Posted: May 25th, 2022
Managing a New Product Launch
This paper discusses Keurig at home gourmet single-serve coffee product launch. Keurig is an established business attempting to break into the at-home single-serve product industry. It attempts to distinguish itself as a key player by offering gourmet coffee services. Coffee continues to be a booming product, with many opportunities. While coffee consumption continues to grow, there are many potential obstacles that Keurig may face. For example, there have always been many competitors in the market. There are two-serve and even single-serve vendors already in the market. The manner in which Keurig at home single-serve will attempt to distinguish its product successful is by promoting itself as an upscale provider to young, primarily male coffee drinkers interested in buying a high quality product with lots of variety. The odds are the company will do well if it markets its product to vendors that already offer gourmet coffees and roasters that vend their coffee to officers and other large-scale buyers. The breakdown of this analysis is provided below for further review and discussion.
The problem in this study is how to penetrate the at-home coffee consumer market segment; and do so without losing the market share of office coffee service market segment while also maintaining selected gourmet coffee quality. This is problematic considering just how many suppliers there are already offering coffee today. The problem is also to determine just what product will best serve the needs of Keurig, as there are many possible products that could be offered in an at-home capacity. A one-cup product is ideally what Keurig is going for, but other products that have been and are still under consideration include a 2-cup brewer, and a one-cup brewer that offers different sizes, such as an 8-ounce brewer, and a brewer that would offer a larger size but weaker cup. The company has less than one year, six months to be exact, to launch the product. The company is also working with a limited budget to manage production costs and changing coffee portion costs as would be required for the home product market.
Summarize Variables, Analysis, Factors & Insights
Economic trends suggest consumer behavior is prime for the one-cup coffee consumer; Keurig was a leader in offering consumers a single-cup portion, increasing sales in fact between 1996 and 2000 by as much as 40% by nailing sales in the office market and gourmet coffee sales in the at-home coffee market (Anderson 4). Because of such statistics the company decided to develop a product that would allow them to manage a one-cup brewer that would allow the same gourmet coffee benefits to at-home brewers. Coffee will always be popular, but other products are also popular and something to consider as well. The gourmet tea market for example, is also something that Keurig has to consider. In fact, this is an area that Keurig has considered for the future. Consider however, hot chocolate, and other gourmet products, that Keurig could offer along with coffee. Keurig will also consider what types of coffee it will offer. For example, will decaf coffee be a large offering? Will it offer many different types of tea as it moves into the future? Constantly monitoring market trends will be a huge consideration for the company. To what extent will organic coffee drinking or low-acid coffee be a consideration for the company?
Technological, Political, Sociological, Cultural Trends and Characteristics
Cultural trends and economic development suggests that coffee buyers are in the market for at home, one-cup gourmet products, willing to spend $2.00 or less on such products (Anderson 15; Bockhold, Coddington & Duerstock, 2006). Between the 1940s and mid-2000’s, coffee consumption has more than tripled, with over 20 million U.S. consumers drinking coffee daily; Keurig is providing the largest varieties of these coffees in a single-cup brewing system, not only in homes, but also in office-settings and within the gourmet coffee market (Bockhold et al., 2006). The coffee market in general’s revenues top just under $7 billion and more annually. This does not however, consider coffee drinking trends in various markets, including the low-acid or organic drinking market, which is something Keurig could take advantage of if it finds it is having difficulty keeping up with the competition once it launches its product and finds it is having difficulty sustaining its revenues. More and more people are interested in conservation. On the other hand, from a marketing perspective, this is one way that Keurig could indeed implement a cultural trend into its marketing strategy. Keurig would definitely be saving the environment and conserving, by not wasting water or wasting by allowing consumers generally to conserve by making only one cup of coffee at a time. By incorporating this philosophy into their entire marketing strategy, they are likely to offer themselves a good head up on their competition, one they had not possibly thought of in the past.
Industry Structure and Competitive Characteristics
At this time the market seems an oligopoly and Procter and Gamble, with Philip Morris/Draft are in the lead with competition (Anderson 18). However, Keurig could be a main competitor in the upscale market. This is primarily because Keurig plans to target its product to upscale clients. Other markets target non-gourmet coffee drinkers which is why you will largely find their products in retail and mass market chains. McCarthy notes this is one reason competitors have more pricing options as well, whereas Keurig’s prices will be more fixed for upscale clients. Keurig’s K-cup system will be more of a monopolistic type competition (Brockman et al., 2006). There is some competition with the two-cup approach and the brewer, however there is some variation among these forms, allowing Keurig some advantages. For example, K-cups used for one-cup brewing in office and at home are much more likely to be used in promotions; there are also less likely to be hijacked or stolen because of their sole use function (Bockhold, Coddington, & Duerstock, 2006). Use of a one-cup brewer would allow easy entry into the market so that Keurig will have lots of opportunity to come out with small and inexpensive gourmet brews for their clients, although they may struggle with a lack of resources from which to market and sell these when they first start.
Industry Growth Characteristics
At this time the coffee market is still growing and statistics suggest this trend will likely continue, with gourmet coffee responsible for as much as 7 billion in annual sales; this suggests there is definite possibility for a single cup gourmet coffee brewer. Other coffee markets entail just over 4 billion within the coffee industry; the at home gourmet coffee industry as a whole brings in just under 4 billion dollars, while the at home retail market brings in roughly 6.9 billion dollars every year (Bockhold, et al. 2006; Anderson, 6). Filterfresh Coffee Service Inc. And Flavia (Bockhold, et al., 2006) are among the major competitors for Keurig, as Filterfresh pioneered the one-cup coffee brewing service system and thus is most familiar with the technology behind it.
Flavia offers a similar system that takes advantage of foil-sealed packs but is not quite the same. Keurig can improve on both. In the home market Sara Lee plans to enter the market as do other brands, so there is not a chance that Keurig would have a monopoly on the market. Competitors would have much lower prices in fact, that Keurig could or would offer, because the coffee pods and brewer’s pots would be lower priced than that which Keurig could offer. Mass retail outlets would also be able to offer some brands including those offered by Salton and Sara Lee, and one offered by Procter and Gamble expected to sell for between $50 and $80 (Anderson 8-9).
Industry Trade Practices
One of the challenges Keurig will have is to market to a gourmet, classy environment looking to buy a better product. This will require extensive branding of its product.
Keurig’s marketing strategy has many different components. They plan to launch their product to upscale buyers interested in gourmet coffee. Gourmet coffee sales in the U.S. alone have been up as much as 40% in the last decade, as coffee drinkers continue to drink coffee daily. Keurig conducted market research for a 10-year period and in 2001 released data to determine whether the single-cup gourmet brewer would be accepted in homes; this consisted of many different surveys, focus groups and at-home test users (Anderson 8). These tests revealed that at least 75% of consumers would at least be interested in trying an at-home test brewer or consider purchasing one for personal use.
Sales and profit projections
The same individuals interested in buying a brewer would pay a minimum of .55 cents for a cup of coffee and at minimum $130 for a brewer, thus defining the core group of target market including males interested in single brewer pots (Anderson, 7; Bockman et al., 2006). This suggests where the marketing strategy should target and projected profits for the future. Key elements included the need for fast brewing time and the least possible hassle. Good selection was also critical components.
Most important to the success of the marketing strategy was also the K-cup which was a unique cup portion system that consisted of the beans of various flavors combined with filtered paper which reflected the unique monopoly Keurig has on the system. The K-cup allowed for the largest number of gourmet coffees to be available for any single-cup system, thus eventually allowing the company to offer over 75 different varieties; the company would also introduce teas to its product life cycle, through the introduction of T-cups. Other ideas that came up were the idea of a universal cup, but this would change the shape and feel of the universal K-cup, taking much away from the branding strategy and perhaps destroying everything Keurig had come to be known for. A Two-cup product would also not be as unique as the single cup product, especially when Keurig had worked so hard and done so much research to discover a product that would work so well for the gourmet at-home coffee drinker. Entering the market with this particular model seemed the smartest thing to do. Coffee makers are one of the single most important appliances sighted for coffee drinkers, particularly young, single coffee drinkers.
The product is currently in the beginning of entering a new product life cycle, a time which much of the financial resource is given to promotion of the product and establishing the market within the marketplace. McCarthy, 270). Thus, it would be beneficial for Keurig to continue promoting its office products and entering into relationships with office retailers to market roasters and other brewers and subsequently sell its one-cup products to offices, and single managers, and therefore advertise its one-cup brewers in catalogues, so it can increase revenues and thereby eventually break into the product market in-home. Private parties such as in-home Tupperware style or private cook wear sales may be another way to help raise funding to break into homes via the gourmet system. It may pair with roasters to purchase K-cups for brewing and sell them to corporate bodies in this manner, via direct relationships. This is an excellent way to do business in the early phases of a company’s product life cycle. Current sources of capital continue to be the current products the company already offers to the public.
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