Introduction
Keurig Inc. is a company that has ventured into the coffee business providing its clients with solutions to quick and effective coffee brewing. Since its inception in 1992, it has established itself with excellence, as its name suggests (Cravens & Piercy, 2009).
The company had succeeded in introducing the single-cup brewing system in to the offices and was seeking to expand its customer base to include the at-home segment. However, Keurig needed to employ proper marketing strategies in order to have advantage over the several single-cup competitors in the market.
Therefore, the management team re-evaluated the strategies of their product plan and decided to revisit their decisions on the price and marketing strategies. This paper will discuss the appropriateness of the distribution and channel strategies employed by Keurig and also consider the validity of the pricing strategies. It will also look into the types of promotions used for the consumer sales and its appropriateness in today’s market.
Distribution and channel strategies
Distribution is one of the key elements in the marketing strategy. It helps the firm to expand its reach and to become more profitable. This is basically the process by which a firm makes its products or services available for use by the target market. The channel design used is critical for the particular company. Keurig employed the level one channel since it has a single intermediary – the distributors.
For this purpose, Keurig employed several distributors to distribute the coffee brewers throughout the United States. With its several distributors, placement of its equipment was made fast and effective and all the maintenance services required were provided.
This distribution and channel system ensured that coffee brewers were provided in offices where managers were seeking to eliminate the unnecessary hustles and inconveniences at the workplace in order to improve productivity and employee satisfaction. The distributors also managed the feedback from clients in order to create proper customer relationships and ensure customer satisfaction.
The Keurig authorized distributors (KADs) worked together with Keurig, under the supervision of the vice president of sales. These marketing channels helped to bridge the gap between the producer (Keurig) and its consumers. This way, they brought the right products to the right consumers.
The distribution and channel strategies employed by the company ensured effectiveness and efficiency. This marketing strategy is still used today because there is value created by intermediaries. It is created through the reduction of the number of sales contacts required to reach the clients.
The main functions of the KADs included the transactional functions, logistical functions and facilitating functions. All these functions are necessary in any vertical marketing system. The KADs performed all their functions well. This includes the distribution and maintenance of the coffee brewers. They also ensured that the feedback on problems was well handled in order to maintain proper customer relations.
Pricing strategies for consumer sales
Firms usually employ diverse pricing strategies when marketing their goods and products. At times, companies are forced to alter their prices depending on the demand and the presence of competition (Hooley, Piercy, & Nicoulau, 2008). In order to select a proper pricing strategy, every business should understand the current market situation. Market research is also an efficient tool when it comes to determining what the clients are willing to pay (Bradley, 2007).
One of Keurig’s challenges was the determination of the proper pricing strategy for their new product. Therefore, they conducted a market research in order to determine the people’s view on the new product and its price.
The types of studies included the intercept surveys, the use of focus groups, an internet-based study and a survey of the current client base. The study area included three cities. All the participants had to consume at least a cup a day.
From the study, the results showed that almost all the participants were satisfied with the coffee. Most of them also showed interest in the product concept. The main advantages pointed out by the participants were the convenience and efficiency of the brewing process.
The brewer was also easy to use and it required minimal time to clean up. In order to gain insight on the pricing of the commodity, the management team reviewed previous market research that had been done. In addition to this, they wanted to determine the views of the participants concerning the price of the products.
Since the participants were satisfied with the commodity, they expressed their desires concerning the price. Most of them were willing to pay $0.55 for a cup of that coffee. Their response on the price of the coffee maker was also positive. For a price range of between $69 and $149, they were willing to pay over $130 for the coffee maker (Cravens & Piercy, 2009).
Another pricing strategy that Keurig used was the use of discount pricing. This was particularly when it came to the sale of their coffee makers in the offices. The coffee makers were given either without any charge or at a low monthly rental. This discounted pricing strategy was necessary for promoting its product and attracting new customers.
Promotions for consumers
Promotion is another element in the marketing strategy. This involves activities that include the sale, advertisement, direct marketing and publicising of the company’s products and services. One of the promotion (marketing) strategies employed by Keurig was providing the coffee brewers to offices free of charge. This strategy was appropriate and is still appropriate today because it one of the best ways to get people’s attention.
This is what is referred to as the free-prize-inside effect. Giving commodities free of charge does not devalue the product but only raises its visibility. This form of marketing seeks to take the word out about a new product. Keurig employed this strategy and in exchange, they made coffee sales.
According to the marketing research conducted, the studies showed that the company’s product was a demonstrations-driven product. This meant that the company needed to put in place proper strategies of demonstrating the system to its customers.
In order to advertise its products, Keurig launched point-of-sale advertising. These were developed and displayed on the brewers. The company, with the help of a majority of the Keurig authorized distributors, participated in the joint marketing program to ensure the sale of brewers that had advertising.
Another promotional strategy employed by the company was the use of the internet to conduct an internet direct marketing campaign. The main objective of this campaign was to create awareness of Keurig’s products and services.
Through this campaign, Keurig received several emails from current clients inquiring of the availability of the company’s products for home use. Therefore, the internet provided a proper avenue for advertising. Keurig also used a public relations campaign together with other marketing exercises to reach its clients.
One of the key objectives of promotion in marketing is to differentiate a product. Keurig was seeking to differentiate its product – which was the away-from-home business that focused on distributing its products to offices. It wanted to introduce this product to include home usage. This led to the introduction of the Keurig-Cup for the home market. This was also driven by the demand by the ever-increasing client base.
The new product (Keurig-Cup) was to be distinguished by colour and design. They were tan in colour and had a distinct base area. Sale of the Keurig-Cups was both direct and indirect. The KADs made direct sales to the target market. The roasters, on the other hand, made sales in both direct and indirect markets. This included making sales over the internet.
Conclusion
Keurig Inc. is a company that has specialised in the distribution of coffee products and coffee makers. It has succeeded in providing an away-from-home solution to coffee making and has provided a number of offices with the coffee makers that have made brewing easier.
This efficiency may be seen in the speed at which the machine makes coffee. In addition to this, the coffee makers require minimal cleaning. The company was seeking to also venture into the at-home consumer market and this was to be done by introducing the Keurig-Cup that would be used in the homes.
Keurig used a network of distributors for their distribution strategy. This included the use of Keurig authorized distributors. These distributors ensured that they performed the transactional, logistical and facilitating functions.
For the pricing strategy, the company performed a market research in order to determine what the customers were willing to pay. Keurig also promoted its new product effectively in order to capture the attention of the potential clients.
References
Bradley, N. (2007). Marketing research: Tools and techniques. Oxford: Oxford University Press.
Cravens, D. W., & Piercy, N. F. (2009). Strategic marketing (9th ed.). New York, NY: McGraw-Hill.
Hooley, G., Piercy, N. F., & Nicoulau, B. (2008). Marketing strategy and competitive positioning (4th ed.). Upper Saddle River, NJ: Pearson.