Managing customers and markets
The report gives an analysis on the role of marketing information and research in analyzing Caffe Nero’s status within the market. The paper starts by introduction followed by the analysis of qualitative research and how it could be utilized for the benefit of the business; the focus is on the use of focus groups as well as in-depth interviews.
Then there’s SWOT analysis for Cafe Nero followed by conclusion then finally recommendation with justification on the appropriate strategies which should be adopted by Caffe Nero to ensure sustainability and growth.
Caffe Nero’s intention within the food industry looks very attractive for competitive purposes. This is because they face low pressure from suppliers and moderate pressure from buyers.
The food industry is highly competitive with many substitutes available, this makes it essential for Caffe Nero to develop business and marketing strategies which will help them do well against pressures from the global forces and ultimately attract and retain consumers. Research undertaken using qualitative method has great influence on decision-making and designing of strategies.
The level of competition within the market determines the development of products and services which would grant them competitive advantage. The high purchasing power of buyers determines the level of sales and ultimately the profits. It is essential for Caffe Nero to focus on consumer tastes and demands (Kotler et al, 2005).
2. Qualitative Research
2.1 Focus Groups
Focus groups comprises of carefully selected group of individuals having relevant experience in a particular field. The experienced individuals are required to perform studies through their personal input and issues common to all. Focus groups are preferred in qualitative studies because of the in-depth values they add to research processes.
Interactions amongst participants, sharing of own ideas leads to adequate exposure which ultimately enables development of new perspectives concerning specific issues (Parent et al., 2000).
Questions answered by respondents are carefully crafted so that the study focuses on the common agenda hence allowing researcher to conceptualize the topic based on the consumer’s background (Ulwick, 2002, pp 91-97) and therefore there is an element of external control to these kinds of study.
Focus groups are used before conducting in-depth interviews so as to help in stirring one another’s thinking. Within the groups they would hear different opinions or responses concerning topic in question hence enabling them think clearly along the same line.
2.2 In-depth Interviews
This is a type of unstructured interview in which the researcher is allowed to ask specific questions to individuals concerning selected topics of research. It comes in as a critical tool used in research whenever individual opinions are required and not group opinions.
In-depth interviews are conducted immediately after focus groups for the purposes of establishing individual responses which could not be shared publicly concerning consumer reactions. In-depth interviews are used for the purposes of helping in deep understanding of the social and physical settings of the environment where it is undertaken, the traditions, values, effects and roles practised by the respondents.
Using in-depth interviews enables collection of sufficient and crucial data information that could not be otherwise shared within the various groups. This also helps in reinforcing trust between the interviewer and the interviewee and hence makes respondents be willing to contribute more and more (Whyte, 1982).
In-depth interviews are used to help gain an understanding on how consumers respond and interpret their interactions based on the products, within their respective market environments.
In-depth interviews are considered flexible and easy to understand since they are generally open-ended, neutral, sensitive and very clear to the respondent. The structure provided by the method allows for open conversations which help in providing detailed information about the interviewee’s general experiences and response towards Caffe Nero.
One prerequisite for this study is formation of good rapport between researcher and respondents as it requires adequate time to execute. This type of research method is common where the researcher and the respondent share common knowledge concerning specific topics of discussion. In-depth interviews are time consuming; heavily qualitative in nature and therefore it is a requirement which requires highly trained professionals (Ulwick, 2002, pp 91-97)
3. SWOT Analysis
SWOT is the general internal analysis done to an organization which helps in evaluating Strengths, Weakness, Opportunities and Threats. This analysis is done with the aim of implementing future growth strategies.
The analysis becomes appropriate when making critical decisions to business ventures based on both internal and external factors with the sole aim of maximizing on identified benefits for future sustainability. SWOT analysis of Caffe Nero being a Coffee restaurant is pegged on the general challenges faced within the market environment (Johnson and Sexty, 1989).
Nero has considerable advantage in pricing its products as compared to other competitors within the coffee business. Its strategy of offering low prices in the market for coffee brands, resonates well within the market, for example the smallest quantity of cappuccino costs on average ? 2 at Starbucks, ? 1.79 at Coffe costa and ? 1.55 at Caffe Nero.
Therefore Caffe Nero is cheaper by over 20% and over 15 % in pricing compared to Starbucks and Coffe Costa respectively identified as its immediate competitors. This strategy pays off in the long run as consumers tend to associate themselves with low prices (Mead, 2005).
The enterprise seeks to diversify its products to the niche markets. For the purposes of adding onto the existing coffee brands, Caffe Nero indulges into offering fast foods synonymous to drinking coffee. These fast foods include; sandwich, cakes and crips.
This has since proved of great benefit as revealed by 2007 company analysis which indicated that 35% of total sales at the Caffe were attributed to food sales while 65% attributed to coffee drinks.
The rationale to this is that by diversifying products to consumers, the business reduces risks associated with venturing in one brand of products and further offers an opportunity for additional revenue (Mead, 2005).
Caffe Nero intelligently opted to renting business premises rather than buying those premises which were averagely costly.
Renting is comparatively cheaper to acquisition and this provides an avenue where the business breaks even its operations within a short time, a factor responsible for quick profitability, hence creating avenues by significantly reducing costs of business set-up. Distinctive ways in selling products based on continental aspects has been associated with high customer turn-out.
The organization offers its products to consumers in a relaxed environment and not the typical fast food environment of eating and drinking while standing as enshrined in American culture, and mostly practiced by major competitors. This in effect has brought relevance to consumers who view themselves as part of the organization in valuation (Mead, 2005).
Aggressiveness in sales promotion and retention of customers through loyalty cards proves workable. This strategy ensures that the business has substantial clientele within the market despite the intensive competition; this ensures that revenues are assured at certain benchmarks.
It also acts as a form of advertising since loyal customers are offered discounts, a situation which prompts new customers to the business because of their sensitivity to consumer spending (Mead, 2005).
Globalization of the coffee business is still at its lowest. Caffe Nero is capable of assimilating massive returns and achieving big economies of scale if it ventures to other markets besides the mother country.
When coffee market is near saturation as the case in United Kingdom, for a business to remain relevant it has to explore untapped potential in different areas. Concentrating its businesses within mother country proves disastrous in the long run as revealed by the ever increasing competition (Mead, 2005).
At the heart of operation in London Caffe Nero is deficient of its own operating business premises. This is critical for the purposes of offering convenient services to customers. Consumers would prefer businesses which are located at convenient points, renting of spaces cannot be effective solution to this because there is big uncertainty on availability of appropriate premises.
Strong partnership with Royal bank of Scotland for financial provision gives a lee way towards expansion plans for the organization. The funding offered at negotiated interest rates, provides adequate time for the purposes of implementing payoff while at the same time minimizing the liability value of the company.
With this the company is in robust position of venturing into new markets with acquisition of critical assets for the business. There is potential of accessing extra revenue with the intentions of globalizing the business.
The company has identified the need of moving to various provinces away from the saturated London for the purpose of tapping into new businesses and secondly the company plans to go global by first exploring western European countries. Their reasoning is justified because these countries have similar culture in consumption of coffee which is very crucial for the expansion of the business (Kotler et al, 2005).
Acquisition of other related businesses, by raising financial stakes in Republic Coffee to 10.7%, have made it clear their intention of buying out the business.
This is critical to controlling market share and for the purposes of expanding strategies. If the process continues then Caffe Nero will use outlets previously used by their rivals to penetrate new markets easily, this strategy helps in further lowering the costs of transacting businesses.
Recent negative publicity surrounding the coffee drink and food industry provided an impediment towards realization of a continuous business trend.
When reputation of an organization is dented there is general fear among its consumers that they will not get value for their money, moreover the food industry in which Caffe Nero operates is very sensitive whereby any bad impression created proves very costly to the business (Kotler et al, 2005).
Security in the expansion endeavors is not guaranteed. Especially when the organization expands its operations to global scenes, some cultures work against ideologies of western culture as seen through frequent terrorist attacks to businesses linked to western world. Massive investment could be lost within a twinkle of an eye and therefore there is critical need of conducting adequate risk assessment for the new business.
There is less attraction of potential customers in form of tourists due to effects of London bombing in 2005. This market niche has a big impact to the business as they provide premium revenue towards the organization’s finances. Whenever the number decreases due to security reasons then the organization is left with internal consumers who at times prove unreliable due to immense competition (Glass, 1991).
Acquisition of rental premises proves to be in jeopardy. Increase in rental prices by 30% proves costly for the business, since continuation of renting new premises helps in curtailing expansion plan of reaching critical forms of revenues.
The industry seems to achieve its end point within London which is the main base of operation due to small time players who happens to locate their business premises at convenient points for the benefit of consumers. This helps in creating stiff competition towards sales making the business unprofitable in the long run (Glass, 1991).
4. PEST Analysis
This is an analysis which seeks to measure market performance in relation to specific common businesses before any form of earnest marketing could begin. Pest deals with analysis of Politics, Economics, and Socio-cultural and Technological aspects within the market in relation to a specific organization.
These factors are considered critical when defining business continuity. The following presents PEST analysis for Caffe Nero organization located in London (Kotler et al, 2005).
The country joined European Union in 1973, therefore its business ethics inclusive of tax, heavily relies upon the framework of European Union agreement.
The critical aspect is that United Kingdom does not subscribe to the use of a single currency in the form of Euro. Businesses seeking to operate in the country therefore have to be content with the inconvenient processes of transacting business using local currency which presents higher exchange rate values (Lovelock et al, 1999).
The country and its associated business worldwide are potential targets to terrorism. This emanates from political policies linking the country to countries which are on the fore front in fighting terrorism, involvement in Afghanistan war and London bombing of 2005 is evident associations.
United Kingdom has got per capital gross Domestic Product standing at $ 26,408 annually, this makes the country to be ranked the fifth economic power house globally with potential population of 60 million people. Gross Domestic Products amounts to over $1 trillion presenting big avenue towards expansion of businesses in terms of revenues.
Growing at an average rate of 2% per annum the transactions in the economies are never affected by fluctuations in local demand, this means that most businesses thrive due to investment both in and out of the country (UK Statistics, 2007).
Government reduced personal income tax from over 20% to 20% in the year 2007. This provided an incentive to consumers who by this effect now have more of expenditure power to the economy which is critical to business revenues. Business taxes were reduced by the same margin of to 28% in order to cater for more private investment within the economy.
The effect of this was reduction in cost of operating business premises. Small inflation rates in the year 2007 sent satisfying signals that the country standard of living was high, and that generally, prices of basic commodities were under close supervision by the government (UK Statistics, 2007).
A good percentage of the total work forces within the country are foreigners contributing to almost 8% of the immigration rate. This in effect implies that cost of labor is significantly affordable which translates to reduction in overhead expenses of conducting a business. Since 8% of the total populations are non-whites, there is considerable diversity of culture and religion.
Most domineering religion is Christianity with scarcity of other religions including Protestants. With all these religion in diversity, the country stands strongly in business orientation as every aspect of the society is catered for (UK Statistics, 2007).
The country is more advanced in technology within all spheres of economy. The only impediment is lack of enough personnel in technological field including engineers. High public debt and low public investment is a critical impediment as laid down policies does not perform much in outsourcing research and development programs.
Generally, United Kingdom has economic factors which could hinder business investment within the country. Most critical is the non-flexibility in the use of currency in transacting businesses, secondly is the high costs on personal tax and lastly high taxes on business. These are few reasons amongst other factors which make global investment in United Kingdom as low and other countries preferred (Mead, 2005).
5. Marketing Strategies
The most appropriate marketing strategy for Caffe Nero is the adoption of a multi channel marketing strategy. This strategy focuses on reaching different segments of the society at appropriate time through a combination of different marketing principles.
The justification to this multi-channel marketing is that the organization brand becomes installed within customer’s minds as much as they are always associated with it.
Business today does not entirely focus on the brand but rather on customer satisfaction and customer care. As competition increases, and for transformation to be realized, there is apparent need in maintaining loyal customers for the purposes of building respectable market share (Aaronson, 2002).
These consumers need to be recognized and appreciated so that they could be considered as part of the company’s success. Traditional marketing was done through limited electronic and print media; this evolved with the addition of electronic marketing like World Wide Web which simplified costs of advertising and helped in greater coverage hence reaching potential consumers. Study conducted in 2002 by Aaronson showed that response rates from consumers increases significantly whenever business experiences improvement (Aaronson, 2002).
Figure 1: Personalization effects on click through rates.
Multi-channel marketing places strategies which incorporate synchronization of communication tools ensuring that consumers are always reminded of the organization’s products. Customers interacting with businesses over multiple channels are more loyal than customers who interact through single channels.
Some key strategies for effective multi-channel marketing comprise of developing un-parallel response network. It is important that Caffe Nero develops a department in the marketing section endowed with responsibility on customer care. This section has to be managed by professionally trained experts so that quality services are ensured and never compromised (Parent et al, 2000).
Personalization of communication; Caffe Nero could realize high potential of demand from consumers when they communicate on personal basis through modes like e-mails. Consumers could be informed of new range of available products and current offers available. This creates an impression which considers customer as one of the most valued asset within the business (Lovelock et al, 1999).
Leveraging of more effective customer channel; marketing campaigns should be stressed towards channels that seem more effective and easy to interact with consumers. If for example web based advertising works out well for caffe Nero then more resources have to be dedicated to it because it would result into more demand and at the same time become cheaper in the long run.
With its broad scope of operation, it is more appropriate for caffe Nero to use web based advertising for the purposes of fully supplementing print and electronic media marketing strategies (Lovelock et al, 1999).
The summary on SWOT analysis does indicate that despite strong growth indicators of Caffe Nero in the local UK market, the future is pegged towards globalization revealed through critical factors known as market saturation. The only concern is to implement effective strategies in penetrating foreign markets and security concerns due to global politics; on a global front the company faces an imminent increase in profitability.
The use of service providers within transition channels; businesses with considerable clientele might find it challenging using new technologies in marketing as this is not core part of their daily business. Business like Caffee Nero could outsource customer care services through dedicated information communication companies so that the company maintains effective touch with consumers.
In their quest to expand globally and nationally the organization will have to interact with customers and intelligently shift them to channels which are convenient to both consumers and the business.
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