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Will Tim Hortons’ upsized cups pay off?
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By Liam Lahey | Insight
If it's Tim Horton's that pours your favourite cup of joe, today marks the day you'll need to rethink what it is you're ordering.
Last week, the iconic Canadian coffee retailer announced on Jan. 23rd it would introduce a new 24-ounce extra large cup. As part of that initiative, the company will also shift the names of its other coffee cup sizes. Thus a 'small' is now an 'extra small', a 'medium' is now a 'small'; what was originally called a 'large' is now 'medium', and the former 'extra large' is now simply 'large'.
"We listened to our customers and the feedback we had from our coffee lovers was they want more coffee," explains David Morelli, director, public affairs, Tim Hortons Inc. "In order to accommodate this new cup, we're changing the names of the cup sizes. The amount of coffee remains the same, the price you pay is the same it's just the name that changes."
Morelli admits there was some concern in Timmy's hallowed halls of power over doing so but two successful pilots quelled any fears of customer mutiny.
"We did test markets in Sudbury and Kingston (Ontario) last summer and into the fall. Frankly, to our surprise, people adapted pretty quickly," he says.
Humans are adverse to abrupt change. When something becomes a daily routine for people changing that habit can sometimes lead to a backlash.
"People that come to our restaurants have the exact change on a daily basis down to the penny because they know exactly how much their order will cost," he says. "Whenever there's a change in that kind of a routine you need to make sure your customers are able to adjust."
Dom Caruso, president and COO for advertising agency Leo Burnett Canada in Toronto, thinks Tim Hortons' move is a smart one, particularly in light of the fierce competition it faces from rival McDonald's.
"It will probably cause people to trade up in size and we do know the market to some extent has been exposed to a lot of 'extra large' sizes out there. Starbuck's has led the way in terms of how large a coffee can be," he says. "Over the long-term they'll need to keep their eye on McDonald's.
"McDonald's is very aggressive in coffee. They've done a lot to invest in that business in terms of the product and customer experience. Like Tim's, they're more in the value segment of the coffee business as they're not pricing in the same quadrant that Starbucks is."
However, in order to ensure the effort is a success, Caruso says the first couple of weeks will be critical as Tim's staff essentially trains its customers.
"At the end of the day, they want their customers to be highly satisfied," he adds. "It'll be interesting to see what the communication will be like in-store from a point-of-sale point-of-view as well as what the staff themselves do."
To that end, Timmy's could take a page out of Starbucks' book.
"They've been very good at training customers on how to order from a fairly complex range of coffee," Caruso says. "In terms of operational excellence, that's what the staff needs to know."
"Our staff are going to work as hard as possible to help people with the adjustment and remind them of the name changes," Morelli says. "Hopefully, it will become as routine for people (to place an order) as it was before."
Regarding whether or not the switch will impact the Tim Hortons brand, Caruso sees no real threat on the company's horizon.
"In the case of Tim's, I don't think customers have an emotional attachment to a particular size. I wouldn't expect any long-term downside to that," he says. "Tim's decided a long time ago on a very practical naming structure, there are no fancy names for what their sizes are."
Same store sales in the restaurant industry are of great importance, Caruso adds.
"In driving same store sales you've got a couple of options: Can you get more people in there? Or you can get them to spend a little more," he says. "In the case of Tim's I'd say for most locations it would be almost inconceivable that they can drive more traffic.
"They need to find ways to be true to their brand and the value that they represent in the market."
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