Nespresso smartly managed to re-invent the market a cheap commodity (coffee) and turn it into a perceived ‘luxury’ item that generates billions of dollars every year in a category that Nestle was able to redefine through the shrewdest marketing, distribution, pricing and retail business strategy I’ve ever seen.
Ultimately, they’re selling capsules with 5 grams of coffee at $0.50 cents/each when you can buy a Kilo for $20-$30 which makes it around a quarter of the price per coup.
How did they manage to quadruple the price of coffee?
- The Nespresso Machine:
They turned the Nespresso machine into a ‘must-have’ household item, a sign of good taste, and a beautifully designed product that costs around $200-$600. Many companies would have opted to keep the machine prices low and offer many discounts to focus on monetizing the capsules but Nespresso was very wise to keep the status of their machine as a desirable luxury item which could be bought as an expensive gift or as a treat for yourself.
The wide range of designs, models and colors means that there’s a Nespresso machine that is ‘right for you’
2. Aspirational Marketing:
A huge global marketing campaign fronted by George Clooney took place across TV, Cinema, Print, Billboards, etc.
The luxury and premium feel, alongside a global superstar and ‘sex symbol’ that encapsulates a ‘bon vivant’ were key to the positioning of Nespresso, especially in the early days when people weren’t familiar with the concept.
3. Nespresso Capsules:
The Nespresso Capsules come in all sorts of colors, flavors and with indicators of ‘strength’, letting customers experiment with different types of coffee and at the same time making them feel like ‘connoisseurs’ in the subject.
Before Nespresso, nobody thought of purchasing coffee ‘by the cup’ so it was cleverly positioned in a way that the nearest price comparison would be buying a cup on Starbucks for $4-$6. Compared to that, Nespresso seems like a bargain!
4. Nespresso Shops:
You can’t buy capsules in your supermarket! You either order them or go to one of the state-of-the-art shops located in the most prestigious corners of the world’s capitals.
The Nespresso shops are pure luxury and decadence, and it is another way in which they were truly groundbreaking. Their design reminds people more of a high-end designer shop or a luxury jeweler than a place to buy coffee. Couldn’t be any more different from your average grocery shopping experience.
5. Nespresso Club:
When you get a Nespresso machine, you join an ‘exclusive’ club which means you can call 24/7 to buy capsules and you’ll get emails inviting you to events at your nearest ‘boutique’.
6. Nespresso Accessories:
If you want to immerse yourself deeper in the ‘Nespresso World’ you can buy Nespresso cups, dispensers, spoons and other accessories at one of their boutiques.
I was particularly amazed by the china cup with a coating of 24 karat gold,!
In summary, kudos to Nestle & Nespresso for creating such an incredible brand and excelling at every touch-point. They managed to turn a cheap commodity into a beautiful, desirable and iconic ‘affordable luxury’.
Written by , Marketing Strategy, Brand Management and Communications Expert