Nespresso case study

PURPOSE STATEMENT

This synopsis will present some problems related to the brand Nespresso and more specifically concerning its store management. We will focus on issues associated on store layout, design and visual merchandising. Nowadays, Nespresso highlights its boutiques while they were not integrated in the initial business model of Nespresso. Indeed, they have only been created in 2002 in order to address customers’ needs. The brand decided to develop its boutique due to the growing demand of its customers for a face-to-face contact, which means a lack of direct relationship with them. However, this touchpoint is indispensable in the strategy of the brand nowadays. In France for example, the rate of opening of shops is about two or three a year.

First we will present briefly the brand Nespresso and its products. Thus we will approach its positioning and channels of distribution in order to introduce the store concept and design of Nespresso. Finally we will deal with theories related to our problem statement: the store design and atmosphere in Nespresso boutiques and the SOR model.

CASE PRESENTATION

Nespresso is the leader on the premium portioned coffee market. The brand was created in 1986 by Nestlé Group which is located in Switzerland and has a turnover of almost two billion euros. Nespresso changed the idea of coffee as a simple basic product and elevated it to a luxury product affordable for the public. The aim of Nespresso is to become the “Icon of the perfect coffee worldwide” and the brand is based on excellence from the product itself to the customer experience. Through the Nespresso Club, the brand has been able to communicate everything about its identity. The creation of this network together with a strong communication strategy extended to every touchpoint have helped Nespresso match its brand image and brand identity. By choosing George Clooney as icon of the brand in 2005, Nespresso has been able to build strong brand equity. The famous George fits perfectly with the image the customers aspire to be. Indeed, Nespresso is a perfect example of brand consistency, from the boutique design to the website and TV ads.

Nespresso offers 3 different types of products. The first category of product is the machine. There are six B-to-C machines and four intended to B-to-B sales. They are all manufactured by 4 different companies and combine technology, simplicity of use and innovative design. For each kind of machine, there are 5 different ranges available in different colours and able to deliver a sufficient pressure to make a real espresso which is not the case of all the competitive coffee machines.

The second category of products is the capsules which preserve all the aromas of the coffee and are available in a wide range of flavours. These capsules can only be used with the coffee machines of Nespresso. Thus, the customers can choose the aromas of their coffee but “undergo” in a sense the brand and the price: if they want to buy the Nespresso capsules for the taste, they also have to buy a Nespresso machine and pay a premium price.

Finally, Nespresso proposes accessories linked to the machines and the capsules such as coffee sets or storage racks for the capsules.

Through the purchase of Nespresso products, the customer enters in a club which allows him to enjoy Nespresso services such as advices about the coffee, the maintenance of the machine, ordering items etc… Nespresso has chosen a differentiation strategy with an image of exclusivity, based on high-quality products, a faultless customer service and premium pricing.

Price of the machines Price of the capsules

NESPRESSO From 149€ to 1790€ From 0,31€ to 0,37€

TASSIMO From 59€ to 169€ From 0,19€ to 0,23€

SENSEO From 56€ to 109€ From 0,15€ to 0,21€

According to the table above, Nespresso is clearly the most expensive brand in the portioned coffee market, for both the machines and the capsules. The brand offers a wider range of products at a higher price compared to its competitors, but the skimming strategy fit totally with the positioning, the brand image and identity of Nespresso. These prices help reinforce the change from Nespresso: make a daily-consumed product such as coffee a luxury item.

In the continuation of a premium positioning, a key element of Nespresso’s exclusivity is its availability on the market: machines are widely available in many retail stores while capsules can only be purchased via the e-commerce platform, a network of almost 270 boutiques and 100 Customer Service Centers. Consumers believe rightly that buying Nespresso products makes them members of the Nespresso Club, an exclusive and elitist club.

Nespresso use four different channels of distribution. The machines are available in electrical goods shops. Customers can also buy the machines, capsules and accessories in all Nespresso shops around the world. These shops are the base of the experiential marketing strategy developed by Nespresso. All products are also available on Internet and by phone. The advantage is that each product can be delivered at home when the customer wants, this is a very recent delivering process called "YourTime."

There is a growing expectation among customers in order to interact with retailers anytime, anywhere, and the retailer should recognize them and their transaction history, regardless of the channel used to contact the retailer. Nespresso has been a pioneering brand as it presents itself not only as a product brand but also as a service brand. The innovation begins twenty years ago with a unique product: the first single-dose capsule system. However, Nespresso has not only launched an innovative and good quality product but it has also created a unique relationship with its customers. Indeed, the second innovation of Nespresso was to “put the customer at the heart of its business model”.

Nespresso is also a pioneer in its approach of business. It was very revolutionary to believe, fifteen years ago, in the effectiveness of the Internet as a means of distribution and mailing as the only mode of contact with customers. Nespresso has successfully incorporated Internet into the overall operations, but this channel presents some disadvantages. The first issue raised by the Internet is the security, especially payment security. The second might be the data confidentiality

...