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There’s no such thing as free WiFi

August 14, 2012 by Richard in Internet, Marketing with 0 Comments

Many of us are now bandwidth junkies, our phones, tablets and laptops seeking to get connected wherever we go. Mobile 3G coverage remains patchy in many areas, so I often feel a little pang of joy when I find FREE WIFI.

I’m writing this from the free WiFi in an airline lounge at Heathrow. Earlier today I enjoyed free WiFi on the train from Yorkshire to London and on the Heathrow Express train. Last week I found free WiFi in Caffe Nero and even on a city bus in Oxford.

There seem to be so many more free WiFi services in the UK than back in Australia. For locals that can be convenient; for international travellers its actually very valuable as it avoids data charges of around $10 per MB on the phone.

Why do some businesses offer free WiFi while others insist on exorbitant access charges? Have these businesses really got their model right?

Why offer WiFi?

I think there are six distinct business models for offering public WiFi:

1. Revenue Generator: the simplest, often dumbest reason for offering WiFi. Users are charged, sometimes hefty fees, for access. Hotels in Australia are particularly guilty here, as are places like Melbourne Airport ($11/hr) . They prey on your immediate needs and are happy to rip you off once without considering the longer term customer advocacy impact.

However some businesses such as Boingo (Global), and BT Openzone (UK) provide WiFi networks in many useful places and allow subscribers access for a reasonable monthly fee.

2. Network Enabler: perhaps the purest model. Free WiFi is provided as a means of encouraging people to meet and share information. Most universities provide free campus wide WiFi, as do business hubs and libraries.

3. Traffic Generator: if people are seeking out free WiFi, why not offer it to pull them in. Smart cafes, pubs and restaurants have realised free WiFi is a great marketing tool. The outlet’s name will even pop up on people’s phones as they wander past. I’ve hung out in McDonalds and braved terrible coffee in a New York Starbucks for this reason.

In the UK, The Cloud has signed up several major hospitality and retail chains (Wetherspoons, Caffe Nero, Wagmamas, Giraffe) with the proposition that if they offer its free WiFi, it draws in customers and builds loyalty.

4. Email List Building: free WiFi in exchange for your email address. Your email address is valuable and most people are willing to register it with network if it means they can get online. Those dumb hotels and airports that try to charge a fee are missing an obvious trick, particularly as travel is one of the most valuable retail markets on the internet.

Consider for a moment how much an email address might be worth. Email marketer Groupon’s latest results indicate that:
- they spend $11.22 acquiring each new customer
- they generate $7.40 profit a year from each active customer
A rival discount voucher site in the UK has informally suggested to me that each email is worth GBP 7 profit a year.

So, the $10 or so in revenue that a hotel or airport takes from the people who bother to sign up is small compared to the potential email addresses that they are letting go.

5. Customer relationship management: again trading free WiFi for your customer’s email address, but this time so you can build a relationship with them. Why would an Oxford bus company want the email address of someone using it? Because it identifies the passenger to them and helps them track how they use their services. Perhaps they can be marketed to for their longer distance services and ensure their buses are used instead of their rival’s (Oxford has two fiercely competitive bus operators).

6. Premium Service Differentiator: WiFi access is part of an added value service. If it has a value, use it to justify an overall higher package price. I know people who choose to buy a first class train ticket from their city into London partly (but not entirely) because it includes WiFi that otherwise might incur a fee in standard class. Some UK mobile networks offer access to BT Openzone’s WiFi network as one of the benefits of their higher value plans.

Differential WiFi pricing on East Coast Trains (UK): unlimited free in first class, 15 minutes free in standard class then pay for extra

Free WiFi on the Heathrow Airport Express train

Free WiFi on buses in Oxford, both express services to London and local City services

Free WiFi in Caffe Nero

References

Free wifi in airports discussion: Airline Reporter

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