Current Business Issues
An internet connection, whether free or fee-based, appears on its face to be a profitable asset to a coffee shop. However, certain factors must be taken into account when justifying the presence of free Wi-Fi in a coffee shop. Competition with other businesses, internet usage habits of coffee shop patrons, business liability for visits to sites of questionable content, and whether to charge patrons for internet usage or offer it for free are all considerations that must be weighed before implementing wireless internet.
Competition: Free Wi-Fi has been growing in popularity over the last six years and is becoming more and more common. In order to successfully compete with other coffee shops that offer free internet connections, free Wi-Fi should be considered as important to increasing traffic and driving sales as the quality of the coffee, food, lighting, music, location, and other aspects of a successful coffee shop. (Garrison-Sprenger 2005) Starbucks is an example of a coffee shop that offers fee based internet access.
Several independent coffee shops or smaller coffee shops chains such as Dunn Bros. in Minneapolis began to offer free Wi-Fi as a way to gain marketshare. (Earnshaw 2003, Garrison-Sprenger 2005) Portland-based Portland Roasting, a supplier of coffee beans to shops, encourages its clients to implement free Wi-Fi as a way to compete with coffee shop giant Starbucks. Eleven Wireless, a startup wireless provider, is working in conjunction with Portland Roasting.
According to the Portland Business Journal, Andrew Yorra, vice president for sales and marketing is quoted as saying “Eleven hopes that the Portland Roasting network will be so successful, that other restaurant or coffee chains will take notice, and sign up for Eleven’s services. “We see a real niche in the marketplace for an engine to power Wi-Fi networks wherever people congregate. ” (Earnshaw, 2003) In addition, Minneapolis-based Dunn Bros. began offering free Wi-Fi to compete with the fee based programs at Starbucks and Caribou Coffee. According to the Minneapolis- St. Paul Business Journal, Dunn Bros.
launched an advertising campaign to emphasize their superior offerings and smaller business structure. “The campaign will include ads in magazines and on bus sides coupled with in-store posters. One tag line reads, “Other coffee shops give you a free stir stick. ” The ads will run through the end of the month and are part of a larger campaign highlighting the unique “local flavor” of Dunn Bros. Advertising this point of difference is an important strategy for Dunn Bros. , a considerably smaller coffee chain than either Starbucks or Caribou.
” (Garrison-Sprenger, 2005) Working in conjunction with wireless providers, coffee shop owners stand to create a profitable niche in their communities, and compete with larger coffee shops like Starbucks that charge their patrons for internet access. In addition to competing with large coffee shop chains by providing a value added service, smaller coffee shop owners are also competing with each other. According to a project conducted in Austin, Texas, reporter Gerry Blackwell quotes consultant Jon Lebkowsky who asserts the following regarding free Wi-Fi; “It becomes an amenity,” Lebkowsky suggests.
“Early on, when you have only a few stores doing it, it differentiates them from the stores that are not doing it. As it catches on, as it gets to the point that most are doing it, the others will be left out if they don’t too. ” (Blackwell, 2003) Widespread use of internet: Internet use has become widespread in business and education, as cited in the introduction. Free access is now found not only in coffee shops, but also in airports and hotels and on campuses. Access to a wireless internet connection has come to be expected by most coffee shop patrons.
Since many people work unconventional hours, or a greater than usual number of hours per week, they chose to work in coffee shops close to their homes or places of business. Not only does the coffee shop provide a quiet place where the patrons can work uninterrupted, it also offers food, drinks, and comfortable seating, as opposed to a library or a restaurant. Since coffee seems to increase productivity, internet usage indicates that offering free Wi-Fi caters to patrons who come to coffee shops to work – both business people and students. (Summerall 2006)
According to a study conducted by Wi-Fi provider Free-Hotspot. com, sites with free Wi-Fi attracted three to five times more users per day than fee based rivals, but those users stayed online for less time than on average than paying users. (Betts, 2006) Liability: When free Wi-Fi was first introduced, anyone within the radius of the signal could gain access to the connection. This increased a coffee shop owner’s concerns of liability, since any inappropriate activity would be traced back to the coffee shop’s IP (Internet Provider) address, and not to the individual user’s computer.
As technology improves, security measures are more frequently put in place. It is common and feasible to provide secure access and to require measures such as account registration before using free Wi-Fi, or enabling content filters to ensure that no illegal material is viewed on the connection. (Fee or Free? ) Fee-based v. Free access: When businesses were first adding Wi-Fi to their coffee shops, a common concern was that free Wi-Fi would cause patrons to linger, holding tables that could otherwise be turned over faster for a greater profit.
Contrary to those assumptions, free Wi-Fi does not seem to make patrons stay longer. Patrons who pay for a set amount of time tend to stay for that amount of time, whether they need that much time on the internet or not. Since the patron is not paying for the whole day or for several hours, they seem less compelled to stay and use the time they paid for. So not only does free Wi-Fi attract customers because of the value-added aspect, patrons also tend not to stay as long as they would if they paid for a certain amount of time.
They are also more likely to return to the coffee shops that do not require payment for access to the internet. (Betts 2006, Smith 2002, Fee or Free? ) 4. Recommendations While the initial set-up costs and on-going maintenance costs may seem prohibitive, it is recommended that free Wi-Fi be incorporated into the business plan as necessary to doing business. The growing number of internet providers lends to a favorable climate for price comparison. If trends persist, the start-up cost will be more than covered over the course of three years.
Based on the research cited, offering Wi-Fi to patrons without a fee seems to be the most logical course of action since many existing coffee shops offer free Wi-Fi, and patrons will be compelled to patronize only the shops that offer free access. Not charging a fee encourages the patrons to come and go, rather than to come only on days they know they’ll be able to stay for a certain number of hours and “get their money’s worth. ” It will also encourage said patrons to linger over a second or third cup of coffee while working on or surfing the internet.
Attachments Wired For Coffee Case Study www.dlink.com/