Discussion Questions appending to Nespresso Business Market Strategic Management.
Question #1 – Business Background, Definition, Role and Scope
The scope of business definition extends beyond Customer Relationship Management (CRM) in theory, or celebrity endorsements. The strategically-priced encapsulated Nespresso coffee, for machines development, capitalizes on an emotional goods category. According to a report by Conley, Bican, and Ernst (2013) the 1986 Nestlé of Switzerland launch segmented a role for coffee-enjoyers to receive premium product in hermetically sealed pouches filled beforehand. The concept underlying the performance of the unit, boosted by a fancy international campaign dangling the face of movie star, George Clooney, thus by accomplishing a move away from the rationale of functional benefit to a feeling of love for the product. Between 2008 and 2010 Nespresso had registered over 900 patents, introduced chocolate to its target-market – including the B2B sector – and had sustained a market growth pattern of over CHF 3 billion Swiss Francs, within by 2011 (Conley et al. 2013). Conley et al. 2013 provide a figure depicting the upward curve of revenues profitability from the stylish, personalized coffee pods. {Appendix A: Image above showing upward revenues in time courtesy of Conley et al. 2013}.
Question #2 – Customer Target Crystallisation of Needs
Quantification of customers’ needs is a vital process, alongside targeting or crystallising such needs. The business data and core strategy must commit to targeting the adult consumer base of Nespresso, by reliance upon a tabulation plan for acquiring ongoing assessments of customer-data including prioritized weighting/importance, and survey feedback mechanisms. Also, nowadays it is imperative to be transparent and let consumers know about the Nespresso commitment to the principles of betterment of society – otherwise, social media can shoot down the largest of conglomerates. The figure to the right Appendix A provides an example of corporate principles for stakeholders (Corporate Business Principles 2010).
Tightly focus on the adult B2B market and their customer loyalty base of futuristic strategy segment of functionalists identified as smartly “price-aware” but presently do not use capsules (Tough market 2012). Uncover analysis and research perceptions to arrive at comprehension of decision factors for the segment-populace. Analysis of competitor’s coffee pods (Costa-Starbucks, magimix, Tossimo-Senseo, and more) reveals elements of loyalty, demographic, and trendy (Montet 2014).
Price-versus-need can be tricky. Quality score of Nespresso is rated high because it provides a sense of luxury, but within a reasonable pricing, thus creating added value.
Influencers in marketing analysis need focus on tangible and intangible assets.
Question #3 – Outline Currently Desired, Core-Value Position to be Executed
Outlining the core customer added-value proposition begins with how consumers, and businesses will be satisfied with the Nespresso pods in the first place. Obviously, customers are to be provided with high-quality products/service at acceptable prices, which highly stimulate their emotional desire for the product. Thus, this positioning statement would recommend the following added-value propositions to be considered: (a) Easy fit into their life rituals, such as feeling good in the morning, with a quick-but-luxurious cup of coffee, setting an emotional desire, (b) Offering a visual way for customers to understand the benefits why Nespresso ranks high in taste/quality/aroma, (c) For businesses in the B2B model, highlight the easy experience of pod-capsule delivery to their customers, such as at hotels industry where Nespresso can raise their added-value proposition. The following spider diagram provides an example:
*{Above spider graph/diagram original artwork by contributor – copyright free}.
The audit, business strategy workshop, examination of market-leader competitive forces, and other desired components may serve to customize your spider diagram for added-value propositions specified.
Question #4 – Desired Marketing Ps & Key Success Factors to be Tabulated
Product service, pricing, and positioning strongly function together. An important recent article by Kahle (2016) suggests that the need for answering the “value-added proposition” in the first place requires answering a basic question (p. 3). For the Nespresso coffee pod product and service that question should be: Why should someone spend a moment to drink your coffee-pod, or buy its Nespresso system for your business? The key herein is to eliminate any opportunities for salubrious images. Emphasize the product premium richness and ease of use. The 5ps must consistent revolve around the position. Carefully negotiate the place(s) of product placement, as well as scouting future locales. Remember to promote specials, to coffee-lovers and B2B market, coupling reasonable prices. People are at center of all marketing-business protocols. Engage social media wisely, with fresh appeal which inspires positive emotions. These aspects must be quantified to aim for a 20 percent per/annum increase in sales revenue worldwide.
Question #5 – Audit-Style Operating Model Position of the Nespresso Business
While evaluation of varying business frameworks must append to company style, product, or services delivered, some are more logistically compelling than others. The virtue of the Blue Ocean Strategy, founded by Chan Kim and Renée Mauborgne, has demonstrated levels of quintessential excellence for distinction and performance excellence for business segments. Thus, the chosen framework for this section, in application for Nespresso, is the Charting Future Company canvas strategy by Kim and Mauborgne. This methodology is most adaptable to the core position of Nespresso, in present and unfolding future needs to address added-value for customers using coffee pod-capsules.
The main aspects to keep in mind with the Strategy Canvas framework model, in conjunction with keeping the value-added proposition for customers in mind, is to match each factor with its corresponding set of activities. For example, when building and constructing your unique Nespresso Strategy Canvas graph, it is important to realize the competing factors should lay along the horizontal axis, while the placement of vertical axis “captures the offering level that buyers receive across all of these key competing factors” as stated by the originators Kim and Mauborgne (Strategy Canvas – Blue Ocean Strategy 2016). The following dynamic is visualized in the diagram below, which at creator’s discretion each trend-line may be color-coded to organize the graph in Appendix B.
{Appendix B Above, courtesy of Kim & Mauborgne shows the basic elements of the Strategy Canvas}.
Competing factors would include: Coffee pod machines/hardware technology, coffee, locales placement, coffee blend choices, pricing, service qualities (friendly), and quality control overall. Activities associated with the coffee pod machines, would be technological service and trouble-shooting guidelines for customers, basic cleaning/maintenance tools, and any appropriate upgrades to hardware/instructions or associated software/CDs. Activities associated with the locales must quantify which regions and locations represent percentiles in sales revenue, followed-up with surveys to improve services or eliminate any poorly performing locations after an evaluation.
The industry value curve/trend line would represent the average of the competing coffee pod industry, as a median. The Nespresso trend line would be accompanied by something like the decaffeinated tea/hospitality industry, as a comparison. The offering levels may be quantified as befitting. However, the first step is to statistically identify the competitor’s positioning. To work together with the marketing/business management agenda, the Key Success Factors (KSFs) must correspond to taking into consideration of strengths and weaknesses.
Question #6 and #7 – Resource Capability & Management Agenda
The parent company of Nespresso has the reputation and financial resources. However, this factor does not diminish the need to focus on resources blueprint in terms of quantification of costs of key product. A recent report (Nespresso MBA Challenge 2015) positioned portioned coffee-pods as the core product around which competitors would rival, since the value chain attached differentiation of excellent offerings of flavors and aromas. The reduction of carbon footprint by Nespresso has adequately been described in the same aforementioned report, stressing a decrease by 20.7% since the year 2008. The machines portion of the sector of Nespresso, must diligently work closely with central management stakeholders because, obviously, they operate under the auspices of separate sales channels and agreements. For example, other branded machines like Krups and Magimix, would need to abide by their respective separate licensing agreements in conjunction with Nespresso.
Finally, given the importance of international relations, worldwide economy, and socio-political realities, tracing this agri-correlated product to real-world operations from field, to suppliers, to table, cannot be under-estimated as shown in Appendix C on left.
Question #8: Management Position and Agenda
The current position for management focuses on the development of current positive characteristics for Nespresso. Nespresso has been highly effective in its development of a brand that balances quality against relatively reasonable prices—this is, in many ways, one of the most effective and important balances that the company has struck in the business to customer interfacing structure. However, the business to business interfacing structure also relies on this B2C relationship and perception, meaning that the balance of quality against price should be maximized for best effects in both B2B and B2C relationships (Conley, Bican and Ernst 2013; The Nestlé Corporate Business Principles 2010).
The first order of business for Nespresso in coming years should be the continued repositioning of the brand in the target market’s life. Additional spending in advertising should focus on those working adults who drink a lot of coffee; the goal will be to portray the product as a cheaper, luxury alternative to products like café-bought coffees. The brand should be re-branded, and advertised in such a way that it appeals to the type of people that enjoy coffee, but not coffee connoisseurs. By making the product seem to be a luxury product, there is the potential to draw in a new habitual group of coffee drinkers.
Finally, the pod system has been completely revolutionary for the home-brewed coffee world. Nespresso should begin to invest more in the mid-range development for machines, as these machines are the kind that many will be looking to invest in as pod coffee becomes more popular. Machine R&D spending should increase by 1-2% per year over the next few years to ensure that the company can remain the leading innovator in the realm of pod coffee machines. These developments will allow the company to remain the premier name in pod coffee. The ecosystem linkages that will be considered can be seen in the following figure. The two linkages that will be the main and primary focus for strengthening over the course of the next few years.
Clearly, the company has already built strong relationships with suppliers, so the next steps will involve building brand recognition and trust between businesses and consumers alike. There is no way to ensure that the company is successful other than maintaining these two difficult types of relationships and allowing them to grow.
Bibliography and References
Conley, J, Bican, P & Ernst, E 2013, ‘Value articulation – The Nespresso case,’ pp. 1-6. Available from: <http://www.kellogg.northwestern.edu/Faculty/Conley/htm/VA_Nespresso.pdf>.
[11 August 2016].
Kahle, D 2016, ‘The Incredible Power of an Elevator Speech’, American Salesman, 61, 7, p. 3, MasterFILE Premier, EBSCOhost, viewed 18 August 2016.
Kim, C, & Mauborgne 2002, ‘Charting your company’s future’, Harvard Business Review June. Available from: <https://hbr.org/2002/06/charting-your-companys-future>. [18 August 2016].
Marijn, A et al. 2014, Nespresso case strategy, ‘Capturing and exchanging value, what else?’ – case on the Nespresso business model and product market strategy – Group 3. Available from: [Handout PDF]. [11 August 2016].
Montet, M 2014, Nespresso plan – analysis. Available from: <http://www.slideshare.net/marinescnd/nespresso-marketing-analysis-2014-complete-analysis>. [15 August 2016].
Nespresso MBA Challenge 2015, How should Nespresso capitalize on the opportunities of the circular economy to build a premium proposition for aspirational consumers. Available from: <http://sustainabilitymbachallenge.com/wp-content/uploads/2012/09/MBAChallenge_CaseStudy2015-2.pdf>. [11 August 2016].
The Nestlé Corporate Business Principles 2010, Principles mandatory June 2010 company report. Available from: [Handout PDF]. [11 August 2016].
Sheetz, P 2013, ‘Nespresso: To incorporate the Internet of things and tea’, Portfolio Planning 6 December. Available from: <http://paulsheetz.com/wp-content/uploads/2013/12/sheetz_paul_nespresso_analysis.pdf>. [11 August 2016].
Strategy Canvas – Blue Ocean Strategy by Kim and Mauborgne 2016. Available from: <https://www.blueoceanstrategy.com/tools/strategy-canvas/>. [17 August 2016].
A tough market brews in coffee category 2012. Available from: <https://www.prophet.com/downloads/articles/A%20Tough%20Market%20Brews%20in%20%20Coffee%20Category.pdf>. [15 August 2016].
Appendix A
Upward trending revenues of Nespresso business activities, in light of competitive forces over time.
Conley, J, Bican, P & Ernst, E 2013, ‘Value articulation – The Nespresso case,’ pp. 1-6. Available from: <http://www.kellogg.northwestern.edu/Faculty/Conley/htm/VA_Nespresso.pdf>.
[11 August 2016].
Appendix B
Basic elements of strategy canvas.
Strategy Canvas – Blue Ocean Strategy by Kim and Mauborgne 2016. Available from: <https://www.blueoceanstrategy.com/tools/strategy-canvas/>. [17 August 2016].
Appendix C
The ‘Traceability’ chart drawn from Figure 1 of the Nespresso Challenge Case Study report.
Nespresso MBA Challenge 2015, How should Nespresso capitalize on the opportunities of the circular economy to build a premium proposition for aspirational consumers. Available from: <http://sustainabilitymbachallenge.com/wp-content/uploads/2012/09/MBAChallenge_CaseStudy2015-2.pdf>. [11 August 2016].
