Detailed Marketing Report: Costa Coffee's UK Market Expansion Strategy

This report provides a comprehensive analysis of Costa Coffee's marketing strategies within the UK coffee market. It begins with an introduction to marketing principles and then presents market research data, including revenue figures, market share, and growth trends. The report includes a SWOT analysis, PESTLE analysis, and a market analysis based on a survey of 100 customers. The findings delve into customer satisfaction, coffee flavor preferences, after-sale service experiences, and staff quality perceptions. Task 2 focuses on identifying key consumer segments through demographic, geographic, behavioral, and psychographic segmentation. The report also discusses market targeting strategies and the structural attractiveness of segments, along with an exploration of the 7Ps of the marketing mix to target identified segments, concluding with a detailed overview of marketing strategies for Costa Coffee to expand its business in the UK.

Introduction to
Marketing

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Presenting the market research on current UK coffee market....................................................1
TASK 2............................................................................................................................................6
Identification of Key consumer segments..................................................................................6
Task 3...............................................................................................................................................8
7 p's of marketing .......................................................................................................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11
APPENDICES...............................................................................................................................12

INTRODUCTION
Marketing is the business process of creating relationship with customers and also helps
to promote the business products in a market, the report is based upon the Costa Coffee in UK
who wants to expand the business in UK coffee market. The report provide a brief overview of
UK coffee shop market in UK by identifying the specific market growth opportunities for the
quoted firm. Further, report identify those consumer segments who are driving the growth using
socio- demographic, psycho-graphic and behavioural variables and lastly report will develop
7P's of marketing mix model for targeting identifies segments (Banu, Rahman and Khan, 2018).
In addition to this a brief study is done on political , economical and legal environment of Costa.
Apart from all a briefing is done on social, environmental and technological impacts on costa.
Further more there are various threats and opportunity of costa that has been discussed in
detail .The present study also contain interpretation of data collected through 100 peoples of a
segment of UK.
TASK 1
Presenting the market research on current UK coffee market
Relevant data for UK coffee market: As per secondary data, the revenue in the coffee segment
amount to US$4174m in 2019. This shows that the market of UK Coffee is expected to grow
annually by approx 5%. Further, the market's largest segment is is in Instant coffee and among
all, the revenue is mostly generated in Brazil i.e. around US$ 16371m in 2019(Camilleri, 2018.
hence, the data shows that the average per capita consumption stands at 2 kg in current year .
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Literature review:
In UK, the chain of coffee shops had grown by 5% and also contributed almost 30% of
the market share. Such that as per the report of Allegra World Coffee Portal's report that revealed
that UK coffee shop market is now valued £10.1bn and its growth is continuously increases. As
per the view of .. in 2023, the coffee shop market will also be exceed by 10,000 outlets.
Therefore, this all data and report shows that the market growth of coffee is increases in day by
day and also creates positive impact upon the growth economy of UK (Gautam, 2017).
As per …. whose article's aim is to “Analysis of Coffee shop Market- A case Study of
UK” where primary data is collected. In this, author take 3 coffee shops of UK as a sample i.e.
Caffa Nero, Costa and Starbucks. In this semi structured interview, the author observe that all the
coffee shops uses similar strategy to promote their business and products but they all have only
varies from some products that makes them different from others.
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Illustration 1: Revenue market of Coffee in UK
(Source: Statistic, 2019)

SWOT Analysis:
Strength: In UK, the coffee market is increases from last many years such that the
branded coffee shops robust 8.7% outlet growth in 2018 and it reached to around 8500 stores in
2018. the coffee market of UK shares around 30% of its market share in UK and this all shows
that the companies who operate in Coffee market has excellent brand image in the world(Jiogo,
2015) .
Weaknesses: The coffee market did not provide innovative products and it has another
weaknesses that there are many countries where the brands still not located. Further, due to high
price of its products, it is not available to all classes.
Opportunities: Costa Coffee also broaden their target market and by providing better
innovative products the coffee shops will easily expand its market in wide range of countries.
Threats: Rising products of coffee beans and dairy products creates threat for coffee
shops and even the increased competition from the local cafes and coffee-house chains also
creates threat for the firm(Lee, Dang and Lee, 2019) .
PESTLE Analysis:
Political Factor: Sudden change in the tax rate of the government, new laws affect the
coffee shops in negative way because it increases the prices of the offered products and
therefore, the customers did not spend money on those products. Therefore, this lead to affect the
financial performance of the business.
Economic Factor: In includes factors like Inflation, interest rates, exchange rate etc. For
example if there is an increase in inflation rate, than price of the coffee in UK market will
increase .On the other hand Increase in interest rate will increase in the cost of capital , that will
result in rise in prices of coffee (Lees, Winchester and De Silva, 2016).
Social Factor: It includes culture trends, demographics etc. The people of UK has
culture of drinking coffee , so Costa coffee can increase its sales with high prices. In addition to
this In UK every age group prefer to have coffee instead of other drink, so it can increase the
demand of Costa coffee.
Technological : Using advanced technology will make optimum utilization of resources .
In addition to this innovation or addition of value in coffee will attract new consumers for Costa
coffee in UK market. Apart from this new technology will make work more simpler and easier .
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Legal factor: Compliance of rules and regulation made by government means Costa
coffee is carrying its business operations ethically and doing fair trade practices. It is abide by all
the safety and employment rules, that will lead to good corporate image in front of
public(Scanning the Environment: PESTEL Analysis,2016).
Environmental Factor: This factor will have major impact on the business environment
of Costa coffee. For example If Costa is using natural and organic ingredient in the coffee, this
will have positive effect on the health of consumers, as a result of which demand of which
demand of Costa coffee will increase.
Market Analysis
In the present study I have collected data from 100 customers, out which there are 20
regular visitors, 20 children, 20 young customers, 20 elderly customers, 20 foreign tourists. This
data is collected by Questionnaire method(Michailidis, 2019).
Data Interpretation
Q1. Are you satisfied with the quality of service offered by Costa Coffee ?
30 people are highly satisfied with the quality of service , in which 15 are young
customers and 15 are elder customers. In addition to this 40 people are only satisfied with the
quality of service, out of which 20 are foreign tourists, 10 are regular visitors and 10 are children.
Apart from this 5 elder customers, 5 regular customers and 10 children are not satisfied with the
service quality. Remaining 5 young children and 5 regular customers were disappointed with the
service.
Q2. What flavour of the coffee you prefer to drink?
As per the reviews of customers, 20 children, 5 young customers and 5 regular visitors
like chocolate flavour and it is the highly offered flavour of Costa coffee. In addition to this 3
elder customers and 5 regular visitors like nutty flavour. On contrary to this Smokey flavour is
mostly purchased by children and regular visitors, so as per the feedback of 15 young customers
and 5 regular visitors like smokey flavour. Apart from all herby flavour is mostly in demand
among elder and regular customers. So there are 7 elder customers and regular visitors.
Q3. Have you taken after sale services from Costa coffee?
50 people have taken after sale services of the of Costa coffee in which 5 children and 5
foreign tourists received proper thank you mail and also got points of reward that have used in
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their next purchasing. In addition to this 40 people got discount cards for the next purchase. Out
of which 20 are young customers and 20 are regular visitors. On contrary to this remaining 50
people still do not have taken after sale service of Costa coffee.
Q4. What are your opinion about quality of staff? (open ended question)
As per 15 regular visitors and 15 foreign tourists communication process of staff was so
formal, that needs to be informal a little. In addition to this according to the opinion of 20 young
customers and 10 elder customers quality of staff was good but communication skill needs to be
developed among them, as they ask same question again and again which is quite irritating. On
contrary to this 10 elder customers and 10 children say that quality of staff is commendable ,
staff workers were multitasker as these customers observe that they were serving more than one
customer at a time. Apart from that 5 regular visitors,5 foreign tourists and 10 children the staff
was working with accuracy without any mess.
Feedback
sectors Excellent Very good good poor Need
improvement
Products
Quality of
service
Quality of
staff
Customer care
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TASK 2
Identification of Key consumer segments
Market segmentation
It can be defined as the practice of categorizing wide market into small segments on the
basis of shared characteristics. Customer segmentation can be referred to as dividing large
customer base into small groups (Michailidis, 2019). In context of Costa coffee, customer
segmentation strategy has assisted an organization in fulfilling the needs as well as meeting the
expectations of customers. There are different types of segmentation strategies these are :
Demographic segmentation : The market segmentation is done on the basis of gender, marital
status, age, nationality, occupation, family size, income etc.
Geographic segmentation : In this, market segmentation strategy customers are categories on the
basis of their location.
Behavioural segmentation : In this market segmentation strategy, the company categorize market
on the basis of behaviour, choice and preference of customers. Organization which utilities the
Behavioural segmentation strategy can categorize their consumers on the basis on their
knowledge about product, Ex-users, potential users, first time users. As It is the tactics which
will support management in identifying those customers group who are making the significant
contribution in the profitability(Nguyen, 2016) .
Psycho graphic segmentation : An organization which uses Psycho graphic segmentation
strategy divides large market into small parts on the basis of their lifestyle, personality and
attitude.
In context of Costa Coffee, business entity utilized mixture of geographic as well as
demographic segmentation strategy for targeting the customers and fulfilling their requirements.
Business entity is targeting the city customers.
Market Targeting
In this step Costa will target one or more segments . This choice of segments will depend
upon various factors. For example marketer of Costa will identify the way in which existing
segment served by other manufacturers, as it is difficult to appeal to a segment which is already
served well. The second factor can be the size of the segment and how it can grow in future. The
third factor that marketer of Costa will consider while targeting the segment is that strength of its
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own company so that it can achieve competitive advantage over other manufacturers (Samoggia
and Riedel, 2018).
Costa can also target market based on subscription , past purchase , magazines and
demographic variables. Company can also evaluate market segment in the following way-
Structural attractiveness of segments- Apart from having required size and growth of
market company do not earn adequate profit because of presence of competitors and rivalry that
should be focused by marketer. So proper research regarding competitors is necessary to analyse
their strategies. For example Costa coffee have competitors like Barista coffee, Starbucks, CCD
etc. that can affect the position of Costa in the new segment.
Interrelationship between segments- marketer of Costa should lay emphasis on the
relationship between no. of segments that they have chosen. There should be a close relationship
between the segments selected by the marketers . A little change in the cost or performance of
the firm will lead to increase the chances for growth of rivalry firms.
The following are the broad segments make up the coffee retail market:
Instant coffee- It is the sector where coffee is dehydrated into the powdered form or
granules of the coffee are sold(Sarsby, 2016) . This is the largest sector and covers 70% of the
total market.Roast and ground- It is the sector where coffee is sold ready ground or coffee is
sold in the form of coffee beans.Coffee pods- This includes decaffeinated coffee . It is the
category coffee is sent to the coffee pods for filtering
Market positioning
It is the process of establishing a brand image in the minds of consumers to make brand
more recognizable. Costa coffee have created positive image in the minds of consumers as it
offer different flavours and provide service which is more superior than other competitors like
Starbucks, CCD, Barista coffee etc. There can be three types of positioning which are as
follows-
Functional Positioning- It focus on adding value to the product and setting new features
so that brand image can be established in the minds of new consumers. Apart from this symbolic
positioning is another type of positioning which is used by those who operate luxurious and
prestigious brand . These are the aspirational elements of the product or brand that fulfil self
esteem of the customers. In addition to all Experiential positioning focuses on elements of the
brand addressing emotional aspects of the consumer
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.
Task 3
7 p's of marketing
Product
The marketer of Costa should focus on the conducting research on about the current
product or services that is it suitable for the market or customers of today. In addition to this
before launching any new product Costa should focus on product design , branding, packaging,
after sale servicing etc. Apart from this there are several guarantees and warranties that should be
decided by marketers. Researcher should also lay emphasis on if the product of the company is
demanded by the potential consumers or not.
Price
There are various strategies of pricing that can be adopted by marketers, For example
Skimming pricing , where Costa can set high prices at the time of introducing the product to
maintain its brand image and subsequently lower the prices to maintain the potential customers.
On contrary to this there is penetration pricing, in which Costa can set low prices at initial stage
and then rise its price (Warouw, Mandey and Wenas, 2018). This pricing strategy is adopted by
the companies to attract new consumers at initial stage. Apart from this there can be parity
pricing where, prices are set equal to the competitors. In addition to this there can be premium
pricing in which Costa can set prices higher than its competitors and discount pricing strategy
where company can set price lower than its competitors.
Promotion
There are various tools of promotion that Costa can use to promote its product. It includes
advertisement, public relation, personal selling and sales promotion. Costa can use TV
advertisement which will help it in reaching its message to the mass audience . Furthermore sales
promotion is also an effective tool of promoting goods in which Costa can offer discount and
point of rewards that can be used in the next purchasing(Wirtz and Lovelock, 2017). It can also
organise contest where gifts and vouchers can be offered to the winner. Apart from this
representatives of Costa can also make periodic public appearances to have one on one
interaction with audience.
Place
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It means placing the product in the market where it is easily available to the consumer.
There are various strategies of distribution of product in which exclusive strategy is one of them
that focuses on distributing product through single outlet, where only one wholesaler or retailer
there to distributive the product. Apart from this there is selective distributors are present to
distribute the product in a geographical area. Costa can also use intensive distribution strategy
which is more suitable to increase demand in large geographical area, as this distribution strategy
focuses on covering all the possible outlets(Samoggia and Riedel, 2018) .
Packaging
It refers to the appearance of the product . The more attractive and distinctive packaging a
product have the more it will create an image in the minds of consumer. A product packaging
should contain a brief description about the contents of the product, price , brand name , so that it
can be easily recognisable by the consumers. Packaging does not only protect the product but it
is the major source of marketing .Packaging should be such that add convenience in distribution ,
handling, displaying, use and recycling.
People
There are various people involve from the idea generation of the product to its final
delivery to the customers. Every single decision is taken by the person responsible for each
activity. For example product making includes all the people from the production department.
For setting price there are marketers who decide the price. In addition to this for promotion there
may be involvement of advertising agency (Nguyen and et.al. 2016). Furthermore there are
seller, distributors, and retailers for placing the product.
Physical evidence
It includes physical environment , Ambience , spatial layout of the space of the Costa. In
which physical environment is the space where a consumer consumes the service or product.
Ambient conditions includes colour, temperature, sound and smell at the space. It also includes
music and noise. The ambience of coffee shop should be soft noise and dim lights, where
customer feel relaxed and calm. Furthermore spatial layout is the way in which furniture and
machineries are set up. For example Coffee shop there can be Sofa or comfortable seats with
tea or coffee tables(The 7 Ps of Marketing,2019) .
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