NESPRESSO

Introduction
Launched 30 years ago, Nespresso is a subsidiary of Nestlé and one of the
worldwide leaders of coffee market. The brand became very famous
thanks to the coffee maker based on capsules. More than a simple coffee,
Nespresso managed to create litterally a “Nespresso experience” by its
innovative concept.
All this case long we are going to analyze the company and is strategies
throughout the SWOT, the positioning, the targeting ant to finish the
marketing mix of the brand.

SWOT analysis:
External analysis:

Opportunities Threats
Coffee becomes one of the most
popular drinks in the world. More Coffee is facing stiff competition
than 1.5 billion cups are drunk, from other soft drinks. Hard
every day, worldwide. Huge market. competition on this sector.

«going out for a coffee » has
become synonymous with informal
meetings or social occasions.
The advertising campaigns that have
been developed by the soft drinks
companies, have communication
budgets significantly higher than
those of the coffee companies.

Over the last 30 years, one can
observe that non-alcoholic soft
drinks have become much more
successful.
Current trends which emphasise
paying attention to one's well-being
and health tend to favour the
consumption of so-called healthy
drinks which are beneficial for the
body such as fruit juices and mineral
waters.

New types of coffee consumption Traditional offerings on this market

are developing notably via the are losing ground.
success of American-style coffee
bars such as Starbucks.

Sales in terms of value progressed Prices for end users have increased
slightly as a result of the increased significantly.
popularity of fair trade coffee and
capsules (Nespresso, Tassimo,
Senseo, etc.), both of which have a
strong growth potential.
Some of the consumers are ready to The hard discount channel is
pay more for a more upmarket increasing its influence on this
coffee. market.

Capsules have proved popular with

coffee enthusiasts of all ages, and it
is therefore not surprising that
Nespresso see this segment as a
strategic growth opportunity.

The dynamism in this market has

obviously been accompanied by a
significant rise in the number of
specific machines sold for the
capsules segment.

The roasted coffee market has also

seen significantly improved
performances for fair trade
products.

There is also increasing awareness

of issues associated with fair trade
and sustainable development.
Customers are extremely
responsive to promotional offers on
coffee.

Consumers are more and more

demanding about the quality of
their coffee.

Consumers also expect an

increasing ease-of-use in relation to
coffee.

Consumers are increasingly taking

ethical issues into account in
relation to their consumption of
coffee, and hence the fair trade
coffee segment has grown strongly.
Internal analysis:

Strengths Weaknesses
The coffee industry has recorded coffee consumption among young
record profits every year since 2001. people has declined significantly

Coffee is the most traded commodity Over the last 10 years world prices for
in value on world markets with the coffee have fallen steadily, reaching a
exception of oil. low of 44 US cents per pound of
Arabica in 2002.

The coffee market in France is worth
1.105 billion euros and represented
143 089 tonnes in 2006
The sale price of coffee that goes back
to the producer is minimal once all the
middlemen have taken their cuts.
Some of these intermediaries are
renowned for singularly unscrupulous
business practices.

The capsules segment has increased Coffee is mainly drunk in northern

by 57% in volume and 56% in value
during 2005 in the mass retail
channel. The market has grown by
approximately 30% annually since
2005.
countries. Most of the producer
countries drink, considerably less,
both in quantity, and in quality, and
frequently only instant coffee is
available to them.

Machines from Nespresso can produce Capsules system is not environment-

real espresso. friendly.
Nespresso chain outlets are now Customers are extremely sensitive to
competing with Italian brands Illy and pricing.
Segrafredo or other players such as
Starbucks Coffee and Colombus
Coffee.

Club Nespresso provides personalised

advice 24 hours a day 7 days a week
on coffee, how to use the product and
maintain the machines. It is also a
sales channel for ordering capsules,
machines and accessories and
guarantees delivery within 2 working
days.
There is also a technical issues hotline
which is open from 8am to 8pm on
weekdays and from 9am to 7pm on
Saturdays.

Technicians provide assistance with

regard to machine returns, repairs,
replacement machines and after-sales
issues.

Nespresso prides itself on providing

special services to companies which
choose to install machines in their
offices. Similar service is provided to
hotels, restaurants, luxury goods
stores and airlines who serve
Nespresso to their customers.

They also provide personalised follow

up for the customer. This depends on
how much coffee the customer buys
and reminder emails are sent when
the company thinks the customer is
likely to run out. Anyone who buys a
Nespresso machine is automatically
made a member of the Club. It is also
possible to join the club directly
through the website.

Diagnosis and advices:

Coffee industry is a very thriving one, it has a huge market with great
opportunities. Coffee is the most popular drink in the world. This sector is
very dynamic with famous and useful innovations such as the Capsules or
Nespresso machines; both have a strong potential. Capsules and
Nespresso machines are a strategic growth opportunity. Consumers pay
more and more attention to quality of coffee and some are ready to pay
higher price for a more up market coffee. They also expect a more ease to
use relation to coffee. So, Nespresso has to keep on innovating to fulfill
consumers’ needs. Analyzing consumers’ needs and aspirations in terms
of coffee could be a great mean to achieve those objectives and adapt the
offer to consumers needs.
Nespresso has to face a hard competition from the others soft drinks that
have higher communication budgets. Moreover, the current trend for
health and well being act in favor of so called healthy drinks such as fruit
juice, smoothies and mineral water. So, Nespresso has to keep being
competitive on the sector, it should increase the communication budgets
and focus on the benefit on health of coffee.

Coffee business is renowned for unscrupulous business practices, so

Nespresso has to improve its involvement in issues associated with fair
trade and sustainable development. Brands must therefore deal with the
paradoxes that exist in relation to consumer demand: they must market
inexpensive yet high quality products that are easy to use and ethical.

Targeting and positioning

The target aimed by Nespresso is the consumers Top of the range.
The customer typifies in between 28 and 49 years, he is urban, likes
pleasing and is an art lover.
The new target aimed by Nespresso at present is the young assets. Indeed
according to the CEO of Nespresso it is the young assets which are going
to allow making increase the equipment rate in coffee machines.
Concerning the location of Nespresso it is a question down from Range
with a policy of creaming.
Indeed the price of coffee machine Nespresso is appreciably more brought
up than a coffee machine Senseo (at least 50€).
Of more Nespresso try to refer to its image top of the range luxury and
class not only in its Coffee but also in his shops who are generally situated
in the very rich streets of cities, but also in their association with Star like
George Clooney or the participation in events as Rolland Garros, Of
America Cup.
The creation of the Club Nespresso adds a luxury touch to the concept.

Marketing Mix
Product:

Nespresso proposes 3 different types of products.

The espresso machines: they are manufactured by 6 different companies
and combine technological technology, simplicity of use and innovative
design. There are 5 different ranges of machines available in different
colours and able to deliver a sufficient pressure to make a true espresso
which is not the case of all coffee machines (Senseo, Tassimo).

Nespresso also produces capsules which preserve all the aromas of the
coffee and are available in a wide range of flavours (16 different flavours).
These capsules can only be used with the coffee machines of Nespresso.
Thus, the customers can choose the aromas of their coffee but can’t
choose the brand and the price: they have to buy the Nespresso capsules.
Nespresso proposes accessories linked to the espresso machines and the
capsules. The customer can buy several objects such as coffee sets, trays,
storage racks for capsules and more sophisticated accessories. The
espresso machines are even delivered with a set of cups especially
designed for Nespresso.

Buying an espresso machine and capsules, the customer enters in a club

which permits him to enjoy Nespresso services. The Nespresso Club offers
advices about the coffee, the maintenance of the machines and permits
the customers to order coffee machines and capsules. The customers can
enjoy these services in Nespresso shops, on Internet and by phone.

Place:

There are four different channels of distribution.

First, the espresso machines are distributed in electrical goods shops. The
potential customers can only buy a coffee machine in this kind of shops,
the capsules and the accessories are not distributed in these shops.

The customers can also buy espresso machines, capsules and accessories
in the 15 Nespresso shops in France (42 around the world). These shops
are the base of the experiential marketing strategy developed by
Nespresso. All has been designed so that the customers make themselves
comfortable: the atmosphere is warm, there are chairs… The potential
customers can taste the different flavours of coffee, try the espresso
machines and listen to the advices of specialised salesmen. The aim is
that the customers see the purchase as a pleasant experience which will
make them want to come back in the shop and buy other Nespresso
products. These shops are a real show window for the brand, to show to
the customers the “Nespresso’s drinker way of living”.

The coffee machines, the capsules and the accessories are also available
on Internet and by phone thanks to the Nespresso services. However,
these services are reserved to the members of the Nespresso club. Thus,
the customers have to register trough the website and/or buy an espresso
machine to enjoy Nespresso services and order capsules. Indeed, buying
an espresso machines, the customer enters in the club which permits him
to order capsules by phone and on Internet (the capsules are only
distributed to the members of Nespresso club).

Price :

The capsule’s coffee proposed by Nespresso is a luxury product. So the

price of the capsule is very high (0,31 Euros) : we can indeed notice that
the price of the product is the higher of the market, three times higher
than the retailer’s brands that are invading the coffee’s market. But
Nespresso is also widely more expensive than some famous brand like
Jacques Vabre for example whose capsule are sold at 0,13 Euros.
The Nespresso’s products are voluntarily more expensive because of the
image of the product. Nespresso wants to give a luxury and upscale image
to his products and play on the design and on the quality to justify the
price. The Nespresso’s products are products which are bought by wealthy
customers. The customers are ready to pay a higher price to have a
different and high quality product, but also for a very good customer’
services (with the club) and a very personalized relation with the firm.

Promotion :

The last advertising campaign on Nespresso was a real success. The

advertisement shows the actor George Clooney in different situation and
saying the slogan which is now famous: “Nespresso, What Else? “. The
communication was huge for this campaign and the results are impressive:
according to surveys, this campaign has a 66% of knowing and 85% of
appreciating of the coffee’s customers. This was really memorable for the
customers and the popularity of the product knows an incredible increase.
George Clooney is a very adapted for the product: his image and his style
are very close to the product and Nespresso’s customers. And he is a
consumer of this famous coffee. This is the first all-public advertising’s
campaign of Nespresso which aim to have a most important popularity in
the public. The previous campaign and communication was more elitist
and aim to reach a reduce target.

Nespresso communicates on the fact that they offer a lifestyle with the
product and a new image to the customers. If they buy the product, they
enter in the “club”, which looks like a group of privileged people, they are
just living something different. The advertising campaign is also created to
start a buzz. He is announced like a date where people will be impatient to
discover the new spot. The release of the advertising is always a real
event.
Nespresso communicates also in sponsoring boats on famous sea’s race
like for example ‘la coupe de l’America”. It is always a communication
which is respectful of the image of Nespresso. They use their image only in
upper communication and in communication representative of their
customers.

They also decide to promote a more sustainable and ethic image. They
associate their image and create some product Nespresso faire trade and
sustainable development. They just want to correct their image because
their capsules for the coffee are more polluting than the competitors and
have a bad effect on the earth. They also want to associate their image to
this because their upper-class customers are more interested in this ethic
aspect than others customers. In fact, it is a trendy way of consumption
for wealthy people. They want to share the same values than their
customers.
They also develop very interesting sales promotion: Nespresso knows that
their coffee maker works only with their capsule. So they make promotion
on the coffee maker to make people buy it and customers who have
already buy it at a low price are oblige to buy Nespresso capsule and
that’s why the coffee maker is not really expensive. They play on the
exclusivity of the capsule Nespresso on the coffee maker.

The direct marketing make between Nespresso and the customers:

Nespresso makes a one to one relationship with every customer which is
member of the club Nespresso. The first advertising campaign of
Nespresso was on this club. Nespresso is doing direct marketing in order
that the customer feels that he is a privileged and has all the attention of
the firm. The service is come with a newsletter to inform the customer
about the evolution of the firm (not advertising) and a reminder of order
calculated on the frequency of purchase. This is possible because
Nespresso has a lot of information about their customers and know what
their habits are and what they like.

Conclusion
Throughout this study case we try to explain the key elements of
Nespresso’s strategy. The brand knew how to take the good opportunities
to grow and develop itself by creating a real feeling of belonging and an
important loyalty of its customers. This is a very good model.

However, at these times of people awareness about global and

environmental issues, the brand should maybe think more of others
solution, these capsules being a real disaster for the environment. Even if
they worked a lot on it, their solving is still not satisfying for a lot of
people. At these times of fair trade and sustainable development, what
could happen if a brand gives the image (wrong or right) to do not be very
interested in the global issues ?