Effectiveness of the Marketing Strategy - Case Study Example

Marketing Audit Report Name Institution Course Date Introduction Marketing mix are different types of choices that a company has to make during the process of introducing a product in the market McDonald (1991). It involves use of the elements of a marketing plan. These elements are product, price, place, promotion, people, performance and process which are commonly known as the 7p’sMcDonald (1991). These seven elements are customized until a suitable combination that suits customer needs is found. At times the product can be substituted by presentation. The P’s are used to help a company to make strategic decisions which are necessary for the smooth running of the company. The first P is the tangible unit or services that a company wants to distribute in the market. The 2nd P is the amount of money a company is willing to offer its product to consumers in exchange for money. The pricing is very crucial since it affects if consumers will buy the product or not. For example if the price is too low the consumers will view the product as of sub-standard quality and if it’s too high few consumers will be interested in purchasing the product (Cant, 2006). However, its challenging to decide on the pricing strategy since some customers believe that cheap is expensive and others believe that expensive goods are the best. The place where a company decides to sell its product has an impact on the marketing mix as well as the company itself (Beri, 2008). The location may be virtual (e-malls) or physical (supermarkets). Promotion involves making the product to be known by the public so as to raise awareness of its existence. The elements of promotion are advertising, public relation, sales relation and personal selling. It is advisable to begin promotion before introducing a product to the market so as to arouse curiosity in consumers. Promotion determines the target market and the product positioning McDonald (1991). This is among the most important P’s since it affects the first three P’s. If the promotion is effective the prices and distribution points increase due to increased brand equity. The first four P’s are the main elements however; we cannot fail to include the other P’s since they are also essential in ensuring the success of the market mix (Groucutt, Forsyth & Leadley, 2004). The people are the ones who ensure the product is successful at the same time they can tarnish the product’s image. Performance involves measuring the strategic and financial goals if they are realistic and achievable. The process involves the methods used to offer a service/product to consumers. These processes are handling of sales, order processing and customer support McDonald (1991). The aim of Nespresso Company was to become the excellent coffee providers in the world. They came up with a boutique where they could meet clients and show their products as well as an experience on lifestyle. They changed the idea of coffee by uplifting it into a luxury and personalizing it (Lorat, 2009). The main elements of the Nespresso brand are its logos/shapes, images and its general layout. Company Background Nespresso is one of the fastest growing companies in the world. Nespresso was founded in the year 1986 by Eric Favre who was by then an employee of Nestle Company. The coffee was first in Italy, Switzerland and Japan before being sold in other parts of the world. In 1990 Nestle Company signed a contract with a company called Turmix which began to sell Nespresso machines in Switzerland. In 1991 the company started its own capsule recycling program in Switzerland and started making its own machines. The same year the company began selling its product in the U.S and France. In the early 90’s Nespresso introduced coffee varieties such as Arpeggio and Chocolate squares. In 1996 the Nespressso process of making espresso from capsules coffee was filed. The Nespresso Company deals with manufacturing machines and capsules which can be bought from their stores. The company uses social media such as Facebook to market their product. Also they have used celebrities such as George Clooney so as promote their product. The company operates in 2 business segments which are Nespresso Home Division and Nespresso Business Coffee Solutions. Currently the company operates in more than forty countries in the world. Nespresso Marketing Mix Product Nespresso produces three types of products. The first product is the espresso machine which is produced by six different companies. They have five varieties of machines which are manufactured in such a way that they have enough pressure to make quality espresso as compared to their competitors. The company also produces coffee capsules which preserve the coffee aroma. The capsules are available in 16 different flavors and colors. They can only be used with the Nespressso coffee machines. This strategy allows consumers to choose a variety of coffee aromas but cannot choose the coffee brand and price since they have to purchase the company’s capsules (Kumar & Sharma, 2005). The Nespressso coffee machines are sold with a set of cups which are only designed for Nespresso. When a customer buys the machine he/she can only make Nespresso coffee and has to buy the capsules from the Nespressso Company. Customers can order customized Nespresso machines which will suit their needs. The company advises their customers on how to use and maintain the Nespresso coffee machines and allows them to purchase the capsules. Consumers have a chance to enjoy the company’s services in Nespresso shops or by ordering via phone or the internet. Place Nespresso Company has three channels of distribution. Their machines are sold in electrical products shops. Potential clients can buy the machines, capsules and other accessories from the company’s 15 shops which are based in France. Nespresso coffee machines are also sold in more than 16,000 sales points. The machines are available in prestigious retail stores such as Harrods (Britain), Les Galleries Lafayette (France) and Kaufh of (Germany). In U.S.A they are found at Bloomingdale and in Japan the machines are available at Ginza. The machines and capsules are also available in Nespresso boutiques in European cities. The Nespresso shops are designed in a way that they provide a comfortable atmosphere to the consumers Wilson (2002). Potential clients have a chance to taste the different coffee flavors, experiment how the machines are used and get advice about the company’s products from specialized sales personnel. The company ensures satisfactory customer experience which makes customers return to the shops to buy the company’s products. The shops are designed like show windows to attract customers and show case the company’s brands. The Nespresso products are available online and on phone though they are reserved for customers who are members of the Nespresso club. For a customer to join the Nespresso club they have to register through the company’s website or purchase the Nespresso coffee machine Wilson (2002). Price Since the Nespresso coffee is a luxury product the product is highly priced. The capsules price cost between 0.31 Euros to 0.37 Euros. The Nespresso coffee machines go for € 149 to € 1,790. In addition the table below illustrates the price on the basis of product size and cost per retailers I, II & III. Price in Canberra, Australia Price Compared to Competitors The price is higher as compared to the competitors trying to invade the coffee market. Nespresso capsules are more expensive as compared to famous brands such as Jacques Vabre whose brands costs around € 0.13. Nespresso voluntarily sells their products at high prices because of the product’s image. The products are mostly bought by wealthy people who believe that cheap is expensive. The company produces high quality and unique designed products thus justifying the high prices. Consumers are willing to pay for high prices so as to enjoy Nespresso’s quality products and excellent customer services Wilson (2002). The customers also get a chance to have personalized experience with the company. Competitors; Sara Lee is one of the potential rivals of Nespresso, Sara Lee introduced the senseo system which targets mid-market consumers, with the initial price of senseo machines at $ 50. This was was less expensive compared to Nespresso machines. However, Senseo is not a direct competitor of Nespresso considering that the later does not favor the mid-market consumers. Promotion The Nespresso uses advertisement to reach out to the public. They have used celebrities such as George Clooney to advertise their product by saying the Nespresso slogan. This advertisement strategy was a complete success since 66% of the people are aware of the brand and 85% of the customers appreciated the coffee. The selection of the advertiser highly contributed to the promotion success (Hastings, 2007; Vallabhaneni, 2013). This is because George Clooney’s image and style are close to the company’s product. The earlier promotions were more elitist and aimed to decrease the target group. The company also advertises by word of mouth, they also use the internet to advertise (The Nespresso website), social media such as Facebook Wilson (2002). Nespresso advertises a message of differentiation. They offer a quality lifestyle full of comfort if a customer buys their product. The advertising promotion is made to start a buzz. Nespresso have also sponsored boats for sea races such as la coupe de l’America where they advertise their product. They have also used sales promotion to advertise their products. They offer they coffee making machine on a discount price. A customer is attracted to buy the coffee machine yet it works only with the Nespresso capsules. This strategy keeps the customer hooked to the Nespresso product since they cannot make coffee without the company’s capsules. Nespresso have also used direct marketing to promote its products. The first marketing was with their club members whereby the company ensures that the customers feel as if they have full attention from the company (Zarrella & Zarrella, 2011). The customers receive news letters to inform them on any changes in the company and orders calculation based on how a customer frequent purchases. Nespresso has a lot of customer information enabling them to learn their habits and fulfill their needs.Also the log presentation can be discussed under the company’s product. The Nespresso log is presented in an elegant manner which creates a very robust visual luxury identity. The brown color is a symbol of stability and peace while the white color symbolizes freshness of the coffee and at the same it reflects quality of the coffee. In Nespresso coffee café there are two shapes. The square shape signifies stability and equality while the circle symbolizes completeness and infinity. The company slogan is written in a way that it shows a personal touch which makes the product different from others. It can be also translated to mean the “star positioning” Wilson (2002). Effectiveness of the marketing strategy The customer relationship management has highly contributed to the success of Nespresso Company Overton (2003). The Nespresso club enables the club members to purchase the company’s products online and get advice from experts. Once a customer purchases the Nespresso machine they become a member of the Nespresso club (Burrow & Bosiljevac, 2009). The company stores a database of the customers which enables it to create a personalized bond with its customers. The company provides particular customers with personalized services based on the customer segment. They also share information with their clients on a personalized level based on a client’s buying behaviors and financial value. They also improve customer experience through events such as coffee tasting events, sports and cooking classes. The company involves its customers in advertising activities by requesting them to give advertising ideas. By using this strategy clients bond more with the firm and get a sense of belonging since they are involved in the company’s activities. This strategy has also ensured the customer loyalty Overton (2003). In 2012, Nespresso has been performed very well and has generated double digit growth. Its position in the European market has risen. It has been ranked as the world’s best coffee. Nespresso business model has guaranteed quality products to consumers and has created customer royalty. The business model has enabled the company to implement technology at the same time delivering quality products and service to consumers Overton (2003). The company has launched new machine Maestria and U which guarantee consumers quality coffee with original Nespresso capsules. The launch of Aguila machine in 2012 was received well by B2B customers in hotels and cafeterias. The general growth of the company has been steered by its focus on ensuring it provides quality products, personalized customer service and use of technology in innovations (Wilson, 2002). Conclusion Through the case study one is able to understand the main elements of Nespresso’s marketing strategy. Even though Nespresso’s services are expensive they know how to create a strong bond with their clients. The club membership gives it a competitive advantage against their competitors. The company knew how to fully utilize opportunities to grow and develop itself. It knows how to retain customers by making them feel special and by using the bait and hook strategy. The company has a very good business model although they have not sensitized their customers on environmental issues. The company needs to come with solutions on how to produce environment friendly capsules since their capsules are dangerous to the environment. By them coming up with a solution they will be able to satisfy a lot of people especially those that are cautious on environmental issues. References Beri, G. C. (2008). Marketing research. New Delhi: Tata McGraw-Hill. Burrow, J., & Bosiljevac, J. (2009). Marketing. Mason, OH: South-Western Cengage Learning. Cant, M. C. (2006). Marketing management. Cape Town, South Africa: Juta. Georgia State University.(1900). The Marketing mix. Atlanta: Marketing Dept., School of Business Administration, Georgia State University. 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