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COMM 343 – INDIVIDUAL BONUS ASSIGNMENTS
This is not a required assignments, for those submissions, you can earn a BONUS of 2% maximum on your
final grade for EACH case you analyzed. Due date will be on April 1st, 2013.
CASE #1 – It Is Brewing: Single-Serve Coffeemakers Are Hot
Brands such as Nespresso, Keurig, and Senseo are competing for the attention of dedicated coffee
lovers who want to brew one very good cup of coffee at a time without taking a lot of time. Although
each brand’s single-serve coffeemaker works a little differently, they are actually a system with two
vital parts, similar to the combination of razor and blade. First is the “razor,” that is, a coffeemaker
designed to heat the right amount of water to the precise temperature needed to bring out the most
flavor from the “blade,” a pre-measured capsule of coffee or espresso grounds.
Once consumers own the coffeemaker, they simply buy a supply of replacement capsules to enjoy
their choice of fresh-brewed coffees, ready in a matter of seconds at the touch of a button. In addition,
consumers usually have to buy espresso cups when they switch to single-serve machines, because
traditional coffee mugs are too large for most of the new machines. In fact, thanks to so many
consumers making the switch, stores report that espresso cups are outselling coffee mugs these
days.
Despite being significantly more expensive than traditional drip coffeemakers, these innovative single-
serve coffeemakers have taken the world by storm in the past decade. Global sales of all brands in
this category are currently perking along at more than 28 percent per year, whereas sales of drip
coffeemakers are growing at only 6 percent per year. Not surprisingly, this meteoric rise in sales has
brought more brands into the market and expanded consumers’ alternatives year after year.
One of the top brands in single-serve coffee is Nespresso, owned by the Swiss food giant Nestle.
Nespresso markets its equipment and capsules through branded boutiques and upscale stores in 50
countries. It has a long history in this category, having sold more than 13 million single-serve
coffeemakers during the past 25 years. Today, Nespresso rings up $3 billion in annual global sales
from its line of single-serve machines and replacement coffee, espresso, and tea capsules.
Nespresso is especially strong in Europe, although it has been targeting U.S. markets in recent years
amid growing interest in single-serve coffeemakers. It prices its capsules at about 55 cents apiece,
which works out to roughly $62 per pound of coffee—giving Nestle a tasty profit margin each time a
customer brews up a new cup.
Philips and its partner Douwe-Egberts have scored a major marketing hit with their Senseo single-
serve coffee systems in Europe, North America, and Brazil. Now Philips is building on that success.
As customers switch to single-serve coffeemakers, some come to enjoy their espresso so much that
they later upgrade to a more sophisticated espresso machine. To meet the growing demand for full-
size espresso makers, Philips bought the Italian espresso machine company Saeco, and is profiting
from this stepping-stone effect.
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The dominant brand in North America is Keurig. Owned by Vermont-based Green Mountain Coffee
Roasters, Keurig has deals with Starbucks, Dunkin’ Donuts, Folgers, and other coffee brands to make
capsules specifically for its machines. Having a 71 percent share of the $1 billion U.S. market for
single-serve coffeemakers and pods has given Keurig a big financial boost. Since 2006, Keurig’s
sales have increased more than 60 percent a year.
However, Keurig’s capsule patents are expiring and, as a result, it is facing more rivalry than in the
past. Companies are launching their own capsules to fit Keurig machines, and undercutting Keurig’s
capsule pricing to capture sales. The same will happen to Nespresso as its patents expire. What’s
ahead for these marketers as the single-serve phenomenon rolls on and more brands brew up
machines and capsules for coffee drinkers all over the world?1
Case Questions
1) Do you think single-serve coffeemakers are discontinuous, dynamically continuous, or
continuous? What are the implications for adoption and resistance of this innovation?
2) Is the decision to adopt single-serve coffeemakers likely to follow the high-effort or low-effort
hierarchy of effects? Explain your answers.
3) In which stage of the product life cycle would you place single-serve coffeemakers? Why
should competitors in this industry pay attention to the life cycle?
4) How is diffusion likely to be affected by the expiration of patents and the introduction of lower-
priced coffee capsules?
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CASE 2 – IKEA’s Household Appeal
No matter where you live, no matter what kind of household you live in—married with children, same-
sex couple, single or single parent, or just roommates—IKEA wants to be “your partner in better
living.” The Swedish retailer rings up $33 billion in sales through 284 stores in 26 countries, offering
stylishly-designed furniture and quality housewares at affordable prices. In fact, IKEA continues to
lower prices year by year on popular items so it can both attract new customers and stimulate repeat
business, even among consumers whose household incomes are stalled or falling. Offering a range
of good-better-best products widens the store’s appeal to consumers setting up new households,
families getting ready for new babies, families where children regularly travel from one parent’s
household to another, and households that are buying on a limited budget. Also, consumers who
might have bought IKEA’s top-of-the-line items before the recession now have more choices if they’re
trading down to less-expensive products.
Shopping at IKEA is deliberately family-friendly: Many of its stores feature a play area where
youngsters can be dropped off while one or two parents browse the store for adult or children’s
furniture and make their purchases without their children along. The stores also are equipped with
restaurants that serve Swedish-style foods for breakfast, lunch, and dinner, equipped with high chairs
for the youngest shoppers. When the IKEA store in Wednesbury, England added a children’s play
area and expanded the restaurant, it saw an immediate sales increase and found that the length of
the average customer visit had doubled, to about four hours.
Yet not every family member looks forward to an IKEA shopping trip. For Father’s Day weekend in
Australia, the IKEA store in Sydney set up a temporary Manland, a room where men could watch
sports programming and play video games while their wives or girlfriends shopped. “Manland is the
perfect solution for both the blokes who find shopping a chore and the ladies who are forced to drag
their partners around,” said IKEA’s PR manager in Australia.
Although targeting singles and couples with advertising that appeals to their needs and wants is
nothing new, IKEA was among the pioneers of mainstream advertisers to target gay couples. Its TV
commercial showing two men shopping for furniture together caused a stir in part because the men
were depicted as a committed couple. A recent—and controversial—billboard for IKEA in Italy
features two men holding hands (and a shopping bag) under the headline: “We are open to all
families.” The ad goes on to say: “With us, you will feel at home. What we want to do is make life
easier for everyone, every family, whoever they are.”
IKEA’s word-of-mouth reputation for quality and value gives the company an advantage in expanding
to new markets. Before the first IKEA store opened in Bangkok, the marketing manager
acknowledged the presence of competition but also noted that many locals “have travelled abroad or
learned from friends about IKEA furniture.” In advance of this store opening, IKEA distributed one
million copies of a special 16-page catalog featuring items chosen specifically for the Thai market. So
many consumers worldwide use the full 370-page IKEA catalog for ideas as well as shopping that
IKEA prints more than 200 million copies each year and makes the catalog available online and via
an app.
U.K. consumers who use Facebook were recently invited to create a 3D IKEA bedroom on YouTube
and click on items from the company’s catalog to furnish it as they wish. IKEA adds the finishing
touch by hanging photos from each user’s Facebook wall in the bedroom. “We want to be the experts
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in truly understanding peoples’ needs, wants, and dreams to help them live a happier life at home,”
explains an executive. Of course, any merchandise chosen for the virtual bedroom can be easily
ordered for delivery in the real world.i
Case Questions
1) The Manland experiment lasted only one weekend in one store. What are the marketing
advantages and disadvantages of expanding it to other stores? Do you think IKEA should do
more with this idea? Why or why not?
2) Would you classify IKEA’s products as suitable for conspicuous consumption, voluntary
simplicity, and/or compensatory consumption? Explain your answer.
3) IKEA’s ads targeting gay couples have drawn criticism as well as acclaim. What effect do you
think such controversy has on the retailer’s image and appeal?
4) Why would IKEA continue to print millions of catalogs every year, while other retailers are
eliminating printed catalogs in favor of online and in-store shopping?
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CASE #3 – Marketing Baby Carrots Like Junk Food
Can marketing encourage people to snack on baby carrots as if they were junk food? That’s what
California-based Bolthouse Farms has set out to do, with the help of Colorado advertising agency
Crispin Porter + Bogusky. Bolthouse CEO Jeff Dunn, a former Coca-Cola marketing executive,
remembers thinking that his firm’s baby carrots are “a perfect snack”—low-calorie, inexpensive, good
tasting, and nutritious. “But people aren’t eating as much of them as we’d like. So what do we do?”
Crispin’s advertising experts told Dunn that baby carrots have a lot in common with junk food.
“They’re neon orange, they’re crunchy, they’re dippable, they’re kind of addictive,” said Omid Farhang,
the agency’s creative director. Baby carrots may be healthy, but Dunn wanted to avoid messages that
discuss nutrition, which he calls “the rational approach.” Instead, the agency aimed to reposition baby
carrots by emphasizing their eat-anywhere, bite-size snackability and associating them with
skateboarding and other popular, contemporary activities. “It’s about getting baby carrots into a
different category,” says Crispin’s CEO.
What baby carrots needed was the right positioning, messages, packaging, and distribution. A new
campaign was born. Crispin created a catchy slogan: “Baby carrots: Eat ‘em like junk food.” Next, it
designed a flashy new bag, much like the packaging that chips come in, with a window so buyers can
see that they’re buying fresh vegetables. It set up a Twitter account and YouTube channel to reach
out to social-media-savvy consumers, tested three TV commercials, and printed store displays
promoting baby carrots as “the original orange doodle.” Also, the agency developed colorful baby
carrot vending machines that resemble the machines used to sell chips and other snacks. Finally, it
posted engaging online content, marketing baby carrots with fun games and apps.
During test-marketing, Bolthouse found that its sales in the test cities were as much as 12 percent
higher than its sales in non-test-markets. The vending machines sold as many as 90 snack packs
each week, and a number of schools called about putting the machines in cafeteria areas. In short,
baby carrot snacks were beginning to catch on.
To keep the campaign fresh, Crispin has added new online content and designed additional
packaging alternatives to catch the eye of shoppers. Meanwhile, Bolthouse is experimenting with new
flavored baby carrots, following the lead of snack marketers that add flavors to their basic chips or
pretzels. This will give novelty-seekers more options and may even win over snackers who prefer
flavored carrots to plain ones. Other vegetable and fruit marketers are paying close attention because
the marketing that makes baby carrots appealing as junk food could very well work for apples and
other foods.
Baby carrots aren’t going to replace every other snack food on the shelf, but sales are growing little
by little as more consumers get the message. For example, U.S. consumers buy millions of extra
bags of chips, order millions of pizza slices, and stock up on fizzy soft drinks for Super Bowl Sunday.
Lately, however, baby carrots are starting to score: Bolthouse Farms now ships 28 percent more
baby carrots during the week leading up to the Super Bowl than in an ordinary week.
Case Questions
1) Which is likely to be more effective, marketing baby carrots to young consumers or to parents
of young consumers? Why?
2) Does the marketing of baby carrots raise any social or temporal dilemmas?
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3) Is there a potential “dark side” to marketing baby carrots as junk food?
4) Do you agree with this strategy of marketing baby carrots as junk food instead of as a healthy
snack? Explain your answer.
