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Sample Essay on Nespresso in China

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Sample Essay on Nespresso in China

Part One: Brand/Country Choice

            A marketing communication plan is vital in developing brand value. It involves the delivery of the desired advertising message in such a way that the target audience notices it easily. A good marketing communication plan must also ensure that the message is delivered  (Young & Aitken, 2007). It is important therefore to ensure that the right promotion tools are used. The following essay outlines the development of a marketing communication plan for Nespresso. The Nespresso brand is part of the Switzerland-based Nestle Group.  The reason why this particular brand has been chosen is that it has evident growth prospects in the U.S market where it has previously been launched successfully. The chosen country that will act as the new market for the Nespresso brand is China. The choice of China as the preferred market for the Nespresso brand is because there has been a massive rise in wealth among the young middle class in China in recent years. This has enabled many of them to embrace various Western luxuries (Zhang et al., 2011), such as high end coffee that the Nespresso brand has to offer.

Although the coffee market in China is relatively embryonic compared to the other well-established markets like the United States, in 2013 there was a 50 percent increase in the sales of coffee pods according to research findings by Euromonitor International (2014). On the other hand, standard ground coffee realized a 19 percent growth during the same period. This only accounts for 0.1 percent of China’s coffee market, in effect demonstrating the sheer scale of the market potential that China has to offer. Therefore, it would be a good opportunity for Nespresso to tap into the Chinese coffee market.

 

            In the next 15 years, the middle class Chinese consumers are anticipated to increase five times the current number (Yang et al. 2012). This could act as an inflection point for coffee manufacturers like Nespresso to expand into China in the hope of tapping into this huge potential market of coffee drinkers.

Part Two: Campaign Context
Customer Analysis

            The potential customers the Espresso brand targets are primarily the Generation Y, or the millennials. These individuals were born in the 1980s and 1990s. They have grown up in the internet era and seek instant gratification. As Wang and Lin (2009) have noted, this target market is characterized by strong hedonic values, such as excessive spending, pursuing instant gratification, and seeking fun and enjoyment.

            Consumer attitude is also crucial in ascertaining consumers’ purchase behavior. Generation Y is more flexible in trying new things. Their access to the internet encourages them to try new things even in coffee consumption more than any other generation. In addition, most of them are either newly married or not married at all. This means that they have a larger disposable income that will enable them to afford the luxury of premium coffee (Wang & Tzeng, 2012).

            Other potential customers that Nespresso hopes to target are returnees. These are mainly the Chinese students who have studied abroad, mainly in Western countries, and who have come back home after completing their studies. This group will have obviously embraced the coffee drinking culture, and hence it will be easier to appeal to them. Nespresso will also target foreign expatriates working in China. Like the returnees, this group is already used to the coffee drinking culture and as such, Nespresso will be merely filling an existing need. 

Competitive Landscape

            Nespresso will undoubtedly face stiff competition from other multinational companies that are already established in the Chinese coffee market. Some of the companies that are likely to give Nespresso a run for its money include:

UBC Coffee

            The company was started in Taiwan in 1968. UBC Coffee operates more than 1,300 coffee stores across China (Drori, Hollerer & Walgenbach, 2014). UBC Coffee offers its customers brewed coffee and espresso drinks as well. The company’s menu also includes an assortment of Western and Chinese dishes at comparatively high prices.

Starbucks

            Starbucks first entered the Chinese market in 1999. As of April 2013, the company was operating more than 500 coffee shops in China, and had a workforce of 10,000 employees. Starbucks projects that it will have over 1500 coffee outlets in China by 2015 (Drori et al., 2014). The company is relying on the success of the Starbucks brand in the United States and other developed countries to pursue growth in the Chinese market through a brand extension strategy. 

Costa cafe

            Costa cafe entered the Chinese market in 2008. So far, the British chain has opened over 100 stores. It anticipates an increase to 2500 stores, by 2018 (Drori et al., 2014).  

 

Market Trends

            Consumption of coffee in China is mainly concentrated in the large cities like Beijing, Guangzhou, and Shanghai. In recent years, there has been a growing trend for coffee preference among the adventurous young, urban and rich Chinese. While coffee is traditionally regarded as a Western concept, a growing number of Chinese population, especially the young urbanites, have started to embrace the coffee culture. Between 1998 and 2003, there was an almost 90 percent increase in the total volume of coffee sales in China to 6,504.5 tones (O’Class & Werawardena, 2010). Currently, China is ranked 74th globally in terms of the volume of coffee consumed annually. However, coffee marketers are mainly interested in the potential for coffee consumption that the country has to offer. For example, the Chinese coffee market is also projected to enjoy an annual growth rate of 30 percent while the global coffee consumption is only projected to grow by 2 percent annually. The Chinese coffee market is characterized by high levels of consolidation and is largely controlled by multinationals. This is indicative of the high potential for China to become a leading coffee-consuming nation, with demand pegged at nearly 200 million consumers.

Review of Marketing Communications Activities
Past Campaign History

            In the past years, Nespresso has successfully launched its brand in the United States market. A review of its market communication activity then would go a long way in improving the prospects for success in the Chinese market. Nespresso’s marketing communication plan in the United States started with the identification of the consumption patterns of the target market. During this stage, Nespresso revealed that over 83 percent of all adults in the United States consumed coffee, albeit to varying levels (Matzler et al., 2013). The highest consumption pattern was noted among the Hispanic Americans and thus, Nespresso tailored its campaign strategy to mainly suit this market. Nespresso also realized that the fast-paced lifestyle of the Americans had increased the demand for coffee in the United States. However, the brand faced stiff competition from other well-established brands in the market like Starbuck and MacDonald’s’. These companies were regarded as American by origin and they had successfully managed to exploit this to their benefit. Nespresso also faced competition from alternative products like tea.

            From a demographic context, 60 percent of those who took Nespresso were female, while 40 percent were males. They were likely to be between 35 and 49 years of age, have high income and by extension, a high purchasing power. In addition, the target market also belonged to a high social class (Matzler et al., 2013). To ensure the distribution of the product in the U.S market, Nespresso made use of the company’s official website. It also identified renowned department stores with whom it forms a partnership with to stock its products. Another channel of distribution that Nespresso identified was the boutiques. Nespresso also identified various promotional tools to reach its target market, including advertising through the television, radio, print media, the internet, and mobile phones. Other promotional tools that were used by the company include direct marketing, promotional sales, and public relations (PR). 

Implications for current campaign

            Having successfully launched its brand in the U.S market, Nespresso can ride on this success to make a smooth transition in the Chinese market. While the two markets may not be similar, the brand aims to target a similar target market as the one it did in the U.S and as such, the consumer behavior of these customers could be the same. Besides, the company can rely on the good reputation and image of its products in the U.S market to drive the success of the Chinese market.

Part 3: Communications Plan
Overall strategy choice and justification

            Today, most global organizations have to deal with that hard decision of the ideal marketing strategy to adopt when launching a product or brand. The aim of global marketing strategies is to integrate and homogenize marketing activities across diverse global markets, in addition to maximizing standardization (Kotler, 2009). Nonetheless, there is need for global marketers to deal with several issues that are likely to impact on their marketing strategy, thereby hindering the global success of their marketing strategy. Some of these include differences in political, cultural, economic, and social environment. Majority of the marketing activities have proven to be most successful when marketers decide to adapt these to local circumstances and conditions (Huang & Sarigöllü, 2012). Thus, a pure global strategy becomes impractical because of its inability to consider local issues. There is need therefore for marketers to understand the manner in which their brand fulfills customers’ needs (Schiffman & Lazar, 2009).

            For the launch of the Nespresso brand in China, use shall be made of the global strategy. This strategy revolves around the idea of “thinking globally, and acting locally”. Therefore, Nespresso will be required to use its global experience to venture into the Chinese coffee market, but tailor or customize the brand in such a manner that the local market with find it appealing to them. One of the benefits of the global strategy is the ability to localize certain fundamental elements and standardize others. It tends to reach a compromise between domestic marketing strategies and global marketing strategies (Wang & Tzeng, 2012). Global marketing acknowledges the importance of domestic marketing strategies. In other words, a global strategy focuses on a global strategic direction as directed at the corporate level, and the local customer difference, which is the main focus of the local units (Kotler, 2009).

Marketing and Communications Objectives and Justification

            Below is a table of the marketing and communications objectives for the launch on the Nespresso brand in China and their justification

Marketing and Communications Objective

Justification

Enable the successful introduction of the new brand

This will aid in brand naming and packaging activities, as well as promotional advertising

Create brand awareness 

The brand is new to the Chinese market and hence the need to create awareness

Improving brand image

The Nespresso brand already has a good image in the U.S market but it is important to improve this image in the new Chinese market

Generating sales

It is important for the brand to be self-sustaining and this can only be achieved by making enough sales

 

Rationale for choice of promotional method

            Although there are various promotional tools that Nespresso could opt for in creating awareness and stimulating the demand for its brand in the Chinese market, this report will only focus on advertising. This is because the target market is highly likely to find this type of promotional tool more appealing to them, in comparison with the other tools. For example, majority of them watch television, listen to the radio, read newspapers, visit their internet and have access to mobile phones on a daily basis.

Implementation of promotional method

            The marketing team will liaise with the chosen advertising agencies to develop TV ad campaigns featuring various Chinese stars to endorse the brand. In addition, an internationally recognized brand ambassador shall also be identified. The same will be replicated with the radio ads.  Advertisement messages for the print media namely; the marketing team in collaboration with the advertising agency shall also develop newspaper ads and magazines. More importantly, the brand will also advertise on the social media namely, Facebook and Twitter. This approach is bound to be quite effective considering that, the target market visits the social media once, if not more, on a daily basis.

Viability

            Advertising as a promotional tool for the Nespresso brand in China is viable because the target market frequently watches television, read newspapers, and listen to the radio. In addition, it is more likely to reach out to millions of customers within a very short time. There is a possibility of repeating the advertisement message over and over (Kotler, 2009). With repeated advertisements, the target audience gets to recall the brand easily, thereby increasing the chances that it will make a purchase. Advertising a very expressive form of promotion, and it reaches out to a geographically diverse audience. Advertising will reach potential customers in geographical locations that other promotional methods may not reach.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

References

Ball, D.A. et al, (2003). International Business: The Challenge of Global Competition- ninth          edition. Boston: McGraw-Hill/Irwin.

Cateora, P.R., Giley, M.C., & Graham, J.L. (2011). International Marketing (Fifth Edition).           New York: McGraw Hill.

 Drori, G.S., Höllerer, M.A.,Walgenbach, P. (2014). Global Themes and Local Variations in          Organization and Management – Perspectives on Glocalization. New York/London:

            Routledge.

Euromonitor International. (2014). Coffee in China.

Huang, R., & Sarigöllü, E. (2012). How brand awareness relates to market outcome, brand

            equity, and the marketing mix. Journal of Business Research, 65(1), 92-99.

Kotler, P. (2009). Marketing Management- European Edition. Harlow, England: Pearson   Prentice Hall Publishing.

Matzler, K., Bailom, F., von den Eichen, S.F., & Kohler, T. (2013). Business model innovation:    coffee triumphs for Nespresso. Journal of Business Strategy, 34(2), 30-37.

O’Cass, A., & Weerawardena, J. (2010). The effects of perceived industry competitive intensity

in addition, marketing-related capabilities: Drivers of superior brand performance. Industrial Marketing Management, 39(4), 571-581.

 

Schiffman, L., & Lazar, K. L. (2009). Consumer behavior – 9 Edition. New Jersey: Pearson           Prentice Hall Publishing.

Wang, C. L., & Lin, X. (2009). Migration of Chinese consumption values: traditions,

            modernization, and cultural renaissance. Journal of Business Ethics, 88(3), 399- 409.

Wang, Y.L., & Tzeng, G.H. (2012). Brand marketing for creating brand value based on a MCDM model combining DEMATEL with ANP and VIKOR methods. Expert Systems         with Applications, 39(5), 5600-5615.

Yang, S. H., Hu, W., Mupandawana, M., & Liu, Y. (2012). Consumer Willingness to Pay

             for Fair Trade Coffee: A Chinese Case Study. Journal of Agricultural and Applied

            Economics, 44(1), 21.

Young, A., Aitken, L. (2007). Profitable Marketing Communications: A Guide to

 Marketing       Return of Investment. 1st Edition. Cornwall: MPG Books Ltd

Zhang, B., Du, W., Wang, H., Su, C., Zhang, J., & Zhai, F. (2011). Tea and Coffee

             Consumption Status and Trend among 18 to 49 Years Old Adults in 9 Provinces of

             China. Chinese Food & Nutrition, 2011(4), 77–80.

 

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