Case Study: Nespresso: Capturing the coffee cup

28 May 2019 by Jonathan Wright

Nespressos successful membership model builds brand loyalty, ensures repeat sales and encourages advocacy.

Where once a filter coffee machine or cafetire could be found in most kitchens, today the must-have item for any coffee lover is an espresso machine, very probably one using some sort of capsule rather than coffee grounds. Nestl patented its Nespresso process in 1996 and quickly became market leader within Europe, with several manufacturers producing machines that will take its coffee capsules. By 2010, Nespresso sales had been growing by 10% a year for a decade and today it maintains mid-single digit growth. In support of its brand, Nespresso opened its first boutique in Paris in 2000. Today, there are almost 800 worldwide. The boutiques include a relaxing tasting area as well as selling machines, accessories and capsules, and providing a collection point for online orders. Also raising the Nespresso profile has been a long-running advertising campaign featuring the actor George Clooney, the face of Nespresso since 2005, which has helped take its number of Facebook followers to more than 7m. Nespresso makes capsules rather than machines, so its business model is reminiscent of computer printers: low-cost machines followed by guaranteed ongoing sales for machine-specific printer cartridges. Nespresso therefore aims to sign up long-term customers with a club membership model. It offers shoppers a machine for 1 with a monthly subscription of 18-45 which then becomes credit for buying a regular supply of coffee capsules or other Nespresso items, all with free delivery. Members can also attend Nespresso events such as masterclasses, where various types of coffee are explored.

Membership levels range from Connoisseur to Ambassador a reward for those who buy 1,500 or more capsules a year, who also receive free samples of new lines, various discounts and assorted free gifts. Interest is maintained by regular new launches, such as its Master Origin range and limited edition coffees with the latest inspired by Parisian cafs. Nespresso has thus created a system that ensures brand loyalty and advocacy with, according to Nestl, 50% of new club members joining after experiencing Nespresso through friends or family.

QUESTION:

Nespresso forms a porminent part of the coffee subculture that exists. Explain to an excited school learner what a subculture is, by using Nespresso as an example. Use your own words, textbook transcripts will not be marked. ( 2 marks )