Keeping in mind the changing spending behavior of customers, there is a huge potential market left untouched and i.e. different kinds of value-added services to provide them to tap future customers and to retain existing ones.
Literature Review:
The idea of coffee joints with the add-on services is not new to the world, but when it comes to India, this concept is young. The mindset of people have changed, their earnings and spending power have also accelerated. The primary purpose of the review is to see that in this scenario whether consumers are willing to pay for the value added services or not, if yes what would be the scenario and if no then what would be the effect.
- Customer needs and demand.
In the current scenario, the number of working people has increased. With the increased income and with the western influence people are more trend conscious, instead of a regular mundane place, people would prefer a specific and more service-oriented joints to serve their interest.
Café coffee day is the customer-centered firm, it seeks to create high customer satisfaction. Some of the today’s most successful companies are raising expectations of customers and delivering performances to match. ( Kotler p 120) Marketers are aware that different consumers have different needs.( Kotler, 2008 p 405)
According to the (2008), number of Coffee drinkers has increased. The demand for the coffee place has simultaneously increased. Gower (2008) argues that the coffee shops have tremendously increased in India since 2003 which is majorly because of the increased demand by the customers as well as the innovative selling methods of the stores through the deployment of cross selling and co-branding strategies.
According to the Forbes magazine, “In order to align your thinking with your customers’ needs you need to get to know them. Extrapolating what you think onto them will fall on deaf ears. This is why changing the way you think about your customers requires that you change the way you think about marketing.”
According to American Journal of Applied Sciences, (2007) in the recent years, marketers have focused their attention on the consumer. The aim is the acquisition of comparative advantage in the market. They have succeeded to expand organizations oriented market, and departments that support the competition strategy for the needs and the wants of the consumers.
Department for innovation, (2009) Value added services are the additional services which offer possibly to increase the revenues and make their offering more competitive since it provides real value to the customers.
Costa CEO, Bharghav (2008) says, “We may be a tea-guzzling country, but India also happens to be the world’s sixth largest producer of coffee, this has created what marketers call a ‘coffee-culture’. Barista, Café Coffee Day and Costa are among some of the coffee chains that have ridden the interest in coffee and socializing to become national chains.”
Huge amount of investment are being made by these organizations to serve their customers by providing them with more value added services. In this case, competitive advantage accrues to companies and thus the core competencies play distinctive advantage over others.
( Kotler p 36)
Cafe Coffee Day director Gupta (2008) who added few value-added services in the chain and said, “Cafe Coffee Day has been a youth hang-out, now Coffee Day Square will be a ‘youth hangout’ for a more worth, young-at-heart consumer who also wants a truly great cup of coffee,” he added. “The effort is to take consumers up the value chain and connect them with India’s coffee heritage in a contemporary way,” Gupta continued saying that the next in the line will be the Coffee Day Lounge, which will be more focused on the dining experience of its valued customers. That will be a gourmet format where one can look at food as a separate interest. Here diet food, traditional foods and separate offerings for children will be offered. The biggest youth puller, is likely to be the third area of interest like nightclub, which the company will start rolling out only after some time. Gupta describes this as an outlet where people can “connect standing rather than sitting”.
To be branded, products must be differentiated, in services differentiation is often achieved through the use of technology and by offering value-added services (Kotler p 53). Dattagupta, (2007) Barista’s CEO believes coffee market is poised for vibrant growth. Roy (2007), CEO, Coffee World, reckons it to be different. “Unlike the other coffee chains, Coffee World is a premium coffee lounge, offering such value added services as Wi-Fi, which can be used for meetings and conversations,” These kind of services would attract more customers, business professionals, students pursuing higher studies and with similar interest.
(2008) mentioned, that Café Coffee Day started as a small bud now emerged as an enterprise because of use cost effective means of communication. Public relations, cleverly planned, extensive services provided to its consumers.
- Consumer psychology and pricing:
Many economists believe that consumers are price-takers and accept prices at “face value” or as given. But marketers recognize that Companies usually do not set a single price, rather develop a pricing structure that reflects geographical demand and costs, market segment requirements, purchase timing, and other factors. (Kotler, p 371). Understanding customer’s perception towards pricing is an important marketing priority. Each price will lead to a different level of demand and will therefore have a different impact on a company’s marketing objectives. (Kotler, p 377). Many companies are not market driven but customer driven- product and sales driven, to transform into a true market-driven company requires a wide passion for customers, create product innovations and understanding customers through qualitative and quantitative methods. ( Kotler p 621)
Basic psychologies play an important role in understanding how consumers actually make their buying decisions. (kotler, p 159)
Research Methodology:
In order to answer this research goal, we opted to obtain the views of the regular consumers at Café Coffee Day, professionals and the students. Selected participants answered a survey questionnaire structured in Likert format. Online survey was also conducted to get the faster response. Data gathered from this research instrument were then computed for interpretation. We followed the following method of data research. (fig. 1)
Figure 1: The Research Process ‘Onion’
Saunders, Lewis M, et al (2003)
Deductive approach always involves development of a theory which is subjected to rigorous analysis. It starts with overview and then proceeds toward specifics and proves the theory. Inductive approach is mostly applicable to situations where specific observation has to be made to develop broader conclusions. This dissertation follows Inductive approach for its research as it had developed broad conclusions based on little qualitative research.
Quantitative data collection methods are centred on the quantification of relationships between variables. Size, numerical data and figures are the main areas of quantitative instruments. Fryer (1991) noted that “qualitative research aim to decode, describe, analyze and interpret accurately the meaning of a certain phenomena happening in their customary social contexts.” The main indication of the quantitative research method is that size most of the time is valid, reliable and can be general with clear anticipation of cause and effect (Cassell & Symon,1994). Contrary to the quantitative method, qualitative method generates verbal information in spite of numerical values (Polgar & Thomas, 1995). We opted to integrate both the qualitative and quantitative approach in this study due to their significant advantages.The primary data in the form of questionnaire was prepared and the relevant secondary data from various sources like magazines, books, newspapers and internet. We also conducted the direct interview with the management of Café Coffee Day to know the consumer behaviour.
In order to determine whether consumers want to pay, following respondents were asked to fill-up the questionnaire-
- Visitors at Café Coffee Day.
- Professionals working in multi-nationals.
- Students studying in the college.
- Online survey at café coffee day website.
We chose the professionals as our major respondents to our survey as they are willing to pay more for the services. Students were also the part of the survey. Online survey was also done for the faster and the response of wide set of people.
The survey questionnaire was used as the main data-gathering instrument for this study. The questions were structure using the Likert format. We first tested the questionnaire to five respondents. We revised the survey questionnaire based on the suggestion of the respondents.
- Procedure and time frame:
The survey was conducted with distribution of the questionnaire (Appendix-1) to the cafe coffee day Customers. The same questionnaire was also given to the Bank professionals and the students for their evaluation and comments. Online survey was also had the same format. The direct interview (Appendix-2) was conducted with the marketing head of the department in order to understand the consumer behaviour and feedback of the consumers to the service provided by the Café. This procedure was time consuming, as different people at different time were required to fill-up the format.
Time horizons: Based on the time allocated for the research, it can either be cross-sectional, which is time constrained and has to be conducted over a short period of time or longitudinal, research done over a period of time. This research was time bounded, hence being cross-sectional.
Data Processing :This study was conducted to ensure that the developed questions were congruent with the proposed research objectives and the problems to guarantee that the nature of the questionnaires was clear and true for utilization on a broader sample scale to come in a conclusion.
Findings and analysis
For the research findings, the telephonic interview with the marketing head had helped us in analysing the consumer behaviour in regards to pricing.
Interviewee: Ms Bidisha, marketing head of Café Coffee Day, answered all the asked questions in regards to the research purpose.
According to her, “café coffee day was a natural extension of getting close to the customer and what the customer likes. Well, we just wanted to penetrate deeply, understand the consumer behavior and we wanted to stay and rise”. At present there are 150 Cafe Coffee Day outlets in India. The ambience is very enchanting, pleasing interiors which would lift one’s spirits.
Cafe is planning to spend Rs 120-150 crore for extension to open cafes at different countries. Speaking on the pattern on expansion, she said that presently operating about 100 cafes in Delhi areas, 120 cafes in Mumbai regions and 135 cafes in and around Bangalore regions.
She clarified that the issues is not about ‘cost’. It’s about the ‘value’. People from South India are more ‘value conscious’, than cost conscious. So, they would rather spend more time & efforts to determine on what they’re spending on, is worth and if it is “value for money”. Café increases its price in South India before the north. And have only seen sales improve, so people from South India don’t seem to have much of a problem with spending.
Café coffee day’s USP would be that, “Firstly, We have the right background of taste for coffee. It is due to the ideal customer positioning. The number is growing. Secondly, we concentrate on the quality and range of products. We understand coffee much more than anyone. We were positioned third at the World Barista Championship 2003. Lastly, our pricing has been kept in mind for the youngsters.”
Café’s strategy has always been is to provide the best of coffee experience at an affordable price. In fact, café’s success is due to stringent cost controls which are also due to recession. Most IT solutions are designed in house so that costs are low.
Today Café Coffee Day may not be lower priced, but the service is associated with a low-price image. “We will give the market what it wants, not we are good at.”
Café Coffee Day is bringing more of concepts which would provide value-added services to consumers like book Cafes, cyber cafes, Lounge cafes.
Major competitors include Barista, Costa Coffee etc. In order to retain existing customers and to attract new ones, Café provides value for money at an affordable luxury and “our mantra going forward is superior customer service through constant research-driven value added services.” It has positioned itself as not only a sophisticated place to win over competitors but also for value for money.
She further extended her conversation by saying that this research might provide them with consumer’s idea on several value-added services.
SURVEY ANALYSIS:
Analysis has been done on the basis of research questionnaire to derive the conclusion. The purpose was to find out that if consumers are willing to pay for the value-added services they get at Café Coffee Day and also if they would like to get more value-added services in order to serve their interest better. Total of 40 respondents were chosen for the research including professionals and students. After gathering all the completed questionnaires from the respondents, total responses for each item were obtained and tabulated.
- Professionals and students reactions differ when it comes to pricing, which can be shown by the following graph representation:
Professionals are more likely to pay extra when compared to students.
- The percentage of people will not mind paying extra for the value-added services that can be shown below:
75% people are willing to pay extra for the value added services.
- The status of the people who frequently visits the Café is following:
Professionals at 57% visit Café more than students and others.
- The number of people wanting additional value-added services to be provided to them is shown below:
34 people out of 40 respondents would want additional value-added services at Café.
- The number of People usually spend the following amount at Café Coffee Day.
Around 25 people out of 40 people spend more than Rs. 200 and can spend more.
- People opting for different services at Café Coffee Day
People prefer value-added service most to value for money, which can be seen above.
Conclusion and Recommendations:
This study developed preliminary research instruments in the pursuit of interpreting the
behaviour of the customers to the price for the value added services provided by Café Coffee Day.
This study is most congruent in fulfilling the research objectives outlined in the
Introductory section as it provided a wide variety managerial perspectives on pricing strategies whilst providing the opportunity to determine whether management should consider customer perspective before deciding on any value-added services being added to the chain and its pricing.
This dissertation on the basis of the questionnaire and the direct interview with the marketing head concludes that the consumers will not mind paying extra for the additional services if that service adds to the value in their spending. Café Coffee day is expected to be affordable brand which provides value to the consumers according to the marketing head.
From this research, we found the areas of excellence and improvement in the value-added services in order to serve customers better which had been done from the factual informations. We also found that the consumers these days are looking for better and improved services with all kinds of modern and updated facilities.
As per findings of the research and even our personal experience proves that consumers will
pay extra amount of money for the additional value-added services they get.
From the above conclusion it can be recommended from our side that coffee places are not restricted to the cup of coffee. Consumers are looking forward for the cool place to hangout while working. Therefore, Café Coffee Day can work more on the value-added services like film viewing which major respondents agreed on then quality time without disturbance i.e. consumers would like to get personal time without interruption and may be more space for the meetings.
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APPENDIX-1
Café Coffee Day is a division of India's largest coffee Trading Company Ltd, popularly known as Coffee Day. It sources coffee from 5000 acres of coffee estates. It is one of India’s leading coffee exporters with clients across USA, Europe & Japan.
The purpose of this survey is to find out if consumers are willing to pay for the value-added service they are getting amidst comforts with the pots of coffee.
Kindly fill-up the questionnaire in order us to serve you better in future.
Additional Comments
About you (optional)
Thank you for your participation.
APPENDIX- 2
Direct Interview with the higher authorities of Café Coffee Day:
A brief introduction about the researcher to Ms. Bidisha and set of questions were asked to her over telephone in respect to the research objective.
Q. 1. How does consumer respond in regards to Value-added services?
Q. 2. Do you think the current Value added service is adequate for your existing and new
Customers?
Q.3. If no, what kind of plans is there for further extension?
Q.4. Do u think they would pay extra for additional benefits?
Q.5. To what extent does u feel you are successful in wining over your competition? And
how?
Q.6. What is the USP of CCD?
Q.7. Who are your target customers? Or, are you looking for re-positioning?
Q.8. How do you think you can control cost in case of expansion as regards to recession?
Q.9. How do you feel your prices are compared to the competitors?
Q.10. How do you see CCD after 5 years?
Q.11. How do you feel in what ways this research would help Cafe coffee day in expansion?