Pret A Manger's Subscription Headache

You'd be hard pressed to find someone who has never stepped foot in a Pret A Manger before. A play on the term pret a porter meaning ready-to-wear, Pret A Manger is an office lunchtime staple worldwide, with 697 locations worldwide. What started as a sandwich chain, Pret is now a one-stop-shop for all your quick meal needs, with sandwiches, soups, snacks and drinks all available.

In September 2020, in a strategic move as the UK emerged from the Covid lockdown and started going back to the office, Pret introduced their Coffee Subscription, where for £20 a month, customers could get 5 coffees or barista-prepared drinks a day, as long as there was a 30 minute gap between each redemption.

The prices went up pretty quickly, with a £5 price bump in 2022 and another £5 hike in 2023, meaning the current model is £30 a month, with the added benefit that members can get 10% off any drink outside the 5-a-day redemption quota. In 2024, this 10% discount off drinks became 20% off the entire menu, to justify the price hike.

The subscription was hailed a success. In 2021, 34.7 million drinks were redeemed globally, and this grew by 67% in 2023 to 57.9 million redemptions. In addition, the average order value made through Club Pret (as the subscription service became to be known) was on average +30% compared to regular transactions.

So far, so good, right?

Until Pret realised a fundamental issue that is incredibly common within the world of subscriptions: membership sharing. Members only had to show a QR code to redeem their drink; no proof of membership, no proof of identity required. This meant it was very easy for members to screenshot their QR code and send them to friends or family, provided everyone redeems their drinks 30 minutes apart.

This should not have been new news to Pret when they launched their subscription service. The issue of password sharing was not a new phenomenon or an industry secret. So should Pret have considered this known issue at the creation and conception of their own subscription service? We would argue yes, and it wasn't just the subscription headache that they failed to account for.

What Pret should have considered

The well-known subscription headache

The headache of account or membership sharing is not new, nor is it a secret. The most obvious example of this issue was Netflix. In a 2019 poll, 70% of participants expressed willingness to share Netflix passwords with their partners, while 16% were already engaged in the practice, while another survey in 2020 revealed that 37% of people share their passwords with people they don't live with. This means prior to the launch of Pret's coffee subscription, the issues with password sharing for streaming platforms were not an industry secret, and in fact, streaming services such as Netflix were starting to think of how to crack down.

So when Netflix started cracking down on password sharing in 2023, sure, it was met with grumbles from the (non)paying public. This was to be expected. But from a company point of view, it was a huge success. Just two weeks after the beginning of the crackdown, Netflix experienced its four best days of user sign-up in four years. The following quarter, Netflix had 9.3 million additional customers, a +15% YOY growth in profits, and +23% growth in stock price.

While the fruits of Netflix's account sharing crackdown and the true uplift in profits only emerged recently in 2023/24, Netflix and other streaming providers were vocal about the issues with account sharing before 2020, so it should have given Pret food for thought on the matter.

Humans' love of loopholes

There's a reason why the saying "Rules are made to be broken" exists; it's because humans love to find ways to bend the rules and get away with it. In other words, humans love exploiting a loophole. It may not be flattering to think the worst of humanity, but when running a business--when money and livelihoods are on the line--these aspects of human nature need to be considered. We love to maximise our gains from any situation and pay as little as possible for it, and it's even better if we've managed to "game the system" so it disproportionately favours us as opposed to the business or company. Let's not be shy or coy about it; we've all been there.

An example is when ASOS introduced the minimum spend of £40 (or £15 if you are an ASOS Premier customer) to qualify for free delivery. Sounds pretty reasonable, right? I found out through colleagues that people then added other items to their basket to hit the minimum spend, and then returned the "filler" items, so they got the sub-£40-or-£15 product they wanted with free delivery, and everything else was sent back on ASOS's dime. Cruel? Savvy? Depends on which side of the transaction you are.

It's nice to think the best of humanity, of course it is. But when we have all exploited a loophole at some point in time, this tendency should have been considered. Especially when the loophole is so easy to exploit. A QR code is easily screenshot and sent to friends, especially if you know you won't be redeeming 5 drinks a day yourself. You're still saving money if you only have 2 coffees a day*, so then why not just give the QR code to your BFF Dave? He can just buy you a drink at the pub when you next meet.

* 2 x £4.05 for a flat white = £8.1/day, so if we say there are 20 working days in a month, that would have cost £162, so you'd have saved £132 by signing up to the £30/month subscription

People don't usually exploit loopholes out of malice or anarchy (though I'm sure some do). Most of the time, it's just friendliness, and in this case, using up the excess. But when you're running a business, this can have an adverse effect from a bottomline perspective. Using the above maths, if Dave himself went to get his own flat whites, he would have spent £162 that Pret now haven't received. Multiply that by 1,000s, then you start to see how this can impact profitability.

Expect maximum usage

Another potential oversight by Pret is that they potentially underestimated how much customers would try to use up their maximum entitlement. It may seem silly, but there is the possibility that Pret management thought, "There's no way people would redeem all 5 drinks in a day! Who needs that much caffeine?" and assumed the average redemption would be 2-3 a day, with less activity over the weekends, and so modelled their projections off that assumption. This again underestimates not only our love for loopholes but our desire to get the maximum out of what we've paid for.

Pret's subscription issue has been likened to Hoover's free flight promotion in late 1992. Hoover (yes, the vacuum cleaner brand) offered two complimentary round-trip plane tickets to the United States to any customers purchasing at least £100 in Hoover products. To put this into perspective, the tickets themselves were worth roughly £600. This promotion was held during a time of global recession, so naturally, the hope was such an attractive deal would attract customers and boost sales. Hoover were hoping that people would spend much more than £100 which would offset the cost of the flights, and they made the application process deliberately complicated in hopes it would deter customers from filing their claim.

Instead, in true human fashion, customers bought the cheapest Hoover products to spend as close to £100 as possibile (a vacuum cleaner at £119.99), and they actually bothered to go through the annoying claims process to claim their flights. Never underestimate humanity's tolerance for unnecessary paperwork in pursuit of free stuff.

Sales soon outpaced Hoover's projections by 10x: around 300,000 people bought qualifying products, meaning the promotion brought in gross sales of around £30 million. Great! But the maths wasn't mathing: Hoover only made £30 profit on the sale of that £119.99 vacuum cleaner, and the flight tickets were around £600, meaning every successful redemption would cost Hoover £570. Multiply that by 300,000, you're looking at a loss of £171 million.

Of course, this is a rough estimation, for there could be people who did buy bundles of appliances worth more, but this is a great example of when a company doesn't think of the best (or worst, depending on the angle) case scenario where the maximum number of people cash in. If you run a promotion or a service, you cannot assume that people will behave how you predict ("People only drink 2-3 coffees a day!", "People will give up on their free flights if we make the process difficult!", "People will be so enamoured by our products, they will spend more money than the minimum threshold!"). Bargains make humans behave in unexpected ways. Consultant Mark Kimber warned Hoover against the promotion but they went ahead anyway, meaning their problem was entirely preventable. The same can be said for Pret.

What should Pret have done?

Of course, we don't have access to Pret's inner costings to create a true P&L analysis, nor have we looked into the possible technological executions, but taking all the above into consideration, here are some suggestions of what we would have proposed.

An office/family subscription

Having spoken to people and read comments from those who have signed up to Club Pret, one of the reasons for account sharing is actually office-based. Mr Boss signs up for Club Pret, and then shares the code with his employees. They each trickle down to their neighbourhood Pret in 30 minute intervals, using Mr Boss's phone or a screenshot of the QR code. This isn't malicious account sharing, this isn't even loophole exploiting; this is a boss using his or her membership to boost team morale. In addition, given the coincidence of the introduction of Pret's coffee subscription with the UK's return to office, it actually makes sense to make it an office-based subscription.

Non-QR solution

QR codes are great. They are easy to scan, but it means they are equally easy to share. Fine if you're just earning points that take 2 years to accumulate to any worthy discount (joking, not joking, Nectar points); less desirable if enables one to redeem £607 worth of flat whites per month. Nowadays with digital advances, there are other phone solutions, such as NFC, so each redemption requires a tap from the phone of the account holder, which is not as easily shared as a QR code. Or even a physical membership card, so it needs to be verified to the account holder. These solutions may not negate the office-based issue, but can certainly stop Susie who works in London sharing it with her brother Luke who lives in Leicester.

Lowering the daily quota

The idea of 5 drinks a day was attractive because it was almost so absurd. What a bargain! Who needs 5 coffees a day? Who cares! Pret will cover them all. The reality is the average person in the UK drinks 2 cups of coffee a day, so then why offer 5 cups? Even 3 cups will suffice as an enticing offer. If you limit the subscription quota to only what that individual is likely able to consume, they are less likely to share the code with others, because that would mean they don't get to benefit from the membership themselves. They share the account not out of generosity of spirit, but mostly because they have the excess to spare. If the limit was 3 cups a day and kept to £25 a month, the customer would still be saving £339.50, but would have less incentive or opportunity to share the QR code with their friends.

Hoover essentially couldn't recover from their marketing mistakes. We don't believe Pret are in that predicament, but we do believe that Pret's current headaches could have been foreseen with market research and a realistic view of human nature. This is why strategy planning is so important: by exploring all possibilities and projecting the best- and worst-case scenario, you are able to avoid walking into obvious pitfalls and ultimately upsetting your customers down the line.

If you need help with your business's strategy, we offer Strategy Consultation, where we can analyse your business's current and future offering to see what the impact will be and what strategic avenue to pursue. Interested? Get in touch and see if we can help.