Free coffee! Free coffee! But only if you don’t mind the guilt of not giving a donation, you cheapskate.
Steven Levitt, one of the authors of Freakonomics, posted an article last week about an interesting new coffee shop in Seattle, WA: The Terra Byte Lounge — “an upscale voluntary payment cafe/deli.”
The Seattle Times calls the founder, Ervin Peretz, the “Robin Hood of the Starbucks set.”
Terra Bite Lounge looks like any other coffee shop – until you get to the menu. There are no prices listed. Terra Bite doesn’t have them.
You read that right: No prices. Customers pay what and when they like, or not at all – it makes no difference to the cafe employees, who are instructed not to peek when people put money in the metal lock box.
And there’s the rub. The coffee is essentially free and customers have the option of contributing however much they want – a “voluntary-payment” system, as the Kirkland Weblog calls it.
Quite an interesting social experiment in trust and honesty, eh? Are customers really paying? Yes, at an average of $3 per transaction. Some even pay more than they would at Starbucks (SBUX).
It’s because the social pressures of contributing are strong. One commenter on the Freakonomics Blog added that, “peer pressure & guilt is only part of it. There’s also an element of the reciprocity impulse, and darn it, just plain old decency.” Another commenter offered a counter argument, however:
I live right around the corner from Terra Bite in Kirkland. This business model makes me feel uncomfortable when I’m there – did I put enough in the box? Did I put too much? I really like having a fixed price to pay.
I’m uncomfortable with tipping too, for the same reason.
Will this business model work? We’ll see. Another Starbucks cafe just opened in the same neighborhood. The competition will be fierce. But if it does work out, Peretz has hinted that he’d be interested in expansion.
Hmmm. Think free coffee will work in San Francisco?
