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Chill without a Bill

How the no-purchase policy a la Starbucks can affect F&B brands

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You don’t exactly want to grab a bite. You actually intend to ease yourself. Or simply kill time somewhere “cool” before heading out for a meeting or a lunch date. So how about visiting a food and beverage (F&B) brand? Or better still Starbucks?

The global café chain recently introduced its “third place’’ policy which reads as– “We want our stores to be the third place, a warm and welcoming environment where customers can gather and connect. Any customer is welcome to use Starbucks space, including our restrooms, cafes and patios, regardless of whether they make a purchase.”

Theoretically speaking, this no-purchase policy goes against logical business thinking, where customers walking into an F&B brand are expected to open their purses, say experts. “Any café or restaurant makes money only when customers make a purchase. Hanging around, using the facilities and making no purchase can milk the brand of its cash as it adds to the infrastructure costs,” say experts.

But it can go a long way in upping the brand’s equity. Starbucks essentially has a unique USP (easy, comfortable and hygienic) and is adopting this policy to make the place look full and make every one of their customers feel like they are part of a bigger group and create a certain vibe, says Pravesh Pandey, director of operations, Byg Brewski Brewing Company.

According to Kumar Rajagopalan, CEO, Retailers Association of India, every restaurant/retailer has a unique strategy and helps differentiate them in the marketplace. “Brands are trying to get the share of the watch (share of time) of the customer. With increasing amount of connectivity through mobile phones, it is important for brands to create methods to bring customers to the store and keep them there.”

Starbucks, which pioneered the café culture and upscale hangouts, is now trying to enforce the idea of a “third place”, between home and office that encourages networking over a relaxed ambience. The no-purchase policy is an extension of this third place concept, say, experts, "especially now when the ‘third place’ is also offered by co-working brands, bookstores, amongst others. The no purchase option gives Starbucks an edge over not just F&B brands, but also the WeWorks (co-working space) of the world.’’

Says Rajagopalan, “No-purchase policy has been adopted by bookstores and even cinema theatres. A chain like SPI Cinemas (Sathyam Cineplexes) also has a bowling alley and crèche in their premises. Bookstores like Crossword have coffee shops and washrooms so that customers do not have to step out even for bio-breaks. These are all ways of getting the customer’s share of the watch.”

Experts believe that no-purchase polices can positively impact a brand’s image in multiple ways. In the millennial era, every person walking into a café or a restaurant or a microbrewery is perceived as a potential customer.

But we divide the crowd into two broad categories namely the billers and the fillers, says Amit Ahuja, managing partner at AA Hospitality which owns F&B brands like Misu, The Open Box and Housefull.

“Both the billers and fillers are equally important for a business. Not every person is a high spender. But as long as they are hanging around, especially during non-peak hours, it makes the place look livelier. We don’t ask them to leave, but view them are potential customers that our staff can perhaps convert into high spenders in the future by offering them great hospitality,” says Ahuja.

Allowing fillers to hang around creates a positive brand image, says Pandey.

“Such a customer starts associating the brand on a personal level. The fact that he/she has a place to sit and relax in a great ambience, without the compulsion of ordering something along with the option of using the wifi, printers, plug points, etc. only strengthens his/her loyalty to the brand and aids in brand recall,” says Pandey.

Rajagopalan agrees, stating the idea is to create an affinity towards the brand. “Some F&B brands want to ensure that customers prefer their premises to spend time and have meetings with the knowledge that eventually a customer will spend money, where they spend the most time,” says Rajagopalan.

During the day when the revenue per available seat is negligible, so smart brands are opening their doors to everyone, says Pandey. “The great vibe enables a customer to come in say at lunch and carry on to high tea. He/she may choose to sit around for dinner as the vibe is inviting and easy to be a part of,’’ says Pandey, revealing that his brand will like to adopt a similar no-purchase policy.

THE THIRD PLACE

Starbucks, which pioneered the café culture and upscale hangouts, is now trying to enforce the idea of a “third place”, between home and office that encourages networking over a relaxed ambience

CONTRARION BET

The no-purchase policy goes against logical business thinking, where customers walking into an F&B brand are expected to open their purses, say experts

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