20 million Americans drank gourmet coffee daily in 2003. As a result of this amount of coffee lovers that can’t start their day without coffee, Keurig. Inc had the idea that they should be able to brew their own perfect cup of coffee any time they need. People started paying $1. 50 or more for a cup of gourmet coffee at coffee shops like Starbucks. This gave Keurig. Inc the idea of offering coffees in a single-cup proportion size to offices.
After the placement of Keurig brewers, gourmet coffee sales increased by 40% in the U. S at-home coffee market. According to that big percent Keurig management wanted to develop an at-home single cup coffee brewer for coffee lovers. Keurig Inc. targets customers including office users and households; the plan to target offices first and hopes to gain a profitable success with at home users. Keurig Inc. ain problem is how to obtain the position they want in the at home coffee market segment without loosing their share of the office coffee OCS segment and maintaining their gourmet coffee quality; on the other hand, they have less than six months to launch the product, and they have very limited budget for production costs and expenses, and changing the portion packs they have.
There are two strong competitors in the away from home market, Filterfish, and Flavia. There are some other competitors in the at-home market. The best strategy for Keurig Inc. s to be the first entrant to the at home market, since they heard rumors that a large number of competitors are getting ready to enter this market, and working hard to be the first in introducing the first. Keurig inc. alternatives are 1) launch the new model B100 using the existing packaging the K-cup. 2) Launch the new model B100 with developing a new packaging version the Keurig- Cup. 1. Two Cup approach, is not of a big deal to the KAD’s and OCS market since they are used to it and have been doing it for a long time, and it would increase the pricing power for the Keurig cup.
Some of the company’s weaknesses are the Keurig cups are not available for sale in markets or outlets, and their lack of resources, and they increase the inventory for all roasters, plus that they confuse the buyer between which cup to which brewer. The competitors will enter the market first with a lower price too. I think it will also hurt the OCS market, which is the big investment of Keurig inc. The price of the brewer itself is too high to break even with a company. 2. One cup approach makes a quick entry to the at home market before all competitors.
The customer doesn’t have to match cups so its lees confusion. Roasters can keep one inventory for OCS market and one for at home market. A weakness is that it would decrease the pricing power with the KAD’s. They would have more opportunity to come out with different brewers if can get to market quickly. Employees might be stealing the cups from the brewers at work to use them at home. The lack of resources might be a threat to keurig inc. Keurig might suffers loss of market share too. The best option for Keurig Inc. s to launch the new B100 using the old packaging style” K-Cup” at a price of $249 because its in the meddle, so in the future they can go higher or lower. At the $249 price they can cover their costs without depending on K-Cups sales. . They can make a 50% discount coupons for a limited time” around 4 months since launching the product” just to make the customer get it for less than they expected ,at this time the company won’t be making any profits but it will breakeven, but after that they will start selling the products at the original price and the profits will start.
They will rely on their reputation and their KAD’s to sell the brewers at the higher prices. 60% KAD’s are going to help sell the keurig single cup system, they will sell between 1. 5 and 1 brewer/day. This price is considered to bring profits out of their product. This option will keep KAD’S and GMCR’s happy since there is one cup offered, and for a future successes I would recommend maintain good relationship with both of these groups A very important objective to keurig is to create good relationships with high-end retailers to sell the keurg at home brewers.
They are taking the pricing of K-Cups into consideration too. The target market would be willing to pay $0. 55 per K-Cup, based on the market research, this price will allow keurg and the roasters to make a higher profit per K-Cup and it will still give the KAD pricing control in the OCS market. Keurig Inc. should show the benefits of the B100 brewer and advertise this product to gain unit sales by distributing through small appliance retailers like department stores, mass merchants, and kitchen specialty stores.
Keurig should also take part in providing discounts and specials to help raise awareness and loyalty to the product. Keurig should maintain direct and indirect channels in the at home market. Try to develop a plane with office managers and key users to prevent the theft of K-Cups to use at home. Implement the KAD referral program using the point of sale advertising display material close to or on the office brewer. Marketing campaign via Internet to increase Keurig awareness. Make a direct marketing approach using the e-commerce website to sell the brewer and the cups leveraging the distribution abilities of KAD’s.