The Strategy Story

Nespresso: Redefining the experience of coffee lovers!!

Some turn to coffee just to relax, unwind, and have a little “me time,” looking to indulge in crafted, specialty cups of java. But for someone like me, coffee is more than just a beverage that helps in kick-starting the day.

30+ years ago Nespresso pioneered the portioned coffee segment with the idea of allowing anyone to make the perfect espresso at home. Hence, today the company continues to be the category driver of innovation, customer experience & quality.

The coffee pods and capsules global market is predicted to record a CAGR of 7. 1%, during the forecast period (2019 – 2024 ). The market is highly driven by the increasing usage of single-serve coffee in households, especially in North American and European regions.

The Nespresso Story

As explained by the Nespresso website: The Nespresso story began more than 30 years ago with a simple idea: enable anyone to create the perfect cup of espresso coffee – just like a skilled barista. Building on the earlier work of Luiggi Bezzera, who first invented the espresso machine in the early 1900s, a new system was developed that would allow anybody to craft, and enjoy, a perfect Italian espresso: the world’s first portioned coffee system.

From the beginning, the Nespresso brand concept has redefined and revolutionized the way millions of people enjoy their coffee today and has shaped the global coffee culture. Nespresso’s business model is built on delivering high-quality espresso and building long-lasting relationships with its customers along with sustainable business growth.

View this post on Instagram A post shared by Nespresso (@nespresso)

Nespresso has expanded its business model and is now present in over 76 countries and counts over 13,500 employees worldwide with more than 700 boutiques. The coffee beans are harvested from the best coffee-growing regions in the world like Brazil, Guatemala, Colombia, and are 100% sustainably sourced.

Read: How Spotify Premium is so successful in getting users?

Marketing strategy of nespresso is based on establishing luxury as a lifestyle.

Nespresso doesn’t sell its coffee as normal coffee; it sells it as experience, making a lasting mark in people’s minds.  The company prioritizes a vocabulary linked to the luxury universe with its range of capsules called “Grand Crus” (linked to the vocabulary of the wine. Moreover, Nespresso’s stores are “boutiques.” Within the boutique, there is a showroom, a tasting area, and also a machine gallery.

What else? A powerful marketing communication strategy at Play by Nespresso

Who has heard the world-famous slogan “Nespresso. What else?”? Probably everybody. With meaning that this coffee is everything that a human being can desire ever. That’s the force of Nespresso’s slogan – it remains associated with Nespresso in your mind even if you do not buy capsules. It represents the pleasure of tasting a high-quality coffee and needing nothing else.

So, what marketing strategy has really contributed to the success of Nespresso’s business model?

Nespresso’s overarching goal has always been to deliver the perfect experience. Here’s a rundown of exactly how the coffee-meets-tech brand provides great Customer Experience for its aspirational customers.

  • Leverages digital channels to release content, with actor George Clooney as the face of Nespresso since 2006. Watch this video to understand Nespresso’s premium brand positioning.

  • Existence of both online and offline channels , that allows customers to engage with the brand via the website, mobile, airport vending machines, Nespresso boutiques.

A style | Nespresso Boutiques

  • Seamless e-commerce experience , where consumers can order any combination of capsules that would be delivered within 2 days.

In summary, Nespresso has focused on 360 degrees marketing strategy. As per Forbes , a 360 marketing plan is an integrated campaign with focused messaging spread across multiple points of customer contact.

Nespresso Providing premium experience through an innovative business model

  • Nespresso Cube , a digital and fully automated boutique, offers consumers state-of-the-art personalized shopping experiences. After placing their order on a digital screen, consumers can also watch robots process their orders at incredible speeds.
  • Accessorizing – The question is not ‘Do you want a Nespresso machine?’ rather ‘Which machine? Which capsules?’

Accessories include (deep breath) glasses, capsule holders, a shaker, trays, bowls, spoons, carriers, scented candles, sugar, a cleaning kit, various chocolates, and biscuits. Amazingly, accessories are given their own hierarchy or ordering system, divided up into the Glass, Ritual, Citiz, Pixies, and Premium collections

  • The club: Benefit from quick easy ordering whenever, wherever.  Learn more about the Nespresso product range at the club. Enjoy fast access to Coffee Specialists for questions or advice. Read the online Nespresso Magazine

nespresso strategy case study

Read: Airbnb: Revolutionizing the travel industry with experience marketing

  • In addition to the permanent collections, Nespresso typically introduces several extraordinary and rare Limited editions each year
  • Leverages a cloud-based customer engagement solution that synthesizes all consumer data (web and app orders, in-store orders, behavioral analytics, interactions with Nespresso kiosks). Hence providing all in one unified customer view.

It surely takes a lot of effort to create a product that locks in and upsells the consumer over their lifetime with  multichannel , tech-fuelled, aspirational cups of coffee that everyone wants in their home and is all about the experience. 

Fun Fact : Under the brand logo there is a phrase written in French “Le café corps et âme.” It translates as “The body and soul of coffee”.

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nespresso strategy case study

Currently Marketing Strategist at a Global Automobile manufacturer. I did my MBA in Marketing. I am passionate about reading into brand stories, hustling to learn new skills & most importantly meeting people & getting a fresh perspective on things.

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Nespresso Marketing Strategy 2024: A Case Study

Nespresso knows it must change its marketing ways to win over the next wave of coffee lovers. With Millennials and Generation Z shaping the market, the brand aims to be their first choice. Nespresso wants to become the favorite for young coffee fans.

To win, Nespresso must understand what the young crowd loves and values. It’s changing its marketing to connect deeply and earn their loyalty. This is key to stand out among rivals.

This case study explores how Nespresso plans to charm the younger coffee drinkers. It wants to prove it’s the best in portioned coffee. By doing so, it aims to stay on top.

Key Takeaways

  • Nespresso is adjusting its marketing strategy to target Millennials and Generation Z
  • Understanding the unique preferences and values of young coffee consumers is crucial
  • Brand positioning, differentiation, and innovation are essential for Nespresso’s success
  • Utilizing digital channels and e-commerce is key in reaching young consumers
  • Engaging with the target audience through impactful advertising and creative messaging is essential

Understanding the Market Segmentation

For Nespresso to thrive, understanding market segmentation is key. This means finding distinct groups and aiming marketing at their unique needs and values. By knowing what different segments want, Nespresso can craft marketing that hits home.

Nespresso’s focus includes the younger folk like Millennials and Gen Z. These groups view coffee differently. It’s crucial for Nespresso to dig into what they like and value. This way, their marketing can match these younger consumers’ interests.

Millennials put a high value on being sustainable, having things easy, and getting personalized products. They don’t mind spending more for goods that are both quality and ethically made. Nespresso can draw them in by stressing its eco-friendly actions and recycling efforts.

Gen Z seeks realness, something unique, and cares about social matters. They like brands that stand for something and deliver personalized experiences. Nespresso can catch their eye with special coffee flavors and unique machines for a custom coffee experience.

By grasping what different target segments desire, Nespresso can design specific marketing strategies. This approach helps the brand connect deeply with its audience. That way, Nespresso becomes the preferred choice for coffee lovers of varying ages.

Market Segmentation Overview

Brand positioning and differentiation.

Nespresso builds a strong, unique brand identity to stand out from rivals. It focuses on brand positioning and differentiation. This helps attract and keep its desired customers by spotlighting its product and experience highlights.

Quality of Nespresso Coffee

Nespresso is known for its high-quality coffee. It selects premium beans worldwide and roasts them carefully. This process ensures a rich, flavorful coffee that wins over enthusiasts. Nespresso’s focus on quality sets it apart from other brands.

Convenience of Portioned Coffee System

The Nespresso capsule system changed home and office coffee brewing. Its capsules make brewing easy and clean. This convenience appeals to those who want quick and simple coffee solutions.

Overall Experience of Using Nespresso Products

Nespresso enhances the coffee experience beyond its products. It designs sleek machines and offers top-notch customer service. These efforts ensure user satisfaction and loyalty. Nespresso’s focus on a superior experience sets it apart.

Nespresso stands as a premium, innovative brand. It shines in quality, convenience, and user experience. This strategy helps Nespresso stay ahead of competitors and keep its target market .

Comparison of Nespresso with Competitors

Digital outreach and e-commerce.

Nespresso needs to tap into digital channels and e-commerce to reach young buyers effectively. By using technology, they can spread the word about their brand. They can also keep their audience engaged this way. Nespresso’s digital strategy includes several key elements:

Social Media Platforms

Platforms like Instagram, Facebook, and Twitter are great for connecting with young people. Nespresso can show off its products and share interesting content. They can also chat with customers. By using hashtags and talking about coffee and life trends, Nespresso can get more visibility. This can help attract new customers.

Influencer Marketing

Influencer marketing is now a key way to reach your audience. Nespresso works with influencers who share its values. This helps connect with young people who look up to these icons. Partnering with lifestyle or food influencers helps show off Nespresso’s products in a real way. This creates interest and more interaction.

Online Advertising

Online ads are crucial for Nespresso’s digital strategy. They use ads on websites, search engines, and social media to raise awareness. This helps bring more people to their e-commerce website. By placing ads in the right spots, they target their desired audience effectively.

E-commerce Optimization

For a great online shopping experience , Nespresso is improving its e-commerce site. They ensure the site is easy to use and safe for payments. They offer personalized recommendations, reviews, and an easy checkout. This makes customers happy and encourages them to buy again.

To win over young buyers, Nespresso is focusing on digital outreach and e-commerce. By using social media, influencer marketing, and online ads, they are making a strong online presence. Their well-set up e-commerce site promotes customer loyalty and boosts sales.

Advertising Campaigns and Creative Messaging

Nespresso knows that powerful ads and creative messages are key to grabbing attention. They aim to reach young coffee lovers with great visuals and stories. This highlights what makes Nespresso special. The idea is to build a deep emotional bond and show the value of Nespresso’s coffee.

Nespresso teams up with famous influencers and stars. This helps spread their message far and wide. By working with well-liked celebs that share Nespresso’s values, more people see their ads. This strategy lets Nespresso tap into a celeb’s fanbase, increasing visibility.

Collaborating with Influencers:

Nespresso picks influencers who truly vibe with their audience and love the brand. This makes their ads come across as real and relatable. It boosts the success of their campaigns.

They use influencers to create catchy content that shows off the brand. They aim to blend Nespresso into the influencer’s world through great photos, videos, or captions. The target is to spark interest in Nespresso’s coffee.

Nespresso often works with influencers longer than just one campaign. This creates lasting partnerships. It keeps Nespresso in the spotlight on influencers’ platforms, building brand recognition and loyalty.

Nespresso digs deep into market research and consumer insights. They learn what young coffee drinkers like and aspire to. This helps Nespresso craft messages that hit the right emotions.

The image above highlights Nespresso’s knack for creative messaging. The phrase “Indulge in perfection” alongside stunning visuals reflects Nespresso’s commitment to top-notch coffee experiences.

By always improving their ads, Nespresso keeps capturing its audience’s attention. This solidifies its brand image and encourages more customer interaction. Such efforts play a big part in Nespresso’s marketing wins.

Product Marketing and Innovation

Nespresso needs to lead in the competitive coffee market. It should focus on product marketing and bringing new things. New coffee flavors, limited editions, and innovative brewing systems can attract more users. This keeps Nespresso’s coffee fresh and interesting for buyers.

Nespresso aims to surprise and please its customers. It creates unique, high-quality products. This helps Nespresso to stand out and attract coffee lovers looking for new coffee experiences.

Introducing New Coffee Flavors

Nespresso should introduce new coffee flavors to meet various tastes. From strong espresso to gentle blends, they should have something for everyone. This keeps coffee lovers coming back to try new flavors and scents.

Limited Editions for Exclusivity

Limited edition coffees make Nespresso unique. These are made with coffee experts for a special touch. Offering them for a limited time creates excitement and encourages people to try them before they’re gone. This can boost sales and make customers loyal to Nespresso.

Innovative Brewing Systems

Nespresso should also make advanced brewing systems. These could let users adjust how their coffee is made. By having top-notch brewing technology, Nespresso can draw in those who value precision and ease in making their coffee.

Nespresso needs to show how special and high-quality their coffees and machines are. Great product stories, pictures, and reviews are key. They help market Nespresso’s products and draw in more customers.

Focusing on product marketing and innovation is vital for Nespresso. It keeps the brand fresh and appealing. This helps keep customers interested and happy with their coffee. Nespresso can stay a strong name in the coffee world by always adding new products.

Social Media Strategy and Community Engagement

In today’s world, social media is key for businesses to reach their audience. Nespresso uses this to build brand loyalty and connect with customers. It makes community engagement a big part of its marketing plan .

Fostering Community Engagement

Nespresso works to create a strong community around its brand. By actively engaging online, it makes customers feel included and heard. This helps build a loyal customer base that feels connected to the brand.

It also encourages customers to share their Nespresso experiences. Through user-generated content, such as photos and stories, customers help promote the brand. This kind of content feels real and can draw in new customers.

Additionally, Nespresso hosts events to bring its community together. Both online and offline, these events let customers share tips and form connections. It shows Nespresso is more than just coffee; it’s a lifestyle.

Building Brand Loyalty

Being active on social media keeps Nespresso’s customers engaged. It updates them on new products and promotions. This way, Nespresso keeps its customers interested and loyal.

Exclusive offers and rewards are also used to value loyal customers. These special deals and previews show customers they’re appreciated. It helps create a strong bond between Nespresso and its customers.

Furthermore, Nespresso collaborates with influencers to expand its reach. This strategy introduces the brand to potential new customers who trust these influencers. It’s a smart way to grow its audience.

Nespresso’s approach to social media aims at engaging and retaining customers. By building a community and rewarding loyalty, it strengthens bonds with its target market. Through these efforts, Nespresso stays a top choice in the coffee market.

Competitive Analysis and Market Research

To succeed in 2024, Nespresso needs to look closely at its competitors and the market. This helps Nespresso learn what others do well and where they can improve. It’s key for coming up with new ideas and standing out.

Nespresso can spot chances to be unique in the portioned coffee market by looking around. Knowing the strengths and weaknesses of competitors helps Nespresso make its products better. This way, they can connect more with people who buy their coffee.

Seeing what people like and the new trends is very important. It helps Nespresso keep up and change its plans to fit what customers want. This keeps Nespresso ahead in the game.

Getting the analysis right means Nespresso can lead the way in the coffee world. They’ll know how to be the top choice for coffee lovers.

By deeply understanding the market and competitors, Nespresso can make smart choices. Staying updated helps Nespresso offer something special to its customers. They can keep winning their hearts and minds.

Customer Targeting and Personalization

Nespresso focuses on understanding each customer to boost engagement. It’s all about knowing what each person likes. This way, Nespresso can make everyone’s experience special.

Understanding Customer Preferences

Nespresso starts by getting to know customer likes through data. This includes looking at what they buy and how they interact online. They spot trends to see what’s popular in coffee choices.

Surveys and groups help Nespresso dig deeper. This info helps craft marketing that really talks to people’s tastes and life goals.

Delivering Personalized Experiences

Knowing what customers like, Nespresso offers them tailored experiences. Personal suggestions pop up on their website and app. It makes shopping feel more personal.

Customers get emails about flavors and special offers they’d probably like. It’s a way to make them feel exclusive and valued.

Offering unique discounts keeps customers coming back. It shows Nespresso cares about their individual preferences. This strengthens loyalty and satisfaction.

The Power of Personalization: A Comparative Analysis

Nespresso stands out by personalizing its approach. This strategy has earned them stronger customer bonds. It means more loyalty and better sales.

Personal touches don’t just feel nice, they offer rich data. Nespresso uses feedback to fine-tune its approach. Ongoing, this keeps making their marketing sharper.

By focusing on personalized experiences, Nespresso stands out. Insights drive them to deliver coffee that matches customer tastes perfectly. This keeps customers loyal and boosts Nespresso’s growth.

Measuring and Analyzing Marketing Performance

Nespresso’s marketing strategy includes measuring and analyzing its efforts. It tracks key indicators like sales, brand awareness, customer engagement, and satisfaction. These metrics help Nespresso understand the impact of its marketing and make better decisions.

One key area Nespresso tracks is sales performance. By looking at sales data, they can see how marketing boosts revenue. They analyze trends, identify successful promotions, and figure out the marketing return on investment.

Understanding brand awareness is also crucial. Nespresso uses surveys, social media, and website data to measure brand recognition. This shows if their marketing is positioning the brand effectively in people’s minds.

Tracking customer engagement is another focus for Nespresso. They monitor how people interact with them on social media and their website. This includes looking at likes, shares, website visits, and email metrics to gauge audience engagement.

Nespresso also values customer feedback. They use surveys and feedback to understand customer satisfaction. This helps Nespresso see what works and what needs improvement in their marketing.

Sample Competitive Analysis Table

Nespresso uses a mix of metrics and analytics for insights. This data-driven method helps them decide how to best market themselves. By monitoring and analyzing constantly, Nespresso can adjust their marketing. This helps them grow, keep customers happy, and lead the global coffee market.

Nespresso can be a global leader in portioned coffee with the right marketing strategy. This includes knowing the target market and positioning as a high-end brand. It also means using digital ways to connect and keeping customers involved. By tuning into young people’s tastes and values, Nespresso can draw and keep its audience.

To appeal to young coffee lovers, Nespresso should really understand the coffee scene. This means tailoring marketing to fit Millennials and Gen Z tastes. Highlighting Nespresso coffee’s quality, its easy-use system, and the overall experience can build a strong brand. Using online channels and e-commerce can help Nespresso connect with younger customers effectively.

Ads that stand out and messages that grab attention will win over young coffee fans. Introducing new coffee flavors and machines will keep Nespresso interesting. By using social media to create a sense of community and loyalty, the brand will grow stronger with its audience.

Nespresso should also keep an eye on the competition and the market to stay ahead. Offering personalized products and marketing will make customers happier and more loyal. By looking at marketing results, Nespresso can make smart choices to keep winning in the coffee market.

What is the current marketing challenge that Nespresso is facing?

How can nespresso adapt its marketing strategy to target young consumers, how can nespresso differentiate itself from competitors, how can nespresso utilize digital channels and e-commerce, how can nespresso create impactful advertising campaigns, how can nespresso focus on product marketing and innovation, how can nespresso leverage social media platforms for community engagement, why is competitive analysis and market research important for nespresso, how can nespresso target customers and personalize their experience, how can nespresso measure and analyze its marketing performance, what should be the focus of nespresso’s marketing strategy for 2024, related posts.

John Lewis Marketing Strategy

Editorial Team

Miu miu marketing strategy 2024: a case study, nintendo switch marketing strategy 2024: a case study.

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nespresso strategy case study

The Nespresso story began more than 30 years ago with a simple idea: enable anyone to create the perfect cup of espresso coffee – just like a skilled barista. From its beginning in 1986, Nespresso has redefined and revolutionized the way millions of people enjoy their espresso coffee and shaped the global coffee culture.

Nespresso wanted to encourage more discerning coffee drinkers to engage with the brand by exploring their online site and visiting their boutiques across the US. 

reduction in cost per visit between September '20 and March '21

foot traffic uplift from the Q4 holiday campaign

boutique visits generated

higher landing page conversion rate

The challenge

COVID-19 brought along a host of new challenges, inspiring Nespresso to open up new click-and-collect services and double down on their location-based marketing strategy to drive consumers to their open boutiques.

The approach

Nespresso partnered with Merkle and S4M to encourage visits to their boutiques. The campaign was uniquely designed to reach Nespresso’s target audience of coffee drinkers who were previously customers of competitors. Those consumers were offered more information about Nespresso, with the goal of persuading them to switch loyalties to the Nespresso brand.

The team identified users who matched Nespresso’s customer profile, targeting users who:

  • Were known coffee lovers.
  • Had previously visited a competitor brand.
  • Lived or worked in metropolitan areas.
  • Had a household income of over $50,000 per year.

S4M leveraged its Dynamic Catchment Area technology, which enabled the Nespresso campaign to reach consumers within:

  • A 15-minute walking time of a Nespresso boutique.
  • A competitor location.

It was also used to target users within areas that had a high affinity for Nepresso boutiques.

The campaign used dynamic creative optimization and a combination of banners and mid-page unit (MPU) formats, enabling high reach in a user-friendly environment. Over 28 different creative formats were deployed over the course of the campaign.

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Please note you do not have access to teaching notes, competitive advantage through innovation: the case of nespresso.

European Journal of Innovation Management

ISSN : 1460-1060

Article publication date: 11 January 2016

The purpose of this paper is to describe how Nespresso achieved competitive advantage through innovation by changing the rules of the game in its industry.

Design/methodology/approach

Nespresso was analyzed based on public available secondary data, in combination with related academic concepts on innovation and competitive advantage.

The company succeeded by the thorough application of a strategy that, through perfect alignment, allowed the company to reach a unique market position. However, as described in the case, it took a relatively long time and the company came close to failure several times. Before the current situation of the company, it remains challenging in the future as well. Hence, the Nespresso story provides interesting space for discussion and learning about what innovation is, how innovation emerges, and under which circumstances innovation can serve as a source for competitive advantage.

Research limitations/implications

Especially given the current market situation, the case offers different starting points for discussion about innovation and long-term company success.

Practical implications

Especially before the current market situation, the case offers different starting points for discussion about innovation and the success of a company on the long term. The case is designed to give practitioners a better understanding on what an innovation as, and how competitive advantages can be linked to innovation.

Originality/value

This case of Nespresso is a unique combination of the concepts of innovation and competitive advantage. It serves as an example of an innovation, which was not successful from the scratch, but evolved over time and is still developing. As many innovations went through such a non-linear process, this case offers interesting lessons learned for academics as well as for practitioners.

  • New technology
  • Business strategy
  • Competitive advantage
  • Intellectual property

Brem, A. , Maier, M. and Wimschneider, C. (2016), "Competitive advantage through innovation: the case of Nespresso", European Journal of Innovation Management , Vol. 19 No. 1, pp. 133-148. https://doi.org/10.1108/EJIM-05-2014-0055

Emerald Group Publishing Limited

Copyright © 2016, Emerald Group Publishing Limited

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nespresso strategy case study

Nespresso Case Study: Teaching to Luxury Companies How to Manage a Business Model Portfolio 

  • Written by 440 Industries
  • Experiential Branding , Luxury Management , Retail Management
  • October 6, 2021

Nespresso Case Study: Teaching to Luxury Companies How to Manage a Business Model Portfolio

Everyone knows Nespresso as a consumer product, but few know Nespresso for the incredible business journey that changed the Nestlé Corporation forever. 

There’s a lot to unpack and to learn from this brand and in this post, we’re going to delve into it and find out all that  Nespresso can teach to luxury companies. 

Switching from Producer to Retailer

Before Nespresso, Nestlé, the parent company, had little if any experience with retail distribution. Most of Nestlé products were in fact sold through national and international distribution chains managed through Business to Business relationships. This was often the case as fast-moving consumer goods are sold through intensive distribution strategies. 

Because of this practice, it is only natural that the first strategy to sell Nespresso was based on a B2B model where Nestlé would sell high-quality coffee through vending machines in office buildings. 

There was also another reason for Nestlé to approach this distribution strategy, and it had to do with the way Nestlé saw this product. 

The company was in fact, focused on the functional value that Nespresso brought to customers.

However, in reality, there are three distinct values that products bring to market, which we could summarise as:

  • Functional jobs , as in solving a material problem.
  • Social jobs , as in owning goods which are indicative of social status.
  • Emotional jobs , which provide us with particular emotional feedback, such as entertainment, excitement, or thrill.

Nespresso marketers focused mostly on a functional benefit: the benefit of not having to leave the office in order to have good quality coffee. Having good coffee at the office would also help companies create a more productive environment for their employees. 

In reality, this approach ended up being a complete failure. No office manager wanted to get the Nespresso vending machine as employees have coffee, not only to enjoy the drink but to take a break and enjoy a little fresh air. 

Once Nestlé understood that functional values were not going to sell Nespresso, it had to reinvent a strategy from scratch and realize that the only other feasible approach was one based on delivering an emotional value. This required a complete redesign of the product’s distribution approach which had to switch from Business to Business to Business to Consumer.

Moreover, the experience of the first failed launch made the company realize that in order to be successful in their second attempt they did not only have to think about the product or value to the consumer but to a whole series of decisions connected to identifying a new target customer , developing the right distribution strategy , identifying the right customer relationships and setting the right price . 

In one word, they had to develop a Business Model for the new Nespresso. 

We’ll explore Nespresso’s Business Model in the next part of our post. 

Building a Unique Business Model for Nespresso

In order to enhance the value connected to the product, Nestlé had to completely reimagine its market strategy. To discuss it, we’re going to break it down into 5 sections, following the structure of the Business Model Canvas.

Value Proposition

As discussed in the previous paragraph the value brought to market is now experiential and emotional, connected to coffee connoisseurship and to the appreciation of a broad variety of coffee types and origins. Nespresso is like the coffee you would drink at a poolside table when you’re hosted by George Clooney in his Italian villa overseeing Como Lake. 

Target Customer 

The target customer for Nestlé are not business establishments but pretty much now anyone who appreciates good coffee. You’d ideally want to experience coffee in style, as a daily luxury that relaxes and energizes you. The product needs therefore to be sold at an affordable price, as it needs to be accessible. Customers should not worry about the cost, because they deserve a little luxury treatment every day. 

Customer Relationships

Customer relationships are formal yet friendly, through the Nespresso Card any Nespresso store knows your preferences and will be happy to serve you with your favorites. A tasting table will allow you to experience different varieties of coffee in-store and find the one that you may prefer. The retail experience is meant to educate and inform customers so that as they keep experiencing different blends, they truly become coffee aficionados. 

Distribution Strategy

This is the most remarkable change in respect to the previous approach. Nespresso is sold through vertically integrated, company-owned stores which are located in high streets and popular parts of the city. Through this approach, a high-end retail experience can be delivered through the relationships that staff and customers are able to foster.

As mentioned above, the pricing strategy was based on the idea of creating synergy. From one end the coffee machine would be sold at a very low-profit margin to encourage adoption. This would allow the brand to create a hard lock-in, making customers more loyal, as they now get to buy the Nespresso machine and take it home. 

Once the habit to have coffee with Nespresso has been developed, then customers will acquire Nespresso capsules directly from Nestlé paying a higher price and providing a very high profit margin.

This approach turned out to be a huge success, making Nespresso the popular global brand it is today.

Nestlè however developed more than one product based on the Nespresso technology but realized that to be successful, it had to make sure that each product would be differentiated on all of the 5 accounts discussed in this section of the post.  

That’s why it went ahead to develop a Business Model Portfolio comprised of one different business model for each of the products it sold.

Developing a Business Model Portfolio and Luxury 

This is when we can start drawing multiple connections between Nespresso and the luxury industry. 

A Business Model Portfolio suggests how a company may not necessarily be luxurious in all of its value propositions. It can be possible to offer products that satisfy functional needs, at a lower price, social needs at an intermediate price, and emotional needs at a higher price. 

All of these products, managed through a different business model, can coexist and the fashion industry is full of examples that can show how luxury collections, mid-tier collections, and commodities can all safely coexist within one brand.  

An example of this is brought by Giorgio Armani who developed its collection making sure all of them would be differentiated in terms of value, target customer, price, distribution, and shopping experience. Here’s a breakdown of Armani collections to shows these elements of differentiation among them.

  • Giorgio Armani Privè. This is the haute couture collection (shown in Paris) which has only one womenswear collection per season.
  • Giorgio Armani. This is the top line, also known as the black label. This is sold only in mono-brand stores and each season there is a man and woman collection.
  • Armani Collezioni. This is the so-called white label. This collection has a lower cost of the top line, but it still features the brand’s stylistic identity by being elegant and classic. 
  • Emporio Armani. This is the young and trendy line, it’s sold in mono-brand stores and multibrand stores, this collection is also designed in one man and one woman collection for each season.
  • Armani Jeans. This is the denim collection, it is sold mainly in department stores.  this collection is also designed in one man and one woman collection for each season.
  • Armani Exchange. This is the most affordable line, with collections continually renewed based on the fast-fashion formula, this collection is also sold through the website. 

There you have it. We have analyses Nespresso’s “go-to-market” strategy and learned a lot of notions that perfectly apply to luxury goods. 

We’ve covered a lot of material, it’s now time to move towards our conclusive remarks.

Conclusions

There you have it! In this post, we’ve looked at how Nestlé as a mass-market producer evolved into a high-street retailer after having learned what value the product had to offer to its customers. Despite initially focusing on offering functional benefits , the brand soon realized that the Nespresso technology had an opportunity to focus on emotional benefits, as a daily luxury experience. 

This insight pushed the company to design a fully-fledged business model around Nespresso so that it could better emphasize the desired customer experience of purchasing and owning the product.

At the same time, with a stroke of genius Nestlé realized how even if it had other products based on similar technologies, each one had to be brought to market with its unique value proposition and business model, therefore realizing that value, price,  customer relationships, distribution channel and customer segments are closely entwined.  

We can see how many brands have learned from Nespresso the benefits of a Business Model Portfolio and have been able to develop tailored marketing strategies to provide luxury, emotional experiences to their customers. 

Examples include Giorgio Armani who has used the Business Model Portfolio to create multiple collections each distributed and communicated according to the value offered to the customer. 

An example of luxury distribution as a means to enhance the product experience is instead offered by Nike and their approach to distributing limited-edition sneakers using collection drops.

There you have it. We hope you have enjoyed our post. Feel free to navigate our blog section to discover other resources in fashion marketing and luxury marketing. Enjoy!

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Business model innovation: coffee triumphs for Nespresso

Profile image of Kurt Matzler

2013, Journal of Business Strategy

PurposeThis article aims to examine the concept of business model innovation and to discuss the design of the key elements. Based on a detailed case study of Nespresso, it seeks to outline how business model innovation can be implemented successfully.Design/methodology/approachBased on a theoretical conceptualization of a business model, the authors conduct an in‐depth case study to draw conclusions for a successful implementation of a business model innovation.FindingsA business model innovation comprises five components: an innovative, unique positioning, a consistent product and service logic, an appropriate value creation architecture, an effective sales and marketing logic and a profit formula that works. Success is based upon a unique, innovative and coherent design of the business model's components.Originality/valueBased on Nespresso's business model, this paper illustrates what a business model innovation is, what its components are and how they should be designed t...

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In line with the increase of coffee enthusiasts in Indonesia, coffee shops are now emerging roommates presents the enjoyment of local coffee in a distinctive way. One of the coffee shops that have a typical way is a Klinik Kopi. The purpose of this study: 1) to identify the Klinik Kopi business model, 2) to analyze internal and external factors that affect the Clinical Coffee business activities and, 3) to formulate strategies and improvement programs as the business development of the Klinik Kopi. This study uses a combination of business model canvas (BMC) approach and SWOT matrix analysis. Results of the study show that optimizing the main resources to create a new value proposition in designing future business models in the form of socio-entrepreneurship programs and business inspiration books influences every element of the business model canvas, namely an increase of carried out in key activities, key partners, channels, segments consumers and incoming revenue streams. Consum...

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Purpose: Although business model innovation (BMI) has gained substantial importance in recent years, there is still a limited understanding of this phenomenon. Yet, the corresponding scholarly literature has previously been characterized by a heterogeneous comprehension of the concept. This situation demands an analysis that synthesizes current scienti c knowledge, uncovers research gaps and underdeveloped areas, and estab- lishes a solid foundation for future research. Design: The study applies an extensive quantitative and qualitative analysis of extant BMI literature, making the concept more transparent and manageable for science and management. Findings: The study presents a set of yielding de nitions of the extant BMI literature and an integrated de ni- tion to promote a common understanding of BMI. In addition, it classi es the eld into six particular research areas. Given the identi ed dominance of exploratory research designs, future research should put more em- phasis on we...

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Purpose This paper aims to review and synthesise the recent advancements in the business model literature and explore how firms approach business model innovation. Design/methodology/approach A systematic review of business model innovation literature was carried out by analysing 219 papers published between 2010 and 2016. Findings Evidence reviewed suggests that rather than taking either an evolutionary process of continuous revision, adaptation and fine-tuning of the existing business model, or a revolutionary process of replacing the existing business model, firms can explore alternative business models through experimentation, open and disruptive innovations. It was also found that changing business models encompasses modifying a single element, altering multiple elements simultaneously, and/or changing the interactions between elements in four areas of innovation: value proposition, operational value, human capital and financial value. Research limitations/implications Although...

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Purpose – The purpose of this study is to provide state-of-the-art knowledge about business model innovation and suggest avenues for future research. Design – A systematic literature review approach was adopted with thematic analysis being conducted on 92 articles. Findings – The body of knowledge for this concept is in its infancy and is highly fragmented. This study therefore attempts to consolidate this fragmented knowledge. It reveals dominant themes, establishes coherence, and identifies conflicting arguments in the current literature. It also points out gaps in the research and highlights new directions for research. Research limitations – This study analyzed articles that were found based on a systematic literature review approach. Practical implications – This study identifies some fundamental issues that managers need to understand regarding business model innovation. Originality/value – The main value of this study lies in its synthesis of the current knowledge of business model innovation.

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Nespresso Products: Strategic Management Case Study

Among global food manufacturers, Nestle is one of the largest producers that distributes its products almost in every country of the world. It is a multinational and multi-brand corporation that provides high-quality foods and brings innovation to the industry. The main strategic priority of the company is to increase growth, which would create an immense scale and maximize cost efficiency per unit (Nestle Global, 2020). Apart from the global supply, outsourcing processes to countries with cheaper labor helps Nestle to generate additional resources. Apart from a variety of local subsidiaries, the company manages more than a dozen brands that allow them to target different consumer groups offering both low-cost and premium-class products. These brands cover a large part of the global food sector, offering goods such as bottled water, baby food, or chocolate. The chosen examples of products are Purina One dry cat food, Gerber baby food, and Nescafe 3in1 instant coffee. All these products are strong competitors in their markets, mainly due to the cost-efficiency of production.

Purina One is a global brand that provides high-quality pet food. As the company states, its main advantage lies in innovative formulas that respond to different nutritional needs (Nestle Global, 2020). The strategy is based on generating value for the customers, but the company keeps prices relevantly low compared to other premium cat food. That is why the strategy for Purina One can be defined as a best-cost provider which allows to “upscale product attributes at a lower cost than rivals” (Thompson et al., 2017, p. 122). Two other competitors Whiskas cat food produced by Mars Inc. And Hill’s Science Diet adopts different pricing strategies. The former offers cheap food of relevantly low quality, while the latter is similar to Purina One in terms of nutritional parameters but costs significantly more.

The same strategy is applied to Gerber baby food that offers high value for the optimal price.

Foods produced by Beech-Nut and Heinz provide similar value and target the same type of customers, but do not have such a global scale as Nestle. Nescafe 3in1 is a leader on the market of instant coffee products. It has several serious competitors, such as Starbucks VIA Ready Brew Coffee, mostly in the U.S. and Jacobs Kronung in Europe but none of them is as globally known as Nescafe. Unlike two previous products, this brand uses the overall low-cost provider strategy with broad differentiation of customers.

Nestle Nespresso offers a system of espresso machines and pod coffee capsules with which everyone can make high-quality coffee at home (Nestle Nespresso, 2020). For these products, Nestle chose a focused differentiation strategy targeting high-income households and offering them a premium-class product with excellent service. On the U.S. market, Nespresso systems compete with Keurig coffee makers. Such brands as Lavazza or Illy offer competitive products mostly in Europe, while none of them has such a global scale as Nespresso. According to Hill et al. (2019), competitive advantage can be sustained when it is rare, valuable, non-substitutable, or costly to imitate. In the case of Nespresso, its main advantage is built on the quality of the good and service, which is valuable, and the scale of Nestle production, which is difficult to imitate. Although the technologies are also competitive, they do not give a long-term advantage as they can be easily rendered. Although the competitors cannot easily match the power of Nestle manufacturing, its main challenge for Nespresso product lies in substitute products, namely other ways to brew coffee.

By making critical strategic choices for Nespresso, Mr. Jean-Paul Gillard proved the necessity for the companies to be adaptive to the environment. The key decision was to change the business model from B2b to B2C and target households instead of restaurants and offices. Moreover, the initial retailing alliances proved to be inefficient in providing high-quality service to the customers. Thus, Mr. Jean-Paul Gillard chose to optimize the operation and concentrate the production within one company. Moreover, the implementation of various sales channels helped to reach many customers and make the purchasing convenient for them.

The solutions taken by Mr. Jean-Paul Gillard in the management of Nespresso were able to revive the company and make the brand thrive. The importance of these decisions lies in the fact that he faced multiple problems at a time and was able to solve them all successfully. Key strategic choices, along with tactical improvements, such as the new sales model, helped to increase sales. Although the company uses niche targeting, there might be alternative strategies applied. As the company’s global supply chain provides a significant competitive advantage, Nespresso might adopt the best-cost provider strategy to increase sales and minimize costs per unit. This solution may be relevant, as the product requires significant investments in innovations, design, and research. Thus, the proportion of indirect costs in the product.

Strategic decisions are crucial for the success of the product as they entail the answers to the questions about “who?” “how?” and “what?” in product management. The case of Nespresso demonstrates how the success of the same products depends on the chosen strategy. From an unsuccessful project, it transformed into a thriving brand due to the correct business model and consumer targeting. Moreover, this example reveals the importance of adaptability to the environment which took place in this case. Mr. Jean-Paul Gillard demonstrated courage in facing critical issues and changed primarily flawed strategy into a successful one. However, not all companies have the chance to correct strategic mistakes. In this case, Nestle did not suffer significantly from the problems with its subsidiary, while smaller companies with a narrow set of products depend on the strategic choices even more.

  • Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2019). Strategic management: Competitiveness and globalization. 13th edition. South-Western College Pub.
  • Nestle Global . (2020). Web.
  • Nestle Nespresso . (2020). Web.
  • Thompson, A. A., Strickland, A. J., Gamble, J., & Thompson, A. A. (2017). Crafting and executing strategy: The quest for competitive advantage: concepts and cases. 21st edition. McGraw-Hill/Irwin.
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IvyPanda. (2022, February 16). Nespresso Products: Strategic Management. https://ivypanda.com/essays/nespresso-products-strategic-management/

"Nespresso Products: Strategic Management." IvyPanda , 16 Feb. 2022, ivypanda.com/essays/nespresso-products-strategic-management/.

IvyPanda . (2022) 'Nespresso Products: Strategic Management'. 16 February.

IvyPanda . 2022. "Nespresso Products: Strategic Management." February 16, 2022. https://ivypanda.com/essays/nespresso-products-strategic-management/.

1. IvyPanda . "Nespresso Products: Strategic Management." February 16, 2022. https://ivypanda.com/essays/nespresso-products-strategic-management/.

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IvyPanda . "Nespresso Products: Strategic Management." February 16, 2022. https://ivypanda.com/essays/nespresso-products-strategic-management/.

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Case Study: How Aggressively Should a Bank Pursue AI?

  • Thomas H. Davenport
  • George Westerman

nespresso strategy case study

A Malaysia-based CEO weighs the risks and potential benefits of turning a traditional bank into an AI-first institution.

Siti Rahman, the CEO of Malaysia-based NVF Bank, faces a pivotal decision. Her head of AI innovation, a recent recruit from Google, has a bold plan. It requires a substantial investment but aims to transform the traditional bank into an AI-first institution, substantially reducing head count and the number of branches. The bank’s CFO worries they are chasing the next hype cycle and cautions against valuing efficiency above all else. Siti must weigh the bank’s mixed history with AI, the resistance to losing the human touch in banking services, and the risks of falling behind in technology against the need for a prudent, incremental approach to innovation.

Two experts offer advice: Noemie Ellezam-Danielo, the chief digital and AI strategy at Société Générale, and Sastry Durvasula, the chief information and client services officer at TIAA.

Siti Rahman, the CEO of Malaysia-headquartered NVF Bank, hurried through the corridors of the university’s computer engineering department. She had directed her driver to the wrong building—thinking of her usual talent-recruitment appearances in the finance department—and now she was running late. As she approached the room, she could hear her head of AI innovation, Michael Lim, who had joined NVF from Google 18 months earlier, breaking the ice with the students. “You know, NVF used to stand for Never Very Fast,” he said to a few giggles. “But the bank is crawling into the 21st century.”

nespresso strategy case study

  • Thomas H. Davenport is the President’s Distinguished Professor of Information Technology and Management at Babson College, a visiting scholar at the MIT Initiative on the Digital Economy, and a senior adviser to Deloitte’s AI practice. He is a coauthor of All-in on AI: How Smart Companies Win Big with Artificial Intelligence (Harvard Business Review Press, 2023).
  • George Westerman is a senior lecturer at MIT Sloan School of Management and a coauthor of Leading Digital (HBR Press, 2014).

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  1. PDF Nespresso: Supply Chain and Stakeholder Engagement Case Study

    sustainability strategy.6 Nespresso also believes that they need to engage the next generation of business leaders and key business institutions. They launched the Nespresso MBA Challenge in 2013, have had three challenges, and today 100 business schools from around the 3 Ecolaboration Report 2009-2013. 4 Nespresso Challenge Case Study. 2016.

  2. Nespresso Business Model & Marketing Strategy

    A post shared by Nespresso (@nespresso) Nespresso has expanded its business model and is now present in over 76 countries and counts over 13,500 employees worldwide with more than 700 boutiques. The coffee beans are harvested from the best coffee-growing regions in the world like Brazil, Guatemala, Colombia, and are 100% sustainably sourced.

  3. Nespresso Marketing Strategy 2024: A Case Study

    This case study explores how Nespresso plans to charm the younger coffee drinkers. It wants to prove it's the best in portioned coffee. By doing so, it aims to stay on top. Key Takeaways. Nespresso is adjusting its marketing strategy to target Millennials and Generation Z

  4. Nespresso Case Study. (Entrepreneurship and Innovation)

    Nespresso's business management model is flexible in adapting to changes despite high reliance on its own creative and innovative ideas. Reference: Söderberg, P. J. V. (2019, August 8). Nespresso ...

  5. Innovation and renovation: The Nespresso story (Revised)

    A radical departure from most Nestlé lines of businesses targeted to the mass market, the Nespresso story offers provocative lessons about innovation in large, highly structured organisations. 2003 EFMD AWARD WINNER (Marketing) The case traces the development of the Nespresso System in a 100%-owned affiliate deliberately placed outside of ...

  6. Case spotlight: Nespresso: Strategy Reset for Growth: The Youth Market

    Nespresso was the global leader in the system based portioned coffee category that it pioneered in the 1980s. Referred to as the innovative 'disruptor' of the traditional coffee market, by the early 2020's Nespresso was facing more than 400 rivals worldwide that were challenging the company's leadership in the portioned coffee category.

  7. Nespresso: Strategy reset for growth: The youth market

    Nespresso, the global leading brand in portioned coffee, is facing an existential threat. The company's current market base, which consists primarily of aging consumers, is likely to decline in the medium to long term. To compensate for the certain shortfall, the company needs to attract young coffee drinkers among Millennials and Generation ...

  8. How Nespresso Increased In-Store and Online Traffic

    S4M leveraged its Dynamic Catchment Area technology, which enabled the Nespresso campaign to reach consumers within: A 15-minute walking time of a Nespresso boutique. A competitor location. It was also used to target users within areas that had a high affinity for Nepresso boutiques. The campaign used dynamic creative optimization and a ...

  9. Competitive advantage through innovation: the case of Nespresso

    This case of Nespresso is a unique combination of the concepts of innovation and competitive advantage. It serves as an example of an innovation, which was not successful from the scratch, but evolved over time and is still developing. As many innovations went through such a non-linear process, this case offers interesting lessons learned for ...

  10. Competitive advantage through innovation: the case of Nespresso

    Purpose - The purpose of this paper is to describe how Nespresso achieved competitive advantage through innovation by changing the rules of the game in its industry. Design/methodology/approach - Nespresso was analyzed based on public available secondary data, in combination with related academic concepts on innovation and competitive ...

  11. Good strategy, what else? Nespresso's exceptional strategy ...

    Nespresso has a unique value proposition:" enable consumers to easily make premium quality espresso coffee at home with great variety". People are willing to pay, relativity, more for the ...

  12. Nespresso Case Study: Teaching to Luxury Companies How to Manage a

    This was often the case as fast-moving consumer goods are sold through intensive distribution strategies. Because of this practice, it is only natural that the first strategy to sell Nespresso was based on a B2B model where Nestlé would sell high-quality coffee through vending machines in office buildings.

  13. Reinventing Nespresso? The challenges of a market leader under attack

    In 2011, Nespresso achieved phenomenal success with revenues of CHF 3.5 billion. But in the meanwhile challenges started to appear. The 1,700 patents protecting Nespresso system were expiring and more and more copycat capsules compatible with Nespresso machines were emerging. Nespresso was seeing declining growth rate and market share loss. The case describes the new

  14. PDF Competitive advantage through innovation: the case of Nespresso

    Nespresso charges between $0.60 and $1 per capsule (five grams of espresso); given there are 454 grams per pound, this translates to charging up to $91 per pound of espresso. Compared to Lavazza ...

  15. Business model innovation: coffee triumphs for Nespresso

    Based on a detailed case study of Nespresso, it seeks to outline how business model innovation can be implemented ... PAGE 30 j JOURNAL OF BUSINESS STRATEGY j VOL. 34 NO. 2 2013, pp. 30-37, Q Emerald Group Publishing Limited, ISSN 0275-6668 DOI 10.1108/02756661311310431 Figure 1 Value creation and value capture: the relationship among ...

  16. PDF Stakeholder Engagement Analysis Nespresso: The Choices We Make

    purchased a Nespresso machine, providing a mailing list for newsletters and platform to speak with their consumers. As part of the platform, the club members chose George Clooney as their brand ambassador, and since then, George Clooney has starred in numerous campaigns and established a solid reputation with Nespresso (Nespresso, Our History).

  17. PDF Business Model Design

    Management Accounting Guideline Case Study BUSINESS PHASE 3 Nespresso In 1988, Nestlé brought in Jean-Paul Gillard, a consumer product specialist, to head up the Nespresso business. Under Gillard's leadership the company made the strategic moves that made Nespresso the phenomenally successful business we know today.

  18. Nespresso: What Next?

    Nespresso had to understand the degree to which it could sustain its competitive advantage in the premium single-serve coffee market in the face of growing competition, and develop strategies to address the growing threat of competitors who were offering Nespresso compatible capsules. The case helps students to develop a deeper understanding of ...

  19. Nespresso: Strategy Reset for Growth: The Youth Market

    About. Abstract. Nespresso, the global leading brand in portioned coffee, is facing an existential threat. The company's current market base, which consists primarily of aging consumers, is likely to decline in the medium to long term. To compensate for the certain shortfall, the company needs to attract young coffee drinkers among Millennials ...

  20. Nespresso Case Study

    Nespresso Case Study. Brand E-commerce market International Success Stories. Rapid implementation of Lengow to accelerate the omnichannel strategy of Nespresso in over 35 countries. Discover how, with the help of Lengow, Nespresso was able to adapt to each market and create new and optimised workflows quickly and efficiently. Having updated ...

  21. Nespresso Case Study

    David Rivkin Principles of Strategy Professor Finkel Nespresso Case Study BRIEF SUMMARY: Brand name of coffee making system developed by Nestle, click of a button high quality coffee-sealed aluminum capsules Established as its own company in 1984, ability to brand and market on its own without being "attached" to Nestle INNOVATION PROCESS: INVENTION: Nestle introduced the Nespresso Coffee ...

  22. PDF Supply Chain and Stakeholder Engagement Case Study: Nespresso

    sustainability strategy.6 Nespresso also believes that they need to engage the next generation of business leaders and key business institutions. They launched the Nespresso MBA Challenge in 2013, have had three challenges, and today 100 business schools from around the 3 Ecolaboration Report 2009-2013. 4 Nespresso Challenge Case Study. 2016.

  23. Nespresso Products: Strategic Management Case Study

    These brands cover a large part of the global food sector, offering goods such as bottled water, baby food, or chocolate. The chosen examples of products are Purina One dry cat food, Gerber baby food, and Nescafe 3in1 instant coffee. All these products are strong competitors in their markets, mainly due to the cost-efficiency of production.

  24. Case Study: How Aggressively Should a Bank Pursue AI?

    Anuj Shrestha. Summary. Siti Rahman, the CEO of Malaysia-based NVF Bank, faces a pivotal decision. Her head of AI innovation, a recent recruit from Google, has a bold plan. It requires a ...