Nespresso Case Study

1895 Words 8 Pages
8.1: The Unique Business model of Nespresso
8.1.1: Nespresso began in 1986 as a more traditional business model in which the company manufactured Coffee machines and created a pod system, and then gave both products to traditional retailers to sell to offices and home users.
8.1.2: For a dozen years, this model did not prosper. In 1998, a new CEO devised changes to the business model, which revolutionised sales and put the company on a growth trajectory which created annual growth of more than 30%, creating more than R4bn in annual sales, making Nespresso not only the star performer of its parent company, the world’s biggest food company Nestle, but also the most successful coffee seller in history.
8.1.3: There are 9 components to a Business
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9.1: Customer Segmentation
9.1.1: The Customer base was refined to a niche segment rather than a mass market proposition.
9.1.2: The quality of the coffee was targeted at the high end user who would be willing to pay much more for the convenience of having café or restaurant style coffee deliverable at home.
9.1.3: As discussed in 3.3, Nespresso targets the top 5% of people, who enjoy the finer things in life but are also comfortable enough to pay the premium cost (the added value) that having that luxury entails. Nespresso is not a brand for the masses. It requires a large buy in: about R2000 for purchasing their cheapest machine, up to R4500 for their most expensive, as well as the continuous cost of pods, each pod costing approximately R7. Most people simply aren’t prepared to spend that amount when there are cheaper alternatives such as instant coffee, but for Nespresso customers, instant coffee simply isn’t good enough to satisfy their needs as coffee-lovers, which is what explains the ultimate investment in Nespresso.
9.2.1: Key Resources and
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9.2.2: The pods had to be uniquely shaped and patent protected so that only their own pods could fit snugly into the machine.
9.2.3: The coffee machine itself had to be extremely simple to use. This was unlike the competitor machines in the market place – which were largely industrial scale for restaurant / café use, such as those produced by competitors at three times the cost.

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