Prof. Francesca VicentiniA.Y: 2015/2016

Introduction of the Nespresso Club concept

1986 – 1994 PIONEERING YEARS: TRIAL AND ERROR

1995 – 1999 START-UP PHASE: LAYING THE FOUNDATION

1989 1991 1995 1998

First aviation Nespresso

machine

First e-commerce platform

Introduction of recycling in Switzerland

Creation of Nespresso

5 employees First machine & 4

Grand Crus

The Beginning

1999

Evolving

Sustainability

2000 2003 2004 2010 2012

Boutique

Recycling George ClooneyBoutique

AAA Sustainable Quality Program

Nespresso opens its 200th boutique in

Shanghai

Achieves their 75% recycling capsule capacity objective one year before

time.

George Clooney becomes the brand

ambassador of Nespresso.

First Nespresso Boutique opens in

Paris

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Strategic Analysis Filter – Teece (2009)

Segmenting the market – WHO?

- Nespresso: differentiation strategy

- Companies + private households

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Strategic Analysis Filter – Teece (2009)

Creating a value proposition for each segment – VALUE?- Broad variety of choices

- Convenience of being able to prepare it in less than a minute

- Unique Nespresso coffee experience

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Strategic Analysis Filter – Teece (2009)

Designing and implementing a mechanism to capture value – HOW TO CAPTURE?- The razor-blade model

- Two types of capsules: for offices & private households

- Continuous capsules sale: lock-in effect

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Strategic Analysis Filter – Teece (2009)

Figuring out and implementing isolating mechanisms – HOW TO PROTECT?

- Intellectual Property System

- Holding patents to protect their competitive advantage

01 02 03 04 05 06 07 08 09Profiting from Innovation Framework

Teece (2009)

2 Modes:

1. Integrated Business Model2. Outsourced Business Model

Nespresso has a hybrid model..

01 02 03 04 05 06 07 08 09Profiting from Innovation Framework

Teece (2009)

Coffee machines:

• Licensees for producing coffee machines

• Selling through direct and indirect channels

Coffee capsules:

• Production of the coffee beans: raw materials

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Cost Structure

Creating sustainable

businesssuccess

Creating long-lasting

consumer relationships

Creating highest quality grand

cru coffee

• 1-2% off the entireworld production of coffee

• Close contact withfarmers

• AAA Sustainable Quality Program

• The Poistive cup

• The Nespresso club

• Brand ambassador

Strategy

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Cost Structure

• Patents

• Brand image

• Sustainability

• Systems, processes and assets that is hardto replicate

• Level of Opacity

• Cannibalizingexisting sales and profits

Protective Measures

“A business model describes the rationale of how an organization

creates, delivers and captures value.”

A. Osterwalder & Y. Pigneur

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The Business

Model Canvas

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Customers Segment

B2C – BUSINESS TO CONSUMERB2B – BUSINESS TO BUSINESS• Companies and firms looking for

qualitative coffee• Hotels• Restaurants • First class airlines

• 18-65 years old

• Niche market• Medium-high

income

• Average of 7 coffee per week

• Looking for quality• Looking for a status

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Value Proposition

CAPSULES EXPERIENCE

Create the perfect cup of coffee, with exquisite cream, a tempting aroma and full-bodied taste…

…at home in a convenient and consistent way

SMART MACHINES:

• Affordable• Clever in size• Technology• Design

• Best Quality• Variety of

choice

• Luxury image

• In-shop experience

• Lifestyle

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Channels

OWN CHANNELS PARTNER CHANNELS

Retailers:

Only machines are sold even in electronic stores

Nespresso wants to bring the machines into your

house

Boutique:Popular chic department stores and major

citiesRight balance between coffee experience and

retail

Online:E-commerce

Reserved to Nespresso Club Members48 hours delivery when ordering <200

capsules

Telephone:Advise on the selection of Grand Crus and

machinesDelivery service suited to individual needs

Reserved to Nespresso Club Members

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Customer Relationships

BOUTIQUES DIGITAL EXPERIENCE

NESPRESSO CLUB

• Advices from coffee experts

• In-shop experience

• Broad range of services• Feeling of belonging to an

exclusive network• Database for all of its

members

• Clear website• Products

assortment• Online orders• Support

CALL CENTER

• Enabling them to place orders 24/7

• Provide technical support

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Revenues Stream

LOCK-IN STRATEGY

Strategy that instigates the repetitive sales of capsules

FIXED MENU PRICINGStrategy of predefined prices

based on static variables

Price range for machines:from 99 to 699 euros

Price range for capsules:from 0,37 to 0,45 euros

CAPSULES

92% of the company’s turnover is

represented by the

capsules

MACHINES

4% of the company’s turnover is represented by the machine and

the cross-selling of coffee accessories

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Key Resources

FINANCIAL:

Nespresso belongs to NestlèGroup

Access resources and capital of an international company

PHISICAL:

3 production center in Switzerland

410 boutiques worldwide

INTELLECTUAL:

1700 patents gave to the company a competitive

advantage

HUMAN:

1,500 coffee specialist in their Customer Relationship Centers10,500 employees worldwide

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Key Activities

PRODUCTION:

• 63000 farmers in 11 countries • Coffee processed and capsuled• Manufacturing activities 100% in

Switzerland• Quality checks

MARKETING & BRANDING:

• Marketing campaign • Brand ambassador & Celebrities• Web presence

B2C DISTRIBTION:

• Direct distribution strategy• Worldwide distribution• In-house delivering

R&D:

• Focus on creativity, design and innovation

• Improving sustainability • Quality and different tastes

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Key Partnerships

MACHINE MANUFACTURERS

Krups, Delonghi, Siemens, Magimix, Gaggia

COFFEE BEANS SUPPLIERS

Farmers provide to Nespresso the coffee as raw

material

(IUCN) International Union for Conservation

of Nature

“Alucycle Program”: sustainability through

value chain

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Cost Structure

US $100.00 US $300.00US $200.00

FIRST PACK THIRD PACKSECOND PACK

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

PRODUCTION COSTS

R&D COSTS B2C DISTRIBUTION

COSTS

MARKETING & BRANDING

COSTS• Farmers• Production

process• Quality controls• Production

centers• Coffee

specialists

R&D TEAM:

Network of expertsfocused ondesigning moreinnovative, high-performing andgreener machines

• Shipping products worldwide

• Provide the same service

• Provide machines to retailers

• Testimonials • TV advertising• Social media

presence• Boutiques in the

best locations• Newspaper

advertising

A successful Business Model

Bringing machines into your house

LOCK-IN

Repetitive sales of capsules

Competitors are now allowed to produce compatible

capsules

EASIER TO FIND

CHEAPER

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Cost Structure

US $100.00 US $300.00US $200.00

FIRST PACK THIRD PACKSECOND PACK

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

FLAVORS SUSTAINABILITY

The company is increasing the

variety of tastes of their capsules’

lines

The company is improving their commitment in

environmental and social responsibility

“AluCycleProgram”

Nespresso is already responding to this

threat:

QUALITY

The company is trying to

increase the perception of coffee quality

A new generation of business model is needed

Nespresso should focus on what really make their customers loyal to them:

The Customer Relationship “Nespresso Elite

Club”

Luxury club really involving customers

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Cost Structure

US $100.00 US $300.00US $200.00

FIRST PACK THIRD PACKSECOND PACK

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

Lorem - Ipsum

GOLD CLUB PLATINUM CLUB SILVER CLUB

2500 capsules

New machine for free

Stimulant to be a loyal customer

Implicit perception of discount

Silver member€ 50 per year

Exclusive service:Luxurious treatment in any Nespresso boutique

5000 capsules

Sophisticated coffee machine

Access to the Gold Club service

Invite two friends Taste coffee before time

to market

“NESPRESSO ELITE CLUB”

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The effect on the business model

Cost structure

• Increase in CRM costs• Giving free machines

Revenues

• Customers staying loyal• New customers

Key partnerships

• Newspapers suppliers

• Mobile devices suppliers

Key activities

• In-shop entertainment

Thank you for your attention!!!

Thank you for yourattention!!!