Term paper on Segmenting Targeting and positioning of Nescafe

Executive Summary

Nestle is the largest food and drinks manufacturer based in Switzerland. It has 479 factories operating in 81 different countries.

The year 2000 displayed Nestlé’s best sales figures at 81.4 billion, which was an increase of 9.1%. The profit was at 5763 million being an increase of 22% compared to previous years.

Coffee has the distinction of being the second most-traded commodity in the world, after oil. It is also one of the world's most popular beverages. Nescafe coffee is a brand within Nestle.

Nescafe holds a majority market share of 56% in the instant coffee market and it has emerged as a world leader in the coffee industry and the word Nescafe has become almost synonymous to coffee. This share has continued to rise over the years.  On an average around 3000 cups of Nescafe coffee are drunk every second all over the world. Nescafe is also the leader in Bangladesh and has been quite successful in capturing a substantial market share over a period of time.

Nescafe faces immense competition from rival coffee, tea and hot chocolate manufacturers. It has also had to compete with the soft drinks market in attracting younger consumers. It has continued to target health conscious people with its decaffeinated and organic products.

The sector finds it difficult to attract younger consumers markets 15-24 years old. It has therefore carried out continuous innovations concentrating around the idea of immediate consumption this has led to the developments of the self-heating can of coffee 'Hot When You Want' and also Nescafe Ice coffee.

Introduction:

1.Origin:

Nescafe is a brand within Nestle. The world's leading Nutrition, Health and Wellness Company. Their mission of "Good Food, Good Life" is to provide consumers with the best tasting, most nutritious choices in a wide range of food and beverage categories and eating occasions, from morning to night. Nestle originated in a 1905 merger of Anglo-Swiss Milk Company, established in 1867 by brothers George Page and Charles Page, and Ferine Lactee Henri Nestle, founded in 1866 by Henri Nestlé in Vevey, Switzerland, where headquarters are still located today. They employ around 280 000 people and have factories or operations in almost every country in the world. The company grew significantly during the First World War and following Second World War, eventually expanding its offering beyond its early condensed milk and infant formula products. Today, the company operates in 86 countries around the world and employs nearly 283,000 people. Nestlé sales for 2010 were almost CHF 110 bn.

2. History of  Nescafe:

Nescafe is a brand within Nestle. The Nescafe coffee we’re enjoying today is a perfect brew of the brand’s long-standing history. The origins of Nescafe hark back to the year 1930, when Brazil had a substantial surplus of coffee, and needed help preserving it. Upon the request of the Brazilian government, Nestle began brewing.

Their coffee specialist, Max Mergenthaler, and his team had a simple proposition – a

delicious cup of coffee by simply adding water. With this guiding principle, the team worked hard to find a way to make soluble coffee that would not lose out on the coffee’s natural flavor. Seven years later, they found the answer.

Nescafe was finally ready. Named by using the first three letters in Nestle and prefixing it to cafe, Nescafe was the brand new name in coffee. First introduced in Switzerland, on April 1st, 1938, it was anticipated to be a huge success throughout Europe. However, because of World War II, its popularity took longer than expected. Soon after the first half of the next decade, Nescafe was exported to France, Great Britain, and the USA. American forces played the role of brand ambassadors in Europe, because Nescafe was a staple in their food rations.

Steadily through the rest of the 1940s, its popularity grew. Today, there are several varieties of Nescafe to suit all the different tastes around the world. But since the very beginning in 1938 they have respected the origins of coffee and work hard to ensure people only have the best in the cup.

3. Objectives:

The objectives of the study are:

Broad objective: To develop profile of Nescafe and the Coffee drinkers.

Specific objectives: To attain the broad objective following specific objectives were pursued:

    • To know the Nescafe Coffee industry briefly.

    • To identify the Market Segmentation and Target Market, Positioning Strategies Nescafe.
    • To focus on the current Promotional Activities of Nescafe.
    • To identify the motivational factors those influence the Nescafe Coffee drinkers.
   

4.Methodology:

For smooth and accurate study everyone have to follow some rules & regulation. The study impute were collected from two sources:

Primary sources:

-Practical desk work 

-Marketing Management text and reference books.

Secondary sources:

-Annual report of Nestle Bangladesh (Nescafe) Ltd.

-Various publications of Nestle Industries (Nescafe).

-Website.

5. Limitations of the Report:

On the way of our study, we have faced some problems that termed as the limitations of the study. In all respect following limitation and weakness remain within which I failed to escape by any means. These are follows:

Budgeted time limitation:

It was one of the main constraints that hindered to cover all aspects of the study.

Confidentiality of data:

Because of some divisional and confidential problem, we could not get enough information. While collecting data some information in the internet did not disclose enough information for the sake of confidentiality of the organization.

Quality Products of Nescafe:

Today, Nescafe coffees are available around the world to suit all tastes and occasions. Here are just a few of our products to discover:

Nescafe Classic:

In Bangladesh under the sole distributorship of Nestlé Bangladesh Ltd., Nescafe Classic was first

introduced in 1998. This was a beverage aimed at the upper and middle segment of the

Population. In October 2000, another Nescafe beverage, viz., Nescafe Sunrise was introduced for the lower income population. Other Nescafe products available in the market such as Nescafe Gold, Nescafe gold Blend are all imported and not distributed by Nestlé Bangladesh Ltd. 

NESCAFÉ 3in1 – The perfect mix of coffee, milk or creamer and sugar in an easy way!

Nescafe Gold Range – The premium choice for the special, smooth cup of coffee every day.

Nescafe Espresso – Short, dark and intense.

Nescafe Super Premium Range:

Nescafe Alta Rica – A special blend of exclusive Latin American Arabica.

Nescafe Cap Colombie – Made exclusively from Colombian Arabica beans.

Nescafe Decaf – Gives the great taste and rich aroma you'd expect from Nescafe but without the caffeine.

Nescafe Specialties Range – Deliciously frothy and creamy tasting!

Nescafe Green Blend – A unique blend of roasted and green coffee beans that's rich in polyphones.

Segmentation, Targeting & Positioning of Nescafe:

Market Segmentation:

Market segmentation means dividing a market into smaller group with distinct needs, characteristics, or behaviour who might require separate products or marketing mixes.

At its most basic level, the term “market segmentation” refers to subdividing a market along some commonality, similarity, or kinship.

Past Nescafe was targeted to morning people.Present Nescafe is now targeting the YouthAccording to Andrew Ward, worldwide account director of Nescafe has launched a $30 million global campaign, specifically aimed at 16-24 years old.

Nescafe’s marketing mix is aimed at a large and varied segment of the instant coffee market. They could be considered the ‘Myer’ of the instant coffee industry. The most obvious segments of the market they target are:

Nescafe segment their market based on four main things. The bases on which Nescafe segmentation has been done are as follows:

 

Geographic segmentation:

Ø  Nescafe has divided the country into Two segments i.e. Southern, Northern

Ø  The Southern Segment consumes the most amount of Coffee and prefers hard and roasted coffee.

Ø  Where was in Northern region, Nescafe instant coffee is consumed in higher quantities.

City size segmentation: Nescafe segment the cities according to the size and the number of population. They provide more which cites have large amount of people like Dhaka, Khulna and Chittagong etc.

Urban /sub-urban/rural people: According to the urban, sub-urban and the rural people, Nescafe provide different types of coffee.

Density: Nescafe has been focusing all its resources on appealing to the population living in the urban areas. Due to limited resources the company feels that diverting resources to the rural areas will not be cost-effective.

Demographic Segmentation: Demographic factors are the most popular bases for segmenting customer groups. One reason is that consumer needs, wants and usage rates often very closely with demographic variables.

Another is that demographic variables are easier to measure than most other types of variables. Nescafe has segmented their market demographically well. Nescafe has tried to segment every age group, families, region, gender and different socio-economic. Mainly they focus on the age group and the income. Those are :

Age and Life-Cycle Stage: Nescafe targets the late teens to early thirties segment of the population. As its secondary target market it aims at the 30+ segments. According to Nescafe it is the 18-30s market in Bangladesh that shall be its future potential coffee drinkers and hence it focuses on appealing to them.

Young adult café culture segment: They target this segment with their new latte range, along with the advertising, sales promotion and the competition to win the lounge seen in the advertisements.

Income: Nescafe has segmented its market on the basis of income accordingly to people. Comparing the price of the other coffee brand .Nescafe is highly affordable to all classes of people because of its lower price than most of the existing brand. The target market includes all those individuals having a monthly income greater than or equal to Tk.10000.

Upscale, quality driven, higher income consumers: Their Nescafe Gold range and exotic tastes such as Alta Rice are aimed towards such consumers, where the price and quality are higher than that of the general blends.

Psychographic segmentation:

Social Class: Coffee is a drink for the affluent segment of the society. As such Nescafe targets the upper strata of society.

Middle-class consumer (no age target):  Nescafe targets such a large segment with their Blend 43, Mild Roast and Espresso products. The consumer gets an economical benefit, as well as a quality product.

Lifestyle: People believe that coffee consumption is an indicator of their rich and prosperous standard of living. Nescafe users or potential users are assessed to be individuals with active lifestyles and hence Nescafe produced its line of Instant beverages. 

 

Personality: Nescafe has endowed its products with a brand personality that corresponds to its present and potential consumers. Some of the personality traits of Nescafe are: Confident, Positive, Success and Achievement-Oriented, Getting started in life, Dynamic and Optimistic.

Behavioral segmentation:

Benefits: Nescafe users can be classified as ‘people who seek to be recharged’, ‘people who want to let others know that they have important stations in life’, ‘those who want to start their day with something positive’, etc.

User Status: Nescafe’s markets can be segmented into nonusers, potential users, first-time users and regular users of coffee.

Usage Rate: Markets are segmented in to heavy coffee-drinkers, medium to light consumers. Nescafe tries to capture heavy to medium users of its product.  

Purchase Occasions: Nescafe promotes its beverages as ideal for all occasions such as breakfast, midday, evening, night (when you want to stay awake), important days such as Valentine’s Day, etc.

Consumer Profile:

In brief, the consumer profile is as follows:

      Primary: 18 to 30 years: Both male and female. (Valentine day’s campaign).

      Secondary: 30+ years.

      Geography: Urban (no rural market positioning done yet as it is not cost-effective).

      Demography: Young, College & University students, Office executives and self-employed Individuals; MHI >= 10,000

      Psychographics: Modern, Friendly, Social, Adaptive to Change, and Attracted by Internationalism.

Nescafe is focusing on the huge market potential in our country. In a country of over hundred twenty million hot beverage drinkers Nescafe is yet to take full advantage of the huge market potential that lies in front of them. However, since its introduction in 1998 Nescafe Bangladesh has achieved a remarkable growth rate of almost 27%. Everyone can see that coffee drinking is rapidly gaining widespread acceptance. This is due mainly because of the shrewd market positioning of coffee by Nescafe Bangladesh.

Target market of Nescafe:

Before talking about Nescafe’s target market at first we are going know about what’s target market? Why it’s necessary for business? The answer is Target market is the second step of product promotion process. Market targeting refers to picking a specific group or small set of groups to which a business will advertise. It is based on the idea that, because it's not really possible to make or do something that will please everyone, a business has to specialize. Companies select an advertising group to strengthen their brands, as well as to get an idea of potential sales for production or financing purposes. They can use three main approaches for this: universal, selective or concentrated. It is common for an organization to reevaluate its target groups and related campaigns over time because markets are always somewhat flexible.

Purpose:

In this part we are going to discuss what the main purposes of market targeting are. The main reason an organization uses market targeting is to give more power to its brand. When a business knows exactly to whom it will sell and what compels those individuals to buy, it is better able to create advertising campaigns that communicate the brand message effectively. Ultimately, this typically ends up giving sales a boost, driving up revenue and profits.

Organizations also use these methods when they want to get an idea of how much of something they’ll sell. These predictions are especially important for purchase managers, who are responsible for buying whatever the company needs to operate, and inventory managers, who track what the organization has on hand so that it is able to meet consumer demands. They also matter to production supervisors, who have to schedule operations based on what purchase and inventory executives do.

Estimates related to sales sometimes are necessary in order for a business to get initial financing from banks or investors. By showing the selected group and how many transactions are likely to happen within that sector, the investors and banks have a better concept of how big the return on their investment might be. It also shows that the company has thought out its platform and advertising schemes thoroughly, and financiers take this as a good sign that the organization is serious enough to succeed.

Advantages & Disadvantages of targeting:

Overall, picking a limited number of target groups provides a degree of focus that streamlines most of what a company does, making operations more cost-effective. That efficiency is not completely free, however. Segmenting and figuring out which group might produce the highest number of sales requires an enormous amount of research, which businesses have to spend money to complete.

Nescafe’s target market:

NESCAFÉ‘s primary target market are coffee drinkers, specifically those whom are looking for a quick solution to quality coffee. People that want to enjoy their coffee without any hassle/ready in a jiffy, all in the comfort of their own home. NESCAFÉ offers coffee that can be enjoyed everywhere at your convenience.

          

Other than the traditional flavors offered (regular, rich, mild and intense) and Latté and Mocha in canned form, NESCAFÉ also has flavors that target the local market here in Bangladesh. Nestle, the largest confectionary, nutrition and Food Company in the world. Nescafe is one of its renowned brands in the business of traditional hot and cold energizing soluble like coffee and is available almost in every part of the world in different forms and variants. It was named as one of the top 100 brands of the world by Bloomberg business week (Top 100 Brands of 2008, 2008). Today, its offerings are available in 32 countries including France, China, Canada, Pakistan, India, UK, USA, Bangladesh and others.

Nescafe's Global Strategy:

Nescafe has built strong brand equity through the use of aggressive marketing strategies globally. Each country/region's Nescafe forms its own strategy to effectively target its audience and generate sales accordingly for the profitability and growth of the company. It is for this reason that some variants are designed and marketed to cater to the needs of that particular segment of the market. It has been noted that Nescafe as a brand is in a intermediary phase from being an exclusive utilitarian consumption product when it used to be just an instant coffee to becoming more of a product with hedonic consumption when it started to create and sell different blends in different markets. Each variant has its own specific feature and personality to add value to the brand under the same name. The company aims at providing products to consumers wherever, whenever and however is required.

Nescafe has different target market for its different variants. In the UK, the target market is young adult consumers aged between 20-35 of middle and upper class who have lived with consumption soft drinks and energy drinks like red bull. To capture that market, Nescafe along with its advertising agency decided on building consumer trust and develop work showing lengths that Nescafe users will go to stay away from other substitute goods. A 360 degree campaign was designed which was launched with a TVC, billboards, radio ads, posters, magazines, news paper and many other media's.

In Bangladesh, with its different variants, is leveraging to vast consumer base and catering to all segments of the market. The market has been divided on the basis of geographic regions like North, South, East and West, psychographics and demographics. The strategy however has been to focus on values and low-key market penetration using 360 degree promotion campaign.

The Greek market was consuming the traditional Greek Coffee which was served in a tiny cup and with a glass of cold water intended to be drunk first. Nescafe captured this opportunity to grab the market share by introducing its Nescafe Frappe in the Greek Market that change habit of the Greek coffee drinkers. It has been heavily marketed to the target audience aged between 17-30 using clever visuals to show a trendy world of partying and dancing including a stylish living for the younger generation.

With a deal with MTV to launch a style campaign for the new generation of consumers aged between 16-24 years old, Nescafe has decided to prelaunch the brand with a $30 Million global campaign. Nescafe has been working on targeting its market through the use of interactive youth oriented websites 'Nescafe Live' where consumer will exchange ideas and information regarding images and videos aimed at 16-24 years old consumers of the global market.

In Australia, the marketing mix is aimed at targeting diverse market segments of all age groups. For the young adult café culture segment, they offer their range of latte with sponsoring campaigns like 'Nescafe Short Film Awards' & 'Win the Nescafe Latte Lounge' of which teaser and TVC's were created. Also, a website was created for information regarding products, competitions and events.

In Bangladesh Nescafe’s target market:

Mainly Nescafe’s main focus is the Socio economic class. Nescafe’s potential customers are those who acknowledge that Nescafe is all about quality and most importantly those who can afford the product. The strategy of selecting their target market in Bangladesh is following:

ü  Income level (10000tk) 

ü  Education

ü  Quality realization

Nescafe is targeting young people in Bangladesh. People who go to university and those are executive, rich people whom prefer coffee rather than tea.

 

Nescafe is offering some different products such as Nescafe Classic Instant, Nescafe Classic, Nescafe Gold, Nescafe Classic Deluxe, Nescafe Gold, Nescafe coffee mate.

Market positioning:

Before talking about Nescafe’s market positioning at first we are going know about what’s market positioning?

Market positioning is the manipulation of a brand or family of brands to create a positive perception in the eyes of the public. If a product is well positioned, it will have strong sales, and it may become the go-to brand for people who need that particular product. Poor positioning, on the other hand, can lead to bad sales and a dubious reputation. A number of things are involved in market positioning, with entire firms specializing in this activity and working with clients to position their products effectively.

When a product is released, the company needs to think beyond what the product is for when it comes to positioning. It also thinks about the kinds of people it wants to buy the product.

 Market positioning is a tricky process. Companies need to see how consumers perceive their product, and how differences in presentation can impact perception. Periodically, companies may reposition, trying to adjust their perception among the public.

Market Position of Nescafe:

Although coffee drinkers are much less than 1% of the population, our survey that considered only youngsters, shows that 9% of the youngsters are coffee drinkers. More importantly, almost 40% drink both tea and coffee. This vast group is very likely to get influenced in the future because of widespread media promotion of Nescafe. All this is showing that the young generation is increasingly developing a liking for coffee and the shift from tea towards coffee has begun.  

When it comes to drinking coffee, almost 92% of the respondents answered Nescafe. This included both the company’s product and the importers. The only other brand to have an impact is Valentino. Valentino’s market presence is not because of taste and recognition but because of the fact that it is served through vending machines. Nescafe is encouraging the promotion of coffee by any other brands or distributors because it will only broaden the growing coffee market.

1 coffee cup 1 good feeling with Nescafe, all people have known to brand in the verities character such as, to pass love between two person, red cup, hug, happiness, co-workers, and or so. This whole happed on Nescafe strategy. Therefore, when you think Nescafe you will think the coffee cup. "Nescafe mug" red cup was popular.

The Red Nescafe mug is another popular symbol which associates the Brand Nescafe with the concept sharing happiness.

                                                         RED CUP

Nescafe Classic is positioned as “100% Pure Instant Coffee” Nescafe Cappuccino is being positioned as “A true Café”.

Positioning Statement of Nescafe:

“Nescafe is a contemporary, up-beat brand of distinctive quality that offers me a rewarding coffee experience every time, everywhere.

-                      This is the positioning statement that Nescafe wants it consumers to relate to when they drink Nescafe Classic. 

The brand positioning process:

Brand Positioning Strategy:

·         The composition of the product

·         The distinguishing position

·         Being concerned about the health of its consumers

·        Combination of taste with quality.

The positioning strategy of Nescafe:

Three steps that are used by Nescafe in their positioning strategy are:

·         To identify the correct competitive advantage

·         To choose the correct competitive advantage

·         To select the correct completive advantage

This is then communicated effectively by the company and then delivered to the selected market position. It is strongly believed by nestle Nescafe that they are unique in their product and its benefits.

Nescafe Global Objectives:

1.More growth out of Nescafe – not only in emerging markets, but also from developed markets

2.Strengthen Nescafe relevance to youth; add strong position in “immediate consumption”

3.Establish Nescafe as the first World Brand for Nestlé – a leading beverage brand world-wide.

To achieve these objectives:

• Change total brand behavior.

• New energy/new focus.

Conclusion:

Finally, it’s critical for sales managers to celebrate success and publicly acknowledge outstanding performers who meet and exceed their goals. “Salespeople respond tremendously to positive reinforcement,”

But Nescafe-Nestle Bangladesh Ltd. manages their sales people with extraordinary systemic policies. We can say that the policies of they manage their sales people in right way. So the company is growing up day by day and they should able to reach their goal. At present Nescafe is not facing any   hard competition from other branded coffees. Nescafe is trying to position itself in the higher end of Bangladeshi market.  So far its promotional and marketing campaign has paid of and it holds more than 80% of the Bangladeshi coffee market. The way Nescafe is trying to position and promote itself is very logical and we can see only success in the days to come….up.

Recommendations:

•Prices of items with less food cost and more margins could be lowered slightly, to make them fast moving items.

•Offer more discounts and offers to attract customer.

•Start concept of economies or “buy two get one free” 

Bibliography:

Books:  Marketing Management and Reference texts.

Internet:

www.economictimes.com
www.nescafe.co.in
www.cafecoffeeday.com
www.barista.co.in
www.google.com
www.businessline.com