When I am in London, I get ~95% of my coffee from Pret a Manger. Why? Because I have the Pret Coffee Subscription. In brief, I can get up to five units a day for £25 a month (coffee, tea, hot chocolate, smoothie, etc.). This is, at least in my case, very cheap.
How is this possible for Pret? It should be a no-brainer that coffeeholics would do the math and get the most coffee out of the money. I have put a lot of thought, and maybe more than I should, into why Pret would introduce such a coffee subscription. I can think of at least ten different, yet related, explanations that make a strong case for why we have the Pret Coffee Subscription. Here they are:
- Demand for subscription. The simplest explanation is that this is something people want. There is a market, and the market delivers. Welcome to Microeconomics 101. Why would you like to subscribe? It makes it easier to get a coffee if you do not have to pay every time but can use your subscription. You might end up paying the same amount but this is a better mode of transaction, i.e., similar to how Netflix is more convenient than having to pay for the individual movies and shows you would like to watch.
- Low marginal costs. Whether I get one coffee or four coffees is not really that significant for Pret in the grand scheme of things. The marginal cost for each additional unit of coffee is low. It is much more important that I go from zero to one coffee than from one to two. Also, the alternative to me getting three coffees a day at Pret with my coffee subscription is not me paying for three coffees at Pret. For that reason, Pret is most likely not losing out on additional sales by introducing a coffee subscription but they will get more customers.
- Additional non-coffee buys. Come for the coffee, stay for the snacks. A lot of people do not only buy coffee but also breakfast, snacks, and lunch, when they visit Pret. If you can make sure people come for the coffee, they will most likely also buy other items as well, and not go to M&S for their lunch. So what you might miss out on in coffee sales you will win on non-coffee items. Part of this is also their loyalty programme, Pret Perks, where you can collect stars by renewing a subscription and buying anything with a drink.
- Social effects. You might be bowling alone but you will not always enjoy your coffee alone. A lot of people enjoy their coffee with their friends and colleagues, and if you have a subscription, you are more likely to bring your friends and colleagues to Pret instead of going to another place. In other words, when one person sign up for a coffee subscription, the chance that other people in his or her network will sign up as well increases.
- Habit formation. This is not only about selling coffee today, but about making the coffee consumer of tomorrow. For that reason, it makes sense to see the coffee subscription as a long-term strategy in making sure people get used to Pret and their many locations and services (such as ‘Click & Collect’). When I signed up for the coffee subscription, the price was £20, and I can say that I would be willing to keep my subscription even if it was a lot more expensive (do not tell Pret). Accordingly, it would be less convenient not having Pret in my life anymore.
- Paying not to drink coffee. A lot of people pay money for not going to the gym (if everybody used their gym membership, the gyms would be too crowded). There is a good reason why the initative was presented during the pandemic, i.e., when people were not in the office five days a week. People might take advantage of the service in the beginning (e.g., get four coffees a day instead of two), but after a few months it will be back to a ‘normal’ level of consumption. If you are not in the office every day of the week, chances are that you will not take full advantage of the Pret subscription every day, and with limited opening hours in the weekend, very few people can and will take advantage of the subscription seven days a week.
- Competition. When I looked into my data, I could see that I spent a total of £59.25 at Costa in the first three weeks of July 2021. In the last week of July 2021, I consumed much more coffee at Pret than what I would have consumed at Costa. However, when I moved my ‘business’ to Pret, Costa lost a customer. I can only imagine that the B2C coffee market in London is very competitive, and Pret will be pleased if they can move people from the alternatives to Pret with a coffee subscription.
- Individual-level data. Data is the new coffee. Or oil. Or coffee is the new data. Whatever. All companies want better data on their users, and it is better to talk about users instead of subscribers or customers. One person might go to Pret and buy four coffees, but it is much better for Pret to have individual-level data on four people ‘buying’ one coffee each with their subscription. In the same way that Amazon is a tech company (or WeWork for that matter), Pret’s chief executive, Pano Christou, also confirmed the relevance of data to New York Times back in 2020.
- Social norms. Very few people will get five coffees a day. As I assume most people go to the same Pret most of the time (or the same few Prets), you do not want to go and pick up five coffees a day (even if you can drink five coffees). I, for one, do not care about such norms but I can see why some people might. In other words, there are social norms at play that you do not have to consider when, for example, using your Netflix subscription. Maybe this would be different if it was a machine you had to interact with in order to get your coffee (research shows that people cheat more when they interact with a machine rather than a person – and it is easy to understand why social norms matter less in such situations).
- Loss aversion. The coffee subscription was introduced in the midst of the pandemic. As described in The New Yorker: “In July, with sales down seventy-four per cent in 2020, the company announced that thirty of its U.K. stores would not reopen. A month later, about a third of Pret’s employees lost their jobs.” The subscription was also one among other features as described by WIRED: “So Pret plans to reinvent itself. Dramatic changes will now take place: it will open more suburban branches, deliver dinners to city dwellers, offer meal deals, and introduce a new subscription coffee service of up to five cups of coffee a day for £20 a month. Pret will also enter the grocery market – selling coffee and pre-packaged food. Most drastically, it has opened its first “dark kitchen” for delivery only and is developing a hot dinner menu to serve greater numbers of customers at home.” Pret might simply not have any other choice than to introduce a coffee subscription – along other alternatives – if they want to stay in business.
With those explanations in mind, I can understand why Pret offers the Pret Coffee Subscription.