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Coke and Free WiFi

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Recently, Coke announced that they will begin offering free WiFi to some rural villages in South Africa.  The internet acess will be provided by a Coke machine.  Depending on the success of the program, they may expand the program to other locations in Africa and beyond.

This struck me as an interesting idea.  Naturally, I did what I usually do with interesting idea - kicked it around with Lazy Man for a bit.  We came to different conclusions on the best way to profit from WiFi enabled machines (the discussion was not tied to the South African machines, but to a more general model).

Lazy Man's thought was to require a purchase to get internet access.  There are very obvious benefits with this plan.  You lock in the sale immediately, and you're not spending money providing access for non-customers.  That sale is immediately "banked" and you can't lose it.  Makes sense.

On the other side of the coin, my thought is to have unfettered access to the free internet.

It's certainly true that there are some people that would never buy a Coke, and you're going to lose money providing free internet access to these people.

However, there are also many people who simply don't want to buy a Coke at this exact moment.  I may not be thirsty now, but I'll be thirsty in twenty minutes.  Give me free WiFi and I'll settle on a bench and probably still be there when I get thirsty - at which point I'll buy a Coke from the machine.  The basic concept is to keep a potential customers in your vicinity for as long as possible.  Anything you can do to "bait the trap" helps avoid having customers defect to your competitor.  Keep a potential customer around long enough, and it becomes increasingly more likely that they'll buy from you.

It's even better if you can turn the machine into a gathering spot ("Meet you by the Coke WiFi, Yordano").  As the group grows, you're likely to draw in people who don't have a strong preference on their beverage choice - but if they're hanging out with Yordano's group, the closest drink is going to be an ice cold Coke.  At first, Buster and Hunter may only drink Cokes when they're hanging out with Yordano, but before long, they may be drinking Coke at home.

There's also a brand perception aspect to this.  If you force me to make a purchase before I get the WiFi, I'm going to perceive this as the WiFi costing me money.  If there's no purchase required, I'll see this as you giving me a gift - a much more positive vibe.  I'll like your company more, and will be more likely to buy your products.  That may not be completely rational, but that's irrelevant - companies often benefit (or are hurt) by irrational consumer behavior.  Understanding what makes consumers "tick" is  key to any successful marketing effort.

Requiring a purchase may produce a higher profit margin, but giving away WiFi in an effort to cast a wider net may produce higher total profits.  A business decision does not have to increase your profit margin in order to be a smart decision - it merely needs to produce a profit margin that exceeds the expected rate of return for your other options for that investment.

[Editor's Note: I certainly see the value of giving stuff away. I give away information on this website and the money comes back to me via advertising. It's just that in this scenario, I found the giveaway so valuable, internet access in rural area, that bundling with your product's purchase for free would create the same positive vibe. I figured the person would say, "Before I got a drink. Now I get a drink and this awesome internet access for the same price! Wow!" If I were in the business of selling Coke products I'm thinking, "Is there a percentage of people who just want the internet access who may pay for that? Would these people then drink the Coke to not be wasteful, get addicted, and lead to future sales? Maybe!"

I don't think there's necessarily a wrong answer, but I thought it was an interesting business idea to think about. Maybe someone out there can tell us what their business professor would say on the subject.]

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Business

Posted on October 30, 2014.

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Several months back, I wrote about how I was investing in IBM mostly because I think Watson is going to be huge. It was a pretty good investment for awhile. I was up 10% and everything was puppies and rainbows. Last week, the investment took a dive. IBM earnings were not what Wall Street expected […]

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Investing

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Spending

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It’s not often that a personal finance blogger says that they are getting involved in multi-level marketing scheme. However, earlier this week, I woke up to an email from a friend saying just that. Specifically it went like this, “I’m really sleepy but had a quick read of this and…. Isn’t Rodan and Fields a […]

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MLM

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Last Friday, we signed the paperwork with our intent to get solar power. Over the last few weeks I’ve been writing about our move to solar power. If you are up-to-date on that you can skip the next few paragraphs. Otherwise, let me bring you up to date. For Earth Day this year, I started […]

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Spending

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Where Will Your Retirement Income Come From?

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The foundation for a secure future is proper retirement planning today. Unfortunately, too many people avoid retirement planning. In fact, according to the recent Retirement Confidence Survey from the Employee Benefit Research Institute, less than half of American workers have performed a retirement needs assessment. This means that most people don’t even understand how much […]

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Financial Planning, Retirement

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Mark Cuban on Student Debt

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Last week, my wife was flipping through cable channels and stopped on CNBC. I’d say that 999 out of 1000 times, she’d just continue on. However, CNBC was just starting a phone call with Mark Cuban. We are big Shark Tank fans here, so Mr. Cuban gets the clicker stopped. Rightfully so. It’s pretty rare […]

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College

Last updated on October 14, 2014.

The Seven Persuasion Tools of Scammers

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Have I ever mentioned how much I love Lifehacker. It’s must reading for me. Last week, I came across an article Seven Persuasion Tactics Repeatedly Used by Scammers. Regular readers know that I often write about MLM and other scams in this space. I feel that keeping your hard-earned money away from scammers is an […]

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MLM

Last updated on October 14, 2014.

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Over the last few weeks I’ve been writing about our move to solar power. In case you’ve missed the articles, let me bring you up to date. For Earth Day this year, I started to explore whether going with solar power would save me money. Then I forgot about it until the question of leasing […]

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Smart Purchases, Spending

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Start a Business Today (and I Will Help You)

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When I started Lazy Man and Money, I started it with the idea that I would explore opportunities to make more money and retire early. I still remember one of my second posts was about a condohotel in Vegas that I was interested in buying into. I thought it was in interesting investment because you […]

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Blogging, Entrepreneurism

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