Flat Price for all the Flat Whites – a closer look at Pret’s subscription model

Dr Adele James and Chris Rawcliffe look at how coffee brands build customer loyalty during the pandemic from a behavioural science perspective.

Will it cover hot chocolate?” was my first question to my colleagues when I heard of YourPret (yes, it does I’ve since discovered). My second question I asked (this time to myself) was ‘why the subscription model?

In a move to address their business in These Unprecedented Times, Pret A Manger recently announced that they are launching a digital coffee subscription model1. YourPret will cost £20 a month, you can get a maximum of 5 coffees (and tea, hot chocolate, frappes..) per day from the chain.

Subscription is an attractive pricing model, not least because it offers a predictable (or ish, during the pandemic) revenue stream. It also gets customers back through the doors in the first place, meaning more potential for cross-selling. The scheme has only just launched at time of writing, so it remains to be seen how successful the innovative coffee subscription will be, although it’s worth noting Leon have quickly followed suit with a similar offering2.

There’s been a lot of discussion and criticism levelled at Pret in recent weeks. Instead of adding to the noise, we instead wanted to focus on this quote from Briony Raven, the Director of Coffee and Packaging at Pret which got the behavioural science team at Breaking Blue thinking. “It’s Pret’s way of doing loyalty,” she said. “It’s about giving people an easy choice when they come back into their everyday routine.” Let’s unpack this a little.

1. Loyalty = Unlike other coffee chains, Pret does not do loyalty in the traditional sense of having a card and collecting points. Instead, they do ‘random acts of kindness’ – free stuff – which capitalises on the zero price effect. But are you loyal to Pret because they may occasionally give you free stuff at random (and we know from Skinner’s work how compelling variable rewards can be3)? And what is loyalty anyway?! There’s a lot of discussion out there about how loyalty is actually just inertia. How many customers go to a business regularly because it’s the easy choice – something we’ve grown accustomed to – rather than out of loyalty? To put it another way, if your usual Pret wasn’t there anymore, would you find another one – or go to another coffee shop?

2. Easy choice = What is the easy choice here – go to Pret, who you think are always pretty quick and consistent with their coffee, vs A.N. Other coffee shop who you are less familiar with? Or to scan your YourPret QR code at the till instead of payinh with cash? Or.. is it the payment model itself? We’re going to assume that the ‘easy choice’ here refers to a subscription model.
Subscriptions are pretty simple, and ‘locking’ customers into a subscription is a good way to build – maybe not quite loyalty – but a more longer-term relationship than just popping into the shop for a brew. Subscriptions are thought to be more profitable vs the PAYG (pay as you drink?) payment model, particularly as they retain customers4. More on that at the end! In any case, the subscription will auto-renew each month using recurring payments, which leverages our inertia where effort is required to opt out. On the other hand, auto-renew as a default is may be seen as ‘sludge’ rather than a ‘nudge’5. What’s more, your first month of YourPret is free – and we know how attractive this can be.

3. Everyday routine = As customers travel and work patterns change, are they likely to ‘come back into their everyday routine’? The ‘come back’ to idea is looking unlikely at the moment, and the shift to more WFH may threaten Pret’s heartlands, meaning their usual ‘everyday routine’ is now disrupted. That aside, ‘everyday routine’ sounds awfully like ‘habits’ – something we’ve written about before6. Going to Pret everyday on the way to the office was a reality for some pre-COVID, a habit cued by our previous office commute. Recent research has found that the average time to form a new habit is 66 days, with plenty of individual differences in between. If we assume that making a new habit (e.g. preparing coffee at home, going to your local independent instead of Pret) is effectively breaking the old habit (going to Pret), then there has been plenty of time for the Pret-habit to be broken since the UK went into lockdown March 2020.

‘It’s Pret’s way of doing loyalty’ – but in reality its appealing to a select few who are passing the door in the first place, and then relying on inertia – not genuine loyalty – to keep them coming back for more. They have acted fast to extend their reach beyond the London bubble, including plans to sell their products through retailers as well as joining forces with delivery apps, for example7. With no guarantee that office workers will return in the same numbers as before, Pret is looking secure business in a new way. COVID-19 has disrupted old habits – but can Pret’s new strategy implement new ones? Time will tell.

https://www.theguardian.com/business/2020/sep/04/pret-offers-monthly-subscription-to-boost-post-covid-pandemic-sales
https://www.bighospitality.co.uk/Article/2020/09/09/Leon-to-launch-unlimited-coffee-offer
https://www.psychologytoday.com/gb/blog/brain-wise/201311/use-unpredictable-rewards-keep-behavior-going
https://www.profitwell.com/blog/subscription-revenue-model
https://theconversation.com/sludge-how-corporations-nudge-us-into-spending-more-101969
https://breakingblueresearch.com/ourthinking/breaking-or-making-the-habit/
https://www.bighospitality.co.uk/Article/2020/09/07/Pret-A-Manger-Pano-Christou-plans-suburban-expansion-and-shift-into-retail-business-evolution-restructuring