Costa’s three year marketing plan
proposes to enable the company achieve an annual growth of 24% in sales
revenues for the next three years. It also targets to introduce a customer
loyalty program that would see the company improve its customer retention rate
at an average of 15% per year. The plan also proposes to improve the level of
Costa brand awareness in the market through aggressive and strategic marketing.
In this outline, emphasis
has been laid on procedures that enable the creation of a good marketing
implementation plan with the relevant academic theories and models highlighted
accordingly. Internal and external analyses have been conducted and have been
instrumental in highlighting the strategic position of the company in the
market. These analyses have been done by evaluating internal capabilities,
industry forces and factors in the macro environment. Specific provisions on
the preferred marketing mix and implementation schedule have also been made
with recommendations on how the implementation budget should be prepared.
Costa coffee is an international coffee
chain with its headquarters in the UK. The company also offers snacks and a few
other soft drinks in addition to its core product- coffee and is known to be
among the industry leaders in the industry with its main rivals being
McDonalds, Cafe Coffee Day, Starbucks, and Subway (Costa, 2011). Costa Coffee
is renowned for its attention to quality and flavour with its coffee hailed as
the best quality coffee in the industry. The company is also hailed as a leader
in innovation with an efficient organisational structure that facilitates the
process of developing new products that meet the unsatisfied demand in the
market (Costa, 2011).
The inclusion of a
company’s mission statement helps in ensuring that the plan falls within the
scope of the long term vision of the company. Mission statements generally
state the purpose for existence of a company and the basis for all endeavours
to be undertaken. Costa Coffee’s vision is to become the most successful
business in the world. This implies the need to assure quality, convenience,
and engaging in marketing exercises as appropriate (Costa, 2011).
The environmental audit is divided into
internal audit and external audit.
Internal audit focuses on the resources,
capabilities, strengths and weaknesses of an organisation and how a combination
of the same can inform corporate and operational strategies (Kotler, 2010). This
analysis needs to be done under the acknowledged strategic frameworks to ensure
that the analysis is comprehensive and useful for reliable decision making. The
resource based view of the firm views the organisation as a bundle of resources
that can be used singly or in synergy with each other to achieve the
organisational goals set. The resource could be assets directly owned by the
company or factors of production that are within the company’s sphere of
influence. The VRIN framework reinforces the resource based view by outlining
the conditions that a resource should have in order to yield a competitive
advantage for a company (Barney, 2000). The qualities of valuable, rare,
inimitable, and organisation must be present for a capability to be considered
a source of competitive advantage.
Value refers to the
ability of a resource to give a competitive advantage to an organisation; if
not help in diminishing the effect of its weaknesses (Barney, 2000). The value
of acquiring and maintaining such a resource should also not exceed the
potential benefit of such a resource. For
instance, Costa’s chief coffee taster was insured for £10 million in 2009
(MarketingWeek, 2011). This may be considered to be a costly resource. However,
it is his tasting abilities that have greatly contributed to the quality of
Costa’s coffee with the company recording a 22.8% increase in sales for at
least six years (MarketingWeek, 2011). This means that the resource is valuable
as its benefits surpass its cost. The resource should also be rare and
inimitable. Being rare means that it is not readily available and being
inimitable implies that it should be difficult for a competitor to come up with
a resource offering similar benefits (Barney, 2000). This unique coffee tasting
ability is considered natural and innate in the specific taster who then uses
his ability to train a team of able tasters. It is rare and inimitable.
Organisation refers to
the systematic utilisation of a resource in a manner that adds value to the
organisation. The company’s coffee tasting capability has been organised in a
manner that ensures quality can be assured across all branches. The chief
coffee tasters maintains a team of tasters who have been well trained by him
with the tasting exercise centralised in London (MarketingWeek, 2011). The
approved tastes are taken note off and unique recipes shared with subsidiaries
around the world (MarketingWeek, 2011). From this brief analysis, it should be
concluded that Costa’s coffee tasting abilities are the greatest source of
advantage for the company.
The external audit can be done on two
levels: the industry analysis and the macro environment analysis.
Industry analysis focuses on industry
specific forces and is useful in determining a company’s competitive position. The
porter’s five forces framework is useful in such analysis with the main factors
to be considered being as shown in the graphical representation below:
Source: Hitt, Duane and Robert, 2001
i.
Market rivalry factors in the level of
competition between current industry players. It is heightened by the presence
of a large number of competitors, similarity of the products on offer, and the
ease with which customers can switch from one industry player to the next based
on price differences and other factors (Hitt, Duane and Robert, 2001). It can
also be heightened by low rates of economic growth. Market rivalry in this
industry can be considered to be high due to the presence of numerous
competitors at the local level and on the global scale. However, the rivalry on
the global scale is reduced due to the fact that coffee consumption lifestyles
are on a steady growth in emerging markets in China and other parts of Asia
(MarketingWeek, 2011).
ii.
Buyer power is raised by the ability of
customers to impose prices on industry players. The coffee industry comprises
of numerous buyers who may not be able to get organised in groups that can
significantly influence pricing (Costa, 2011). However, the fact that they can
switch from brand to brand without incurring switching costs raises buyer power
significantly.
iii.
In the case of supplier power, the power
is raised where industry players are unable to switch from one supplier to
another without incurring significant switching costs. In this industry,
suppliers are numerous and switching costs are low hence supplier power is weak
(MarketingWeek, 2011).
iv.
Threat of substitutes is determined by
the level of capital required to mount operations, access to distribution
channels, brand strength of existing industry players, and legal provisions
among others (Hitt, Duane and Robert, 2001). At the local level, the threat of
entry is lowered by low start-up costs (MorningWeek, 2011). However, the case
is different for start-ups intending to mount global operations. With most
players having own distribution channels, it becomes difficult for entrants to
access the existing distribution channels.
v.
The threat of substitutes should be
gauged based on the presence of products that could provide benefits similar to
those under consideration. For instance, in this case Tea would be a perfect
substitute for coffee with other soft drinks also being viable alternatives.
Switching costs should also be considered with the absence of high switching
costs signifying a strong threat of substitutes (Pearce and Robinson, 2005).
The threat of substitutes in this industry is moderate in light of the fact
that coffee drinkers tend to be quite attached to its unique taste and effect.
The PESTEL model is among the most
effective tools for this analysis and it includes an analysis of political,
economic, social, technological, environmental and legal factors (Pearce and
Robinson, 2005).
i.
Political factors factor in the systems
of governance and the commitment of the ruling class to respect the workings of
free market economies. The tendency to nationalise successful corporations and
interfere with the running of businesses are among the most common forms of
political risks in most countries (Stacy, 2007). Political stability is also an
important factor with the occurrence of insurgencies always seen as a threat to
business. An analysis for each market helps in informing the short term and
long term strategies to be embraced (Stacy, 2007). Increased political
stability around the world gives Costa the opportunity to expand its
international operations and establish itself as a leader in the industry.
ii.
The economic factors to be considered
should include the rates of economic growth, per capita income, costs of living
and others. These factors help in determining the average purchasing ability of
consumers in the market. Costa is faced with a rapid economic growth in the
emerging markets and this presents an opportunity to realise impressive growth
rates in asset base and revenues (MarketingWeek, 2011).
iii.
The socio cultural factors refer to
customer preferences and lifestyles. It can also refer to the demographic
patterns and established behavioural patterns among different sections of the
society. The culture of taking coffee has been observed to be on an upward
trend in many Asian countries and this presents an opportunity for Costa to
take advantage of the growing demand (MarketingWeek, 2011). The coffee taking
culture is also said to be deeply engrained in the British culture and this
assures Costa that the UK market is likely to remain a significant source of
their revenues in the future.
iv.
Technological advancements in the
industry helps in the development of automated production procedures and this
in turn helps in the reduction of the cost of labour and standardisation of the
quality of products offered in the market (Lasserre, 2003). With advanced
technologies, product quality can be assured. Costa’s coffee has consistently
remained of high quality and this can be attributed to technological
advancements that help in standardising quality.
v.
Environmental factors are mainly related
to the environment and the sustainability agenda. It forms a crucial part of
corporate social responsibility agendas of most organisations (Keegan, 2002).
Production processes should be focused upon to minimise wastage and adverse
impact to the environment.
vi.
Legal factors refer to laws that have
been introduced that deal with taxation, operation procedures, employment
practices and even food safety. The laws differ from country to country with factors
such as minimal wage being very crucial in the determination of operational
costs (Kotler, 2010). Food safety is especially important with many food safety
practices tending to assume a global standard. This standardisation helps in
pursuing a global strategy by multinationals.
SWOT is an acronym for Strengths,
Weaknesses, Opportunities and Threats. It provides what would be called a
summary for the internal and external analyse. Strengths refer to factors that
can be used to help in the achievement of organisational goals while weaknesses
are those that can impede the realisation of the same (Pearce and Robinson,
2005). Opportunities and threats arise from the external environment. The
summary of the SWOT analysis from the contents of the case study are as
tabulated below:
Strengths
|
Weaknesses
|
|
- Special
coffee tasting abilities
|
-Small
distribution network that would be inadequate to serve targeted markets
|
|
Motivated
and highly skilled workforce
|
|
|
-Strong
innovation culture and information sharing mechanisms
|
|
|
-Strong
brand
|
|
|
|
|
|
Opportunities
|
Threats
|
|
-Growing
coffee taking lifestyles in Asia
|
-Presence
of strong competitors at global and domestic market levels
|
|
-High
rates of economic growth in emerging economies
|
|
|
-Political
will towards private enterprise in China and other emerging economies
|
|
Highlighting of marketing issues
provides the basis for the marketing plan with the marketing objectives largely
based on the issues highlighted. The company is faced with competition from
local and global competitors with market rivalry heightened by the fact that
brand loyalty and switching costs are generally low (Kotler and Lane, 2006).
This makes it easy for consumers to switch brands. Customer retention, growth
in revenues and brand loyalty are therefore areas of concern. The marketing
objectives for this outline are as follows:
- Achieve an
annual growth of 24% in sales revenues for the next three years
- Improve its
customer retention rate at an average of 15% per year
- Capture
additional market share through new product development through continous
innovation
Marketing strategy defines the approach
that a company should assume in order to realise their goals. The strategy adopted
should be consistent with the outcome of the internal and external audit and in
a position to make good use of the strengths of the organisation. Porter’s
generic strategies outline differentiation, price competition and
diversification as some of the strategies that the organisation can embrace as
its approach in the market (Haberberg and Rieple, 2001). A combination of the
three approaches would serve the company well.
Growth strategies can
best be understood by focusing on the recommendations contained in the Ansoff’s
model as illustrated in the graphical representation below:
|
Existing Products
|
New Products
|
|
|
Existing markets
|
Market penetration
|
Product development
|
|
New markets
|
Market development
|
Diversification
|
Source: Haberberg and Rieple, 2001
The marketing
implementation plan should consider the options of market penetration, product
development, market development and diversification. Market penetration is
suitable where a company intends to market existing products in existing
markets (Haberberg and Rieple, 2001). Product development applies where new
products are to be introduced in existing markets. It is considered to be a
process that works easiest in markets where a company already has a good brand
image. Market development on the other hand helps is a suitable strategy where
a company enters a new market with existing products (Kotler and Lane, 2006).
This strategy works best where the psychological distance between the existing
and the new market is very low. Products need to be consumable in the new
markets. The last strategic option is diversification which deals with the
introduction of new products in new markets. This strategy is considered to be
the riskiest one with the company having to deal with challenges related to
insufficient exposure and weak brand in the new markets.
This plan proposes to
embrace market penetration, market development and product development
strategies.
The implementation plan should factor in
the marketing mix to be adopted and choice of market segments to be targeted.
The elements of the marketing mix that
are to be considered include price, place, product, and promotion. These have
been elaborated on as shown below:
Product refers to the attributes of the
products being offered. It includes quality and possession of suitable flavours
as desired by the consumers (Rugman and Verbeke, 2002). The plan proposes the
conduct of continuous research through the wide branch network to monitor
consumer reactions and determine the suitability of the product features.
The pricing proposed for this plan is
mixed. Premium products such as Costa Light shall be priced higher than the
market averages. The premium approach shall also be adopted with lifestyle
sections in the restaurants reserved for those wishing to socialise while
taking coffee and snacks. To capture customers that are sensitive about price,
a creative approach to price reduction can be done without making the
impression that the products being sold are of low quality. This shall be done
by creating product bundles that can be purchased at a price lower than the
total for individual products. This approach would ensure that the quality
image of the company is not hampered while remaining appealing to customers who
are price-sensitive. Benefits related to loyalty cards shall also be enhanced
in order to promote customer loyalty.
Place refers to the distribution system
with strategists always preferring to ensure proximity of outlets with target
customers. In the London markets where takeaways are more popular, the outlets
only need to be strategically placed and with a mechanism to serve provide
prompt transaction processes. In markets such as India and China, coffee
drinkers take coffee as part of a socialisation exercise and this implies the
need to have a comfortable eatery to facilitate such activities. The number of
outlets needs to be increased from 700 outlets to about 1500 in the next three
years.
Promotion refers to all processes aimed
at making the market aware of the company and includes elements such as
advertising, public relations, direct sales, internet marketing and others
(Strauss, 2008). The promotion exercises shall mainly be conducted through
advertisements through the internet and traditional media. The message shall
mainly resonate around portraying Costa restaurants as the best joints for
those intending do socialise over coffee.
Market segmentation refers to the
process of singling out a section or sections of the market with peculiar
characteristics. The market segment that would serve the purpose of the company
would be the youthful sections of the population in China, India and other
Asian markets. The idea is to capture these markets by making Costa restaurants
the preferred socialisation sites where young people can hook up and have fun
while enjoying a cup of coffee and snacks.
The implementation of the marketing plan
shall be sequential and designed in a manner that will create a momentum at the
appropriate points. The first 3 months shall be dedicated to market research
with an aim to determine which marketing messages and approach to marketing
would work best for the market segment targeted. Upon conclusion of the
research, marketing messages shall be designed within 2 months and the
marketing process rolled out. The planning stage shall also incorporate plans
on how to implement and market the promotion mix elements selected. The actual
implementation shall subsequently be implemented for a period of 3 years. Subsequent
promotion exercises shall be implemented with relative expenditures used as
follows:
|
Budgetary item
|
Year 1
|
Year 2
|
Year 3
|
Proportion of marketing budget
|
|
Advertising
|
25%
|
40%
|
35%
|
26%
|
|
Internet marketing
|
40%
|
30%
|
30%
|
18%
|
|
Product launch events
|
25%
|
40%
|
35%
|
16%
|
|
Loyalty schemes
|
40%
|
30%
|
30%
|
10%
|
|
Personal selling
|
30%
|
40%
|
30%
|
12%
|
|
Public relations
|
35%
|
35%
|
30%
|
8%
|
|
Sales promotions
|
40%
|
30%
|
30%
|
10%
|
It is important to establish mechanisms
to monitor the progress of a marketing plan to assure results and facilitate
timely corrections in cases where the implementation fails to yield required
results (Haberberg and Rieple, 2001). Annual growth in sales shall be monitored
by keeping an eye on quarterly revenue reports. The results for each quarter
shall be compared to those of the previous quarter in order to determine that
whether it would be feasible to achieve the targeted annual rate. A monitoring
team shall be established to analyse the results and derive corrective action.
The building of brand
loyalty and subsequent improvement in customer retention shall be monitored
using data from loyalty cards. Data on the frequency of transactions among card
holders shall be used to determine the customer retention rates. Corrective
actions shall be taken if the results received at any point are not
satisfactory and shall revolve around changing the marketing message and
changing the promotional mix as well as the significance of the cards.
Barney, J., 2000. Firm Resources and sustained
competitive advantage. Advances in
Strategic Management, 17, pp. 203-227
Costa, 2011. Costa:
For Coffee Lovers. (Online) Available at: http://www.costa.co.uk (Accessed
5 22 March 2012)
Haberberg
A., Rieple A., 2001. The Strategic Management of Organizations. Prentice Hall: Financial Times
Hitt, M. A., Duane, R., Robert, E.H., 2001. Strategic
Management: Competitiveness and Globalization. 4th Ed.
Cincinnati, Ohio: South-Western College Publishing
Keegan, W.J., 2002. Global Marketing Management. Upper Saddle River, NJ: Prentice-Hall
Kotler, P., 2010. A framework for marketing management.
Upper Saddle River, N.J: Pearson Prentice Hall
Kotler, P., Lane, K.K.,
2006. Marketing Management. 12th Ed. Pearson Education
Lasserre,
P., 2003. Global Strategic Management. London: Palgrave McMillan
MarketingWeek, 2011. Costa’s £10m tongue.
Course Material
Pearce, J., Robinson, R., 2005. Strategic Management. 9th Edition. New York: McGraw-Hill
Rugman, A.M., Verbeke, A., 2002. Edith Penrose’s
Contribution to the Resource-Based Views of Strategic Management. Strategic Management Journal, 23, pp.
769-780
Stacey, R. D., 2007. Strategic
management and organisational dynamics :the challenge of complexity to ways of
thinking about organisations. Financial
Times, Prentice Hall
Strauss, R.E., 2008. Marketing planning by design: systematic planning for successful
marketing strategy. Hoboken, NJ: Wiley
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