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Term Paper, 2017
12 Pages, Grade: 1,3
2 Coffee-Mate Profile
3 Segmentation, Targeting and Profiling
4 Coffee-Mate's Potential Segments and their Evaluation
In their daily life coffee is mostly indispensable for people nowadays. Already in the 1980’s in the UK coffee was very popular and well known, even though the English preferred drinking tea. As coffee consumption increased the demand for complementary products like coffee creamers increased also. As coffee creamers gained popularity in the UK Coffee-Mate, Nestlé’s brand of coffee creamer, was faced with the problem that its market was still relatively small with a variety of competitors manufacturing substitutes, e.g. cream and other brands of coffee whitener. Being confronted with this and a decreasing advertising budget the managers of Coffee-Mate were forced to look for new consumers in an attempt to increase sales.
As a first step, they did a survey, to get to know their potential customers better and to have a better general overview of the target market. Because the competition in the coffee creamer sector is relatively strong, it was essential that Coffee-Mate created a strategy with the aim of strengthening their position in the coffee creamer market in Great Britain and surpass their competitors.
To clarify the next steps for the company, it is the aim of this Case Study to investigate and evaluate the segments of the Coffee-Mate in terms of finding a proper recommendation for an effective strategy that Coffee-Mate could use.
To complete this strategy, Coffee-Mate and its market segments are presented first in theoretical part, then the process of targeting will be outlined. Moreover, the sections of the company are defined and evaluated, regarding to their profitability for the company. Finally, a recommendation for the managers will be made. This recommendation will assist Coffee-Mate to use their minimal budget as effectively and efficiently as possible and select the best option for the company. Additionally, increase its sales and gain more stability in the creamers market. In order to do so it is important to have an overview of the brand and its sales environment.
Nestle’s Coffee-Mate was launched as the first non-dairy coffee creamer in the US in 1961 and in Great Britain later in the 1980’s.
The coffee creamer market in Great Britain at that time had an average annual market value of £ 25 million with a household penetration of only 18 %. Coffee-Mate was able to keep 55 % of the market share with its marketing budget of £ 1.5 million, although there had been a growth of private labels, which shared 37 % of the market.
Coffee-Mate and the newer Coffee-Mate Lite were only used in connection with coffee in the 1980’s. Therefore, the use of Coffee-Mate correlates with consumption of coffee. In comparison to other countries e. g. Italy, the average consumption of coffee in the UK was quite low, only about 3 kg per head annually which was about 1.5 cups per day. Customers of Coffee-Mate bought an average of 1.5 kg per year. Besides that, the national Food Survey suggested that there was a correlation between weekly income and consumption of coffee: the higher income, the higher consumption of coffee. Furthermore, the survey revealed as well that coffee consumption tended to be higher in childless households.
There were many competing whiteners on the market which made it quite difficult for Coffee-Mate to increase sales. People normally used milk in different variations such as whole milk, semi-skimmed or skimmed milk. Moreover, dried milk was also used as an emergency replacement.
In addition, the market for coffee creamers was further complicated by different types of consumer behavior. There were consumers who did not use dried milk or creamers at all because they changed the taste, some were using than just in case of emergency when they ran out of milk or cream and others considered creamer as a treat.
With its special ingredients, Coffee-Mate could distinguish itself from the competitors. It contains a mix of vegetable fat and dried glucose, but as it also has milk derivatives, which legally cannot be sold as non-dairy or used by people who are lactose intolerant. When the low-fat alternative, Coffee-Mate lite was introduced, the sales volume increased about 10 % as consumers saw it as a healthier alternative to cream. The lite version is a low-fat alternative. Lastly people that were not consumers of the products claimed that the product had a high sugar content and therefore made the taste of the coffee too sweet.
One of the main advantages of Coffee-Mate for the British users was the reported improved taste. British consumers claimed that it improved the flavor of their coffee by providing a thicker creamier taste. This was very important because no matter what the taste might be, in the end the perception of the consumer is all that counts.
Unfortunately, Coffee-Mate was not included on people’s weekly shopping list and this limited the sales, since it was not perceived as a basic, like sugar, for a cup of coffee. Another disadvantage of the product was that it was only used as a complement to coffee and it was used by some only as an emergency solution in case one had run out of milk.
Once obtaining an understanding of the brand and its market environment, it is important to understand the procedure of targeting a market segment.
The intent of targeting, is to pitch the product to the market, concentrating on the specific market segment(s) which increases the efficiency and effectiveness of a campaign. A market segment is defined as "a group of consumers sharing common needs or characteristics which the company has decided to service." All this information about the characteristics is taken together with profiles and selected market segments. This description contains four characteristics: demographic, geographic, psychographic and behavioral aspects.
To increase sales revenue in Great Britain, Coffee-Mate had to choose the most suitable market segment(s) to service, from those discovered through marketing research. The TGI market research company conducted two surveys of consumers who bought coffee and of consumers who bought whiteners. Their research centered on consumer attitudes, purchasing habits, behaviors and motivations. Coffee-Mate instructed TGI to target and identify their key customers so they could reach them in the most cost effective way.
In order to do so, each of the market segments first has to be evaluated along three major aspects: the size and the potential for growth of a market segment, its structural attractiveness and the company's objectives and resources. The starting point is usually the examination of the segment size and potential growth. The marketer has to find the most suitably sized market segment. It is essential to clarify the number of customers and units to service. Besides that, the structural attractiveness has to be taken into account which values the profitability of a market segment. Furthermore, the marketer needs to consider that the previous criteria is not mutually exclusive with their own organizational objectives and resources. For example: a market segment of the optimum size can be dismissed if Coffee-Mate does not have the production capability to meet production volumes required due to the limitation of its resources and capabilities.
The market research revealed five different segments as illustrated in Figure 2.
Abbildung in dieser Leseprobe nicht enthalten
Source: Own depiction based on Kotler/Wong/Saunders/Armstrong (2005), pp. 455ff
 See Nestle (15.03.2017); Hutchinson (20.03.2017)
 See Figure 1, p. IV
 See Pride/Ferrell (2016), pp. 181f; Hüttenrauch (2016), p. 45
 Kotler/Armstrong (2013), p. 203
 See Doyle/Stern (2006), pp. 70ff
 See Pillai/Bagavathi/Kala (2013), p. 107; Armstrong, G./Kotler, P./Trifts, V./Buchwitz, L./Gaudet, D. (2007), pp. 236f
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