Coffee in the experience economy

An exploration of Australian café culture and the business models within it.

By Natalie O’Brien

Why does one café draw customers like a magnet, yet four doors down another is empty?

To the outsider, both look recently and tastefully renovated, housing similar shiny pieces of expensive coffee machinery.

Over the last 12 months, I have had more time to assess my feelings as a customer through a variety of experiences, from purchasing a coffee on the run, having a business lunch, date night, regionally based excursions or visiting attractions as a family.

I have reflected on why in some instances I have been gifted with a lasting and memorable experience I want to share – perhaps even embellish – while at other times have been left frustrated or uninspired with no real feeling or connection to place or product – the je ne sais quoi was missing.

Je Ne Sais Quoi (the intangible missing quality)

If we assume the physical aesthetics and machinery were the same in both cafés the difference in experience might be attributed a host of other factors – the quality of the coffee, the skill of the barista, the menu, the friendliness and efficiency of the staff, the fact that someone smiles.

If I am a regular customer, they may remember I order a latte in a KeepCup and that I have a daughter.

From a customer perspective, the experience is meaningful when the overall ambience – décor, mood, character – is pleasing, the staff are warm and efficient, and the product is targeted to the customer.

‘The Experience Economy’ has dozens of case studies on how savvy businesses excel by offering compelling experiences for customers, resulting in consumer allegiance and direct benefits to the bottom line.

What the case study on coffee brought home to me was:
• Companies who trade coffee receive a commodity price.
• When a manufacturer roasts coffee and sells at the grocery store, they receive a markup, the retail price for the good.
• Brew the ground coffee and serve in a service station you can receive up to $2 for providing the service.
• Serve the coffee in a unique and beautiful space where the ordering, creation and consumption embodies a heightened sense of occasion, and consumers are happy to pay $4 to $6 per cup.

Depending on what a business does with it, coffee can be any of four commercial offerings:

Commodity, Good, Service or/and Experience

Businesses that ascend to the “experience level” establish a distinctive experience that includes the purchase of coffee, increasing its value significantly over the commodity price.

Why did Starbuck’s fail in Australia? Some would say the perception was they were selling a service, not an experience.

A Youtube video talks about Seattle-based coffee company Starbucks reducing its presence in Australia in 2008 by shutting 61 stores.

Unlike the chain’s organic launch into the US, slowly integrating the stores into the community, Starbuck’s arrived in Australia en masse without giving the consumer time to connect with the brand.
It was seen as commodity-based, offering basic menu items with the US ethos of ‘To Go’.

Unlike the US, Australians had been introduced to coffee by Greek and Italian immigrants in the early 1900s, and by the 1980s coffee was a big part of Australian culture – the individual characteristics of espressos, lattes and macchiatos were well-known and appreciated; friends and colleagues caught up over a coffee. Even the advent of the home coffee machine did little to diminish the ritual of “going out for a coffee”.

Bottom line – Australians preferred paying less – yes, less – for coffee made by baristas with speciality coffee skills, consumed in pleasant surroundings.

Late last year, Starbuck’s opened in Italy and they were mindful of their approach in a country rich in café culture and traditions. Their new site in Milan include a roastery where customers can see the process of coffee roasting, thus respecting the artisan origins of the Italian coffee experience.

The Aussie coffee experience has spread globally, with Australian roasters, baristas and business owners infiltrating New York’s café culture. It’s good news for locals, who never knew what they were missing, and great for Aussie tourists.

From Little Collins Café, a café in Midtown East, serving Aussie staples such as avo and feta smash and vegemite toast, through to Two Hands, a bustling café on the edge of Nolita and Chinatown which serves an “outback cap” – a cappuccino with powdered chocolate on top, and a Tim Tam on the side.

While there are many more, NYC is not the only benefactor of Australian coffee culture. Coffee lovers in London, Tokyo, Hong Kong, even Mumbai, are all experiencing Australian expertise and hospitality honed over decades.

In Melbourne we are spoilt for choice, happily walking a new street or laneway to ensure the best coffee experience to meet our individual needs.

My first grown-up memory of coffee in Melbourne was in Italian cafés and restaurants like Mietta’s, Bortolotto’s, Di Stasio’s, Florentino’s and Pellegrini’s. To walk through these historic doors to grand, or not-so-grand, spaces, bustling with interesting people, menus with exotic pastries, waiters in black and white and speciality coffee, was very special to this country girl. In my early working life Syracuse, The European, Walter’s Wine Bar, Black Cat Café and Mario’s became regular meeting places

What are the chances of a speciality coffee roaster moving in below your office? In 2009 Market Lane Coffee set up in Prahran Market. Each morning I would order my brew, head upstairs to turn on my computer, by which time my perfectly delicious coffee would be waiting.

Today, I continue seeking out new places to enjoy coffee in the city, the suburbs, the regions, and other states. For me, the coffee experience is a ritual, combining the elements of a special place, a good coffee, warm staff, conversation with friends, or merely solo time to think, read or work.

When a customer buys an experience, they are paying to spend time enjoying a series of memorable events – almost a theatrical play – to be engaged in a unique and personal way.

When we have alignment of product, place and people, we ensure that the customer’s experience is heightened, encouraging them to return and to share their experiences with others, thereby increasing the profitability of our business.

References:

Natalie is a leading food and tourism growth strategist and the Managing Director of Natalie O’Brien & Co. You can read more about her experience here.