The purpose of this report is to conduct the brand audit of Nespresso to understand the success and failure of the brand strategies used by the company.
Nestle Nespresso is an independent business of nestle group with head office in Lausanne, Switzerland. Being a global brand, Nespresso has 12000 employees worldwide along with operations in more than 60 countries. Nespresso has grown over the period of 30 years using number of strategic brand decisions to improve brand equity.
The report aims to provide in-depth answers to questions such as target market, marketing mix, brand inventory and brand extensions (Keller, 2014) have contributed towards success of Nespresso.
The objective of brand audit is to evaluate the brand equity and suggest ways to improve and leverage that brand equity for Nespresso (Michel, 2014).
The philosophy behind Nespresso is to enable everyone to make and enjoy perfect cup of espresso coffee and shape the global coffee culture. Company focuses on delivering best quality coffee along with ultimate experience for consumers. In addition, company operates in both business-to-consumer (B2C) and business-to-business (B2B) segment to enable consumers to recreate perfect coffee moments. The Nespresso system is an interaction based on Nespresso aluminium capsule and Nespresso machine (Nestle Nespresso SA, 2017).
Nespresso system is designed to provide and ensure the consistent quality. The unique business model of company delivers and guarantees quality through the supply chain (procuring, production and sales) and ultimately develops privileged relationship with customers. Each and every Nespresso capsule sold globally is made in state-of-art production facility in Switzerland (Brem, Maier and Wimschneider, 2016).
The story of Nespresso started 30 years ago to revolutionise and redefined the concept for the way people enjoy their Espresso coffee. The growth of Nespresso is based on five phases. The first phase was started in 1986 and last until 1993. This includes development of ‘Luiggi Bezzera’ original espresso coffee concept through introducing the system of encapsulated coffee and interact machine to create perfect coffee. Moreover, in 1989, Nespresso system was introduced for household market and Nespresso club offered personalised service to consumer.
At this stage, growth was achieved through consumer market through selling C100, the first Nespresso system. In 1991, company introduced Nespresso in the US and France household market based on coffee experience for customer (Neste Nespressco, 2017).
The second phase stared in 1995 and remained until 1999. During this stage Nespresso machine reach breakeven, developed new innovative machine as well as Grand Cru range continues to expand. In addition, company promote Nespresso over the internet and C250/554 machine was launched with thermobloc and automatic features as breakthrough for household market. The Nespresso machine was installed on Swissair and achieves first class brand exposure (Nestle Nespresso SA, 2017).
The third of Nespresso growth is ranged from 2000-2005 and reinvented coffee machine for ‘unique coffee experience’. The incorporation of corporate identity and introduction of shop-in-shop merchandising was introduced in strategic retail outlets. The two important developments were opening of Nespresso boutique in Paris and introduced limited edition ‘Grand Cru’ (Neste Nespressco, 2017).
The fourth phase of growth is ranged from 2006-2012 and Nespresso achieved double digital growth during this period. Moreover, George Clooney became brand ambassador of Nespresso as well as Le Cube machine with new design and square shape. During this period, an innovative and ecological machine called PIXIE was launched and company 200th boutique in China.
During the fifth phase, from 2013 to 2015, Nespresso consolidated it position and reference in coffee market. The introduction of revolutionary Vertroline system has enabled to offer highest gastronomy. The launch of Nespresso Cube (retail concept) has enabled the company to offer personalised services (Novascientia, 2017).
Khattri and Prakash (2016) stated that Nespresso brand was named after ‘Nestle’ and ‘Espresso coffee’. The brand name was generated through picking the ‘Nes’ from the Nestle and ‘espresso’ to highlight the affiliation of nestle with coffee machine. The brand name prompts the association of nestle with product and in particular ‘N’ is made a symbol in the logo.
The strong visual identity along with elegant lines and familiar and trusted shape is created positive impression for Nespresso. The logo uses two colours which are brown and white. The white is associated with freshness and lightness as well as reflect qualitative value whereas brown reflects peace and stability. The slogan used by the Nespresso afflicted with brand is ‘what else’ with a question mark. Since, nestle is famous for its minimalist style, the Nespresso machine comes in black colour.
Nespresso has used three elements to create brand awareness and loyalty which are name, symbol and categories. The hand written font highlights personal touch which makes the point of difference. The strapline includes the idea of reference and thus, translate the star positioning for the Nespresso (Aaker, 2012). The images below enclosed the logo and slogan of Nespresso
The purpose of boutique opening by Nespresso is to meet the needs of clients, to show them product and accessories along with experience of taste, lifestyle and pleasure. In terms of products, Nespresso packaging changed the idea of coffee evaluation in terms of luxury product and Nespresso packaging has introduced the idea of personalised approach to coffee. The brand character is based on design, features and colour.
The variety of colour indicates a variety of coffee taste and inclusive the idea of personal touch. The images below enclosed the boutique experience and product offering approach of Nespresso (Arai, Ko and Ross, 2014).
Celebrity George Clooney (Brand Ambassador) endorsed the brand image. The image of star associated with brand improves consumer perception and brand experience is add-on advantage for Nespresso. The elegant irony voice adds the strength and enhance the ability of brand to make it live and creates ironic position. Overall, brand elements highlights that brand is coherent in terms of communicating the brand identity. The idea of perfection is reflected from every single aspect, simplicity and pleasure and thus, position the brand as premium luxury coffee brand (Nestle Nespresso SA, 2017).
Bob (2014) studied that the current coffee industry has succeeded in infiltrating the life of a number of people all over the world and big coffee brands are Costa coffee, Starbucks, Folgers and Keurig. Nespresso has positioned itself as a premium player in the coffee industry and aim to bring premium coffee experience to the household.
The diagram below shows the competitive landscape for Nespresso and company market share in single-serve at home market against brands such as Green Mountain, K-cups and Lavazza. The three important points of differences are convenience, simplicity and speed during the home coffee experience.
Lavazza is the closest competitor for Nespresso in terms of function and looks as Nespresso machines. These companies have differentiated based on crowd whereas Verismo has to expand communicated with broadening customer appeal. The category (indirect competitors) includes influential players such as Starbucks, McDonald’s, Dunkin Donuts and Folgers (Kapferer, 2015).
For generic competitors, wide range of alternatives and substitute such as teas, bottle water sodas, Irish soda and energy drinks. The effect of these may have same caffeinated effects but the difference in terms of channel and taste. The budget trade-off for Nespresso is items such as alcohol, fast food, snacks and ice cream. Nespresso pushes head-to-head based on proprietary system and build their own coffee capsule (Keller, 2014).
Matzler et al (2013) analysed that for Nespresso, the point of parity includes the practical design of coffee machines, excellent services and high-quality coffee. Brands such as ethical coffee focus on sustainable capsule material at a lower price as shown in the diagram. The ‘Ethical Coffee Co’ is involved in legal battle with Nespresso in terms of patents and rights infringements and the legal battle is known as capsule war.
In terms of business strategy, Nespresso has positioned itself focused differentiation approach. The point of differences includes strong social images and endorsement of celebrities. There are a number of competitors such as Dualit, Copepod, Mondelez and 40 other brands have taken advantage from patents of Nespresso slip into expiration and have introduced Nespresso compatible capsule to position themselves against same niche of cost leaderships and i.e. driving down the margins (as shown in the diagram below) (Franzen and Moriarty, 2015).
Khamis (2012) stated that Nespresso has established itself as premium quality espresso in convenient, quick and consistent manner. Company has positioned itself for high-end consumers including business professionals, travellers, business professional and people who want a perfect cup of coffee at home. The marketing strategy includes promotions, memberships as well as boutique experience.
Nespresso target market focuses on the consumer who is aged between 20-50 years old and desires modern fashion forward quality product. Nespresso caters the need of customers who have an affinity for ease of use, design and image. For example, pixie espresso machine cater the needs of individual and distinguish itself based on the price, control, serving volume and accessory lines (Levy, 2016).
Brand mantra encloses the brief description of company intended perception of consumer. The brand mantra of Nespresso includes associations such as elegant, unique and luxurious experience. Brand personality shows the human characteristics that human can attribute to brand using number of ways such as open-ended response, asking consumer to profile the brand using pictures and brand personality is based on elements such as excitement, competences, sophistication, sincerity and ruggedness. The points of parity for Nespresso highlight high quality coffee at premium price, Research and development, Old Italian methods, innovative, glamour’s and trustful brand (Morschett, Schramm-Klein and Zentes, 2015).
On the other hand, the point of differences includes social image, level of care, club Nespresso and boutique, high technology, N black and sober logo, high technology and visual identity (Chernatony, 2010, p.281-282). (Appendix 1)
The marketing mix compromises price, product, location and product. The four elements for Nespresso highlight that emphasis is given on promotion because it drives its customers. Nespresso machine and coffee come in many variants and company has open many boutiques in number of countries such as US, Germany and China. Company continue to expand its product lines through introducing new taste, coffee variants and new machine models while targeting the premium end of market (Baptista and Barba, 2015).
Pricing policy of company is based on charging premium and premium products include exclusive distribution in boutiques. The pricing approach of company involves selling moderate to high price products. For example, machine brand ‘Essenza mini and Aeroccino’ cost £139 pounds, ‘Expert’ cost £249 whereas high end ‘Creatisita’ cost £399 (Abedi, Berman and Krass, 2014).
Promotion is highly funded aspect for Nespresso and company divert significant amount of budget on advertising and promotions. Nespresso endorsed it brand using celebrities to promote it premium lines. For advertisement, company used big stars such as Penelope Cruz, George Clooney, Danny DeVito and many other celebrities to promote Nespresso as shown in the diagram. For retail location, the customer groups are separated based on product category and deliver customer unique shopping experience (Baptista and Barba, 2015; Morschett, Schramm-Klein and Zentes, 2015).
Aaker and Joachimsthaler (2012) explained that the archetypes reveal to marketing team which brand logo, name and symbol should be used with existing and new products. The role of brand architecture is to define both brand complexities and boundaries. The first step involved is analysing the product portfolio of Nespresso to understand the trademark and brand. The next step involves assessing the contribution of brand and amount of revenues it generates. The different product and machine offering of Nespresso has different values with portfolio.
The next stage is assessing the market position and Keller highlight the need of vectors such as direction and force. The differential element of Nespresso is minimalist design and reaching the target market through proactive marketing campaign. Nespresso has positioned itself a premium quality coffee brand as well as it uses technology to innovate and bring new machine models to the market. The most important value point for Nespresso is brand image which is critical in strategic thinking for the future (Diekhoner, 2017). (Appendix 1)
The journey of Nespresso to become a global brand has expanded over the period of 30 years. The premium quality coffee and state of art machines have enabled the company to deliver better value for money and high benefits for Nespresso.
The company is well-established player in the premium coffee market but increasing number of competitors has posed new challenges for company. The patent issues and emergence of low-cost premium players has resulted in the weakening of many brand extensions.
In order to strength the Nespresso brand as a whole, the product portfolio and promotional strategies need to strength. The three recommendations for Nespresso are as follow
Nespresso over the years has successfully implemented four criteria’s of integrated marketing communication which are contribution, complementarily, coverage and versatility. However, needs to think about pre and post George Clooney era. The response to sale of capsule particular in hypermarkets and reinforce the feeling for selective club. The reinforce CRM by using gold, black and silver and invite customer to special events.
Moreover, to maintain luxury brand positioning, Nespresso should active in all type of media and packaging using luxury brand codes to provide real shopping experience for the customers.
Company needs to reach new segment of markets such as families and young professionals in order to expand the customer base of company. The recommendation includes introducing product and brand with niche segment of family segments of market. Nespresso can utilise its brand image to leverage brand equity for the family segment by introducing new advertising campaign and designs to appeal to family and young professional segment of market by offering quality and value for money.
The affordability for families is likely to expand the brand further and develops new profitable segment for Nespresso. The brand extension should include affordable and quality machine for families and young professionals looking for stylish and affordable cup of coffee in comfort of their home.
Nespresso marketing program is effective with its existing loyal customer base. In order to reach the conservative segment of markets the brand needs to advertise product as affordable and deliver the unique same unique experience. The potential to leverage the secondary association for Nespresso is high and brand can advertise on the fact a brand for individuals.
The positive association comes with quality and individuality would like to attract number of young people and encourage them have coffee. The combination of endorsement and sponsorships would further improve the image of company. The sponsorship would improve the brand outreach among the young audience of brand who look for quality product at good price.
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