With year-end and the festive season, many were busy buying gifts for their loved ones. Some chose to gift Nespresso machines and products from the Apple Store, fitting very well with the lifestyle of most these days – browsing the internet with a good cup of coffee in the comforts of their own home.
Musing over this, it struck me that fundamentally, the approaches taken by the marketing organizations of Apple and Nestle (Nespresso) to promote their products are quite similar:
i) Apple and Nespresso are ‘closed’ systems within the digital and coffee industries respectively, thus ‘locking’ customers to products and services offered only by them
ii) Apple and Nespresso successfully introduced a-la-carte concepts, where customers can choose from various apps and songs from iTunes store (for Apple) and different flavors of coffee capsules (for Nespresso)
iii) Apple and Nespresso set up boutiques to serve middle to high income groups in elegant or chic neighborhoods of big cities
Both companies made breakthroughs in what I’d consider to be mature industries. Apple faced competition in a fast-changing information technology industry, whilst Nespresso faced a traditional coffee drinking culture. Instead of competing where the masses were, they stepped out to focus on high-end consumer segment that could afford premium products. In addition to the technology offering, the customer value propositions centered on convenience, simplicity, speed and style – to name a few. Whilst some argue that the profit margins made by both companies per product are far too high, this does not seem to deter consumers from buying their products.
What I find also interesting is the competition these trendsetters have brought into respective categories. Smart phones and single-use coffees of other brands are now flooding the market, giving consumers more options to choose from, whilst further transforming the lifestyle of consumers. This inevitably helps both companies in growing respective categories. Even in losing some market share to competition, Apple and Nespresso have the advantage of having established market precedence and brand reputation early on. In addition, they had also heavily invested in intellectual property protection, thus creating more barriers for competition to penetrate easily.
How these companies continue to innovate – through product or marketing strategy – will be a space to watch. In current times, both cannot rest on their laurels and have to be at their heels. It is clear that re-investing their high profits into continuous development for the future will be essential, or they risk losing out of their own game.
For now, I’ll settle for a cup of espresso and my iPad on my sofa!