Keurig Company Background
Keurig Inc is a company that was founded in Massachusetts back in 1992 with the aim to creating and developing a technique that would be able to help users of coffee to blend just a splendid cup of coffee at a given instant. Notably, from definition, Keurig is a Dutch word that means excellence, and this was the driving force of the company in the global market. In 1998, it was able to launch its first K-Cup pods and brewers which aimed at Office Coffee Service. Notably, the single-cup amassed fame, and in 2004, Keurig Inc added at Home Market.in 2006, Keurig was secured by the Green Mountain Coffee Roasters which led to accelerated growth in each party. In 2014, the Green Mountain Coffee changed its name to Keurig Green Mountain after having a long relationship with Keurig Inc
The company is also aiming at developing a distinct subculture of coffee drinkers and educating younger and new consumers. It also aims at providing various varieties of products which are fresh and convenient in terms of demand. The office managers also tend the coffee machine so as to increase employee productivity and decrease hassle.Keurig Company considers using different versions of the coffee portion pack (K-Cup) in the consumer market
The sources of competitive advantage that Keurig had was its investment in its products and the market. First of all, the company started by first carrying out in-depth research on the market where coffee was dominant and a hard to break-in market. Hence, Keurig was able to notice untapped market which included office buildings, hotel rooms, laundromats and car repair shops among others. Moreover, they sought to establish the market where people hardly found freshly made coffee. Keurig's primary objectives were to be able to provide newly prepared coffee in the shortest time possible. Therefore, they decided to venture into the white space where the market was readily available, and the consumer needs were at high levels (Anderson,2017).
Keurig segmented it market broadly and wisely. They ensured their products were of quality and it provided value and satisfaction to the consumers. As a result, the company gained healthy market, and it kept on increasing with time. Furthermore, the company market strategy was reliable as it first started by focusing on the Away-from-home OCS championed by the Starbucks and other renowned coffee providers. They were involved educating people on their products and carrying out research on their products. Indeed, there was positive feedback from consumers which saw revenues of the company increasing tremendously from the acceptance of a single-cup coffee system. The company was able to expand in years to come, and they were able to make their dream of At-Home market possible.
The primary customers of Keurig products are the office users and the households. The office users are the prime targets due to the inability to get access to freshly brewed coffee, and the products suit them just perfectly. For the households, Keurig provides coffee making machines that can help them make one of the best sweetest coffee with just the right amount of everything. Keurig benefits directly by expanding their market and increasing their revenues in the global market through focusing on both its products and market (Cauwood et al.,2015).
Keurig has put in place distributors who traverse all sections of the market to distribute the products and also maintain the brewers in offices. The distributors are known as Keurig's Authorized Distributors who purchase brewers from the leading company at a whole price then sell them to the consumers. KADs was also responsible for selling of K-Cups used for the coffee. The company makes their money through the sale of their products in Away-From-Home and At-Home, and the At-Home market retail is estimated at $18.5 billion in 2000. The main competitors of the company are FilterFresh and Flavia who also sell a single-cup coffee system(Martin, 2006).
Future Business Model
In future, Keurig needs to carry out secondary research on its internal sources such as balances sheets, profit and loss margins, inventory figures and sales figures. It will help the company to have insight into its domestic performance. Furthermore, it will improve the management to discover areas of focus to prevent problems that are likely to compromise the company's operation. Also, research on external sources like the competitor data, educational institutions, government, and internet must be carried out. The study will help the company know some potential markets as well as areas to avoid when it comes to executing the business in future. Moreover, the primary research should be conducted in future to discover areas that have never been exploited before as a way to tap new potential markets. It should get administered through questionnaires, interviews, and observations on various occasions (Potts et al, 1999).
The company segmented the market by targeting two broad customers that is the households and the office users. It began by focusing on the away from home commercial segment of office users in the hope of a successful rollout which would end up as a springboard for launching the at-home segment. The Starbucks and other purveyors coffee specialty laid the groundwork for launching into the away from home OCS (office coffee service). Successfully, they had educated the users about the good quality coffee and made them pay$1.50 and above for one cup of coffee and a bit more for coffee-based specialty beverages. This resulted in open doors for the company to offer single-cup system into offices hence capitalizing on users desire to have the same great taste in the office as they got at a coffeehouse.
At-Home coffee markets if tapped nicely can be the biggest and best market for Keurig company. I think it is a good market in the future if the pricing is friendly to both consumers and producers. The management needs to invest time in it, calculate the risks and then have a good plan to make it successful
Apparently, I think competition is a good aspect of any business. With the game, companies can give their best-regarding products and services to customers to remain at the top. Keurig should try to measure up to companies like Procter and Gamble and Kraft who represent about 84% of the expenditure in the market. The target market should be every household that is capable of meeting the price of the product. For the full and successful implementation, Keurig needs to solve issues with its competition, its pricing challenge and finally, they need to sort out its marketing strategy. When the problems get handled, the fruits of the At-home market gets realized.
Majorly, the channel of conflict arose due to pricing. The prices were too high for the consumers to purchase. The management was also confused on whether to redesign to favor the consumer it, either way; they will still experience losses. Hence, the pricing should be looked at to support both consumers and producers. The company should not be limited to KADs alone; it should promote its products through the internet in web pages, TV advertisements, and radios.
The K-Cup is loved by many people where it helps coffee lovers get access to coffee instantly. However, it comes with its pros and cons. The advantages include instant coffee; it came with a variety of flavors which were admired, it does not require help to heat water, someone chooses their preferred heat and strength and finally, does not require prior programming to use. On the other hand, the Cup is quite expensive, non-recyclable, the machines are pricey hence few people can afford, it can be hectic when there are many people to be served since it is a one single serve and lastly it doesn't give a thick creamy flavor that most customers love hence providing a challenge to producers (Streeter et al.,2008)
Review the price-demand relationship on pages 337-338 of your textbook.
Over the years, Americans have been spending a lot of money on coffee than ever before. However, the single-serve revolution by Keurig has caused a transformation in the brewing habits of one the largest coffee drinking nations in the world. The increasing popularity of Keurig's single-serve pods has had an enormous impact on the demand for green beans in the United States. Unlike in the past where people used to make a 'pot' of coffee, nowadays people are making a cup. These changes have affected coffee farmers, traders, and Arabica coffee roasters because the prices continue to fall rapidly despite plentiful supplies (Cohen, 2015).
Whereas consumption by volume continues to fall, Americans still spend billions of dollars on coffee despite the hefty premiums on single serve coffee by roasters .From exhibit 7: Intercept testing market research more people are willing to pay for coffee with fewer prices. Table 7B on K-cup pricing based on coffee consumption indicates the same trend (Anderson, 2005). Keurig coffee maker innovation has influenced the price-demand relationships in the coffee market. While there is high demand for the company's products, there is a low demand for coffee due to the recyclable coffee pods. High demand for Keurig coffee maker means high prices and more profit for the company. On the other hand, reduced demand for coffee beans means low pricing and more losses to farmers, traders, and roasters.
At the start, Keurig market research indicated that consumers were more concerned with the pricing than the brewer and this affected investment decisions by the company. As a result, Keurig expectations fell below their projected targets. Apart from demand and pricing, they were also faced with the challenge of manufacturing costs for the brewer. High manufacturing prices influenced the company's market prices and the demand. The demand for any product is usually affected by its pricing which is a similar case to Keurig.
Using Exhibit 6 in the case, graph the two price elasticity demand curves (on the same graph) for Keurig-aware and non-aware potential buyers. The numbers in the chart (6, 9. 31, 1, 7, 18) refer to the percentage (%) of potential buyers that say they would (definitely/probably) buy the brewer. (you can hand-draw this, it does not have to be perfect, and if you don't have a scanner, you can take a photo and email it to me). "n" refers to the number of respondents in the research sample-- it does not affect your calculation in any way so just ignore it.
Describe the graph. Is the demand elastic or inelastic?
In the graph, what is experienced is that the demand is elastic in that the level of supply is strongly affecting the price. The small changes experienced in price is bringing a great change in the general quantity that is supplied.Keurig coffee maker innovation has influenced the price-demand relationships in the coffee market. While there is high demand for the company's products, there is a low demand for coffee due to the recyclable coffee pods. High demand for Keurig coffee maker means high prices and more profit for the company. On the other hand, reduced demand for coffee beans means low pricing and more losses to farmers, traders, and roasters.
Give one example from the data as to how a percentage (%) change in price results in a percentage (%) change in demand.
In the data, the percentage change in price, result to a percentage change in demand as demonstrated by
0.55% with 43.8% with 0.50% with 53.3%
If Keurig decides to sell the brewer for $149 compared to $199, how many more K-Cups does Keurig need to sell to make up for the loss in brewer revenue?
$149 = $199
If 0.55 = 43.8
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