A New Wireless Brew

Reversing course, Starbucks decides free Wi-Fi is essential to bringing customers to its stores.

Starbucks recently made Wi-Fi free in all its U.S. establishments, reversing a policy of charging customers for in-store access. But the change provides more than just gratis wireless connectivity. Starting this fall, when the Starbucks Digital Network rolls out, customers will also have access to free online content, news, music and videos thanks to partnerships with companies such as Yahoo, Apple and the Wall Street Journal, says Stephen Gillett, Starbucks’ CIO and general manager of digital ventures, the group in charge of the company’s evolving in-store technology offerings.

Gillett has been retooling the “Starbucks experience” since he joined the company two years ago, finding ways for customers with wireless devices to engage with the company in new ways. Starbucks views its stores as what it calls “the third place”: a wired coffeehouse that serves as a bridge between home and the office.

A new one-click log-in aims to win customers who may have been turned off by Starbucks’ previous registration and networking policies. In the past, using Starbucks’ paid Wi-Fi could be complicated. There were several payment options, including a deal that offered two free hours a day to customers who used their rewards cards and agreed to receive marketing e-mails from provider ATaannddT.

Giving Customers What They Want

Increasingly, consumers expect free wireless connectivity. Forty-five percent of Wi-Fi users surveyed by In-Stat last year said they wouldn’t pay to use a hotspot, up from 33 percent in 2008. Most of those willing to pay said they would do so only if there were no free access close by, says Frank Dickson, vice president of research with In-Stat Mobile Internet.

For many retailers, though, the decision to offer free Wi-Fi hasn’t been an easy one—especially if their hotspots were generating revenue. Two years ago, Starbucks’ competitor Panera Bread was offering free Wi-Fi in its 1,200 restaurants while retailers such as Borders and McDonald’s were not. At the time, Stan Schatt, senior associate analyst at ABI Research, predicted that free Wi-Fi would soon be seen by companies as a cost of doing business. Borders began offering free Wi-Fi last October and McDonald’s did so last December.

The biggest worry for Gillett and his team might be what effect Wi-Fi squatters—people who set up in the store for hours but may not buy much—will have on the customer flow at Starbucks.

On his blog, Gillett answered that question this way: “We thought about this and worked closely with our store operations team before making this offer. Starbucks has always been about the third place and constantly looking at improving this experience. This is the right thing for our customers and our store employees.”

Contact Senior Online Editor Thomas Wailgum at twailgum@cio.com. Follow him on Twitter: @twailgum. Read the original story at www.cio.com/article/596883.

Copyright © 2010 IDG Communications, Inc.

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