dp thoughts.png

Ideas. Insights. Inspiration.

Sipscription Revisited

A&W Canada emailed me in late February and invited me to participate in a test of their new coffee Sipscription program: for the month of March, I was able to enjoy unlimited coffee at any A&W Canada location... for free, no strings attached.

"Coffee" and "free" are two of my favourite things, so I happily accepted A&W's invitation.


On April 1st, the day after the test had concluded, A&W sent me a second email asking me to complete a simple survey about their program.


But I felt I owed them more than that, so the following is my review of A&W's Sipscription program from my perspective as a coffee-lover, a consumer, and a marketer... and what I believe needs to happen in order for a national launch of this program to be a success.



As a coffee-lover...

I'm a coffee-snob, the result of having worked at Starbucks for four years earlier in my career. So I didn't have high hopes that my local A&W, located inside my local Petro-Canada gas station, would be able to deliver a particularly good cup of coffee.


I'm happy to report I was wrong: the coffee is actually quite flavourful. I don't have any inside information about the actual coffee served, but here's what I know:

  • From the logo on A&W's paper cups, it's a coffee produced by Van Houtte. They've been around for over 100 years, and produce some quality mass-market coffees.

  • From the A&W website, I know I was served an "Organic Fairtrade coffee with a sweet warming flavour and complex aromas of caramel, chocolate and red fruit."

  • From my taste buds, I'd describe the coffee as a darker, full-bodied roast with very little acidity. I didn't notice the chocolate or fruit mentioned in the description, but there was a slight sweetness to the aftertaste of the coffee I quite enjoyed.


All of the coffees I consumed during the month were enjoyed "black". That's how I usually drink my brewed coffee, but in hindsight, I should have tried at least one of them with milk and sugar for the purposes of this review, since that's how most people will likely drink it.


Still, speaking to the coffee itself, it's definitely something I wouldn't hesitate to buy the next time I was out and needed a dose of caffeine. Starbucks is still likely to be my first choice (for reasons I'll discuss in my marketing section below), but they charge $3.10 (with tax) for a Venti-size cup of brewed coffee, and A&W's equivalent size is just $2.19 (including tax); that's a much better deal. Going forward, I'm also likely to choose a black coffee from A&W over one from Tim Hortons ($2.02 with tax) and McDonald's ($2.02 with tax) based on taste.



As a consumer...

Let's pretend for a moment that this hasn't been a free test. If I had been asked to pay in order to participate in A&W's Sipscription program, what would be a worthwhile price?


Below is a visual representation of all the free coffees I enjoyed in March:

(Please don't tell my children I wrote on our kitchen table with a whiteboard marker for the purposes of this visual, or cleaning marker off the kitchen table will be my new part-time job.)


The simple math for me worked out as follows:

  • Cost of one large A&W Coffee: $2.19 (including tax)

  • Cost of the 16 coffees I consumed during March: $35.04*

Based on this simple math, anything less than a $35 monthly subscription fee (tax included) would represent a fair value, right?


Well... that depends.


Whether a coffee subscription makes sense for you as a consumer would ultimately come down to three factors:

  1. Cost: Although the cost of an actual A&W Sipscription program (should one be rolled out nationally) is unknown, it's safe to say the cost per cup will be significantly higher than the alternative of brewing a cup at home and bringing it with you in a travel mug. If you're in a position where visiting an A&W for free coffee multiple times each day makes sense, this factor gets somewhat mitigated, but it's still highly unlikely you'll ever get the cost-per-cup down to a brewed-at-home equivalent. You definitely pay a premium for away-from-home convenience. Speaking of which...

  2. Convenience: If you're a coffee-lover who doesn't already have a machine at home that can quickly brew you a single cup of quality coffee, A&W's Sipscription program might make a lot of sense for you. If you're not going to pass an A&W every day on your way to wherever it is you're heading... not so much.

  3. Variety: As part of their Sipscription test, A&W only allowed you to get a caffeinated brewed coffee even though they also serve decaf coffee and tea. That decision was almost certainly made to reduce the complexity of the test, and I understand it in that context. But if this condition were to hold for a national roll-out, the lack of variety could be a major disadvantage for some. Sure, most people have their regular beverage, but the option to switch things up is attractive, even if you never use it.


Based on the factors above, an A&W Sipscription (in its current form) wouldn't make sense for me:

  • Cost: My wife and I both drink a lot of coffee every day, so a few years ago we invested in a very good coffee machine and we buy quality coffee beans every week. A cup of coffee brewed at our home doesn't cost anywhere close to $2.19 per cup even if you were to include the amortized cost of our very expensive coffee machine.

  • Convenience: I've been working from home for the past five years, and I spend most of my weekdays in my home office. A coffee ordered via an app and picked up using a drive-through is fast and convenient... but not faster and more convenient than walking the 13 steps from my home-office desk to my kitchen coffee machine and touching a single button.

  • Variety: Over 90% of the non-water beverages I consume during the course of a given week would be brewed coffee, but I do also drink tea and the occasional specialty coffee beverage. An S&W Sipsciption that offers only brewed coffee is limiting for me, and while I could always make those other beverages at home (or buy them at other coffee retailers), that effectively makes the Sipscription less attractive: you essentially amortize the cost of the Sipscription over every beverage you consume, and thus consuming beverages outside of the coffee program increases the cost-per-beverage.


If I were driving to and from work every weekday, I'd literally pass my local A&W on my way to the highway. I'd consistently consume ~25 coffees a month, and even a $35-priced coffee subscription (while extremely expensive compared to the $8.99 cost of Panera Bread's monthly coffee subscription) might make sense based on that math.


But under my current work-from-home circumstances, it's not likely I'm going to leave my house to pick up a coffee only to return back home moments later.


As such, a Sipscription cost would only make sense at a "throwaway" price point: a cost that would pay for itself after just four or five coffees, and that was low enough for me not to feel bad about wasting money should I not get enough value in any given month.



As a marketer...


When I initially wrote about A&W's Sipsciption test, I suggested there were four factors that would ultimately determine if this program would be successful:


1. The coffee is good. Check!

As above, they delivered a great-tasting blend.


2. The program offers value. To be determined.

This will depend entirely on what A&W decides to charge for a monthly Sipscription and the customers they are able to attract as a result. The program's value will also be determined, in part, by any limits that may be introduced with a national roll-out: for example, a daily maximum on the number of coffees a customer can get or a minimum number of hours between refills would naturally make the program less appealing.


3. The program offers variety. To be determined.

A&W is a quick-service restaurant first and foremost. It may not be necessary for them to try and compete with a coffee-first chain like Starbucks, but the Sipscription program won't ever be a serious consideration for coffee-lovers when only a single, caffeinated brew is offered as part of the program. At a minimum, they should have a second brew with a different flavour profile and a decaffeinated coffee available as part of the subscription. Ideally, A&W would make it a full-on "Beverage Sipscription" and include tea and soft drinks. The more consumer beverage occasions that A&W can satisfy with its Sipscription offering, the more likely people are to consider joining.


4. The program drives incrementality and food sales for A&W. To be determined.

The first three factors have to do with whether or not the program would be successful with consumers; this one has more to do with whether the program makes sense for A&W. But I think this is where the greatest opportunity exists.


During one of my visits, I tried some of A&W's breakfast items, not because I was particularly hungry, but because someone had given me a gift card.


And I discovered, quite simply, that A&W's breakfast items are phenomenal.


A&W's "English Muffin Sausage and Egger" is just as delicious as McDonald's "Sausage McMuffin", and I'd argue A&W's hashbrowns are even better than what you get at McD's. Considering I wasn't even aware that A&W served breakfast until I wrote my initial Sipscription post last month, I was absolutely shocked by the amazing taste of the food...


... and that's a huge problem. I'm no stranger to QSRs, and I frequent them far more often than I should. A&W should have found me and given me an incentive to try their breakfast items a long time ago.


The Sipscription program is a perfect opportunity to introduce people to their breakfast menu, provided they're willing to think of "coffee" as a loss-leader (at least initially).



For a successful national launch...


In The Subscription Boom, author Adam Levinter suggests subscription offerings generally meet one of three needs:

  1. Replenishment, where frequently consumed items are automatically delivered to you (like the Dollar Shave Club or Amazon's Subscribe and Save program);

  2. Curation, where experts in a category help you discover new items for you to enjoy (like LootCrate or Carnivore Club);

  3. Access, where paying your monthly fee gives you access to content, services, or facilities you wouldn't otherwise be able to enjoy (like Netflix, Canva, or your gym membership).


Adam has also said that the best subscription programs are "full stack" subscriptions that check all three boxes.


In its current form, A&W's Sipscription Program most closely resembles an "access" program: you pay your monthly fee, and you access free coffee, not unlike how Netflix subscribers pay a fee every month so they can watch great content.


Could the program hit on replenishment? Not likely, unless A&W can figure out an easy way to have your coffee delivered to you at regularly scheduled intervals... and even if they were to partner with a delivery service like UberEats or DoorDash, I suspect the economics of such a program would be terrible.


The "curation" box would be easier to check, however, simply by having monthly "feature items" included in the Sipscription. Is A&W planning to introduce a new breakfast item one month? Sipscription members should get a free trial of that item. Will A&W make a plush Rooty doll available as part of their 55th anniversary in Canada this year? Allow Sipscription members to have one, on the house. Sure, there's a cost to curating various items and including them as part of the program, but the sourcing and production costs get distributed over the revenue generated by the entire program, and less frequency program users will help fund these items for those who use the program more zealously.


Of course, how the program is ultimately structured will depend on how A&W views the objective of their Sipscription program: is it a revenue-driver that's required to be profitable on its own or a traffic-driver which is intended to be a loss-leader that gets customers into the restaurant to buy higher-margin food items.


But if I were the decision-maker at A&W, here are five things I would do for a national launch of the Sipscription program to maximize the chances of adoption and long-term success:


1. Strive for traffic, not revenue. I'd quickly make peace with the fact that (at least initially) the Sipscription program wasn't likely to be profitable, and I wouldn't try to have a higher subscription price in order to make it so. Instead, I'd work hard to achieve a "throwaway price" for the program such that people don't mind paying it even if they don't get full value each and every month. In the survey A&W sent to me (below), I was asked, "what would be a fair monthly price for the subscription program", and the scale went from $1 to $40, with the slider set right in the middle. Research would be required, but I'd bet anything beyond a $10 monthly price point would be above the "throwaway" figure for most people, and a price-point higher than that would attract only (less profitable) heavy-users to the program. Besides, once the program gained a critical mass, you'd naturally benefit from economies of scale. And you could always increase the monthly price once you had secured a critical base of loyal users.


2. Offer a 30-day Free Trial. Once I decided it was okay to lose some money on the Sipscription program in the short-term in order to achieve long-term success, I'd ensure everyone who wanted to sign-up for the program was given a free 30-day trial. Let people create a new habit of visiting an A&W every day, and it'll be difficult for them to break it once the trial is over... that's how Netflix initially got us, right?


Collect the consumer's credit card information upfront so that you can bill them once their 30-day trial has ended, of course, but send them a reminder email a week before that happens to ensure they don't get an unpleasant surprise on their credit card because they intended to cancel but forgot. And in that email, include an e-coupon for a free breakfast sandwich... and hint that more free offers are regularly given to Sipscription members.


Will you get a few people who try to abuse this offer by using multiple email addresses? Perhaps... but that's easily managed by asking for additional information (such as an address or birthday) you can cross-reference with email addresses given. Don't build your program for the 5% of people who will try to scam it, build it for the 95% who won't.


3. Move from "coffee" to "beverage". At the onset, include every beverage currently sold at A&W as part of the program (not just caffeinated coffee), then consider introducing new beverages to A&W restaurants once the program is established and justifies doing so. (Smoothies? Iced-coffees? The actual beverages introduced would be driven by the extra equipment and training required to implement them at all restaurants, and the expected return on that deployed capital.) Why bother with additional beverages? Because greater variety means a program that's appealing to a greater number of users. A two-tiered program (i.e. coffee-only for $5-10/month and Full-Beverage for $10-15/month) could also be an interesting way to bring people into the program and then trade them up.


4. Capitalize on Sampling Opportunities. Every time a new food feature is promoted at A&W, I'd deliver a "try this free" e-coupon to Sipscription members via the app. Sampling has been proven to drive sales for food items, and A&W should take advantage of the regular traffic the Sispcription program will generate to introduce users to food ideas they're then more likely to purchase on subsequent visits. Plus, people like free food offers, and providing them to Sipscription members will help convert them into loyal brand ambassadors.


5. Don't Ignore the Experience. Aside from the variety of beverages, one of the primary reasons I'm a Starbucks advocate is because of the "third place" experience the company fosters. Part of that experience is the physical space of a given Starbucks store, and part of it involves the friendly baristas who eventually begin to recognize and authentically interact with regular customers. Fostering a welcome physical space might be difficult for many A&W locations (i.e. post-pandemic, I wouldn't think to work away-from-home at my local Petro-Canada A&W, for example), but the service aspect can and should be nurtured.


As an aside, the staff at my local A&W were remarkable; about halfway through the month, they began to recognize me and would reach for my coffee as I approached the counter. One time, when I approached the counter, the woman said, "I'm sorry I had your coffee over here (by the drive-thru window) because you usually pick it up there!" When I jokingly explained how I come into the store on Tuesdays and Fridays to play my lottery tickets, she said, with complete seriousness, "I will try to remember that," and I can tell she meant it.


A&W was smart to test their Sipscription program now so it can be ready to roll-out nationally once the pandemic is behind us and more people are commuting again. And while the program likely isn't for me given my current work-from-home situation, the idea itself has tremendous potential.




* While I enjoyed 16 coffees as part of this test, many of those were trips were made simply because I was participating in the test and the coffee was free. Given the fact that I work from home, a more realistic number for a given month would likely be ~10, or the number of Tuesdays and Fridays in a given month: those are the days I visit my local Petro-Canada (in which the A&W is located) to play my LottoMax tickets. Yes, I fully realize the lottery has been said to be a tax on the stupid... but I also know my minuscule chances of winning get reduced to zero if I don't have a ticket. Plus, it's fun to dream.


If you liked this post, don't miss the next one: get dpThoughts delivered to your inbox up to three times each week. 

(Or add me to your RSS feed and get every post in your reader as soon as it's published.)