Panera introduces “take all you need, pay what you can”

It’s only on occasion that I write something specific on this blog about Mullen or our clients. But once in a while there’s something too good to pass up. This week’s move by Panera Bread to open a “community café,” that allows people to “take what they need and give all they can,” is a case in point.

I don’t need to tell you too much, as the story is pretty much everywhere. In a nutshell, Panera opened a new non-profit store in the St. Louis suburb of Clayton. It looks and feels like any Panera except the prices are different. There aren’t any. You pay what you feel is fair or whatever you can afford.

According to Ron Shaich, Panera’s Chairman (he just resigned his CEO position to head up this new initiative) this is something he’s wanted to try for a long time.

A skeptic could come up with any number of reasons to question a project like this. It doesn’t make good business sense. It could eat into business at the for-profit stores. It’s not a long-term growth strategy. An optimist, on the other hand, might argument that it’s brilliant. Showing that Panera cares about the community. Conveying it’s a brand with a social conscience. Endearing itself to the thousands of customers who won’t merely patronize the café but will turn into vocal advocates for the idea.

This week’s Fast Company declared that the most important leadership quality a CEO can possess is creativity. Not operations. Not finance. Not management. Creativity. Creativity means breaking with the status quo, trying things that have never been done, innovating on a regular basis. And in the case of Panera, and Ron Shaich, following your heart.

Here’s to hoping this little experiment works and inspires more brands to be equally inventive.

18 comments
John Bidwell
John Bidwell

God, I love a gutsy idea. My hat is off to Panera. I would love to be a fly on their wall--and risk getting swatted--to hear the math behind this. What are the staff savings vs. projected losses? I would also love to see them doing this in different communities. Where will it be most successful? (I'm reminded of the bagel guy in Freakonomics who found that smaller offices followed an honor system better than larger ones. What will Panera discover? Lastly, I would like to see Panera's present its mission in different ways to see what works best. My hunch is that this one is too general.

Steve
Steve

Interesting idea, Edward. Not sure it will have much impact on hunger (if that's what it's about), but we'll see. Could definitely see it as a vehicle for community-based groups and organizations to rally around, volunteer and learn more about local service and giving. Altruism aside, sort of agree with Jeff that this may have more value as a marketing vehicle to serve the larger organization. If nothing else, it's definitely a great environment to study human behavior!

Ben Kunz
Ben Kunz

This is crazy smart.
.-= Ben Kunz´s last blog ..Why do CPMs still exist? =-.

Lalia Helmer
Lalia Helmer

Interesting points made here by some well known experts in the field of cause marketing. The main point of your blog here is to promote creative thinking, and that is exactly what Panera has done with this philanthropic business. Creativity requires taking risks and experimenting and some times those experiments fail, but never do they become "stale". Instead with a few more ingredients they may morph into a different product and finally succeed.
Other restaurants have tried this model, such as small one in Texas that I have written about. Recently a gaming company, Wolfire, has offered a pay as you want model for their game bundling packages that will be donated towards charity.
Bravo to these companies for their creative experiments. Even is as a business model they will not succeed,they will inspire others to continue to invent other ways of merging business with philanthropy.

Olivia Khalili
Olivia Khalili

Denise Cerreta's One World Cafe in Utah has been doing fairly well since she opened it in 2003. I read that was an inspiration for Panera.

Tim, the idea doesn't seem to be giving food away from what I understand; it's to make food available to people at a price they feel it is worth to them. I actually think it makes sense to roll it out in an upper-class community (at least publicity-wise), as my hunch is that people would over-pay slightly. Stereotyping here, for sure, I know. It will be interesting to see how it unfolds, but I love the creativity and the follow-your-heart-of-it.

Jenifer Olson
Jenifer Olson

Interesting idea, Edward. Not sure it will have much impact on hunger (if that's what it's about), but we'll see. Could definitely see it as a vehicle for community-based groups and organizations to rally around, volunteer and learn more about local service and giving. Altruism aside, sort of agree with Jeff that this may have more value as a marketing vehicle to serve the larger organization. If nothing else, it's definitely a great environment to study human behavior!

Megan Strand
Megan Strand

I have to say I'm struggling with this Panera donation restaurant idea.

As a social experiment, I think it's great. Will it self-sustain? Out-perform other Panera locations? What's the customer reaction?

But as a community effort, it feels like it's missing a crucial ingredient. Like education around why they're doing this or where your donations might go. It's missing the "story" portion that compels us as human beings to react, respond and engage. As a result, I think people will just end up more confused than anything...I know I am!

I love Panera and hope this story will evolve into more than just a blip in the headlines. I think the experiment is well-intentioned, but for me it's missing some vision.

Tim Brunelle
Tim Brunelle

First, it's exciting to see a national brand try. That's it. Try. As the Fast Company/IBM Global CEO Survey points out: Creativity is critical, so by that measure, Panera's succeeding with this new venture.

But here's a question: Why Clayton, MO? That community's median estimated household income is $73,193 (http://www.city-data.com/city/Clayton-Missouri.html). Whereas, a 15 minute drive across the river brings you to East St. Louis, IL where the median estimated household income is $26,083 (http://www.city-data.com/city/East-St.-Louis-Illinois.html). Why give away food in a wealthy community?
.-= Tim Brunelle´s last blog .."Step Into Liquid" - Great profile of HV from the Sr. Editor at Twin Cities Business magaz =-.

Susan Milligan
Susan Milligan

Thank You, I've not heard about Panera's new venture.
One of the mini-market chains donate their end of day day muffins, bread and donuts to local shelters. Our local Grocery Wholesaler donates fresh items to local church food pantries. These are good people and they are almost anonymous donors. There are many ways of giving charity.

The Panera is offering a good service and is getting advertising and good-will in return. And some money back, and volunteer staffing. (too good to be true?.....we'll be watching.) The idea is Take What you Need, Edward, but most people seem to Take All They Can. I'm excited to see how this idea from that creative CEO will adapt.

Volunteers from local high school and university groups might benefit from working there. Would be an excellent lesson for Y Generation to learn about extending charity.

Jeff Shattuck
Jeff Shattuck

Hank,

Setting aside Panera for a minute (I'll get back to it), I want to challenge your theory on why people don't seem to be willing to pay for music. You're right to note that there it's a want (so is a Panera sandwich, by the way) and you're right that radio has helped drive an expectation that music can be free and never die. But to me, these are not the core reasons music is struggling with pricing. Rather, more than almost any other commercial product I can think of music can now be copied with magical ease. What used to take at least a minute-for-minute process, now happens in seconds-for-mintes -- even hours. Add to this the fact that record companies and bands have packed albums with filler for years, and you've got the means and the desire to steal. Which is what people are doing.

Back to Panera. I remember back in the dotcom days a company called onsale.com. After fumbling around in the auction world, they launched a notion of real time retailing, in which prices were constantly adjusting to demand. Not as altruistic as Panera, to be sure, but equally impractical. In my opinion, you just can't have prices being set on a real-time, individual basis, because planning and paying for inventory becomes nearly impossible, especially as scale rises (unless you're just a facilitator, such as ebay).

One more point: If I think about the Panera store as a marketing vehicle to serve the larger business and not as a business in and of itself, I can see its value. Of course, the cynical side of me then lights up and I'm liable to go on a rant against advertising (which I won't do because I'd just annoy people, myself included)!

Jeff
.-= Jeff Shattuck´s last blog ..Am I tortured enough to have my name in lights? (part two of two) =-.

Howie G
Howie G

That is awesome stuff. Love good feeling initiatives! I really hope it works.

I spent 3 years working as an out reach street counselor in LA with Stand Up For Kids helping homeless teens get by and eventually off the street. You have no idea how eager they would be to have something like this in Hollywood or Santa Monica. Often they go hungry because many of the places with food handouts require being preached too about religion. And these kids are pretty tenacious about life, and more respectful and kind that you could ever imagine for having such bad circumstances (most come from broken homes).

Hank Leber
Hank Leber

Needless to say, I'm a fan. It's the same principle that Agency Nil was built upon: the notion of good faith in business service and value-based pricing.

Often you don't need a mandate to make a price. The market will make it, with service and product quality as determinants. Most businesses are afraid to experiment with this notion, as it would seem that consumers would merely take unfair advantage of your 'free' goods.

But the consumer mind is not that primitive. We live in a society where people understand that the products and services they consume come from another human being who is making a business of it. He/she believes in the product and its value, and depends on that to make the business work. If people want quality, they will pay for it. This holds true for essential products like food, shelter, etc. - things that are low on Maslow's hierarchy.

Leeching the system is not the way to get the quality we desire. Consumers know if they don't pay fairly for it, it will go away and they lose the opportunity to have it. This example works well in the food service industry because it's something that we all need every day, and that has an inherent value in and of itself.

One major industry where this is not working very well is the music business. Artists are struggling more than ever and the creative product is suffering industry-wide. But why doesn't it work here? Two main reasons:

A) Music is something that is a want, not a need. So it isn't about sustenance, and the perceived value can then range due to a number of factors

B) For a century, radio has made a rendition of music that is free - so we're used to the concept and can more easily justify not spending for it.

Businesses will take more and more chances on the value-based free-pricing model. It's these courageous, confident businesses that will help keep industries self-regulated by providing raw, fair results. Not to mention the positive brand-building a company gets from making such a clear statement.

Cheers to Panera for taking a bold step. I'm excited to see how this may affect other food industry leaders. Wonder what would happen if Starbucks - with it's 3000% markup and position as a daily staple for millions, made a value-based move...
.-= Hank Leber´s last blog ..Pegshot, Foursquare just farm teams for Facebook? =-.

Joe Waters
Joe Waters

I think this is a good idea and one that demonstrates Panera's commitment to the community. It will be interesting to see if it works long-term.

In terms of being a new idea, it's only new in that it's being executed on the for profit side. Goodwill has been selling items for a donation for years. Progressive soup kitchens have sold surplus items to the community and even opened their cafeterias to the public.

The question is whether the cause element of this effort is sustainable. I'm not sure it is. As I often say, consumers want a world with causes, not a cause world. But the latter is just what this new enterprise delivers. And while consumers may love it now, will they still love it next year when they plenty of new places to eat and, perhaps more importantly, plenty of other places to give.

Will the funds raised to operate the cafe really be enough to sustain a high quality product that people want AND serve the community?

In short, while Panera is getting much deserved praise for this venture, the long term prospects for it seem rather stale.

Joe
@joewaters
.-= Joe Waters´s last blog ..8 Reasons You Should Go To Cause Marketing Forum Next Month =-.