The Marketing Mix of Costa Coffee - Case Study Example

The Marketing Mix of Costa Coffee We are living in a global economy, where physical boundaries do not matter much. The rapid advantage in information and communication technology has made now made the world a global village. This phenomenon has affected, in one way or other, across the board in almost all the economies, almost all the fields. The field of marketing is no exception. There were the days when selling was prevailing in the economies rather than marketing. The entire aim used to be to generate revenue, but now the aim of satisfying customer has been given a key significance. Keeping the aim of customer satisfaction in mind, it becomes essential for the marketers to make sound decisions regarding various aspects of the product or service (marketing mix), rather making decision solely on the basis of estimates or guesstimates. As a result of evolution of such concepts in the business world, the field of marketing has now become something far beyond rule of thumb decision making. This article is intended to analyze the marketing mix (product, price, place and promotion) of one commodity and one service. Before starting the evaluation, it is essential to have a brief overview of the theoretical basis of the elements of marketing mix. In the end, we will comment on the effectiveness of marketing mix of both of them. Marketing Mix: The marketing mix is one of the most frequently used term in the field of marketing, in fact we can call it a buzz word of marketing. It includes the basic tactical components of marketing mix. Traditionally there are four elements of marketing mix; product, pricing, place, promotion. However, some of the authors add other three Ps too, to make it 7 Ps. The rest of the three are process, people and physical environment. All these Ps have a number to specific decisions to be taking and the sum total of all those decisions ultimately contribute to what we call marketing mix, a set of tactical decisions aimed to better market the product and thus increase customer satisfaction. These four Ps are as follows: Product: It means any tangible or intangible good or service. The related marketing decisions are: Brand name Functionality Styling Quality Warranty Accessories and related services Price: Few of the pricing decisions are as follows: Pricing strategy (skim, penetration etc.) Suggested Retail Prices Volume discount and whole sale prices Cash and early payment discounts Seasonal Pricing Bundling Price Flexibility Price Discrimination Place Decisions: Here place means the distribution system, they places where the products should reach and how they should reach etc. The distribution related marketing decisions are: Distribution Channels Market Coverage Specific Channel Members Warehousing Order Processing Distribution Channel Transportation Warehousing etc. Promotion Decisions: In the context of marketing, promotion refers to different aspects of marketing communication. The promotion decision includes: Promotional Strategy Advertising Personal Selling Sales Promotion Public Relations Marketing Communication Budget THE MARKETING MIX OF COSTA COFFEE About COSTA Coffee: Costa coffee established its first coffee shop “Costa Expresso Bar” in 1978 in Vauxhall Bridge Road in London. Even to this date, they still use the same method of slow-roasting coffee beans. Now it serves the brothers’ authentic blend of 6 Arabica beans to 1 Robusta in 500 coffee shops all over the world. Products: The brand name of COSTA has been promoted as a symbol of status, a symbol of high class. The COSTA coffee is basically a hot drink; however, the various customer researches show that customers who have come here are actually not more intend to drink coffee, rather they come here of its ambiance, so in case of costa coffee, what additionally is given to the customer is more important than what the core product is. Despite this fact, one can not argue the quality of costa coffee which is beyond any shadow of doubt. Pricing: The price of Costa coffee is too high as compare to what an average or even a high profile coffee may cost. We may attribute such high prices to the fact that COSTA is more about the ambiance it provides, the highly customized and customer-oriented services provided by the staff of COSTA coffee. They have introduced a service of COSTA cards. These cards are like prepaid calling cards. You charge those cards online or through vsiting stores and when you have to dine out, you do not need to carry cash. Just that Costa Card is what you need. The pricing strategy adopted by COSTA coffee is niche marketing. They are actually focusing on market skimming, rather than market penetration. The purpose of market skimming is that they are targeting the higher or upper class society and projecting their product as a product of high class society. Thus, it is essential for them to match their target market with their pricing strategy. They also offer a number of discounts offers. These discounts may be seasonal, such as on the occasion of New Year, these discounts may be on products, to promote them or it may be on bulk buying, such as some birthday party or so. They do have a facility for the arrangements of parties etc. For example, if you have number of guests greater than or equal to the number specified by them, they do arrange for a party, or even some conference separately, with no outsides in that area. In such a case, they also charge different prices, but the best thing is that they provide customized ambiance for different occasions, according to the requirements of the customers and what additionally they charge is though in the name of that party but actually the customer pays for the ambiance it provides. Place Decisions: Obviously, the vary nature of coffee house does not allow that transportation of the prepared coffee from one central location to all coffee shops. There are over 500 coffee shops of Costa round the world and these coffee shops do not have exactly same ambiance, the same menu round the globe. Rather, they customize it according to the demographics and the needs of the customer. However, the core product is same round the globe. This means that the raw material as well processing method is exactly same all over the world. Moreover, the customization is not synonymous to the inconsistency in quality. If you drink one particular type of coffee from one coffee house of Costa one day and drink the same another day, the quality would not change, likewise, the quality would not change in different areas of the city. The same slow-roasted been is the processing method round the globe. The order processing is simple. You enter the coffee shop, find a place and go and sit there. A waiter will come to you, treat you gently and ask for the order, if you wish to take time, he would grant you and move ahead and will return after few minutes, he will take the order and the will forward it to coffee shop kitchen, where the coffee is prepared, you will get the coffee within the promised time. One of the essential decisions in this regard is that of location. Most of the COSTA stores are build after careful investigation and search for the location, this also contributes as a main factor to their success. Promotions Strategies: The main source of marketing communication for Costa coffee is its website and the word of mouths, besides its sign boards in the locality. The entire promotion strategy of Costa reflects its differentiating factors. It promotes and presents itself as the place to get relaxed, a place where drinking coffee is not the main appeal, though the coffee of costa is one the best in the town, yet it is the ambiance, the customer oriented services that attract the customer towards costa. The costa is famous for its individual attention. COSTA promotes itself on the basis of its four core values, Passion, Excellence, Challenge and Pride. The staff of COSTA is the sales force of it, since they deal with the customer and they are the only one who can retain or lose the customer. Thus, the staff of COSTA is trained after being recruited for better customer service in order to enhance customer satisfaction. Most of the promotion work is outsourced to Mother Inc. which has focused in capitalizing the Italian Heritage of COSTA. This idea has worked too much. According to the Marketing Director of COSTA “Prior to this campaign, all we had was a corporate identity. Mother’s work has gradually over-run everything we have done. We have all fallen in love with it. Despite a low media spend, this has given us a big brand feel. And we are still number one despite competition from Starbucks in the UK market.” (This discussion was based on a brochure released by Costa Coffee, designed by their Marketers, Mother Inc.) THE MARKETING MIX OF HOTMAIL: About Microsoft: Microsoft Corporation was incorporated in 1975, which was since its very inception, a market leader in software industry, especially the end user software. About Hotmail: Every month, almost 465 million users use MSN every month. Right now, it is operating in 42 markets and 21 languages, thus catering a variety of users. Product: MSN Hotmail or MSN Live is basically providing email accounts to the customers. The brand name hotmail has been emerged from the term hotline, which meant a telephone line that can be connected any time in very short time. Plugging this analogy, hotmail meant a mail (electronic) service which transfers messages within no time, besides transferring messages, it provides storage capacities too. With the rapid advancements in Information Communication Technology, the use of internet and email has increased remarkably, and it forms the backbone of communication in many organizations. Besides, transferring messages and storage, the services such as file attachment, virus scanning of messages etc. are also provided as the auxiliary ones. As the competition with the various mails servers such as yahoo, gmail, aol and other custom made POP3 servers is increasing, hotmail is trying to make it more user friendly, the introduction of pioneering innovations in the name of “Windows Live” is its key example. Keeping this in view, MSN is trying to more and more user friendly. In this struggle, it has tried to make its web-based email client as much similar to most popular (especially in workplace) desktop based mail clients Microsoft Outlook as possible. Besides, it also makes efforts to make it more secure and customizable. These are most common functionalities and features reflected in the press release. As a matter of innovation, the product design (the interface of hotmail in this case) and redesign is a usual task for the innovation-oriented teams at Microsoft. Pricing: There are two main types of pricing packages for hotmail email accounts; the first one is the premium account, which needs an annual payment, the second one being usual account which does not require any payment at any point of time. Apparently it seems that everybody who is not the premium account holder, but the account holder of MSN Hotmail is basically receiving free service and the company is getting nothing from it. However, along with the premium account holders, the free account holders are also a source of revenue for them, though indirectly. The revenue they generate by displaying Ads on their websites, which the account holders regularly use, they generate the revenue which is far higher than what they could have generated by putting those email accounts to subscription. The press release under discussion has also an attraction for those advertisers who wish to advertise their products on web at such a huge and frequently visited website and entertaining the geographically diverse customers / users. On the basis of such large customer base and internet traffic at their websites, they have been able to get very high cost advertisements to be displayed in their ads. Places: The place in the case of hotmail is mostly virtual, the internet. However, physically, the data of the email accounts is stored in gigantic servers of hotmail at the central point. There are also some data distribution techniques applied to avoid bottlenecks in the network. Promotion: As already mentioned, the hotmail is aimed to attract two classes of audience; first one being those who want a personalized email address. They are targeted for premium accounts, with greater security and other added features that a custom development can’t provide with the efficiency with which hotmail can provide on account of its experience and the economy of scales. The second audience is the advertisers, the person who want to advertise on web. Quoting the network traffic per month or the amount of email subscriptions a network has, in press release and other occasions is siply to attract advertisers. Source press release: http://www.microsoft.com/presspass/press/2007/may07/05-06WLHotmailLaunchPR.mspx After evaluating the market mix of a good and a service, we can conclude that the significance of one particular component differs from product to product. For example, pricing was an essential issue in the product industry for costa, it even charged for the environment it provided, but pricing or charging the email account holders in not at all the core interest of the organization, they are more focused on increasing the network traffic thus, attracting the advertisers. To sum up, we can say that the marketing mix of a service is more inclined towards functionality and that of a product is distributed among the functionality (product) its price and distribution etc. Promotion is definitely important for both. BIBLIOGRAPHY 1. Sandhusen, Richard. Marketing. Boston: Barron's, 2000. 2. Hisrich, Robert. Marketing. Woodbury: Barron's Educational Series, 2000. 3. Taylor, J, Marketing Communications, London, Kogan Page. 2004 4. Hooley, G., West, C., Lynch, J., & Wilson, A.. Marketing in the Uk. Great Britain: Published on behalf of the Institute of Marketing. 1984 5. 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