Barista Coffee Company Ltd.

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1) Positioning of Barista
Target segment:
* Customers from section A and section B who generally have aversion towards the loud atmosphere of coffee hubs * Students community formed the majority of customers during the first half of the day * Professionals were expected to visit in the afternoon or the early evening * Family and friends came in the night

* 23 % of the surveyed customer were less than age of 20
* 46 % of them were in the age group between 20 to 35 yrs Benefits/Points of difference:
* Places where young crowd can hang around comfortably
* Filled the gap between five star coffee shop and corner coffee stars * Café ambience is used as a differentiator. Muted music and décor projects itself as a place of coffee lovers * Scrabble board, Books, music to engage customers. Thus offering experiential coffee * Maintaining baristas and customers relationship on an equal level * Letting the customer hang around for a long time

2) Reasons for adopting franchising strategy
* Can open new outlets with no investments
* In 2003, suffered losses of 21.4 crore. Therefore, needs to reduce the expenses * In franchising , cost of operating will be substantially lower * Currently, its real estate cost from 20 % of the total sales. This can be reduced through franchising * New stores can be opened in tier 2 at lower costs

3. Should Barista go for price reduction of its product line or should it continue with its premium pricing strategy?
Ans: Going by the facts mentioned in the case, Café Coffee day had a clear advantage in terms of affordable prices and was able to reach out to more number of the customers because of that. But the target audience for CCD is primarily youth while for Barista, it was young couples, professionals and families. Thus going by the difference in customers of the two, price of Barista should not be changed from the current prices. Also since it had established itself as a ‘Fine Café’ with high brand profile, it should maintain the same too. Second reason for no change in pricing also comes after looking at the Revenue/Squarefeet of the different outlets and here too Barista leads the chart with Rs8900 with 80 outlets compared to Rs 5800 of Café Coffee Day from 228 outlets. Also going by the number of outlets planned for the future does not seem to show that Barista is looking to target the volume of the market with only 50 outlets more to be added to the existing 130. While on the other hand CCD wants to grow more than twice by 2008 to a total outlet figure of 500. Clearly to achieve that huge number of outlets, and hence customers requires competitive and affordable pricing to penetrate into the market which Barista need not do. 4. Should company adopt differential pricing strategy or retain the same across all towns?

Ans: Differential pricing strategy would be required if the company wants to penetrate deep into the Tier II cities where customers are price sensitive and indifferent to the choosing Barista over Café Coffee day just because of the ambience, etc. Also the culture in a Tier 2 city doesn’t point towards having business meetings at such cafés but it is youth primarily that drive the business at such places. Entering into a Tier II city would need to Barista to focus on penetrating in the market and for that it will have to compete directly with Café Coffee Day in terms of pricing, ambience and product offerings. We would like to suggest that in order to differentiate with the existing outlets it can have different menu options with different pricing along with offerings that have been doing well in major cities at the same price in order to show consistency and also at the same time leverage the fact that customers like the product. The other reason why we suggest differential pricing strategy is the fact that since Barista had moved to a new concept stores called Barista Crème, which were premium stores that offered...
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