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Segmentation, Targeting, & PositioningOpportunities in the Coffee House IndustryCreated by: Kent Corl, Rachael Donovan, JennaFrey, Kelsey Knowles, and Michael Pletcher

Table of ContentsCompetitor Brand Analysis.2Comparison Chart of Competitors.5Segmentation Analysis .6Geographic. 6Demographic. 6Socioeconomic. 7Psychographic. 8Outlet Type. 8Benefits Sought. 8Usage. 9Awareness and Intentions.9Behavior. 9Top Competitive Segmentation Groups.10New Segments. 10Finding Blue Oceans. 12Strategy Canvas. 12Best Two Blue Ocean Paths.14Best Blue Ocean Path. 14New Strategy Canvas. 15Final Recommendations & Steps for Implementation.16Coffee House with Child Play Area.16Delivery Coffee Truck. 16Coffee Shop with Healthy Options .17References. 19Competitor Brand AnalysisWhen launching a new product or business, there are a number of steps one shouldtake to evaluate the market and position your business. The first step is a competitor brand

analysis. Below, we have outlined our competitors for a new coffee shop in the Lock Havenarea. We looked at their product features, distribution channels, price, promotion, and niche.With this information, we can better position our new business into an untapped market andboost our chances at success.StarbucksStarbucks is a very popular coffeehouse that is now also being known as a bistro. Theyhave added a variety of lunchtime items such as; sandwiches, salads, and Panini’s. Theirdistribution channel is quite small. Most of their items are made in the coffee shop, giving theability to personalize each and every order. They have a number of pre-made pastries, andother goodies. Starbucks also sells their coffee in the popular K-cups. These are easy to find,almost every department store has them on their shelves.They are having a promotion on February 13th for Valentine’s Day. Starting at 2 p.m.they will have a special pairings menu. They will also have fun surprises and “sparks of love” fortheir customers. They have come up with a clever name for this promotion, “World’s largest#Starbucksdate.”SheetzSheetz is an up and coming competitor to those that are in the coffee business. Not onlydo they have a wide variety already, but they are still expanding the menu today. Sheetz hastwo types of coffee. Regular brewed coffee and specialty coffee. In most of the Sheetz storesthere are only five kinds of fresh brewed coffee for customers to choose from. Those five kindsare: Original, Decaf, Breakfast Blend, Colombian and Serious Dark Roast. Then the customercan add as much sugar, creamer, milk, flavored creamer, and cappuccino to their coffee asdesired. The price will always be constant. For the specialty coffee, customers use the orderpoint system, where they order whatever kind of specialty drink they would like. For this project,we are focusing on iced coffee. Customers can choose one flavor, espresso (regular or decaf),and milk at no additional cost. However, if they want extra espresso, flavor, or soy milk, that isan additional cost.All of the coffee, regular or specialty is made fresh and sold directly to the consumer.The consumer can walk into the store and have the regular coffee right at their fingertips. Theyjust walk up to the coffee pot and pour as much coffee they desire into their cup and then addthe sugar, creamers, and cappuccino as well, this is also readily available at their fingertips. Forthe specialty coffee, the customer just goes to the order point and orders their flavor, espresso,and milk that they desire. They also have the option to choose if they want whipped cream ornot. The prices for the regular coffee are 1.25 for a small, 1.29 for medium, 1.39 for a large,and they even have an extra-large coffee offered at 1.49. Specialty coffees come in smallmedium and large. For an iced coffee, a small and medium are the same price at 2.43. Thenthey have a large priced at 2.96.Sheetz promotes pretty heavily. They promote using signage in and outside of the store;they use employees, and then even have advertisements in radio and television. Sheetz alsouses social media for advertising as well. The messages that are often used for promotion aremessages about a new item that is offered on the menu that they want people to try. Unlikemost competitors, Sheetz has a specific niche. They believe in convenience and being on-thego. Sheetz isn’t just a convenience store either. While you’re getting your cup of coffee, you can

get something to eat, too. They even have a twenty four hour breakfast menu. You can evenstop and get gas for your car. Most stores are also gas stations. But, the convenience is thekey for Sheetz. They have order points in their store for customers to order whatever they wantfor their specialty drinks, and the regular coffee is always available and the customer gets topour the coffee, not the staff. Both coffees are also fresh, there will never be stale coffee orexpired espresso or milk used in the making of the coffee.Dunkin’ DonutsIn 1950, Bill Rosenberg was the first to open a Dunkin’ Donuts shop. Since then, thecompany has grown substantially into 10,083 Dunkin’ Donuts stores worldwide. Dunkin’ Donutsoffers a variety of food that is mostly breakfast-based. Dunkin’ Donut’s menu consists of hotbeverages, iced beverages, frozen beverages, at home brewing, a bakery and sandwiches.Dunkin’ Donuts utilizes the rapidly changing world of technology to connect with theircustomers. Customers can sign up for a Dunkin’ Perks for great deals on all of their products.Customers can also connect with Dunkin’ Donuts through Facebook, Twitter, and YouTube andeven follow their blog to find out the latest products that they offer. Aside from social media,customers with smartphones can download the Dunkin Donuts app for coupons and deals onthe go!Avenue 209Avenue 209 is a locally owned coffee shop and café in downtown Lock Haven. Theyhave become a primary coffee competitor in the area since they opened back in 2009. Theydiffer from their competitors on many levels. They know the value of sitting down and having anexperience, not just a coffee. You will not find a drive through and your order may not be madein five minutes or less but what they lack in speed they make up for in quality. Avenue 209 hasa vast selection of coffee beans that they import from all over the world. Some of the beansthey even roast themselves. They aren’t just limited to coffee either. Their menu also includes:lattes, cappuccinos, an Americano, a steamer, hot chocolate, tea, espressos, frappes, as wellas food items such as bagels, breakfast sandwiches, cookies, muffins, biscotti, ice cream, andmore.Each week Avenue 209 has a variety of events going on. They always have an openmic night, they often have local performers, and on Sundays they always hold a church service.You are likely to hear about them from their social media pages, radio ads, their sign out front,or word of mouth. They are constantly advertising for events that are going on or justemphasizing why people should support local businesses.McDonaldsAnother coffee competitor in Lock Haven is McDonalds with their McCafe line. TheMcCafe product features include a varied selection, cheap price, and convenient drive throughto pick up your order. Their variety of coffee includes roasted coffee, iced coffee, and lattes withflavorings of mocha and caramel. In addition to Coffee they serve hot chocolate, fruit smoothies,and shakes. McDonalds sells their coffee products direct to the consumer throughout thecountry. For regular coffee, prices are 1.00 for a small, 1.49 for a medium, and 1.69 for alarge. A frappe costs 2.49 for a small, 2.99 for a medium, and 3.29 for a large. McDonalds

markets their business using social media, radio and television commercials, billboards, andcoupons mailed to your house and in newspapers. Their marketing message pushes theircheap price and that you will love their products. An example is their famous jingle and slogan“I’m lovin’ it”.McDonalds differentiating niche is their wide selection of other food that you can buywhile getting coffee. They carry a full line of breakfast items, burgers, chicken sandwiches,salads, and desserts. Along with the food McDonalds also has a drive through service whichallows you to pick up your coffee without exiting your car. These two things aren’t seen by manyother competitors, especially in Lock Haven. As mentioned above, McDonalds really pushestheir cheap price as well. This leads us to believe that they are targeting the cheaper qualityniche in coffee.ConclusionAfter performing our competitor brand analysis, we have found that the coffee market isvery competitive. Starting a new coffee shop is going to take some creative thinking and goodproduct positioning. Our next step for launching a new coffee shop is to do a segmentationanalysis so we can identify segments not being targeted.Comparison Chart of Competitors

Segmentation AnalysisMost coffee shops are standstill locations. How great would it be to have your coffeedelivered by using an App? Nowadays there is an App for everything and anything. Theconvenience of a coffee delivery service would accommodate any consumer who does not havethe time to travel to the location. Along with the app, we want to explore the possibilities of atraveling Coffee Truck. This way those who do not have a coffee shop near them can still havetheir coffee fix. We also would like to target the life stage segment by having a coffee shop witha child-play area. This way the parents’ can enjoy their Zen of that fresh cup of coffee and knowtheir children are safe and having a good time too. Looking into the segment of productknowledge we came up with the idea of having a library in a coffee shop, which then gave usthe idea of a Coffee Bar for the involvement segment. Our competitors are not currentlytargeting these segments, which makes them great opportunities for us to gain a competitiveadvantage. This analysis will explore when segments our competitors are currently marketingto and how our new ideas could be built into a new successful business.GeographicRegionStarbucks focuses the majority of their segmentation on the west as they wereestablished in Washington and have most of their stores in the Western most states. Dunkin’Donuts is almost exclusively located on the east coast. More specifically, they focus mostly onthe northeastern most states of the US as they originated in Massachusetts. McDonald’s doesnot segment by any specific region; they are located equally through the US. Sheetz is onlylocated only in the mid-east coast. Avenue 209 does not segment by region since they are alocal coffee shop with only one location.City SizeDunkin’ Donuts and McDonalds do not segment by city size as they are found in cities ofall sizes. Starbucks for the most part are typically found in cities with a population of 30,000 ormore. Sheetz segments to city sizes with a population of 50,000 or less. Avenue 209 segmentsto Clinton County, which contains a population of less than 40,000.DensityDunkin’ Donuts and McDonalds do not segment by density as they are found in smalltowns, rural, urban, suburban areas; though there is a significantly less focus on rural areas.Starbucks segments to cities and suburbs while Sheetz is opposite; Sheetz segments tosuburbs, small towns, and rural areas. Avenue 209 segments only to Clinton County, whichconsists of small towns in rural areas.DemographicGenderSheetz, McDonalds, Dunkin Donuts, Starbucks, and Avenue 209 target both males andfemales. However, certain drinks are targeted towards specific genders. For example;Frappuccino’s are targeted towards women, and the dark roasted coffee is targeted moretowards men.

AgeAll of these coffee shops mostly target consumers above the age of 18. This is the age groupthat needs the extra caffeine to get them throughout their work days.RaceIt does not appear that any of these coffee shops/chains target specific races.Life StageCollegiate, adult, and senior life stages are targeted by these coffee shops/chains.Birth EraThese coffee shops have targeted the baby boomers, Generation X, and Generation Y.Household SizeThree to four people for Dunkin, McDonalds, Avenue 209 and Sheetz because they offermeals and other food products for family sized households. Starbucks would be suitable for aone to two person household since it is targeted to working men and women.Residence TenureThe residence tenure would either be own or rent for each of the competitors. If aconsumer has the extra money to spend on coffee, then it would not matter if they own theirhome or renting their home.Marital StatusThe marital status would be any for all of the competitors. A customer’s marital status won’taffect their preference of buying coffee.SocioeconomicIncomeThe income status for each competitor would be less than 15,000. Even thoughStarbucks is a higher quality and on the higher end of price other the other competitors, all ofthe coffee shops have a reasonable price that customer’s even with an income of less than 15,000 could afford a cup of coffee.EducationThe education level of customers would be any for each of the competitors. Whether acustomer has a high school or college degree, or even less schooling than that, it will not affecttheir choice in purchasing a cup of coffee.OccupationSheetz, McDonalds, and Dunkin’ Donuts target blue-collar laborers as theirproducts are cheap and served fast. We also see Starbucks targeting more upper classjobs such as managers and other administration positions. With their higher price points

and gourmet coffee, they are attracting more from these occupations. Avenue 209 doesnot segment by occupation as they are limited by only having one location.PsychographicPersonalityStarbucks and Avenue 209 target a “hipster” crowd with their luxurious interiorsand gourmet coffees. These people tend to hang out at the coffee shops to mingle anddo work. On the other side, Sheetz, McDonalds, and Dunkin’ are targeting more of a“regular joe” personality. These are just your average working people who need theirquick coffee fix in the morning.ValuesStarbucks customers especially seem to be achievers. They also value theexperience that they get at Starbucks, such as their relationship with their barista, yourname printed on the coffee, and the atmosphere of the store. We also see these samevalues at Avenue 209, but not quite as extreme. Sheetz, McDonalds, and Dunkin alltarget people who are more actualizers. They realize that they can get good coffeecheaper elsewhere and do not need the fancy atmosphere or cups.LifestyleIt doesn’t appear that any of these coffee chains are targeting specific lifestylesegments. It seems like they are banking on most lifestyles liking coffee enough to stopby their store.Outlet TypeIn-StoreAll competitors are targeting people using a stand-alone store. The biggestdifference is with Starbucks and Dunkin‘ where you can buy their ground coffee inmultiple chain stores. McDonalds has also started selling their ground coffee in chainsstores, although it is not available anywhere near Lock Haven yet.DirectYou can buy Starbucks and Dunkin’s coffee and other products directly throughtheir website. Although this is technically a direct way to buy, you still have to wait up toa week for the ground coffee to be delivered to your door. McDonalds and Avenue 209do not offer this segmentation type.Benefits SoughtProduct FeaturesWhen it comes to the product features, the benefits are the same for all competitors.People who want coffee usually want the caffeine to get them through the day and to stayawake. Avenue 209 is different in one way, and that is by being an actual coffee shop. Theconsumers can sit down enjoy some entertainment, while having their cup of coffee. This is

different from McDonald’s, Starbucks, Dunkin Donuts and Sheetz because they are more for aconvenience and for those who are on the go and want to grab a coffee quick.NeedsThe needs are different for each competitor. For Starbucks, the need is the quality oftheir coffee. The store is known for the best quality coffee and for having a great taste. Sheetz,McDonalds, and Dunkin Donuts needs are based on the price. These competitors have some ofthe lowest prices of coffee in the market. Avenue 209’s need is based on the atmosphere. Theatmosphere is welcoming, relaxing; consumers can dine in, and relax.UsageUsage RateThe usage rate for all competitors is both medium users and heavy users.User StatusThe user status is different for each competitor. McDonalds, Sheetz, and Dunkin’s usersare nonuser, first-time user, and prospect. Avenue 209 would be a regular user. Starbuckswould have prospects, first-time user, and regular user.Awareness and IntentionsProduct KnowledgeAll competitors market to those who are aware, informed, interested, and intending to buy.BehaviorInvolvementSheetz, Dunkin Donuts, and Starbucks all have a special effort to get their consumersinvolved. What they do is they offer a loyalty rewards program. With Dunkin and Starbucks, theusers load money onto a gift card, and they get point for every coffee they buy. Then withSheetz, they have a buy 10 coffees, you get the next one free. McDonald’s does very minimumto get their consumers, while Avenue 209 has a program where a consumer may not haveenough money at the time of purchase, but they fill out a card where the consumers fills it outand can pay for it next time, just like an IOU.

Top Competitive Segmentation GroupsNew SegmentsLife stage: Coffee Shop with Child Play AreaNone of our current competitors are segmenting consumers who specifically havechildren (in the Lock Haven area). Our new coffee shop would target customers who havesmall children by having an atmosphere inviting and friendly to children. This new coffee shopwould have plenty of adult seating just like everyone else but would also have high chairs andbooster seats for children. Along with child seating this new shop would have a play areadesignated to children filled with toys, books, arts and crafts, as well as small play equipment.This allows our customers to sit and enjoy their coffee experience while not having to worryabout a screaming, bored child.This new segmentation method would help the business in many aspects. Because ofthe emphasis on children and a coffee experience, we could set a prestige pricing strategyhelping us gain higher profits. We could also extend our product line to include child sizebeverages (hot chocolate, apple cider, juices, etc.) to gain even more sales. With thissegmentation we could run several different promotions such as, “Buy any large adult beverage,get a child sized beverage half off!” This promotion would attract more and more consumerswith children, exposing them to our differentiated family friendly coffee experience.Outlet Type (In-Store): Coffee TruckWe have decided that we would work with a different outlet type. The way we couldreach new segments is by having a coffee truck. Sometimes people don’t have the availability orthe option to go to the coffee shop or store to get their coffee. So a better way to reach thesepeople is by having a coffee truck. The coffee truck can deliver the coffee to them, and it will stillbe fresh, just like the consumer would get directly from the store. The coffee truck could also be

set up like an ice cream truck, and can go throughout neighborhoods, or high density areaswhere people may be walking to and from buildings to get from one place to another and theycan stop at the coffee truck to get a cup of coffee. This would mean that the consumers wouldnot have to go to coffee; the coffee would come to them. There would also be a constant routethat the truck would follow, and the truck should show up in the same area around the sametime every day.Outlet Type (Direct): Coffee Delivery with an AppOne segment that coffee shops are not targeting is the direct outlet. We cantarget this segment using a coffee delivery service. Customers will order their coffee onan app or through our website from the comfort of their home (or dorm room), and within15 minutes, their hot cup of coffee is delivered right to their door. Targeting the directsegment will attract people who do not want to drive to the store to get their coffee. Thiswould especially work in Lock Haven with the amount of busy coffee drinking collegestudents on campus with no car. Currently, there is no other coffee shop targeting adirect outlet type like this.Getting your coffee through a service like this will be a little more expensive thantraditional stores because we will have to charge a small delivery fee. A way to makethis less expensive would be to offer free delivery if you purchase 3 coffees or more.This will make a larger profit per delivery, and also push our customers to order coffeefor everyone in the dorm, or everyone in the office. The best promotion for this service isour delivery car. The car will be wrapped with the business’s name and will be seen byLock Haven residents every single day while making its daily deliveries.Product Knowledge: Coffee Shop with a LibraryWe have done research and found that there are no libraries in the Clinton County areathat cater to their consumers who would enjoy sipping a cup of coffee or tea while enjoying anice book. As most bookworms believe, coffee and books go together like cake and ice cream.Coffee also accommodates students while studying and doing coursework. The major productfeature of coffee is the caffeine that helps its’ consumers get through their long days.We will be opening a coffee shop with a library in it. Consumers will be able to sit at ourtables or lounge in our comfy recliners or in our luxurious couches while enjoying a cup of coffeeor tea. They will be able to read a good book, do research, type that paper, or study for thatexam. They won’t have to leave mid-way through a study session to grab coffee. We will remainopen 24 hours a day to keep up with our competitors Dunkin Donuts and McDonalds.Involvement: Coffee BarThere are different types of coffee shops around the world. Whether it’s a small towncoffee shop, a national chain or a fast food restaurant, competitors entering the market arealways looking for new ways to stand out among the crowd. A coffee bar is business that isn’treally popular and most competitors aren’t focusing on. The target involvement for a coffee barwould be special effort. Customers would be able to come into the coffee bar, buy a cup and

have access to a variety of different coffees. They could even ground their own coffee, bag itand take it home to enjoy! This will get customers involved in the coffee business and let thecustomers have a little bit of freedom when buying their coffee.Finding Blue OceansLooking at the coffee industry in Lock Haven, we see a high end coffee shop, and a lowend coffee shop. We find that all of these coffee shops are fighting over speed, quality/flavor,price, uniqueness, variety, and atmosphere. Our strategy canvas shows where the two types ofcoffee shops fall in regards to the offered features.Strategy CanvasAlternative IndustriesAccording to Blue Ocean Strategy, alternative industries include products or servicesthat have different functions and forms but they have the same purpose. When people go to amovie theater, people will get their usual popcorn, a soda, and maybe even throw in somecandy as well. We are going to come up with a coffee house, but not just a typical coffee house,we are going to add a movie theater as well. Customers will be able to come in and watch amovie, but at the same time they will be able to enjoy their favorite coffee. We also let themhave choices to go with their coffee. We will offer food items like donuts, bagels, croissants, or a

small sandwich. With this path, we will be able to gain people who may just stop in for thecoffee, and we will also get customers who want to come for a good movie. Then we will alsoget customers who want both options. We would be creating a larger customer base with thisoption.Groups within IndustriesGroups within the industry is selecting one strategic group and marketing to them. Wehave decided to create a coffee shop that is just targeted to business professionals. Sometimesthese business professionals don’t have time out of their day to stop and grab a cup of coffee,or even have time to leave the office. Since these professionals have meetings constantly, wewill open a coffee house that will allow them to hold meetings and conferences in them. If theywant to hold a conference, they will have to call in advance to reserve the coffee house, sinceconferences are typically a large amount of people. We also will have food items that they canhave as well. We want these targets to have a comfortable and cozy environment but at thesame time to continue getting their work done. We will have the coffee shop open during normalbusiness hours, nine to five, since this is the time that business professionals are working in theoffice. The only time during those hours that the shop would be closed is when a business orsomeone reserves the entire space for a conference or large gathering.Within the Chain of BuyersWithin the chain of buyers is a path toward finding a blue ocean which looks ateverybody that purchases the product. In some instances, the people who buy it may not be thesame people who use it. Our idea is for a complimentary coffee delivery service for localbusinesses. Every weekday morning, our coffee business will deliver a small coffee table witheverything needed to make a great cup of coffee. This service will target local businesses whowant to give their employees a quick and easy way to get a cup of coffee before work in themorning. This will give the local business owners the convenience of not having to buy, stock,and clean up coffee equipment in the break room. This will also make employees moreproductive since they will not have to waste time brewing or seeking out coffee.Complimentary OfferingsOne of the biggest problems in the Lock Haven area is commuting. Everyone commutes,either to work or to school. The only forms of public transportation in the area are local taxiservices and the University’s Trolley, which is only for students and makes minimal stops.Consumers often say the reason they don’t stop for coffee in the morning is that it doesn’t fit intotheir commute. Creating a formal public transportation system would solve the commuters’problems. The busses would make several stops throughout the Lock Haven, Flemington, andMill Hall areas including a stop at our coffee shop. This also creates an opportunity for ourcoffee shop to utilize a mobile coffee cart and stop at the bus stops throughout the day socommuters always have access to our coffee.Functional vs. Emotional AppealsA company that is functionally oriented focuses on the functional aspect of the businessand will become more and more functionally oriented. While a company that is more emotionallyoriented will focus on emotions and will continue to be emotionally oriented. Companies who areemotionally oriented will offer extras that add price, but won’t enhance the functionality of the

business. While functionally oriented companies focus more on commodities that add life an

Starbucks Starbucks is a very popular coffeehouse that is now also being known as a bistro. They have added a variety of lunchtime items such as; sandwiches, salads, and Panini’s. Their distribution channel is quite small. Most of their items are made in the coffee shop