Marketing plan development and strategic implementation

Marketing Plan

Description of the Product

The product is coffee, or specifically it is high end coffee, expertly roasted and made available to coffee shops, institutional customers and retail customers over the Internet. There are several elements to the product. The first is the beans, which are sourced from equatorial regions around the world. There are different breeds and cultivars of coffee available on the market. Coffee, like wine grapes, picks up significant characteristics from its terroir as well. The result is that there can be tremendous differences in beans from different parts of the world, or even from different farms within the same part of the world. For all of the world's major coffee companies, beans from all over the world are blended together and roasted with the objective of creating a uniform taste that can be replicated all over the world. All major competitors, from Nestle to Kraft to Starbucks, utilize this basic formula.

High end coffee, however, is highly differentiated from this formula. Ultra-premium coffee is roasted in small batches with beans from individual regions and farms. The specific roast is designed specially to bring out the unique characteristics of the beans from that farm, and for the means of production (espresso or filter). Ultra-premium coffee therefore aims for a character that is anything but uniform -- each batch and indeed each cup could and should be entirely different from its predecessor. The appeal for consumers of ultra-premium coffee lies specifically in these differences. These are the same customers who spend hundreds of dollars seeking unique wines, beers and spirits, or unique dining experiences. Such tastes typically extend to other products as well, from clothes to entertainment to automobiles and vacations.

The Internet is the perfect vehicle for this type of business. There are two reasons for this. The first is that these consumers are diffused. While the nation is filled with millions of coffee addicts, those who take it seriously enough to pursue ultra-premium coffee tend to be diffused around the country. These consumers are therefore hard to reach via conventional channels because volumes in any individual city (with one or two exceptions) are too low. The second reason is that the Internet is often where these consumers learn about different ultra-premium coffees. Aside from their local roasters, they readily order beans from companies in Chicago, Miami or Vancouver if that is where they can get the ones they want. The same goes for coffee shops that serve this high end coffee. This business is largely conducted on a national scale to meet a niche market, making the Internet the perfect vehicle for the business.

Our company, Sufi Coffee, takes its name from the Sufis of Yemen who were the first to cultivate coffee and develop it as a drinking beverage. This homage to the history of the beverage is juxtaposed against a strictly modern interpretation of coffee drinking that lies at the heart of our market. The company was founded in 2013 by four students, and is in the process of acquiring its financing. To this point, we have sent one student to learn about coffee roasting and source a roaster. The other students are working on the business plan, in particular the marketing plan, and they are also working on building the website that will be the focal point of the marketing plan.

Sufi Coffee is going to be primarily an online operation, which is a reflection of the diffused customer base and the most practical way to run a niche business in the Internet age. The company believes that it can become profitable and earn a healthy 5% share of the ultra-premium segment within two years by virtue of an aggressive Internet marketing campaign. Sufi is going to have an Amazon-style warehousing operation to handle orders, but the website will not function the same way. The website will market the products with creative input (words and images) from the Sufi team, rather than from customers. This way, customer comments can be filtered to ensure that they support the company's marketing mission. The online approach to this business allows us to better reach our target market, to do this affordably, and to be more effective in promoting the product.

SWOT

The main strength of our company is going to be the quality of the coffee. We believe that we will need to offer superior quality coffee in order to compete in this segment. By definition, our coffee needs to be better than Starbucks at the very least to compete in the ultra-premium segment. However, we will benchmark against current industry leaders in order to ensure that we have taken a leadership position in the business, rather than a me-too position. Product quality is going to be the main initial strength. Other strengths that we are going to cultivate are a sound financial position and strong branding.

There are several weaknesses that our company faces. As a brand-new company, there are many things that we lack. One is that we have not yet established our brand. That is a weakness that will need to be remedied as fast as possible. Indeed, much of our plan involves both leveraging our strength but also mitigating our weaknesses as quickly as we can. We have limited contacts within the industry, and we have only a few relationships with suppliers. There is a competitive market for good suppliers, so it is a challenge for the company to secure them when they become available. There is an experience gap between our company and the companies against which we will compete. All of these weaknesses will need to be addressed, and quickly.

The business exists to exploit one major opportunity. This is a new business, so multiple opportunities might be a bit ambitious until we have mastered the first one. We seek to exploit the growth of the ultra-premium segment of coffee. As consumers begin to take their caffeine addictions more seriously, they are turning to better-quality coffee. This begins for most with a trip to Starbucks, but increasingly consumers are moving beyond to small, local roasters and shops that specialize in high-end preparations. It is at this latter level that we see an industry with tremendous growth potential. While a small niche market today, the future can be seen a number of ways. A larger niche -- something akin to where craft beer is today -- is not at all unrealistic for the United States. However, ultra-premium coffee is a major segment (20-40%) of the market in New Zealand and Australia (at least in the cities) and this is the upper bound that could happen in the U.S. As well, given a few decades of development. Either scenario implies a long-run high-growth trajectory. While some firms have already put in a decade or more into the business, the ultra-premium segment is still in its introductory phase of the product life cycle, so entering the market now and establishing market share is a tremendous opportunity if the expected growth occurs, much less the upside growth.

There are significant threats, however, to this business. Aside from the different internal weaknesses that could undue our efforts, the business is threatened by competition. If more mainstream competitors can blur the lines between the ultra-premium segment and their offerings, the segment might not be able to achieve rapid growth. If the U.S. economy tanks, it probably will not affect our target market much, but it could affect our access to financing. Banks were very hesitant to lend during the last recession, and a reoccurrence of that could stifle any growth plans we might have, even if our business is growing. Lastly, there is the threat that climate change will have a significant and negative affect on coffee supplies and coffee quality. As a result, consumers might be priced out of the coffee market, or we could find our access to beans good enough to make our coffees has dried up.

Target Market Strategy

Our target market tends to be younger (under 40), well-educated, and relatively affluent. Drinkers of ultra-premium coffee encompass both genders, and may have families or be single. However, they are generally younger and more open to new experiences, an essential characteristic of consumers in this niche. Older consumers, most of them, are stuck in their habits and patterns and are less likely to know about ultra-premium coffee much less care. The prices in this segment are not necessarily any higher than those charged by Starbucks and its imitators, something that reflects a lack of sufficient differentiation for the segment. However, these prices are still at the high end for what is normally a daily beverage. Our customers therefore are likely to have well-paying jobs, which also means they are likely to be well-educated and urban. Our customers are also aware of different trends, are discerning in their tastes with respect to many different products, and prefer to pay a premium for a better or more exclusive product.

We are focusing our business on two main segments, the retail side and the wholesale side. Retail customers are going to come to us through our wholesale clients and through our website. Wholesale customers will come to us through our website and via our sales staff. The wholesale customers are probably going to be coffee shops with the same target market as our retail clients. Thus, we serve the same customer no matter which route to market we choose.

In terms of psychographics, the customer has a number of characteristics. The target customer prefers quality in their consumer products, and is of discerning taste. This is true of most consumer products, but especially of ones where the consumption of equality is a visible and public expression of one's discerning nature (clothing or entertainment, for example). Such consumers are almost always willing to spend more about quality. Most have a genuine interest in the product, and enjoy learning about it, because the learning enhances their enjoyment of the product. This is very much similar to the process of wine connoisseurship, for example, and like with wine there are always going to be some pretenders who have little genuine learning interest. These are never the target market, but are a market that will be reached regardless.

If the consumption of the good in question enhances one's status among his or her peers -- in particular leading to envy or respect for the finding of that product before others -- then this is highly important to this target market.

The reason that these psychographic characteristics are so important for this product is that the product is ever-changing. The general ultra-premium coffee product does not really change, and the purchase of this product is habitual, but the specific variant of the product will change with a high rate of frequency, constantly providing the consumer with an opportunity to enhance his or her knowledge and status. A similar psychographic can be seen within the craft beer or indie music communities.

Another important psychographic is the appreciation of pleasure. Consumers of ultra-premium coffee, ultimately, are willing to engage in a high amount of effort to obtain the coffee when they know that there is going to be a high payoff. In this respect, there are strong similarities to foodies who pursue the latest dishes at the best restaurants. There is a trendiness element to their approach to consumption, but at the same time they genuinely appreciate that they product they are seeking is the highest creative expression of the craft.

Reaching this target market relies heavily on word-of-mouth. Because the market skews young, educated and with high disposable income, the Internet and social media are the ideal conduits by which the target market can be reached. This target market uses these media forms to acquire new information and interact with its peers. Thus, the Internet is ideally suited to market to this target market group. Social media and guerilla marketing tactics in particular appeal to this group, and are generally considered the norm for members of the target market to receive product news and pitches. The use of conventional media forms would probably fail to reach this market. Even wholesale customers are likely to be more fluent in social media than in industry publications.

Marketing Mix

Sufi Coffee has a product orientation. While selling the sizzle is important, to compete in the ultra-premium coffee business the company needs the finest cuts of steak as well. Thus, the quality of the beans procured and the quality of the roasting are critical to the success of the company. To this end, our roaster is experienced and will be undergoing training on a high-end roaster. With experience and study in Seattle, the roaster is going to set out recipes for each bean we acquire, and train staff in the art of roasting ultra-premium coffee for maximum complexity and flavor.

The price for this product is high. Normally, an ultra-premium niche would price comfortably above the premium segment of the market, and there are instances where this happens with highly-exclusive, limited-supply items. However, for the most part prices are set by the general market, and that includes the premium players. With even other ultra-premium competitors setting prices at this level, it will be difficult if not impossible to set them higher for regular releases. As such, premium pricing is going to be adopted, matching the price points set by competitors. In reality, pricing at that level largely reflects the cost of ingredients and processing, neither of which differ materially between premium and ultra-premium producers save for economies of scale. Ingredient cost per cup, for example, might differ by five or ten cents, meaning that the price to the end consumer is going to be driven more by local market conditions and fixed cost coverage than by the variable cost.

Place is a critical element of the market mix. There are two parts to this. The first is the discussion of the Internet as a distribution means. Online ordering means that the company can have a fairly broad geographic scope. In this case, orders could theoretically be sent to anywhere in the world that U.S. law allows (so not Cuba or North Korea). Practically, customs duties, higher shipping costs and other barriers limits the market to the United States and its territories. The Internet is probably the default place for customers to learn about the product, so it is the best place for this business. Competitors almost always sell online, because of the diffuse nature of the customer base, so all serious competitors are only a click away. This means that the place is both an asset and a significant threat. The company needs to ensure that the asset part wins. The second issue with place is the distribution means. The distribution needs to be with UPS or FedEx. Beans are at their peak within 4-6 days of roasting, so delivery within 1-2 days allows cafes in particular to deliver coffee to their customer while the beans are at their peak. Distribution charges will be paid by the customer, as there will be options for lower-cost shipping and even free above a certain order amount.