Frozen Yogurt, Coffee or Cupcakes? None of the above. What you are really buying is the ambience and the buzz…
Near where I live, about a year and a half ago, a vacant store next to a grocery store in a strip mall displayed an “opening soon” board and workers were swarming all over it. A few weeks later, Zinga! Frozen Yogurt opened to some fanfare.
Fast forward to the summer of 2012.
Most evenings the place was packed. Happy families, kids, couples and singles could be seen streaming in and out of the store, lounging in their outdoor seating area and in essence, radiating happiness and summery joy. I had never seen that much traffic going into the strip mall parking lot before (not unless there was a coming snow storm and the masses were out to get every loaf of bread and every available bottle of milk).
So how is the fro-yo, the reason all of these people are ostensibly going there?
Pretty good…though not exceptional. Good ingredients, innovative flavors, good service and non-confusing options (their 3 step ordering process is outlined below).
But does that explains its popularity and self-advertised “one of the fastest growing franchises” status? No.
The answer, I believe, is that Zinga is very good at selling the experience and the ambience, $3 to $5 at a time…and combining those things with good, tasty food to creating the mythical “3rd place”, much as Starbucks did with coffee.
This is not a radical new way consumers have been sold to, though.
For the longest time, bars and clubs and have marked up alcoholic drinks 800% to 1000% to 2000% and sold them to the young and the restless that come to see and be seen and experience the bar or club’s ambience. Until fifteen or so years ago, people that wanted to drink coffee or eat some yogurt or ice-cream either went to a fast-food restaurant for its utilitarian look and rock-bottom prices or went to a nice restaurant for the sit-down service and hopefully some ambience, or grabbed something at Kroger and headed home to eat and imbibe in front of the TV.
But starting with Starbucks, that changed.
Starbucks was very good at figuring out that good ingredients, with some exotic flavors and good service – when combined with a welcoming ambience and the “3rd place” set-up, with Free Wi-Fi (limited to 30m now?) and comfy seating would allow it to charge $3, $4 or $5 ($7 this past holiday season for a one-of-a-kind coffee whose name I now forget) for a cup of coffee. And it replicated this model across the world.
Zinga is doing the same with vibrant wall colors, OK seating and buzz on Facebook. The result? Consumers (mostly kids with families in tow) go to a “cool” place. They buy something exotic (a “pacific coast tart” base to hold “valencia orange” frozen yogurt). They take it all in (are these metaphors dating me badly?). Perhaps run into friends or be seen. They walk out after spending $3 to $5 or even more on a cone or cup. And I guess talk about it later on FB or at school the next day.
Nothing wrong with that of course…but its a very interesting demographic trend that is as true in Ashburn, VA as it is in parts of Sao Paulo or Bangalore – as long as the demographics are yuppie-ish in nature. So one level this is a tad aspirational because people are spending $5 for something that only costs $1 or less to really put together (but then again you could say that for any restaurant meal). On another level, this taps into the human need to socialize and hang out with others. As long as they can afford it…but perhaps also if they can’t afford it every day, and view it as an affordable luxury. And on yet another level, it taps into yuppie-ish parents’ proclivity to spend a lot of money on what they kids want.
So this movement started with coffee yesterday (and will continue for a long time into the foreseeable future…don’t see Starbucks or its competitors going anywhere). We are seeing frozen yogurt today. There is also a growing “gourmet cupcake” movement ($2.75 and higher for a single cupcake) in some places.
I wonder what else will be used to sell more buzz and ambience tomorrow…
If you like this stuff you should read our expert analysis from Industrial Structure class on the Cupcake industry in Chicago
OK…I’m intrigued. Is that something you can send me?
PS: Glad to see your comments again on this blog Ryan