You see the Freemium model a lot with technology and software companies. Whiskey Morning Coffee is one of the first companies to apply the model to a cup of coffee. In this article we will discuss:
1. What is the Freemium Model.
2. How A Software/Technology Model is Used with Coffee
3. Financial Breakdown
4. Has it worked so Far?
What is Freemium?
Maybe you have heard of the Freemium business model, or maybe you haven't. Here is my definition of the freemium model. a company provides a service or product for free for the customer. Over time, some customers choose to pay for an upgraded version because it is more convenient or just better. An example of this is Spotify. You can have a free Spotify account and listen to music, but if you want to pick your songs and don't want ads you pay $7 or so a month.
The moral of the story with a freemium model is that the people who pay for the service also are the ones, and advertisers, covering the cost for the "free" customers.
How Did Coffee Go Freemium?
Whiskey Morning Coffee (WMC) makes most of its sales online and through subscriptions selling bags of coffee, and merchandise. To be honest, none of us wanted to work in a restaurant type atmosphere serving cups of coffee. We are in the bean slinging business not the cups. This is why we started out with the idea of a coffee trailer that goes around giving away free coffee. You only have two options: black coffee, or coffee with cream and sugar.
General Business model
Whiskey Morning Coffee Trailer sets up in a new place around DFW Every day. This could be a retail store that sells WMC bags, or just a large parking lot.
1. WMC fan, or random comes us to trailer.
2. WMC collects customer data.
3. Customer walks away with a free 12oz cup of coffee.
4. WMC then retargets customers and keeps them engaged with their product preferences.
5. Customers go from free to paying customers when they buy other stuff at trailer, order online, or subscribe to a monthly delivery.
Benefits
- In most towns don't need health permits because we are giving away a non-hazardous food (coffee) as a complementary service.
- Easy to partner with store owners to set up because you are bringing people into the parking lot.
- A unique way to offer sampling at retail locations.
- Generates word of mouth marketing
Disadvantages
- 3-5% customers don't buy anything and get free cup of coffee 2-3 times a week
- Labor cost. person running trailer couldn't make enough on tips alone. We pay $10/hr with tips. Staff makes $12-$25/hr. depending on traffic
Financial Breakdown
Cost
- Custom Branded cups with coffee and creamer: $0.48
- Labor: $10/hr
- Trailer/Vehicle cost: $50/day
Gain
- 1 out of 6 customers buy something at trailer over $15
- 10-15% of customers order online within 30 days.
- Retail Stores sales increase by 8-10%
- Sell Advertise space on coffee cup lid for $0.10/per cup
Takeaways So Far
Whiskey Morning Coffee has only been running this business model for 2 months, so it is a little early to see if it will work or not.
Right now, the model is profitable and returning 5-10% profits. The true data that will determine the success is the Customer Lifetime Value which we won't have a clear understanding till after 12 months of implicating.
After 12 months, if the business model works, we would like to scale it by focusing on adding trailers, and advertising revenue physically and digitally.
Things We Could use Expertise in:
- Franchising
- Selling Digital Advertisements
- Data collection & Utilization
- Custom Paper Cup Manufacturing.
Order your own brew here. You will like it I promise! www.whiskeymorningcoffee.com
Follow us on Facebook, Instagram, and TIK TOK to stay up to date with how model is working: @whiskeymorningcoffee
Rhonda Carson
May 15, 2022
What a Great idea !!! I wish y’all all the luck in the world… will be praying for y’all to make a success with this !!!