Subscription As A Loss Leader: A Lesson from Burger King
Burger King is offering a coffee subscription for only $5 per month. That’s less than two trips to Starbucks!!! How can they do that?
Here’s a better question. Why do they do that? So often we look at a company’s product offering and assume they are trying to make money selling that product. Most of the time that is a great assumption. However, sometimes companies offer products or prices for strategic reasons.
Although I do not know this for a fact, it is extremely unlikely that Burger King offers a coffee subscription to make money selling coffee. They offer it so that when you come into BK you will buy something else as well. You could think of this as using a subscription as a loss leader.
Here are a couple other possible “subscriptions as loss leaders”:
- Amazon Prime likely exists for the same reason. Amazon probably doesn’t have you as a Prime member so they can make money on shipping boxes. Rather, they want you to join Prime because you have even more incentive to buy everything from Amazon. Why shop anywhere else?
- Fender Guitars realized that 90% of first time guitar buyers stop playing within the first year. They realized if they could get that number down to 80% it would double their repeat purchase market. Pretty smart thinking. They implemented a subscription program to help people learn to play guitar. Surely, they want to make money on the subscription, but what if they don’t? What if they just boost guitar sales by 20%? Seems worth it.
Mark is a pricing expert who helps companies understand value, how to create it, communicate it and capture it. He has a PhD from U.C. Berkeley and an MBA from Santa Clara University, plus 25+ years pricing experience. As an educator, speaker and coach, Mark applies innovative, value-based pricing strategies to guide growth and increase profits for large and small companies.