Penetrating a Saturated Market and Winning Customers.

coffee-loyalty-cards
http://www.docksidecafe.co.uk

Coffee. Something close to my heart, appealing to my senses and something worth waking up for. I rarely write of my daily passions. Believe it or not, my brain capacity stretches further than just the cohesion between digital and traditional marketing and my determination to be controversial, relentlessly picking away at someone’s strategy.

Nonetheless, let me take you back to what’s important. Coffee. Coffee is renowned for being one of the most saturated markets in the world, tough to penetrate, impossible to compete. According to the International Coffee Organisation (ICO), the average growth rate of consumption has risen 1.3% annually since 2012. The same guys tell us that global coffee exports grew 9.5% in August 2016 year on year. I agree, those stats are pretty phenomenal.

When I talk to aspiring entrepreneurs, it’s inevitable that at some point, I will slowly begin boring them with my passion for the coffee industry. Usually it sounds like this; “Yeah, I would love to own my own coffee shop when I retire, but only when I retire, I can’t compete with Starbucks!” Despite the discourage in most coffee enthusiasts dream of becoming a business owner, the market surprisingly has room to grow. There are actually many gaps to be filled in the saturated industry. Me being inquisitive, I thought this would be cool to explore.

According to Mintel’s 2016 market report on coffee consumption, nearly 8 in 10 of us drink coffee made at home, equating to approximately 78% of people in a representative sample size. According to Mintel, “standard instant coffee is by far the most frequently drunk product and the only type of coffee that the majority of users drink at least once a day”. Although there seems to be so much choice when purchasing instant coffee, it’s also where consumers are craving innovation the most. When 1,569 internet users who consume coffee aged 16+ were asked what they would like to see introduced into the industry, 24% of them answered “A wider range of instant coffees with added flavors.” Yes, there you go. Get blending before Nescafe do!

Now, I want to talk about loyalty. I have participated in lots of discussion recently where people are slating good old-fashioned loyalty programs used by small independent shops. We all know them; the old buy 6 and get one free. I wanted to explore this a little. Old-fashioned loyalty is no longer a method of customer retention. Loyalty programs are now another requirement to competing in a market. The same way that mobile networks such as EE and O2 now offer you more data, but they do not charge you any more. These things don’t make a business stand out, it allows them to target consumers at the same level whilst keeping up with the demands of society. They are competing with the external requirements, the requirements that are not controlled by the business.

Now think about this for a second, how often do you use that cardboard rectangle to collect stamps? Honestly, it’s more of a hassle for me to find it amongst the 15 I have squeezed into my wallet. According to Mintel, coffee has an extremely loyal consumer group. 53% of all coffee buyers stick to one coffee brand. This means that coffee brands are given a margin of error as far as the retention of its acquired customers. What does this mean? Well, if you were the owner of a coffee shop, hiding behind a barista bar for 10 hours a day, wouldn’t you want to innovate? Well research suggests you should. Mintel states that the most encouraging way of having you buy a new coffee is free samples. 55% of almost 1000 coffee consumers said that this is how they would like to be introduced to a new coffee.

So, here is the black and white retention and acquisition plan (hybrid loyalty scheme!) for independent baristas in 2016. Roast a new coffee blend, experiment with new tastes that your customers will dig. While you are doing this, retain stress-free your loyal 53% of customers. Live the barista dream and innovate. When you are happy, sample it to the 47% of disloyal coffee consumers who are going to the Nero down the road, sick to death with the little paper card that they have to carry around and more often than not, lose. Convert them by giving them more than Nero, better taste and service. Now they are YOUR customers, converted to your better tasting blend, cooler, stylish coffee house and collectively take that 53% to 65% and change the world. Now you are “The best espresso this side of Milan”.


Follow me onTwitter: @connorjohh

Email me on: connorwells111@gmail.com

 

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