Nespresso Coffee - Well Known Brand Name in Coffee Industry

Question: Describe a report about a brand called Nespresso coffee. Answer: Introduction Nespresso developed out of Nestle that was already a well-known name in the coffee industry. The line Nespresso was developed as a particular division within the firm that focused on the manufacture and marketing of ground coffee beans and added flavorings. The company is primarily responsible for the manufacture of the coffee machines that are used in coffee shops and other outlets for offering readymade coffee. The coffee capsules are a product that is related to the coffee machines because the coffee machines use coffee capsules rather than ground coffee in the systems. Although the price of coffee capsules is slightly higher than the equivalent amount of ground coffee powder, the marketing strategy has provided the product with the much-needed leverage in order to maintain a strong presence in the market. The product has in fact succeeded in achieving a presence in the market with an effect that it is the product that is more in demand than the low-cost coffee powder. The success of the product is thus related to the very effective marketing strategy that has given the product the means to sustain itself in the market. Background What is the product, who manufactures/delivers the product, and where can it be bought? The Nespresso coffee capsules are a product developed by Nespresso, which takes the idea of coffee preparation into a new direction by devising an idea of capsules. Although Nespresso did have products which included coffee powder earlier, the development of a product in a new line provided the company with a distinct product that had a completely different presence in the market. The coffee capsules were developed with the idea of using them in the coffee brewing machines that were also manufactured by Nespresso (Blythe, 2006). In such a case, Nespresso aimed at the creation of an exclusive product that had a presence in the market as something that other competitors dont offer to the customers. The main idea behind developing the coffee capsules was creating a product for the coffee machines where unlike the coffee powder, the aroma of the coffee does not go away from the coffee. In such a case, the coffee capsules were developed by the company with a view to making a product that provided for a single use and had all the ingredients including the special flavors in it (Brem, Maier, Wimschneider, 2016). The delivery of the product has been through a vast number of channels owing to a large number of families owning coffee making machines in homes (Cadogan, 2009). While earlier coffee machines were limited to the shops, the current trend of owning coffee machines in almost every household has encouraged the company to make their product available across all the platforms and outlets through which the customers are able to buy them conveniently. Internal and external analysis of the companys marketing environment The company Nespresso is one of the leaders in the coffee products and the products of the company including the coffee capsules have proved to have shown huge success owing to the successful marketing strategy of the company. The analysis of the internal and external marketing environment of the company reveals that the internal marketing environment is one that is always dedicated to the teamwork of the employees (Constantinides, 2006). The employees are given the idea that they are working for a reputed brand and as such, must work towards upholding the brand image. The analysis of the external environments brings to light the image of the company among the customers of the company (Dominici, 2009). It has been seen that Nespresso maintains a loyal customer base and as such, it is evident that the companys external marketing environment is a healthy one with a healthy relation with the customers. The main target markets for this product The target market for the product is across all the working class population. Coffee is a product that is marketable across all the sections of the population and also across the entire world. Since Nespresso uses the best quality coffee for its products, it is in a position to garner a large section of the customer base (Ferrell Hartline, 2005). The customer base for the coffee capsules includes the coffee shops as well as the everyday working class individuals who own coffee machines. The working class section of the society is one that is a constant customer of coffee and coffee products (Goi, 2009). Also, the rising incomes have created a growing number of the households owning coffee machines. In such a case, the customers extend to all the sections of the society that are growing increasingly conscious about high-quality coffee and is also ready to spend money for it. Marketing Mix Product While describing the product on three layers, the core product is, in fact, the coffee capsule that is much better than the powdered coffee as the capsules do not lose their flavor and as a result, help in the maintenance of a much better aroma that enhances the experience of the coffee. The actual product is developed keeping in mind the appearance and packaging of the product. The product is packaged by food grade materials that have minimum effects on the human body and also help in the preservation for a longer duration (Jain, 2000). The augmented product, in this case, is the level of responsibility it maintains in making the customer experience a pleasing one. The augmented product is also the one where the company is extremely dedicated to the quality of the product and also maintains a system of complaints against any defective or any product that is not up to the mark. The product falls under the consumer class as it is a product that is directed to the general population. A lthough the company developed the coffee capsules mainly with the idea of coffee shops in mind, it cannot be considered as a business product. This is because although the capsules are being sold as components for the coffee shops, it is still directed towards the general population (Kocovic, 2011). The lifecycle of the product can be seen when we take into account the development of the product. The product was developed with an idea of creating a product to go with the coffee machines. However, as coffee machines became more and more popular, the other competing companies also began developing substitute products for the coffee machines that were similar to Nespressos coffee capsules. However, Nespresso quickly overcame the competition by creating a line of coffee capsules that had variant flavors added to it (Krstic Becic, 2011). In addition to that, the company also improved the quality of their product to such a level that it was not possible for the competitors to compete on such a level. The branding strategy that Nespresso has used in this product is particularly significant as the product has been branded in accordance with the brand value of Nestle of which the brand is a part of. In such a case, the brand image and repute of Nestle has helped the product gain a significant level of brand value. Price The product has been priced slightly higher than its competitors. This is because the idea of competitive pricing would not work in the case of a product with such a high brand value. Keeping a low price would in fact cause the brand to lose customers as it would mean that the brand is compromising on its quality. In such a case, the idea of pricing in a manner that the brand value would be retained is a good strategy. The pricing objective that has been set for the product is one that aims at gaining long run profit. The strategy that is applied in gaining this objective is the process of creating brand value (Luck, 2008). While the brand has succeeded in creating a brand value, it has helped the company gain more profit margins on its products and has also contributed to the sustainability which provides for a long run of profits. The product has seen a rising demand if not consistent. More and more individuals are turning to the product due to the convenience in use and the shops are also making a continuous use of the product as the machines use the capsules (Luck, 2010). In such a case, the price elasticity is more or less rigid as the company does not increase or decrease its prices to a large extent. The prices are kept more or less consistent in an effort to convey the brand value while at the same time maintaining its affordability. The price of the product can be affected by the quality and the image of the product. Table 1: Table Showing sales of Units In western Europe as Compared to its competitors. Promotion The product has been developed keeping in mind the needs of the general population. In such a case, the IMC has been developed with a view to promoting the product among these circles. The promotion has been done across various channels that provide the company the means to reach out to the target customers (Yelkur, 2000). The internet advertisement aims at portraying the various flavors that the product provides.; the strategy that is applied here is thus a strategy of differentiation from its competitors (Matzler, Bailom, Friedrich von den Eichen, Kohler, 2013). The brand aims at portraying to the customers that it is able to provide the customers with a wide range of flavors that are not provided by the competitors. In such a case, the customers are also ready to go for the products as they do not mind spending more for a better product that also provides the customer with so many choices. The effect of the advertisement in a hierarchical manner is seen when the customer grows mo re aware of the product owing to its presence of advertising in a large number of platforms (Matzler, Bailom, Friedrich von den Eichen, Kohler, 2013). In such a case, the company then gains the customers attention and proceeds to show them their products which end up in the customer develop a liking towards the products. After that, the superior quality and the choices of flavor are conveyed to the customers which draw the customers towards the brand into making the purchase in the favor of the brand. In such a case, we have to analyze the various promotional elements in the brands advertising (Mullin, 2006). The companys promotional elements have strived to gain the customers attention and then aimed to show them the range of products and the quality of the same. In such a case, the messages of the advertisements have always been more directed towards one where the company displays its quality of products to a customer base that is extremely serious about this aspect and takes it seriously. Placement The marketing of the product has been done via direct as well as indirect channels in an attempt to gain a maximum share of the market and the customer base. The direct channels include the ones in which the company has its own outlets where the product is a staple and is sold in large amounts. On the other hand, the indirect means are the ones in which the company sells it to the coffee shops but it still manages to reach out to the target customer base (Oldroyd, 2004). In such a case, the company may sell its capsules to the coffee shops but ultimately. It reaches to the customers who are also individual customers of the capsules for their machines at home. The distribution strategy for the product is a conventional strategy that makes use of the conventional modes of distribution as well as the modern means (Phillips, Doole, Lowe, 1994). Table 2: Nestles Market Shares in its main Markets for Coffee As the company is high on demand among all the strata of customers, it is not surprising that the product performs significantly well because of the conventional distribution system (Paley, 2007). The distribution intensity that has been used by the company is an intensive one and it has proved to be quite suitable for the company. While earlier the company reached out to the customers, the distribution system is now on where the customer reaches out to the company for their products. The company maintains a presence in supermarkets as well as specialty stores. The company also has a presence in department stores (Richter, 2002). Also, the company maintains a presence on the online platforms. The product is one that is particularly high in demand and as a result, being present in a wide range of channels is indeed important. Table 3: Place of Nespresso Coffee Capsules in the Market Conclusion Nespresso has been a successful company till date and their product, the coffee capsules have also been extremely successful. The product was launched as a part for the coffee machines in the shops. In such a case, it was a business product and had a niche customer base. However, the rising incomes provided the everyday working class citizens top own coffee machines and as a result, the product saw a surge in its sales. As a result, it changed its status to a consumer product. The rise in the sales meant that it was now open to a wider market that also provided more challenges. However, as the product progressed, there was also a number of competitors that appeared on the scene. In such a case, the product needed an efficient marketing strategy that would help it in maintaining its place in the market. The marketing strategy of the company intensified on maintaining the product quality while creating the differentiation and uniqueness of the product. Innovative Recommendations The coffee capsule is in itself an innovative product by Nespresso. However, there needs to be a continued innovation for the product. The product has seen a constant evolution due to the various challenges in the market. The various competitors have followed the exact same strategy and as a result, Nespresso aimed at the formation of innovative products that always provided the company with a product that was exclusive as well as better in quality. In such a case, the innovation is one factor that the company cannot compromise. Constant innovation is the key to sustenance in the competitive market. The innovation of the product has been seen when the company introduced the range of flavors in the capsules. However, the company must keep in mind that the innovation in the product needs to be continued. There needs to be a dedicated team that works for the research and development of the product in a manner that it caters to the preferences and choices of the target customer base. Als o, the promotion of the company needs to be innovative. 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