely seems to be vulnerable to cheating, but I think the publicity they can expect from such a weird idea might outweigh the downside of sending some customers to other businesses. In other words, don’t expect this to become common–there may be a brief fad for disloyalty cards, but after the novelty wears off, the practice becomes slightly worse than worthless, and non-cheaters start opting out.
Comments on this entry are closed.