The Effectiveness of Coffee Shops Chains Retail Communication - Essay Example

Compare and Analyse the Effectiveness of 4 Coffee Shops Chains Marketing Communication Table of Contents Introduction 2. The UK Coffee Market 3. Porter’s Five Forces Analysis 4. PESTLE Analysis 5. Significance of the Study 6. Objectives of the Research 7. Overview of Adverts 8. Starbucks a. Marketing Segments b. Effectiveness of Ad Promotions 1. iTunes Card 2. Email Promotion 3. You Tube Viral Videos 4. Social Media Link 5. TV Advert 9. Costa Coffee a. Marketing Segmentation 1. Print media Ad 2. Sample Vehicle Ad 3. Coffee Cup Holders 4. Costa club card 5. Online Ad 6. Costa TV Advert 10. Pret A Manger a. Marketing Segmentation 1. Pret A Manger YouTube Video 2. Pret A Manger FaceBook 3. Pret A Manger Special Offers 4. Pret A Manger Card 11. Caffe Nero a. Marketing Segmentation 1. YouTube Video 2. Vehicle Ad 3. Facebook Ad 3. Facebook Ad 4. Nero Cards 5. Twitter Tweets 12. Consumer Behaviour 13. Marketing Mix a. Promotion b. Pricing c. Product d. Place 14. Critical Review Introduction Branded coffee chain market in the UK is quite competitive with several brands competing to serve the taste buds of the approximately 62,641,000 population. The brands competing in the industry use various different marketing strategies to gain competitive edge over the others. Their marketing communication strategies are worth analyzing as it enables observers to explore how multinational companies manage to build huge empires in spite of massive competition. This essay will examine the various ads, promotional offers and creative communication and advertising ideas of four major branded coffee chain companies in the UK, Coffee Costa, Starbucks, Caffé Nero and Pert A Manger. The UK Coffee Market Coffee entered England as early as 1610. Coffeehouses started to appear in places like Oxford by 1650. By 1700, there were over 500 coffee shops in the UK. However, the real boom in the Coffee chain industry came before a decade. The UK branded coffee shop market registered 7.5% growth last year with a turnover of £5.8 billion (UK Coffee, 2013). The number of coffee shops in the UK increased over 4% in the past one year. There are 15,723 coffee shops in the UK with Costa Coffee being the largest chain with 1,522 shops. Starbucks comes next with nearly 752 outlets and Caffe Nero with 530 shops. Pret A Manger is another evolving organic food chain known for great coffee. It has over 230 shops in the UK and many more in various parts of the world (UK Coffee, 2013). The UK branded coffee houses provides a luxurious coffee shop experience to whosoever visits them. The independent coffee shops fade away quickly in front of these massive coffee chain giants which provide ample choices and extremely high quality coffee to their customers. Costa Coffee, Starbucks, Caffe Nero, Pret A Manger and EAT together have shown very strong buoyancy even in the face of the dwindling the UK economy. Costa Coffee, Starbucks and Caffe Nero together controls nearly 54% shares of the branded coffee chain industry. They recorded a 10% growth in 2012. Costa coffee has opened nearly 160 outlets in 2011. The branded coffee chain market has grown by 10 times than it was before 15 years. It still has ample room to grow as only 5,225 outlets of the total 15,723 coffee shops in the UK belong to them. The rest are controlled by the independent coffee makers and the local bakeries (UK Coffee, 2013). (UK Coffee, 2013) Porter’s Five Forces Analysis (Mrda, I, Nikic, S & Baturan, S) Low Buyer Power: The buyer power is limited because only a handful of companies control the branded coffee chain industry. The cost and ambience of most of the coffee shops are nearly the same. The buyers have little choice when it comes to variety, cost and the availability of branded coffee shops. However, since the quality of the coffee offered in most of the branded coffee shops is similar, even a very low discount can make the buyers switch to a different user easily. Low Supplier Power: The supplier power is also very limited because Coffee comes from developing countries situated in the tropical region. The Fair trade policies have regulated the coffee price to a certain extent ensuring the farmers get their due share. High Threat from Substitutes: Caffeine is indispensable for the active life of several people. But, still many other substitutes like the tea and hot chocolate attract people away from the coffee shops. Hence, most of the branded coffee chain shops make it a habit to serve these drinks also along with coffee in their shops. High Threat from New Entries: The threat from new entrants is also very high. Coffee shops require little capital to start and the flexible government laws allow anybody and everybody to become an entrepreneur starting their own coffee shop. It does not take much expertise to prepare coffee. High Market Rivalry: Many international brands are looking forward to enter the UK branded coffee chain market. Competition from the local market is also quite high. Nearly 66% local coffee houses are controlled by independent coffee houses rather than branded coffee clubs. There are nearly 10 to 15 branded coffee chain companies increasing the competition further. PESTLE (Political, Economic, Social, Technological, Legal, Environment) Analysis Conducting a PESTLE (Political, Economic, Social, Technological, Legal, Environment) analysis on the branded coffee chain industry in the UK it can be noticed the competition in the market is extensively high. All the major companies need a unique strategy to sustain their position in the market. (Mrda, I, Nikic, S & Baturan, S) Every company tries different strategies to sustain themselves in the market and grow further using various techniques. This paper will explore the advertising and marketing techniques used by four major branded coffee chain companies in the UK. Significance of the Study Exploring the branded coffee chain market in the UK will give a substantial insight into one of the fast developing business field in the UK. Analyzing the trends and techniques followed by the four major coffee houses in the UK and how they managed to gain ample profits even in a grim economy help in short listing the key strategies necessary for huge business to survive in a bleak environment. Also exploring their ad wars and promotional campaigns will help to get an insight over the marketing strategies necessary to gain competitive edge over another company in a severely rival industry. Objectives of the Research The main objectives of the research is to compare the marketing strategies and advertising campaigns of four major branded coffee chain companies in the UK and list out the various effective strategies they used to lure target customers and gain competitive advantage over others. Overview of Adverts The research focuses on a group of adverts designed for each company. Five promotional ads for each company are chosen. They belong to different media starting from you tube adverts, print media ads, TV adverts, sample vehicle ads, social media network pages and email ads. Various promotional products like club cards, cup and bag adverts and redemption coupons are also studied. The target customers for the each company are described in the segmentation section. The essay will explore how each ad attracts the target customers explained in the marketing segmentation sections directly. (Sarah, 2011) Starbucks Starbucks is the world’s largest braded coffee chain store which originated in USA. They are the leading retailers in selling roasted coffee. They were the pioneers in introducing unique brewed coffee, lattes and trademark espressos in countries outside the Europe. Starbucks is a well known name all over the world. The coffee chain has branches in several countries. Marketing Segments Marketing segments divide the target customers into demographic and psychographic. The demographic group is segmented based on the age, sex, location etc while the psychographic group is segmented based on the taste, beliefs and interests. (Segmentation Strategies) (Mrda, I, Nikic, S & Baturan, S) Effectiveness of Ad Promotions Starbucks integrated marketing strategies are worth studying. They maintain an effective relationship with each of their customer and use all the possible media to advertise about themselves. 1. iTunes Card Target: Young customers and those who like new flavours Their main target customers of all ages and provide something unique to each target group. For example, they advertise Starbucks as a chilly hangout for the youth with great music and new coffee flavours. Starbucks provides its customers redeemable cards with promotional cards at the back. The code can be used in the iTunes store to download the song mentioned in the card for free. They can be used sometimes to download eBooks as well as videos too. They try to use both the push and the pull strategies making the coffee famous among the retailers as well as the customers directly through this promotion. The youth are directly attracted and the retailers are forced to sell Starbucks products as their young customers demand the same for the sake of the promotional codes if the pick of the week is their favourite song. 2. Email Promotion Target: Middle age people and people who expect respect Starbucks promotional emails are considered one the best promotional emails. Their emails have the basic details of the customers like what membership they belong and prominently highlight why the email is sent like a special discount or birthday or Christmas in prominent fonts. The promotion will be carried out to various channels. For example, a birthday email from Starbucks will announce there will a redeemable postcard following it. A SMS in mobile will announce there is a birthday email with a special offer. The email will encourage the receiver to share it in social media, just to increase their reach. They will do it without a promotional note, nudging you to upload your birthday celebration photos taken in Starbucks in Facebook or Twitter. They have a link to share the mail recipient’s ideas with the world kindling crowd sourcing. Similarly they ask the recipient to confirm their email address to get a free coffee or other offers. This is an easy way to keep their database updated at the cost of the customer. Such promotional emails attract both the middle age people as well as the youngsters. They are aimed in sustaining the classical coffee lovers and make them feel special and respected. 3. You Tube Viral Videos Target: Youngsters Starbucks release many humorous viral videos occasionally in the internet. They promote it through emails and many online ads. One of their famous viral videos will show a man forcibly giving a woman drinking some other drink a Starbucks coffee. This ad is a perfect example for AIDCA (Attention, Interest, Desire, Conviction, Action) formula. The ad grabs the viewers attention by creating suspense and make them take the action of purchasing the product at the end through catchy captions. 4. Social Media Link Target: Youngsters, creative people, quality coffee lovers Starbucks social media pages are quite famous. They are quite creative and filled with ample creative ads. One of their social media ads just show coffee a coffee stained white table cloth symbolizing many people have used it at a time with a single word socialize. The ad creates an impression group discussion and socializations should be done along with a Starbucks coffee. This ad popularized their social media mainly because of its simple creativity. Both these ads were created aiming at the youngsters mainly and they had enormous reach among the target group aged 18 to 35. 5. TV Advert Target: All coffee lovers Monday is hated by every person in the world. A creative Starbucks advert changed this notion completely. This ad released in TV and YouTube, lists all the good things that happened on Monday from moon landing to Big Bens inception. The whole ad is created using a materials used in Starbucks like cups, covers, spoons etc. The ad subtly promotes their discount offer which provides Latte for £1.50 every Monday before 11:00 am. The freshness, humour and the discount promoted subtly became an instant hit. Costa Coffee Costa Coffee was started in 1971 by Sergio and Bruno Costa. They took off real well after the company was acquired by Whitbread in 1995. They have branches all over the world and is considered as the best and largest coffee chain brand in the UK (Thinking Bookworm). Marketing Segmentation (Mrda, I, Nikic, S & Baturan, S) Evaluating the marketing segments for Costa coffee it is evident there is no special psychographic relevance for Costa Coffee customers except that they love the very high quality coffee which Costa definitely provides. Considering the demographic profile of its customer’s quality coffee lovers from all ages starting from youngsters to professionals, families and mature customers everyone love Costa coffee. Hence, it has grown into the number one coffee chain in the UK within a very short period. Usually upper middle class people, the elite and the rich prefer visiting Costa coffee. Middle class people visit their coffee during celebrations and when they want to taste very high quality coffee. 1. Print media Ad Target: Upper middle class people and professionals Costa Coffee newspaper ads claim high quality coffee with the best quality paper. The ad uses bright colours and subtle message that this brand is for the best of the best rightly targeting their upper middle class audience who love extra pampering. 2. Sample Vehicle Ad Target: Families and mature customers Their sample vehicle coloured bright red and white gathers attention automatically. The way it boasts they are not mediocre will make any person smile. Costa had been known to compete with Starbucks in many of the ads claiming people have voted Costa in favour of Starbucks. The vehicle advert has everything necessary to gather attention. Further, it gives out sample sips to anyone interested luring in many more to visit their coffee. 3. Coffee Cup Holders Target: Students and Youngsters They too come in attractive colours. Costa cup holders can be used to carry various types of cups both hot and cold. It can be used in picnics, outings and parties instead of a tray. It is a useful promotional tool which serves as a great advert for the brand. 4. Costa club card Target: Families and mature customers Costa club card offers various special offers and good discounts. Owning a Costa coffee club card will enable a person earn rewards on every purchase of eatables in Costa stores. Their loyalty card schemes enable the user to earn 5 points for each £1 spent in Costa stores. Each point is worth 1 penny and they can be redeemed to make free purchases. For example, accumulating 500 points will allow a person to make a free purchase worth £5. They can redeem their points in any online or offline Costa coffee stores to purchase an array of snacks and beverages. 5. Online Ad Target: Youngsters, students and professionals The online ads target youngsters with their attractive captions and visual ads. Youngsters and students on the lookout for something new love their creative ads. Professionals are targeted with various offers ranging from Costa cards to book awards and various different flavours. 6. Costa TV Advert The Costa Ad were a number of heads pop up from coffee land and shake according to the music is a very famous TV advert. The YouTube Video showing the making of that TV advert also went viral. (Best Ads, 2012) Pret A Manger Pret A Manger is unique organic food chain known for their great Italian coffee as well as fresh foods. Pret A Manger was started by Sinclair and Julian in 1986. Their natural as well as scrumptious food is famous all over the world now as they have expanded to the US, Hon Kong and Singapore. They serve only fresh food prepared every day morning. They give out the left over’s to the homeless every night. Marketing Segmentation (Yakoniva, 2010) Most of the people who use Pret A Manger are people interested in maintaining their body well and who know the importance of natural food. Their customers usually have at least a bachelor degree and are aged 27 to 37. Both families and single people visiting Pret A Manger are enthusiasts of fresh food. They are successful and hard working people capable of paying the high cost. Their main concern is their health. 1. Pret A Manger YouTube Video Target: Natural food lovers Pret A Manger videos emphasize how homely the ambience inside the store is. They make the viewers of the video feel like they are looking at the best natural food store in the world. 2. Pret A Manger FaceBook Target: Youngsters aged 27 - 37 The company uses Facebook very effectively. Their page is filled with very creative ads. Even their adverts feature natural foods substances shaped into various forms instead of using some plastic or textured theme. The ad which enquires the person what they like to drink showcases garlic and a red chili shaped like a teapot. Youngsters aged 20 - 40 are frequent Facebook visitors. They are the people who will suffer with various problems like diabetes and obesity if they do not switch to natural diet now. Hence, Pret A Manger aims in using the social media tool they use most to advertise themselves. The ad showing all eatables stacked in desktop symbolizes the young generation which does everything in front of their monitor. It gives out subliminal messages that if you are one such person, start using Pret A Manger. Another Facebook Ad featuring the Pret A Manger coffee proudly boasts the winners are those who use the brand, a caption which will appeal to the youngsters directly. 3. Pret A Manger Special Offers Target: Families, Married couple Pret A Manger gives special offers now and then targeting the locals. They make their cards available in various public joint for free. The card shown for example here invites people for a free organic coffee. It invites people to try the coffee house just once even if they have never been to the store. People will automatically think whats wrong in trying as it is free. Such special offers go a great way in introducing many customers to natural food and increasing the number of regular customers. 4. Pret A Manger Cards Target: Youngsters, families and professionals The card gives you a free coffee if you have consumed particular number of coffees in the store. The card will be stamped each time you buy a coffee there and you can avail a free coffee if you have accumulated certain points. Such offers are very useful for people who visit the store with a group frequently. They can easily earn one or two free cups regularly. Caffe Nero Caffe Nero is the third largest coffee chain house in the the UK. This Italian style shop was established in 1997 by Gerry Ford and grew enormously within a decade spreading its wings as far as UAE. They are trying to expand further to Russia. Caffe Nero is known for its various unique promotional policies (Jeffrey Covell, 1992). Marketing Segmentation The marketing segmentation done for the company shows they should target more on their new market Russia where they do not have much reputation. Caffe Nero is found in most of the capital cities in all the European countries. They have ample women customers mostly middle aged, working and with a family. Professionals who have an eye for quality love their coffee. They use the Nero coffee shops as a meeting point with for various official as well as personal meetings. (Caffe Nero, 2012) 1. YouTube Video Target: Women Ever heard of a coffee shop preparing a beautiful romantic love story running over 9 minutes ? Caffe Nero did just that. It even released a trailer for the same which went viral. The advert touched the heart of several women and became extremely famous with several likes. Asian faces were used in the advert to target the large number of immigrants who are regular customers of Caffe Nero. The advert links romance with Nero coffee subtly conveying the promotional message without any direct caption. 2. Vehicle Ad Target: Professionals Caffe Nero means black coffee in Italian. Hence, they use a black car as a sample vehicle to promote their ad. The vehicle can be found in several public gatherings issuing samples and promotional cards for their brand. The ads in the vehicle are changed often showcasing their various awards and achievements. 3. Facebook Ad Target: Women, Professionals Since women are their major customers, Caffe Nero advertisements are printed on various shopping bags, coffee mugs and many other small items and put up for sale. Their Facebook ad showcases such products. They are designed in a way to attract both kids and mothers with small playthings and chocolate figures. These ads are a very famous among family women as well as professional women. 4. Nero Cards Target: Professionals Nero Loyalty cards also allow the user to avail free coffee if they have consumed a particular number of coffees in the store previously. 5. Twitter Tweets Target: Youngsters Caffe Nero has a very active twitter page with thousands of followers. Everything from the change of manager in a branch to a new flavour introduced is tweeted within a few minutes. The seasonal flavours introduced by the shop get famous within a few hours by these tweets. Consumer Behaviour: Consumer behaviour in this industry does give importance to quality coffee. Aroma, colour, blend of the coffee everything is important. Every person had a different taste and they choose a coffee shop which satisfies it best. Need recognition is the basic factor determining the customer buying behaviour in the industry. They do not give much importance to info search. However, evaluation of alternatives occurs constantly. People discuss about various coffee shops and try various flavours often. They do not think much before making the purchase decision. However, post purchase evaluation occurs almost immediately after tasting the coffee. Quality is the ruler here and everything else from great ambience to cheap cost and good customer service comes next. Age and culture also affects the customer buying behaviour to a certain extent. Youngsters like trying various types of coffees while the matured people are settled for a particular taste. The ads represented about target all the three factors of consumer behaviour. They boast of their quality and kindle the buyer to purchase. They also advertise positive post purchase evaluation by various users through their ads and claim themselves the best in comparison to other alternatives. Marketing Mix Promotion: promotion is done in every possible place people set their eye on from famous websites to malls, restaurants, walls, mobiles and every possible place. Most of the ads featured here are multi-channel ones which can be displayed in TV, newspaper, magazine, send through email, mobile and displayed as a banner ad on internet too. The promotional objective of most of these advertisements is to boast about their quality and they achieve it quite well through graphical images as well as creative techniques. Pricing: The pricing is almost same. But, none of the ads display the price partly because the customers know all the brands are evenly priced and partly because they do not want to drive the customers towards independent coffee houses because of their high price. Product: Out of the four marketing mix strategies Promotion, Pricing, Product and Place, product is the most important one in the industry. Coffee lovers will come in search of the product if they like the quality, no matter how far it is or how costly the product is. Hence, all the ads aim showcasing themselves as the best, above mediocre and preferably special in some way or other. Place: The adverts described here usually do not connect with place. But, there are seasonal ads which showcase local places and drinks. The adverts are not concerned with distribution as they are always tied with promotion. The Social Media Strategies and the Communication strategies used by all the brands are also nearly the same. Consider the TV advert for Costa Coffee which shows heads dancing on a coffee surface. It is a perfect example for AIDCA (Attention, Interest, Desire, Confidence, Action) formula. They grab your attention because of the unique setting in the first place, kindle an interest as to what will be said, creates a desire to purchase the product, instils confidence in the product and make a person perform the action of purchasing the product the next time they cross the coffee shop. Critical Review: The advertisers have actually done a neat job using the FaceBook and Twitter pages in a very creative way with ample creative pictures. But, they lack back when it comes to websites which appear plain simple. Similarly the promotional products like Costa cup holders and Caffe Nero bags aim in promoting the logo. Instead they can use something funny or attractive similar to the strawberry chilli heart design in Pret A Manger loyalty cards. Attractive and creative designs will increase the reach of these promotional products further. Appendix 1. Starbucks iTunes Card Email Promotion (Ruiz, 2013) YouTube Link : http://www.youtube.com/watch?v=L550t8Vvm5k Social Media TV Advert http://www.youtube.com/watch?feature=player_embedded&v=sj5NxPryPXE Costa Coffee Print media Ad Sample Vehicle Ad Coffee Cup Holders Costa club card Online Ad Costa TV Advert Making of the TV advert YouTube Video http://www.youtube.com/watch?v=wRxbURwl5eU Tv advert http://www.youtube.com/watch?feature=endscreen&NR=1&v=lcZipkD2zjc Pret A Manger YouTube Video http://www.youtube.com/watch?v=YKdRbUQJUB4&playnext=1&list=PL9DFA7EF5A096AB54&feature=results_main Pret A Manger Facebook Ads Pret A Manger Special Offers Pret A Manger Loyalty card Caffe Nero YouTube Video: http://www.youtube.com/watch?NR=1&v=I9VV_D87nF0&feature=endscreen Trailer: http://www.youtube.com/watch?v=g6CVa_Iyrls Vehicle advert Loyalty Card Facebook Advert Caffe Nero Twitter References 1. Best Ads n.d., Costa: Coffee Heads. Retrieved 13 March 2013 from http://www.bestadsontv.com/ad/47904/Costa-Coffee-Heads 2. Mrda, I, Nikic, S & Baturan, S. n.d., Costa Coffee vs Starbucks: Business Intelligence. Retrieved 13 March 2013 from http://rodenberg.nl/publications/publications/COSTA_COFFEE_vs_STARBUCKS.pdf 3. Jeffrey Covell, 1992, Caffè Nero Group PLC. International Directory of Company Histories. Volume 63, St. James Press. 4. Hospitality and Catering News, 2013. UK Coffee: Market grows and to grow strongly. Retrieved 13 March 2013 from http://www.hospitalityandcateringnews.com/2013/01/UK-coffee-market-grows-and-to-grow-strongly/ 5. Marketing n.d., Segmentation Strategies. Retrieved 13 March 2013 from http://media3.bournemouth.ac.the UK/marketing/07segmentation/04strategies.html 6. Mack, Sarah, 2011, Marketing 111 4 Oclock. Study blue. Retrieved 13 March 2013 from http://www.studyblue.com/notes/note/n/marketing-111-4-oclock/deck/692287 7. Ruiz, Joseph. Strategic Marketing Solutions. Ingredients in a CRM campaign - A Starbucks Case Study. Retrieved 13 March 2013 from http://www.strategicdriven.com/marketing-blog/bid/85558/Starbucks-Integrated-Marketing-Case-Study-Effective-Starbucks-Marketing-Campaign 8. Research Methodology, 2012, Caffe Nero. Retrieved 13 March 2013 from http://research-methodology.net/caffe-nero/ 9. Thinking Bookworm n.d., Costa Coffee Marketing Strategies. Retrieved Mrch 16th, 2013 from http://thinkingbookworm.typepad.com/blog/2012/03/costa-coffee-marketing-strategies.html 10. Yakoniva, 2010. Slideshare. Marketing Communication Plan for Pret A Manger food chain. Retrieved 13 March 2013 from http://www.slideshare.net/yakovina/marketing-communication-plan-for-pret-a-manger-food-chain Read More