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.]