In the mood for a cuppa? How about being able to have a cup of coffee anytime you want — all day, every day — for free? That’s the business model adopted by Alon Ezer, CEO of CupsTelAviv, a high-tech twist on the traditional store loyalty program — and he’s making money from it, he told The Times of Israel.
“We have a loyalty program that goes across not a specific chain, but across independent and franchise stores we signed up for the program. As far as I know, this is the only such loyalty program anywhere in the world, and it holds a great promise for not only coffee shops, but for brick-and-mortar retailers of all kinds,” Ezer said.
Created in September 2012, CupsTelAviv indeed lets coffee lovers drink all they want at one of the 40-plus Tel Aviv-area coffee shops enrolled in the program. The program actually has two tracks; unlimited coffee, any time of the day or night, for NIS 169 (about $45) a month, or a cup a day for NIS 99 (about $27) per month. The shops in Ezer’s program, the subscription, and the loyalty card subscribers present at the shop are all contained in CupsTelAviv iPhone or Android app.
There are no limits on the kind of coffee that subscribers can order — they can order all the fanciest cream-covered concoctions they want — and, said Ezer, tea lovers can get their favorite drink if it’s on the menu of member shops. The shops themselves range from small, out of the way places with a strong “cool” factor (“Those are very popular among Tel Aviv coffee lovers,” said Ezer) to units of franchises.
Considering that a cup of hafuch (a cappuccino-type drink that is probably Israeli coffee-drinkers’ favorite) costs an average of NIS 15 (about $4) at Israeli coffee shops, the attraction of a CupsTelAviv membership for coffee drinkers is quite understandable. But there’s plenty in it for the shops, too, said Ezer. “They get additional sales from the cakes and sandwiches people order with their coffees, plus additional business from friends or guests who accompany the subscription holder. And, they get valuable data about their customers, which they can use to target additional markets.
So how does a store prevent an unlimited member from ordering an extra cup for friends? With the one catch in a subscription: You have to wait 30 minutes before ordering another cup at the same store. “It takes time to order and drink a cup anyway, so there’s no loss for members,” said Ezer. “And if you don’t want to wait, you can go to a neighboring member coffee shop and drink one there right away.”
But actually, the coffee shops aren’t the ones at risk, said Ezer — he is. The shops get paid for the coffee they serve by CupsTelAviv. “The truth is, I am the one paying for the coffee, and I don’t care who drinks it.” The half-hour limit is there to protect the company. Ezer makes his money on the fact some people drink more, while others drink less — and from the discount he gets from the shops. “I am currently the biggest consumer of coffee in Tel Aviv, and the biggest single customer for some of these stores, so I am eligible for a nice discount. I pass the discount on to consumers,” while ensuring that there’s enough left over to make a profit.
And profit he does, said Ezer. “We started out last September with nine shops, and by December we increased it up to over 40, with several hundred full-subscription members.” CupsTelAviv could probably have amassed more members, but Tel Aviv was more of a proof of concept for the system, said Ezer — and the system works well enough to warrant expansion. “In the coming months, we plan to implement our model on a wider scale in a large American or European city,” Ezer enthused. Similarly, he has been considering applying the model to other areas. “We have a road map, and things are moving along on schedule.”
The idea of a multi-store loyalty program for independent, small establishments makes a lot of sense, and Ezer admits that it’s likely to be copied at some point (he looked into patenting the idea, but was advised that it would be difficult to protect and enforce). Still, he is sure that the CupsTelAviv concept will succeed — and that he will be the one to pull it off. “We have the experience in working with the stores, with pricing, and with the organization of the project. Tel Aviv was a good beta site for us, and I think we are ready for bigger things now.”