Wednesday 2 May 2018

Why can free Wi-Fi boost the consumer number for coffee shops but not McDonald's?

Many coffee shops including those large chains, such as Starbucks, Costa, provide their consumers with free Wi-Fi, and many analysts argue that this policy has significantly boosted these coffee shops' consumer numbers and revenues. Similarly, fast food chain McDonald's also starts to provide their customers with free Wi-Fi, but their customer number has not been boosted up significantly. This is because of the differences between the sectors' key businesses. 

Without Wi-Fi, a significantly larger proportion of McDonald's consumers choose to sit in McDonald's comparing with coffee shop consumers, because McDonald's sell proper meals (even though it is fast food) and coffee shop consumers buy drink and their willingness to sit down and drink coffee is much less. Therefore, when providing free Wi-Fi, coffee shops give their customers more incentives to sit in their shops and this will increase the likelihood of their customers to order more coffee while they are sitting in the coffee shops. In addition, the customer groups for McDonald's and coffee shops are different. In general, coffee is more expensive than fast food, so coffee shop customers should have higher incomes than fast food chain customers on average. In addition, it takes longer to drink coffee than to eat fast food, as coffee is hot, especially for those who sit in.  

Overall, the key reason is that Wi-Fi is a complementary good for coffee to greater degree. 

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