We are starting a new content series where we highlight how large brands tackle the topics of authentic marketing, community building and customer retention.
Welcome to the first of our Brand Breakdown videos, where we aim to showcase consumer brands that excel in retaining their customers through online community building.
We start off by looking at Nespresso, which is undoubtedly a pioneer not just of community building online, but also of direct to consumer subscription commerce. While exact numbers are unavailable, they are estimated to have at least 5 billion euros in revenue alone in the EU, and are widely considered the market leader in the coffee subscription business.
There are many things I personally like about Nespresso - one of them is that despite being owned by FMCG behemoth like Nestle and being in a competitive space like coffee, they built a direct to consumer brand where they skipped traditional distribution channels like supermarket retailers, and instead sold directly to their customers through their online web store, or unique offline concept stores.
Most impressive for me personally though, is the fact that they have built a very strong online community. They get half a million daily visits directly on their webstore, have great engagement on social media with numerous fan pages and fan groups, and most impressively that
50% of the new customers they onboard are referrals from existing customers. Not George Clooney...
So what makes this community work? There are many many reasons of course, but we thought we would highlight 3 of them.
First - They have a clear brand definition and approach. They have even put out their brand essence in as many words online. The core proposition is around sourcing the best coffee there is, and the positioning is clearly for the premium or luxury segment. As an example, they say Nespresso is not a cup of coffee, it is a "sensorial experience”.
Second - They focus on getting a clear buy in from the customer at the point of sale. The only way I can become a Nespresso customer is by buying a Nespresso machine - and while the price of these machines is discounted, it is high enough that I have to mentally vest into purchasing more Nespressos. This is the same classic lock in business model followed by other successful brands such as Gillette and playstation
Third - And perhaps the one we like the most, is that there is a clearly defined community membership lifecycle. You start off as a connossieur, then become an expert and finally become an ambassador. Membership benefits keep increasing as I move up this chain, and all of their marketing and community initiatives revolve around this as well.
Ofcourse, everything cannot be perfect about the brand. And there were a couple of areas that we thought that Nespresso could do a better job.
To begin with, the positioning around exclusivity and luxury, seems a bit out of sync with our current times. On one hand it doesn't make the brand seem too friendly and on the other they are constantly playing defence on issues that matter today such as Sustainability.
Consumer preferences today are clearly different from the early 2000s when the brand reached prominence, and people need to see more authenticity, which they aren't doing a good job at
Second, a big part of the strategy they adopted to protect their brand and customer experience was through patents - e.g. on the coffee pod systems. A lot of these patents are now expiring, implying they are facing competition from others such as senseo. Bottom line - the only strong remaining moat they have now, is their customer community.
And finally, coming to the community, while I love the membership programme, this too seems like it was built for an older generation. For example, you would need to wait 10 years to become an ambassador. Let me say that again, they expect you to wait 10 years before you can benefit from the best service that they have to offer. I can understand this works well to retain their 10 year old members, but this cannot be exciting at all for their 1 year old members.
So to sum it all up - Nespresso for me is undoubtedly a very successful brand and there’s a lot that all marketers and direct to consumer business owners can learn from it. That said, it definitely looks like it’s ageing and is ripe for disruption; we would love to see the new Nespresso of our generation
That’s it! Do let us know what you thought of this brand breakdown, and do let us know which brands you would like us to cover in the future.