PRINCIPLES OF MARKETING MANAGEMENT

Name

Institution

Instructor

Course Code

Date

 

 

Executive Summary.

            Costa Coffee which is one of the leading coffee brewers in the United Kingdom was founded by Sergio and Bruno Costa, the main objective of the company was to create a premium brand of coffee in Italy. In 1995, Costa Coffee integrated with Whitbread Plc and has since penetrated numerous markets in its expansion plan strategy. The management of Costa is concerned after a study showed Starbucks-its main competitor-as having the highest consumer brand loyalty and recognition by an astounding 77% backing and Costa at 72%.Since the company’s challenge is losing consumers to its competitor, the management is concerned and ought to study on the consumer behavior, identify the typical consumers and satisfy their requirements.

Costa therefore embarked on a strategy of expansion in order to penetrate different markets and provide premium brands. Since the expectations, requirements and the consumer behavior have been identified and presented, the challenges the management have is to implement new strategies in order to satisfy the coffee consumers in the UK and in the entire world. This paper explores the marketing situation in the consumer market, analyses the SWOT situation of the company, audits, budgets and controls and the marketing implementation strategies among other things.

 

 

Table of Contents.

Mission Statement………………………………………………4

Current Marketing Situation…………………………………….. 5& 6

Internal and External Audit………………………………….….…..7

SWOT Analysis……………………………….………..8,9 &10

Objectives & Issues……………………………….………11, 12 & 13

Marketing Strategies………………………………………14 &15

Marketing Implementation………………………………15 &16

Budgets & Controls…………………………………………………18, 19 & 20

Conclusion…………………………………………………………20

References………………………………………………….21, 22 & 23

 

 

 

 

 

 

 

 

 

Mission Statement

• Costa Coffee is a consumer and market focused company that delivers premium quality products, constantly outperforms its competitors and provides predictable earnings to its shareholders.
• Providing a challenging environment to its employees and encouraging dynamism in the workplace and in the same stride to penetrating numerous markets all over the world.
• To provide the best quality brands of coffee in the United Kingdom and in the entire world and to be the market leader among coffee brewing companies.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Marketing Situation

One of the product strategies of Costa Coffee is to have a wide range of nine ranges of coffee brands, together with offering the best quality; the company has a wide variety for the consumer to choosefrom. This ranges fromchocolate, teas and infusions, iced coffees. The gourmet coffee has been made available in PVR cinemas as a result of consumer feedback that in-house eatables were missing. Another product strategy is to offer eatables at ‘Costa Express’ points; in addition, the staff are well trained and serve the best product,the coffee cups used fit the coffee choice that aconsumer purchases (Weilbacher,2003).

Place: the company has combined efforts with PVR cinemas; the company will have a change to establish a cafeteria in a multipex in order to allow the consumers easily access the products. In its expansion plan, the company intends to expand to eight new cities and among those targeted are; Kolkata, Hyderabad, Chennai and Punjab.The places mostly targeted are malls, high-streets, airports and major hospitality centres. The cafeterias also have high quality furniture that is well designed (Quelch, 2006).

Some of the promotional strategies are the use of traditional strategies, image advertising, movie and television placements and online marketing to reach a wide audience. Online marketing through networks such as facebook is yet another strategy used. There is also customized branding to suit different locations and target groups, for instance,branch managers are given  a chance to brand products according to what suits their locations. The use of a loyalty card reward system that enables consumers to redeem their points for further purchases.

Price strategies: Costa offers coffee in different sizes such as Primo, medio and massivo at very competative prices hence giving consumers a choice.Slicing the price of cappuccino from £3 to £1.75 has been applied also to increase sales and overall revenue. Applying the strategy of price discrimination, Costa is able to retail affordable coffee to regular consumers. Other strategies include discontinuing operations in locations that are not so profitable, dividing the market into sections for different consumer locations, changing the outlook of different sale points and customizing the consumer menu to suit different markets.

 

 

 

 

 

 

 

 

 

 

 

Internal & External Audit

            The executive information of the Costa Coffee Company indicates that there are gaps between what the company intends to achieve and the actual state that the company is in. There are weaknesses emerging from their business, knowledge management and the actual knowledge processes (Randall, 2001). Costa Coffees executive information could be used to help to identify and formulate and manage the audit problems. The company products much as are well presented requires an authentic Italian image; most of the foods are snaky and therefore meant for people on the go. The point of sale strategy puts in question the impact that it has on sales and the snacks offered do not take care of healthy eating.

 

 

 

 

 

 

 

 

 

 

SWOT Analysis.

• Strengths: Costa coffee has achieved extensive growth over the years and this is proven by the increase in profitability, increase in volume of sales and revenue as well as the global expansion.
• Costa coffee produces premium brands that give consumers value for their money. This can be proven by the high volume of sales as well as brand loyalty of the said consumers. They also offer the consumer a wide variety of brands to choose from (Field et al. 1996).
• The company has invested in IT infrastructure, this enables them to manage their logistics conveniently as well as manage their widespread international trade and procurement procedures.
• The strong financial base enables the company to be able to change marketing strategies very fast. Another factor is consistency to customers as a result of few overhead costs and little deficits.
• The company is able to deliver quality customer service and is devoted to achieving customer satisfaction. This has enabled the company gain reputation in the market.

 

 

 

 

Weaknesses

• There is lack of control of the market despite the advantages of IT infrastructure. This in the long run could reduce production levels and by extension profitability levels.
• Costa Coffee products retails across many sectors. This may lead to lack of focus on one particular sector hence other players may have competitive advantage over them (Peter et al.1996).
• Although the company operates in many countries, its presence is only felt in relatively few markets; as a result, the other branches lack market command and trading repute.
• The company lacks experienced staff with knowledge in essential expertise; there is also vulnerability brought about by losses caused by staff turnover.
• There is financial unreliability and athreat to liquidity in the company; thisis mostly experienced at the introduction of new products.

Opportunities

• Focusing on the larger Europe and the greater China region, the company could get into mergers and other strategic alliances in order to expand further.
• Opening up of new retails outlets, distribution points will allow the company to diversify from operating mega stores to local based centers. This will allow market development.
• Operating large branches worldwide; Costa Coffee could still continue employing this strategy and also focusing on exploiting other opportunities for business success.
• The branches of Costa Coffee operate in relatively few countries; this provides an opportunity for the company to explore other markets like China and India (McMartin, 1995).

 

Threats

• Being the market leader means that the company is the target of many upcoming others to beat both in the home market and internationally.
• In the other foreign countries where Costa Coffee operates, the company is exposed to political, economic and exchange rate risks.
  • The company may not effectively adapt to the changes in the markets caused by development in IT. This is because the market is likely to change due to these developments (McDonald, 2001).
  • Outsourcing to low cost regions in an effort to lower manufacturing costs could also lead to unhealthy competition in prices and by extension inflation on prices.
    • Any shift in focus of Costa Coffee’s large competitor could put pressure on the company to equalize. This also means staffing requirements as a rapid response measure.

 

 

 

Objectives and Issues

Customer acquisition and retention: in simple terms customer acquisition refers to getting the consumers attention, trying to make them appreciate the products and getting them to start purchasing. In this regard, Costa’s strategies have ensured that consumer satisfaction makes other consumers join the cycle (Hoyer et al, 2001). This consumer life circle has played a crucial role in ensuring the consumers are loyal to their brands. Consumer retention strategy has enabled the company increase sales revenue.

Currently, the market share of the Premier Inn is slightly above 6% of the whole market in the UK, 4 brands account for a total of 80% of all the total hotel rooms in terms of turnover. In the next three years, the company is in the process of expanding by compeating its major rivals like starbucks in order to increase their market share (Ziethmal, & Bitner, 2003) In the first year the company intends to go into mergers with other companies in new markers, and then the second phase will see the company customize their brands to suit local needs, in the third phase, Costa intends to extend the loyalty programs to the new markets to increase sales and brand loyalty.

Product and market development: the company has intentions of executing product portfolio overhauls in the next three years. A major expansion is set for the India market; this will also follow mergers with local companies to ensure consumers familiarize themselves with the market. This is expected to be at the rate of 30% per year majorly targeting income earners between 18-25 years. The second and third years will see an expansion to over 100 outlets throughout the country. In the same stride, since product customization has worked in other markets, this will be implemented to a peace different age groups hence producing premium brands in the next 18 months.

Capitalizing on the already strong Costa brands inpenetration of new locations: in the new markets, the objective is to replace the already established retailers in supermarkets, hospitals and leisure facilities. To strengthen the company’s position in international markets by opening new stores year after year, and having a strong distribution network. Partnering and merging in new markets like China, India and Indonesia is an area of focus in order to increase turnover and operatingrevenue (Worth, 2003).           To understand investors and ensure the shareholders get value for their money has been of key consideration,improving on digital marketing techniques by reaching an array of audience,targeting all groups of people in terms of age,social and economic classes while still maintain the premium and quality production.

Issues: in the recent past, Costa coffee has committed to partner with Torex Company which is a major provider in integrated technology solutions in the hospitality industry. This new contract will see the company provide application management services, data services, hardware and software and project management services just to mention but a few (Kotler,1997). In addition, Costa Coffee brand benefits by using Torex InnTouch point of sale equipment for the last ten years, this ensures effecicient management of cash,saves time,helps in stock management and ordering strategies, labor management and business reporting becomes manageable.

Torex Company integrates well with Costa Coffee’s loyalty and reward schemes, an example is where consumers gain points by purchasing food and drinks and these points could be redeemed for purchases in the future. Torex solution therefore manages this segment by ensuring balance enquiries are attended to; they initialize the loyalty cards, assist customers to acquire and redeem the points (Hoyer, 2001).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketing Strategy

Loyalty card scheme: the development of this strategy helps to boosts sales, in the case of repeat purchase, the consumer gets free coffee. It is being applied in Italian coffee shops. Through world classmarketing, Costa intends to prove its authority and involvement in the entire coffee processing (Helsen, 2010). To commence this process, the loyalty card was distributed through leaflets to households with free coffee redemption in any outlet across the United Arab Emirates. This reward scheme also offered the Frescato brand to prove its commitment to offering a variety to the consumer and to market this brand as well.

Maximizing consumer touch points: with competition being rife in the sector, Costa intends to open branches in airports, complexes. Location specific branding is another approach applied; it allows branch managers to design the brands in accordance to what suits their areas of coverage (Ghemawat, 2004).Customizing brands often makes people relate more with the products, for instance the brand design used by students in a college is likely to be different from what would suit shoppers visiting a mall. The use of digital media in order to command a huge audience, the company also uses facebook for advertising.

Mergers: Having entered into the market just in 2006,Costa partnered with Yueda Group,this strategy was aimed at ensuring that company gains influence in the local market,understand the consumers and in the long run penetrate the Chineses market. Having gained reputation in the Italian market, Costa intends to transfer the same aura to China since most consumers would mostly want to identify with a global brand that doesn’t compromise on brand quality (Daniel, 2002).

Differentiation: this strategy involves a company making its products appear different, diverse and more exciting to the consumer. Having Starbucks as the major competitor, Costa had to come up with this strategy to having a competitive edge. Costa has spent £60 million to acquire Coffee Nation which operates numerous coffee machines. The company wishes to name this self service centers ‘Costa express’. The self service machines are convenient points where consumers can purchase coffee at bus termini or streets (Brassington, 2000). Differentiation as astrategy ensures high volume of sales at less expenditure. The coffee machines ensure market penetration and meeting the needs of customers wherever they are.

 

 

 

 

 

 

 

 

 

 

 

Marketing Implementation

Consumer behavior refers to how consumers feel and react to different product, retailers and brands as alternatives. This is mostly influenced by factors such as culture, media influence, social and economic class and family. While making decisions on shopping or making marketing decisions, the consumer is influence by the amount of knowledge they have on the product. Another important factor is how aggressive a company can be in marketing campaigns and strategies in order to reach the consumer (Subramanian et al.1998)

Against this background therefore, Costa has chosen market segmentation as a marketing strategy for a three year plan; in the first year, the company will do a target marketing to identify different markets and putting them into segments. The differentiation attributes of the different segments will also be taken into account and the needs identified at this stage. Division of the markets will be considered in the second phase to through communication and distribution networks. Resource allocation is therefore done to apportion resources to the groups, their responses analyzed and the requirements of different markets taken care of (Yamin, 2003).

Segmentation done on the basis of behavioral and geographical needs; regions such as countries, cities and even neighborhoods is also considered. Psychographic factors such as interest, activities and opinions will also be analyzed. Different needs will be met hence enabling the company to have a competitive edge over the others, meet consumer needs and implement sales strategies.

         The use of leaflets to market the loyalty card,the use of point of sale termini, loyalty reward schemes and the use of self service coffee machines are just a few of the way Costa Coffee implements its strategies in the market. The Costa express strategy has been implemented to enable consumers grab a cup of coffee on their way to work, college and hence convenience. This implementation strategy has seen the company benefit from high-volume but low margin sales. The most important point to consider is that the company still manages to deliver variety and quality to consumers(Murphy, 2007).

The multi-brand strategy ensures that the point of sale and cost express strategies do not affect the brand equity in cafeterias. Customized product development also helps in ensuring brand loyalty by consumers. A different implementation method is the participation of Costa Coffee in conventional and specialty channels; this is through the establishment of direct trade contracts with other coffee roasters that are international producers (Blyth, 1990). This move though requires consumers to pay additional premiums for certain types of coffee brands and this is passed up to the producer level. If this stratagem is implemented effectively, it helps a company to cut a niche’ and penetrate specialty coffee markets.

In implementing the strategy of penetration, Whitbread has made a breakthrough in China. The country has a dense population and Costa Coffee has used this to its advantage; the company has carried out studies of the culture and the preferences of the local consumers. Costa operates 500 coffee stores in the United Kingdom and in Europe and around the Middle East; it operates a total of 150 stores (Bilen, 2002). The company is a force to reckon with among coffee brewers. However in China, the company entered into a merger with Yueda Group owing to the fact that it was a new entrant and so needed to gain consumer confidence. This move is also meant to enable the company compete effectively with Starbucks which is its main competitor.

 

 

Budget and controls

         One of the control issues that are of fundamental importance is to ensure reliability of financial reporting: The Company has ensured that it provides accurate and timely information to better their management of business. Proper accounting and credibility to the organizations shareholders has been integral and so is elimination of errors, risks and irregularities. This is achieved through the operation of a strong audit trailand evaluation (Bartlett, 1979). The Second focus on controls is the compliance with laws and regulations: this ensures that the business is not disrupted due to reasons of legal actions taken on the company; rather the focus should be on creating contractual relationships with partners, customers and complying with statutory requirements.

      Thirdly, there ought to be effectiveness and efficiency of operations, proper management of business growth and the controls related to it, ensuring the responsibilities of both the management and employees are properly speltout. Emphasis on cost controls, this is achieved by ensurung greater efficiency in operations and better company operating performance (Barczak, 2003). To ensure the company has proper controls, the management even though managed to open Whitebread as on of Costas subsidiaries has managed to control costs in addition to delivering premium products.

Another area of control lies in assessing IT risk; Costa Coffee having invested in ITinfrastructure ought to ensure that potential business consequences are taken into account and the technology risks that could be costly to the company. Preventive Controls; the company has ensured that it has detective controls to spot areas where controls are loose, for instance, taking time to do a check on funds that have not been accounted for at the end of reporting periods (Anon, 1979). This has been useful to end occurrences not planned for or contingencies. The company has put in controls to monitor their competitor’s strategies and how this is likely to affect the business as well as the threats involved. This ensures that Costa maintains a competitive edge over these outfits and also responding to possible threats.

Others are Business Process Management Controls (BPM) and tracking systems, automation of the business processes, centralization of the business information distribution points and monitoring and managing employees and their performance in the company (Agrawal, 1994).

For the year ended March 4th, the profit before taxes was £208m; this was a 5% enhancement, total revenue increased by 8% to £1.4bn. The company’s earnings per share went up from 52.82p to 92.37p. As a result, there was a final dividend announced for shareholders of 28.35p, there was an increment by 4% to 38p (“Annual Report and Accounts Whitbread PLC2009/10?.2010). In increasing the supply chains of Costa Coffee and Premier Inn brands, the new management came up with a three year plan which saw the budget figures rise by 75% to a total revenue of £350m. The new executive office Andy Anderson has a three year plan of expanding to 65,000 hotels in Britain and atotal of 3,500 coffee bars globally. The Premier Inn brand has currently 43,219 rooms so this expansion means a 50% growth, and almost double of the 1,871 cost chains.

In July 2004, the company purchased the 132-strong Premier Lodge chains, and this meant a budget expenditure of £505m, White breadtherefore became the largest hotel operator in the United Kingdom. A budget allocation was also made of £79m in the partnership with Chiltern Mondiale and Kew Green hotel businesses.

 

conclusion

In conclusion, for more than a century, today Costa Coffee remains one of the leading coffee brewers in the United Kingdom’s coffee industry. This has been attributed to the production of premium and quality brands, strategically placing itself for more opportunities and penetrating even to other foreign cultures (Aaker et al, 1999). However, even with their success formulae at hand, the company needs to analyze their knowledge management tools especially in the quest for exploring foreignmarkers. By and large, the fact that Costa Coffee focuses on remaining dominant and attaining financial and market stability, their marketing management tools have been worthwhile so far.

 

 

 

 

 

 

 

 

 

 

References

Aaker, D. and Joachimsthaler, E. (1999). The Lure of Global Branding. Harvard Business Review (November-December):137-144

Agrawal, M. (1994).  Review of a 40-year debate in international advertising: Practitioner and academician perspectives to the standardization/adaptation issue. International Marketing Review 12 (1): 26-48.

Anon. (1979). Adapting export packaging to cultural differences. Business America; Dec 3, 1979;

Barczak, G (2003). Managing Global New Product Development Teams. Institute for Global Innovation Management Working Papers.

Bartlett, C. A. and S. Ghoshal (1989). Managing across borders: The transnational solution. Cambridge, MA: Harvard Business School Press.

Bilen, S.G., Devan, R.F. and Okudan, G.E. (2002). Core Curriculum and Methods in Teaching Global Product Development. International Conference on Engineering Education: August 18-21, 2002.

Blyth, J. U.S. Firms Are Becoming More Realistic About Global Marketing. Marketing News; Oct 1, 1990; 24, 20; pg. 14

Murphy B, G., Celuch, K., & K Callaway, S., 2007. Small Business Internet Use And Strategic Flexibility. Journal of Small Business Strategy, 18(1), p.57.

Brassington, F and Pettitt, S, (2000), Principles of Marketing, Second Edition, Prentice Hall, Harlow

Daniel, E., Wilson, H., & Myers, A., 2002. Adoption of e-commerce by SMEs in the UK. International Small Business Journal, 20(3), p.253.

Ghemawat, P. (2004). Distance still matters: the hard reality of global expansion. Harvard Business Review.

Helsen, K; Jedidi, Kamel; DeSarbo, Wayne S. A new approach to country segmentation utilizing multinational diffusion pattern. Journal of Marketing; Oct 2010; 57, 4; pg. 60

Hoyer, W.D. and MacInnis, D.J. (2001) Consumer Behaviour, 2nd Edition, USA: Houghton Mifflin Company

Kotler, P. and Armstrong, G. (1997) Marketing An Introduction. Fourth Edition. New Jersey. Prentince Hall International

Lemak, D. (1997). Global business strategy: A contingency approach. Multinational Business Review (spring).

McDonald, M. (2001) Marketing Plans. How to prepare them, how to use the. 4th edition, Butterworth Heinenamm

Murphy B, G., Celuch, K., & K Callaway, S., 2007. Small Business Internet Use And Strategic Flexibility. Journal of Small Business Strategy, 18(1), p.57.

McMartin, J. (1995) Personality Psychology: A student Centered Approach, UK: Sage Publications

Peter, J.P. and Olson, J.J. (1996) Consumer Behaviour and Marketing Strategy, USA: Irwin

Quelch, John A. and Hoff, Edward J. (2006). Customizing Global Marketing. Harvard Business Review 64(May–June):59–68.

Randall, G. (2001) Principles of Marketing, 2nd edition, Thomson Learning.

Subramanian, M., Rosenthal, S., Hatten, K. Global New Product Development Processes: Preliminary Findings and Research Propositions. Journal of Management Studies 35:6 November 1998.

Weilbacher, W. (2003) Brand Marketing: Building winning brand strategies that deliver value and customer satisfaction, NTC business books, chapter1 and 2

Worth, S., Balestrero, G. Cross-border collaboration. Association Management. Washington: Nov 2003.Vol. 55, Iss. 11;  pg. 36

Yamin, M; Altunisik R. A comparison of satisfaction outcomes associated with adapted and non-adapted products. International Marketing Review; 2003; 20, 6; pg. 604

Ziethmal, & Bitner, (2003) Services Marketing: integrating customer focus across the firm, McGraw Hill, chapters 1,3 and 6