Situational Analysis: Current market strategy: Target Market: Target B to C:
The main target of Nespresso are people staying in cities and having a high income.
Target B to B: Premium supermarkets. and Marketing mix:
Product: Nespresso offers a extensive range of premium products in the single serve coffee industry It creates a high standard, fosters continous innovation and provides excellent service.
The various products it offered were machines, capsules and accessories in form of cups, tableware and candles. Most of the machines are compact and well-designed and with most machines making expresso like, Pixie, Essenza, CitiZ, Lattissima, etc.They recently added Maestria for making cappucinno which included staming/frothing wand,but was expensive. The finest coffees in the world are blended, roasted and ground with the utmost skill for the capsules, which are made of aluminum. The coffee had varieties like arpeggio, capriccio and Rosabya de Columbia, and also limited edition varities.
Price: Nespresso is highy priced with machines in the range of 179$ to 699$ and capsules in range of 0.65$ to 0.70$. The price of capsules from Nespresso is higher than alternative brewing methods. This has enticed supermarkets to produce Nespresso compatible capsules and might lead to Nespresso customers using more affordable capsules than the ones from Nespresso. Place:Nespresso based its distribution channel on its partenered retailers, flagship stores and its online website. Thus, Nespresso uses mostly direct distribution channel by direct contact with customers for most of its capsules sales. Promotion: Advertising was limited to infrequent print ads in regional editions of magazines and newspaper like the The Wall street Journal, Esquire, Food & Drink, Town & Country. The flagship storeshelped promoting as customers gets a chance to test the product before buying leading to long term relation with its club members. But this approach will fail to capture the part of booming market.It didn’t use TV Ads as done in Europe which featured actor George Clooneyleading to their growth of more than 30%.
External Environment :
Below is a brief analysis Nespresso’s external environment, which consists of four key components:
1) Customer:
Market Demand and buyer behavior: Coffee has become a necessary commodity for most Americans over the last few years. Nespresso provides customers with sophisticated coffee brewing machines helping them brew that perfect cup of coffee at the convenience of being home. Nespresso targeted the premium coffee segment. The demand for capsule coffee was surging among US consumers. It is in growth stage of product lifecycle. The growth of single-serve coffee had grown by 66.1% as seen in 2012. The appealing machine design, shiny capsules and various holders attracted the consumer segment.
2) Conditions:
a) Political: Nespresso must consider the regulations from the countries they are importing from. Companies have to source its coffee considering political upheavals, changes to policies, and foreign government seizing company assets. Furthermore, firms have to comply with government laws such as business entity applications, legal contracts, store and factory leases, and tax laws etc. The local governments have certain regulations pertaining to labor laws, food-handling regulations, and business practices restrictions in marketing and advertising. Specialty coffee firms, are subjected to numerous regulations by federal agencies, including the Food and Drug Administration, the Department of Agriculture, the Federal Trade Commission, the Environmental Protection Agency and the Department of Commerce, regarding the production processes, product quality, packaging, labeling, storage, and distribution. Furthermore, they are subject to regulations by the Federal Trade Commission.
b) Economic: In the past couple of years the cost of coffee beans
