Brand Critique

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MKTG 3003 Brand Critique

Nespresso

Executive Summary This report critically evaluates the management of Nestle’s premium portioned coffee brand,

Nespresso, on the basis of consumer based brand equity. To do this a brand overview is provided

followed by an analysis of brand equity and marketing program and the provision of

recommendations to combat identified threats to brand equity.

After examining the basic segmentation variables, the report defines Nespresso’s target market as

high income frequent coffee drinkers who seek quality and convenience. Further evaluation of

Nespresso’s marketing program identifies that the most significant elements of the marketing mix

relate to the design of the coffee system; the Nespresso Club services; a premium pricing strategy;

and celebrity endorsement; and an exclusive distribution strategy.

The report identifies the sources of Nespresso’s brand equity as brand awareness and image, which

are reinforced through the repetition of previously identified brand elements. Threats to these

sources of brand equity include Nescafe’s brand extension into portioned coffee and increased

competition.

Consequently, the report recommends that the future management of the brand focuses on

strengthening the brand’s existing position

Table of Contents 1. Introduction ................................................................................................................................ 3

2. Brand Overview ......................................................................................................................... 3 2.1 Brand Portfolio .................................................................................................................................. 3 2.2 Brand Elements ................................................................................................................................. 4

2.2.1 Brand Name ................................................................................................................................. 4 2.2.2 Packaging ..................................................................................................................................... 5 2.2.3 Logo & Symbol ............................................................................................................................ 5 2.2.4 Slogan ........................................................................................................................................... 6

3. Sources of Brand Equity ........................................................................................................... 6 3.1 Brand Awareness .............................................................................................................................. 6 3.2 Brand Image ...................................................................................................................................... 7

4. Marketing Program .................................................................................................................. 8 4.1 Target Market ................................................................................................................................... 8 4.2 Marketing Mix ................................................................................................................................... 9

4.2.1 Product ......................................................................................................................................... 9 4.2.2 Price ............................................................................................................................................. 9 4.2.3 Promotion ..................................................................................................................................... 9 4.2.4 Place ........................................................................................................................................... 10

5. Brand Attributes ............................................................................................................................... 11

6. Threats to Brand Equity ......................................................................................................... 11 6.1 Nescafe Extension ............................................................................................................................ 11 6.2 Increased Competition .................................................................................................................... 11

7. Recommendations ................................................................................................................... 12 7.1 Leverage Coffee Expertise .............................................................................................................. 12 7.2 Emphasise Coffee Experiences ...................................................................................................... 13

8. Conclusion ................................................................................................................................ 13

9. References ................................................................................................................................ 14

Appendix A: Nestle Australia Brand Portfolio ......................................................................... 19

Appendix B: Perceived Positioning ........................................................................................... 20

1. Introduction The purpose of this report is to critically evaluate the management of Nestle’s premium portioned

coffee brand, Nespresso, on the basis of brand equity. The analysis will focus on the Nespresso

brand in relation to coffee capsules. A brand overview will be provided, including a summary of

brand elements, and Nestle’s brand portfolio. The relevant sources of brand equity will be

identified and evaluated. An evaluation of Nespresso’s marketing program and target market will

also be undertaken to determine their effectiveness in contributing to brand equity. Based on this,

key brand related attributes will be highlighted. Finally, the report will examine potential threats

to Nespresso’s brand equity and make recommendations.

2. Brand Overview 2.1 Brand Portfolio

Nestle adopt a multi branding strategy, which means they create and develop many different

brands that belong to a variety of product categories (Armstrong, Adam, Denize & Kotler, 2012).

For example, Nestle Australia have a variety of brands that belong to 10 different product

categories (Appendix A). However, for the purpose of this report the focus will be in relation to

Nestle’s Australian coffee brands (Figure A).

Figure A: Nestle Australia Coffee Brand Portfolio Source: (Nestle Australia, 2016a).

2.2 Brand Elements

2.2.1 Brand Name

For the purpose of this report, relevant brand elements have been identified as brand name,

packaging, logo, slogan. The name, “Nespresso”, has become synonymous with quality and luxury

through the brand’s commitment to providing coffee experiences (Nestle Nespresso, 2016c).

2.2.2 Packaging The main form of packaging of Nespresso coffee capsules consists of thin, long boxes, which have

a minimalist design (Figure B).

2.2.3 Logo & Symbol The Nespresso brand is visually represented through the use of a logo and symbol, which are often

displayed together. This combination positively impacts brand performance through aiding

recognition and recall (Park, Eisingerich, Pol & Park, 2013). For example, the symbol consists of

the unique design of the letter ‘N’, which is also used to make up the logo ‘Nespresso’ (Figure C).

Figure B: Standard Packaging Capsule Source: (Nespresso, 2016c).

2.2.4 Slogan The brand’s slogan, “Nespresso. What else?” suggests that there is no alternative that offers the

same level quality as Nespresso. It also implies that the Nespresso brand is incomparable in their

approach to delivering a sensual experience, not just a drink (Nestle Nespresso, 2016c).

3. Sources of Brand Equity

3.1 Brand Awareness

The repetition of Nespresso’s slogan assists with building awareness by consistently reminding

consumers that only Nespresso can provide an ultimate coffee experience (Hoyer & Brown,

1990; Khamis, 2012). This focus on incomparability aids recall by attempting to ensure

Nespresso is the only brand that consumers will retrieve when they think of portioned coffee.

This has established a dominant position within the market, which aides recall. It's clear that brand

name, slogan and symbol and logo are important brand elements to the contribution of brand

awareness.

Figure C: Combined Logo and Symbol Source: (Nestle Australia, 2016b).

3.2 Brand Image The brand image of Nespresso relates to associations linked to premium coffee (Nestle Nespresso,

2016c). For example, a significant association many consumers have with Nespresso is the

provision of sensual and quality coffee experiences (Khamis, 2012). This means, the brand name

‘Nespresso’ plays an important role in reinforcing the association because of their superior coffee

expertise and ability to source the high quality coffee (Nestle Nespresso, 2016c).

Other significant associations include luxury and exclusivity. Nespresso reinforce these

associations through the provision of premium product cues on their packaging (Mugge et al.,

2014). This highlights that the brand name, slogan and packaging represent key brand elements to

the formation of Nespresso’s brand image.

4. Marketing Program

4.1 Target Market

Nespresso’s coffee appeals to an international consumer market, however, due to its premium

nature they target more affluent geographical areas, such as Sydney (Khamis, 2012). This means

that income levels are a significant demographic variable in defining Nespresso’s target market.

Consequently, Nespresso’s target market can be defined as high income, frequent coffee drinkers

that seek a premium and convenient coffee experience (Figure D).

Figure D: Segmentation Variables Source: (Butler, 2000; Khamis, 2012; Markides, 1999).

4.2 Marketing Mix 4.2.1 Product The core benefit of Nespresso’s coffee capsules is satisfying the physiological need for caffeine.

Nespresso’s actual product consists of the innovative and convenient system of delivering high

quality coffee. This product offering satisfies consumers’ needs without having to sacrifice quality

for speed (Keinert, 2012).

4.2.2 Price Nespresso leverage the positive relationship between price and perceived quality to add value to

their brand equity through a premium pricing strategy (Brucks, Zeithaml & Naylor, 2000;

Nespresso, 2016a). For example, Nespresso charges $0.68 to $0.93 per capsule, whereas other

brands charge $0.49 to $0.55 per capsule (Primo, 2013).

4.2.3 Promotion The most significant aspect of Nespresso’s promotional activities includes the use of George

Clooney as the brand ambassador to leverage secondary associations. For example, Clooney’s

qualities of sophistication and charisma enhance likeability, which transfers onto the brand, adding

to brand image (Khamis, 2012). The consistent and repeated exposure of Clooney with

Nespresso’s brand elements, such as the logo and tagline, enhance awareness by aiding recognition

and strengthening recall (Seno & Luka, 2007). For example, when consumers become exposed to

advertisements containing Clooney consumers recognize the brand name and

recall the product category (Figure E). That is, celebrity endorsement has created a clear link with

the brand and built global awareness.

4.2.4 Place

Nespresso adopt an exclusive distribution strategy for their coffee capsules because they are only

available directly from Nespresso either through their online store or boutiques (Armstrong et al.,

2012; Nestle Nespresso, 2016b).

Figure E: Nespresso Print Advertisements Source: (McCann Paris, 2007a, 2007b).

5. Brand Attributes From the above analysis, the key brand related attributes include:

● Luxury

● Exclusivity ● Quality

6. Threats to Brand Equity 6.1 Nescafe Extension

Nescafe also has a coffee capsule system, and threatens Nespresso’s brand awareness by impacting

consumers’ ability to recall Nespresso’s brand name. This is compounded from the similar

pronunciation and focus on quality of both brands, which means they are both likely to appear in

the consumer's evoked set, when the product category is presented.

6.2 Increased Competition The maturation of the portioned coffee market and expiration of Nespresso capsule patents has led

to an increase in competitors, such as Nespresso compatible pods (Heron, 2013). These

competitors suggest to consumers that high quality portioned coffee is now more accessible,

which potentially threatens Nespresso’s brand image by weakening associations of exclusivity and

luxury (Keller, 2009).

7. Recommendations

7.1 Leverage Coffee Expertise Nespresso have an extensive history in developing portioned coffee, which forms the basis of

their coffee expertise. To combat threats to brand equity, Nespresso could reinforce this

extensive amount of expertise. For example, 2016 represents Nespresso’s 30th anniversary, in

conjunction with this, a campaign could be developed to celebrate and reinforce their expertise to

customers (Nestle Nespresso, 2016d). This campaign may involve the creation of a 30th

anniversary limited edition capsule, combined with a tagline that emphasizes experience, such as

“Nespresso. Creating quality coffee experiences for 30 years”.

7.2 Emphasize Coffee Experiences To maintain a premium image and strengthen associations of luxury and exclusivity Nespresso

could further emphasize that they create luxurious sensual experiences. This may be achieved

through a supporting marketing program that emphasizes the ‘Nespresso Club’ membership. For

example, a promotional campaign that highlights the benefits of being a club member could be

developed to reinforce luxury.

8. Conclusion This report has critiqued the management of the Nespresso brand on the basis of brand equity.

Significant elements of the marketing mix include innovative product design, premium pricing,

celebrity endorsement and exclusive distribution. Potential threats to source equity were identified

as Nescafe’s brand extension into portioned coffee and increased competition. It was

recommended that a focus is placed on strengthening the brand through emphasizing coffee

expertise or reinforcing the creation of experiences.

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Appendix A: Nestle Australia Brand Portfolio

Drinks Cereals Choclate & Confectionar

Lozenges Recipe Bases

Noodles Cooking Ingredients

Cooking Milks

Baby & Toddler Health

- Nesquik - Milo - Nestle Hot Chocolate - Alpen Blend - Caro Extra

- Milo - Nesquik Uncle Tobys - Oats - O & G - Chereios - Oat Crisp - PLUS - Natural Style - Oat Flakes - Shredded Wheat - VitaBrits - Weeties

- Allens - KitKat - MilkyBar - WhiteKnight - Aero - Smarties - Lifesavers - Crunch - Peppermint Crisp - Chokito - Violet Crumble - ROLO - XXX

- Quick-Eze - Butter Menthol - Anticol - Soothers

- Maggi - Thomy - Crosse & Blackwell

- Maggi - Baker’s Choice - Plaistowe

- Carnation - Sunshine

- NAN - CERELAC

Source: Nestle Australia, (2016a).

Appendix B: Perceived Positioning

Appendix C: Expressi Logo Compariosn

Source: Aldi Australia, (2016); Nespresso, (2016b).