Costa Coffee's Marketing Mix Strategy in the UK

This report evaluates how Costa Coffee has used four marketing mix elements to reinforce their positioning in the UK market. It also discusses the strategic decisions and relevant theories in their marketing efforts, and analyzes the effectiveness of their marketing strategies.

Marketing
Portfolio

CONTENTS
INTRODUCTION......................................................................................................................1
MARKETING MIX ELEMENTS FOR REINFORCING POSITIONING IN UK..................1
Overview of Costa Coffee......................................................................................................1
Current marketing situation....................................................................................................1
Marketing mix elements used by the company......................................................................2
STRATEGIC DECISIONS AND RELEVANT THEORIES IN MARKETING EFFORTS. . .4
EFFECTIVENESS OF MARKETING EFFORTS OF COSTA COFFEE................................7
CONCLUSION..........................................................................................................................9
REFERENCES.........................................................................................................................10

TABLE OF FIGURES
Figure 1: Ansoff Matrix.............................................................................................................5
Figure 2: BCG Matrix................................................................................................................6
Figure 3: Overall NPS of Costa Coffee......................................................................................8

INTRODUCTION
Even though, there are still glimpses of the global recession at present, the branded
coffee market expanded to a certain degree. The main reason behind this is customers
consuming coffee slightly reduce their spending on coffee which has optimistically
influenced the coffee industry of UK. Because of the recent pandemic, different companies
have faced issues regarding reinforcing their position in the market and so as the Costa
(Skallerud and Gronhaug, 2017). However, with the successful implementation of marketing
strategies and marketing efforts, the company was been in a position to reinforce their
position in the markets of United Kingdom. Considering this, the main aim of the current
research report is to analyse the manners in which the company has utilized different
elements of marketing mix for maintaining their position in the recent years and will throw
light on the strategic decisions and relevant theories in their marketing efforts. The finals
section of the report will going to analyse the effectiveness of Costa Coffee’s marketing
efforts.
MARKETING MIX ELEMENTS FOR REINFORCING POSITIONING
IN UK
Overview of Costa Coffee
Speaking in volume in relation with the Costa coffee, it is one of the biggest coffee
chain of UK which has its headquartered in Dunstable. After Starbucks, Costa Coffee is the
largest chain across the world. The company is completely owned by Whitbread. Further, it is
only one coffee shop among the other competing firms operating in the markets of UK which
is offering handmade coffee to their clients. The company has its specialization in the Italian
coffee and thus, have acquired round 37.6 percent of share in the market. Nonetheless, due to
the political situations and issues in the global business environment, recent pandemic and
rising level of competition both globally and locally, the company is coming across with
numerous challenges with the passage of time (Costa Coffee, 2022).
Current marketing situation
Because of the changing political scenario of UK in the recent years, there has been
wide number of modifications being done in the policies and regulations. Further, taxes have
increased which has influenced the overall operations of the company. Other than this, people
today becoming more and more concerned and aware in regards with the environment which
has forced Costa Coffee to consider the impacts of their operations on the environment. In
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addition to this, the number of brand operating in the UK market are very high and this figure
is rising at an exponential pace, all these are offering tough competition to Costa. Moreover,
with the rising level of technological advancement, big coffee houses are adapting their
operations and strategies for augmenting their productivity, efficiency and profitability.
Marketing mix elements used by the company
In the last three years, for the purpose of strengthening their position in the markets of
UK, Costa Coffee has utilized four important elements of marketing mix that is product,
price, place and promotion (Shimp and Andrews, 2016). Explanation of the ways in which
the company have utilized these important elements of marketing mix is being elaborated in
the subsequent paragraph:
Product
Cost coffee has realized the fact that in the context of the mechanism of the marketing
mix element, product is being regarded as one of the most important aspect. A product is
defined as the item of use which is being produced by the firm as per the needs and
requirements of the customers so as to satisfy a particular group or individual. Further, the
products of Costa are trademark of quality as well as excellence which has been successful
enough in bringing new business to the firm. Different coffee products are being offered by
the company such as Frappe, Mocha, Americano, Latte, Espresso, Cappuccino and many
more. However, recently there are different range being offered by the company for meeting
out the changing needs of the customers (Arthur, 2020). Considering the impact of pandemic,
restrictions and lockdowns, costa Coffee has introduced a new range known as “consumption
at home” and “on the go to work” for attracting large base of customers. The overall range of
these products encompasses whole beans, roast and grounded coffee and coffee pods. This
can be made by people at home easily and they can enjoy the flavours and richness of coffee
of Costa whenever they desire. Even the firm has also launched ready to drink canned costa
coffee and Cost light drink for delivering an authentic coffee taste experience to the target
customers. This strategy of the company was proved quite effective in building as well as
strengthening the recognition of the brand in the market.
Promotion
A product has no value without promotion and thus, it is regarded as the most crucial
element in the context of marketing mix. It helps in upraising the value of brand and its
recognition in the market. For increasing the figures of sales along with penetrating the
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market, Costa coffee makes use of this element quite often in their operations at UK.
Promotion typically involves advertisement of the products of the firm which describes about
the whole products such as its features, usage, quality and price. In addition to this, the
company does not emphasize on the promotion from the beginning, however they have
introduced loyalty programs and cards considering the rising level of competition in the
market. Recently, the company has launched a new loyalty proposition known as “Costa
Club” and has replaced their previous Costa coffee club scheme (Murphy, 2021). This has
really helped the firm in in building strong association with the clients. Furthermore, this
loyalty program has also allowed the firm to offer different special deals by the loyalty cards.
Most of the loyal customers of the company has utilized the deals being offered by the
company. Furthermore, they are making more efforts to make their digital presence on
different social media platforms. Along with this, Costa Coffee has also introduced a
campaign for driving footfalls or visitors in one of the mall in London. In this the firm has
utilized dynamic advertisement which included time specific offerings of products along with
information related to real time occupancy from the stores. This clearly reflects that the
company is evolving and enhancing their performance level with the support of the
promotion element of the marketing mix (Costa Coffee, Westfield Stratford Mall, 2021).
Even though, the brand name of Costa does all for the company, there is no further
requirement of advertisement. Word of mouth from the valuable clients is being considered
as the main referrals for the firm. Thus, it can be said that it is reputation of costa Coffee
which speaks for themselves in their sales in the markets of UK. Nevertheless, the firm has
utilized a novel strategy of emotion led marketing for promoting their new Cost light drink.
For this drink the campaign has been used which featured advertisement promising “all the
love, none of the handles” for tapping into the concerns of the customers in relation with
consuming high amount of calories in their hot drinks.
Price
The pricing methodology defines the payment for the consumption of the product.
This simply signifies that the price is the amount which the consumer pays for buying a
merchandise or a service. In relation with the marketing mix, the methodology of pricing is
quite essential element for determining the profit or loss of the firm through selling of the
product. Thus, for identifying whether the firm has incurred loss or earned revenue from
selling goods and services, it is obligatory to have an adequate pricing approach.
Furthermore, pricing strategy also has a great influence on the sales of the product along with
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the overall marketing strategy as well. In the recent years, there has been augmentation in the
demand of high quality products in UK. This has also increased the product’s cost (Luan and
Sudhir, 2015). Even though the cost of the products of Costa Coffee are quite cheap as
compared to its competitor, but the product’s quality is more than their rivals. For capturing
the larger market share in UK, company has adopted competitive pricing strategy. This
decision has been undertaken by Costa Coffee considering the rising level of competition
from the famous brands such as Starbucks, Pret A Manger and Caffe Nero.
Place
In the context of the marketing mix, place element plays a very important role. Each
and every company have a place and position for distributing their product and services
which signifies that they have an opportunity to display, distribute, sell, outline and promote
their product in the market. Speaking in relation with Costa, the location of the company is
being regarded as one of the most vital element towards the higher sales of the form. Because
of the high quality products of the company, they have kept the prices little higher (Joseph,
2016). Those customers who prefer using quality products are quite willing to pay higher
prices for their desired product. Furthermore, company has store in those areas where people
have high purchasing power. This clearly indicates that the business is being targeting upper
and upper middle class individual and families. In addition to this, Costa Coffee has also
opened their stores in the recent past in varied malls and shopping centres for the purpose of
gaining an edge over the other competitors through their location. Other than this, due to the
current situation of pandemic, the company has also initiated free home delivery and
emphasized on inventory as well as transport facilities at the time of selecting their location
for making stress-free operations (Armstrong, 2016). The sitting arrangements, outdoor
seating areas and eat in options are being introduced by the firm considering the restrictions,
safety and security of the customers.
STRATEGIC DECISIONS AND RELEVANT THEORIES IN
MARKETING EFFORTS
Speaking in volume about the different strategic decision being taken by costa Coffee
in their marketing efforts, it can be said that considering the political situation, economic
condition, altering environment and needs of the customers, different changes have been done
in the marketing of the company. To combat the rising level of competition from different
giants operating in the same market in UK, they have introduced many new range of
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products. They have also developed new market by stepping into different nations across the
world for the purpose of increasing their market share. These strategic decisions can be better
illustrated with the help of important marketing theory and model known as Ansoff Matrix.
This has been utilized by the company for developing strategic options for their business
(Jobber and Ellis-Chadwick, 2018.). It is very simply to use and thus, has been utilized by
Costa Coffee for such kind of evaluation. Seeking help from this matrix, the manager of the
firm has been able to know the four possible scenarios, market activities, future product and
strategies to be adopted for gaining competitive advantage in the market. There are four
strategies being explained in this Ansoff matric, however, in the current context of marketing
efforts of the Costa Coffee in the last three years, mainly three strategies are being adopted
significantly.
Figure 1: Ansoff Matrix
(Kerin and Rudelius, 2016).
The very first is new product development strategy. In this the firm has reached the
existing market through development and introduction of new products and services. They
have expanded their product portfolio by making alteration in the existing products range and
creating new ones as well. Some of the examples include a new range known as
“consumption at home” and “on the go to work”, ready to drink canned costa coffee and Cost
light drink for delivering an authentic coffee taste experience to the target customers.
Secondly, the firm has also adopted market development strategy (Lewis, 2022). In this,
Costa Coffee has entered new market through their existing products and services. In the
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recent years, the company has expanded their operations in Asian markets by tapping the
markets of India. They have opened many stores in India and has achieved success and
growth as well.
Finally, the firm has also adopted market penetration strategy as they have
emphasized on increasing the sales volumes of the current products of the company to the
existing market of the organization. In this, the firm has focused on the ways of defending
their market share and the manners in which they can grow in the market. In this context,
Costa Coffee has changed and modified their seating arrangement and offered outdoors
seating areas to the customers. They have also introduced eat in options considering the
restrictions, safety and security of the customers. Other than this, many changes are also
being done in their products such as adding sugar free variant, reducing added sugar in their
drinks and new healthy choices for the customers who are becoming more conscious towards
health.
Underpinning the discussion further, it has been analysed that recently the firm has
also stopped selling some of the tea and beverages as the sales of these products were up to
the mark and is not been demanded by the customers (Craig and Shimp, 2017). However,
there are some products which are considered as the important element for increasing the
sales and profits of the company. Thus, Costa Coffee emphasize more in such products so
that enhanced growth can be achieved. The decision in relation with which products needs to
be reintroduced, which needs to be eliminated and which needs to be modified is being done
on the basis of analysing the performance of the multiple products. Furthermore, for this
decision making BCG matrix is being utilized by Costa. Since, Costa is a large business
organization and thus, one of the issue which the firm faces continuously and steadily is
regarding in which products money should be put in and in which products money should be
put out.
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Figure 2: BCG Matrix
(Kotler and et.al, 2019).
Talking in relation with the coffee products in the portfolio of the company, they are
being regarded most selling, liked and known product of Costa and thus, they are considered
as Start. This is due to the fact that the market growth of the coffee products of the company
such as Frappe, Mocha, Americano, Latte, Espresso, Cappuccino and many more is quite
high. Along with this, the relative market share of these products is also on the higher side.
However, tea and beverages of Costa Coffee are the question mark in the BCG matrix as they
have low market growth as well as relative share in the market. Even some of the tea products
which have caffeine in them have been removed from their menu for promoting health and
safety for their target customers (Joseph, 2021). Therefore, from the above reflection of
strategic decision being taken by Costa Coffee in their marketing efforts, it can be said that
the firm is been making good attempts to design their whole marketing strategy and concepts
in order to attain higher growth of their business and for capturing larger market share in UK
and across the world.
EFFECTIVENESS OF MARKETING EFFORTS OF COSTA COFFEE
It has forever been supposed that recognizing a right commercial centre for a business
is truly challenging as well as to acquire feasible premium from a client as a steppingstone
when there is a particularly divided commercial centre with numerous contenders.
Nonetheless, different marketing efforts of Costa Coffee has been able to make a definite
difference. Company with the passage of time and taking into account the current market
conditions, have engrossed and adopted different marketing strategies from time to time.
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Whether it is launching a new product, growing presence in the digital media such as social
media platforms, introducing sales promotions and special deals to introducing different
loyalty programs and club cards and varied campaigns all these marketing efforts of the
company have emphasized on promoting and advertising the quality of the products being
offered by the company and the value their products going to offer to the customers (Kim and
Hyun, 2018). There has been increase in the consumption of coffee in recent years in UK and
thus, it is not so difficult for the people to search varied cafes.
To stand out from this fierce competition, Costa has introduced different new drink
choices such as adding sugar free variant, reducing added sugar in their drinks and reduction
of caffeine in tea and other beverages. This marketing effort of the firm is considered quite
effective as coffee has always been considered as the healthiest beverages that billions of
people consume on a regular basis. Furthermore, it is one of the most extensively widely
investigated ingredients. It has been shown in varied scientific research that coffee is quite
safe for healthy adults and can even has many beneficial health implications. Thus, it can be
attributed that the idea of developing and introducing a pleasant, high quality and healthy
coffee beverage is quite effective. The main idea behind the marketing effort of Costa Coffee
is revolving around the significance of reinstating the value of time spend with their mots like
coffee drinks and beverages more meritoriously. Furthermore, it has also been regarded as a
good attempt by the company for breaking into the competitive market of the coffee shop
(Reinartz, 2021).
Other than this, measurement is being considered as the main key for optimizing the
process as well as marketing efforts of the company. There are certain key performance
indicators which can be utilized for measuring the effectiveness of the marketing efforts of
Costa coffee. Firstly, marketing return on investment is being regarded as the important
method through which sales revenue generated from a particular marketing effort of the
company can be measured on every dollar being spent. Costa Coffee has spent around £1.5
billion towards their marketing and the marketing return on investment of the firm is almost
£478.7 million for the period. Thus, it can be stated that the marketing activities and
campaigns of the company were quite effective (Challagalla, Murtha and Jaworski, 2014).
Secondly, looking at the Net Promoter Score (NPS), the effectiveness of the marketing
strategy of the Costa Coffee can be estimated and evaluated. Net Promoter Score helps in
tracking whether the customers will going to recommend the using the product on the basis of
the scale of -100 to 100.
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Figure 3: Overall NPS of Costa Coffee
(About Costa Coffee's Brand, 2021).
The above figure clearly indicates that the NPS score of Costa Coffee is 56 which
signifies that the customers will likely to recommend the utilization of the products of the
company. In addition to this, when looking at the trend, it has been originated that from the
last three years this trend has been increasing at a fast pace which further indicates that the
firm has been able to attract large base of customers towards their café and products. This
overall also signifies that the marketing efforts of the company proved beneficial for the
success and growth of the company. Similarly, incremental sales is also being regarded as
one of the most crucial method or tool of measuring the effectiveness of marketing effort
towards the sales numbers. For example, Costa Coffee has introduced a campaign for driving
footfalls or visitors in one of the mall in London (Chaffey and Ellis-Chadwick, 2019). In this
the firm has utilized dynamic advertisement which included time specific offerings of
products along with information related to real time occupancy from the stores. Due to this,
there has been average increase the morning footfalls of customers to 7 percent and 3.9
percent increase in the total sales revenue.
CONCLUSION
Thus, from the analysis above it can be concluded that marketing plays a very crucial
role for promoting the business and for attaining higher profitability and share in the market.
Marketing mix elements are the basis of this growth as without these elements business
cannot survive for longer period of time. In the current research report, it has been
determined that different marketing efforts have been attempted by the company with the
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passage of time and have also proved quite effective in generating higher sales revenue and
higher market growth.
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REFERENCES
Books and journals
Armstrong, M.A., 2016. Handbook of Human Resource Management Practice. 10thed.
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Chaffey, D. and Ellis-Chadwick, F., 2019. Digital Marketing Strategy, Implementation and
Practice. 7th ed. Harlow, Essex: Pearson.
Challagalla, G., Murtha, B.R. and Jaworski, B., 2014. Marketing Doctrine: A Principles-
Based Approach to Guiding Marketing Decision Making in Firms. Journal of
Marketing.
Craig, A.J. and Shimp, T.A., 2017. Advertising, Promotion, and other aspects of Integrated
Marketing Communications. 10thed. South- Western: Cengage Learning.
Jobber, D. and Ellis-Chadwick, F., 2018. Principles and practice of marketing. 7thed.
McGraw-Hill Higher Education.
Joseph, K.O., 2016. Integrated marketing communication: A catalyst for the growth of e-
business management. The Social Sciences, 6(2), pp.64-73.
Kerin, H. and Rudelius, S., 2016. Marketing, the Core. 4thed. McGraw Hill Publishing.
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Luan, Y.J. and Sudhir, K., 2015. Forecasting marketing-mix responsiveness for new
products. Journal of Marketing Research, 47(3), pp.444-457.
Reinartz, W.J., 2021. Understanding customer loyalty programs. In Retailing in the 21st
Century. Springer Berlin Heidelberg.
Shimp, T. and Andrews, J.C., 2016. Advertising promotion and other aspects of integrated
marketing communications. Cengage Learning.
Skallerud, K. and Gronhaug, K., 2017. Food retailers' positioning strategies and the influence
on their buying behaviour. Asia Pacific Journal of Marketing and Logistics, 22(2),
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Online references
About Costa Coffee's Brand. 2021. [Online]. Available through:
<https://www.comparably.com/brands/costa-coffee>. [Accessed on 9thMarch 2021].
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Arthur, R., 2020. Coca-Cola launches new range of at-home costa coffee products. [Online].
Available through: <https://www.beveragedaily.com/Article/2020/05/27/Coca-Cola-
launches-new-range-of-at-home-Costa-Coffee-products>. [Accessed on 8thMarch
2021].
Costa Coffee, Westfield Stratford Mall. 2021. [Online]. Available through:
<https://www.thecloudandcompass.com/costa-coffee-case-study>. [Accessed on
8thMarch 2021].
Costa Coffee. 2022. Our history. [Online]. Available through:
<https://www.costa.co.uk/behind-the-beans/our-story/history>. [Accessed on 9thMarch
2021].
Joseph, S., 2021. Costa Coffee adapts ad strategy to boost emotional appeal of Costa Light
variant. [Online]. Available through: <https://www.marketingweek.com/costa-coffee-
adapts-ad-strategy-to-boost-emotional-appeal-of-costa-light-variant/>. [Accessed on
8thMarch 2021].
Lewis, A., 2022. Costa’s New Menu Features New Coffees and Hot Chocolates for Easter.
[Online]. Available through: <https://www.delish.com/uk/food-news/a35127815/costa-
menu-new/>. [Accessed on 9thMarch 2021].
Murphy, D., 2021. Costa Coffee rolls out Costa Club loyalty program. [Online]. Available
through: <https://mobilemarketingmagazine.com/costa-coffee-rolls-out-costa-club-
loyalty-program>. [Accessed on 9thMarch 2021].
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