Tuesday, April 27, 2010

Is free Wi-Fi a good thing?

Have you noticed all of the signs advertising free Wi-Fi lately? Bookstores, fast-food chains, coffee houses, restaurants, and oil change shops are among the places offering free access to the Internet. I suppose this is evidence that the world is becoming more connected, and there is little doubt that people who feel a need to be connected 24/7 are comforted by ubiquitous wireless access, but is it a good thing? Is it good for your business?
Before answering those two questions, ask yourself two other important questions.
  • Does adding Wi-Fi increase your value to your customers?
  • Does adding Wi-Fi contribute to your bottom line?
Adding value
Whether Wi-Fi adds value is not a simple a question. Consider the many coffee shops and restaurants that have added Wi-Fi hotspots. The access is not secure, and it is often slow. Even so, customers that use their computers see value in having Internet access. However, what about the other customers? Does a room full of people typing away on computers or using mobile devices provide the atmosphere that they seek? Do they resent not being able to find a place to sit and enjoy their visit because the tables are full of people who have long since finished their coffee but are still working on their computers? This is probably not a problem at fast-food establishments because customers value speed and because other cues such as decorating schemes and uncomfortable furniture encourages them not to dawdle.

What about other types of businesses? Do you run a business that requires people to wait? Unlike restaurant patrons, customers waiting for an oil change may not expect comfortable ambiance. (The coffee in most car repair waiting rooms is hardly drinkable.) Adding Wi-Fi might help customers turn down time into productive time.

The key is to understand your customers and your market.

The bottom line
It does not cost much to set up a Wi-Fi hotspot. Monthly Internet access charges, even for high volume business use, could be under $100. Wireless routers are also not expensive. If providing a hotspot increases sales, then it is probably a good idea. In the last example above, a car repair shop, it might be reasonable to assume that customers would come to the shop instead of a competitor's because of the hotspot. It is easy to see how the adding a hotspot increases customers' perceived value and how that could lead to increased profits.

Restaurants or coffee shops are different though. Most of these businesses depend on a constant flow of customers purchasing at least a minimum amount of something. Adding a hotspot encourages customers to linger. This means that tables do not turn over as quickly. If keeping tables occupied increased sales, that would be fine, but that is usually not the case. In addition, customers that are turned away or have to wait a long time are not likely to be satisfied customers. In this case, adding Wi-Fi might reduce sales.

The bigger picture
The topic of this post was Wi-Fi, but it could just as easily have been about any number of business decisions. Here is an example using the auto industry.

Should a luxury car company introduce a smaller economy car? Cadillac introduced the Cimarron, which Time Magazine named one of The 50 Worst Cars of All Time. BMW introduced the Mini Cooper to much acclaim. What was the difference? BMW understood its market and introduced a sporty car with an interesting history. It leveraged the brand and extended the product line. BMW added value and incrased the bottom line. Cadillac stuck a label on a moderately popular Chevy and decided that charging a high price would make it a luxury car. This damaged the Cadillac brand, decreased customer value, and hurt the bottom line.

What this all really means
Finding new ways to meet customer needs is always a good idea. Creativity and innovation are good things, and businesses that are always looking for ways to meet customer needs are probably going to be successful. Before they can do that though, they must understand their business and their customer. They've also got to ask themselves two questions.
  • Does this increase your value to customers?
  • Does this contribute to the bottom line?

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