Question

what kind of coverage strategy is appropriate for Nespresso ? Please draw the ideal channel structure of Nespresso.

Answer 1

Market coverage strategy:

Market coverage strategy is defined as the evaluation of the marketplace and determination of how much of it should cover with the company’s promotional strategy.

Market coverage strategy is considered as the start of any marketing plan and also precedes everything else. It depends on both the internal and also the external factors and it is assumed as the business's privilege in order to determine the market focus.

There are three different types of Market coverage strategies namely

· Intensive distribution

· Exclusive distribution and

· Selective distribution

Intensive distribution happens when a business manager aims to extend their reach through as many possible sales channels.

Best example would be the ecommerce companies. A typical online business may sell their products through their own business website, and also through other online marketplaces such as or, eBay.

Extensive distribution is direct opposite to the intensive one. This method only aims for exclusivity which can always increase the perceived value and also the quality of any transactions regarding the placement and POS.

Example: Apple only uses this method which means they always pick and choose the retailers who would be authorized to sell their products. By doing this, the company would have a better chance of being featured in a unique way.

Selective distribution always considers the selection of the retail outlet locations which is always based of some of the main factors like people purchase habits and geographical location.

Appropriate market coverage strategy for Nespresso

“Selection distribution” or otherwise called “Effective Distribution” strategy would be a best fit for the brand Nespresso.

Reasoning

· The reason being, this would be beneficial to the manufacturers because it will only allow them to get into franchise businesses and other business chains within some considered locations on which their target market mostly reside.

· This will also limit their finances, and also the capital costs that might come along with the new sales channels.

· A limited number of their outlets at retail level would account for a significant fraction of their own market potential.

Channel Structure

A channel structure is a defined as a process of meeting the demands of one’s customers using the available products and services. This is typically considered as a high-level view of the sales and distribution channels which would outline the architecture of a business.

Types

· Consumer channel structure- Deals mostly with FMCG goods

· Industrial Channel Structure- Deals with heavy machinery goods

Appropriate channel structure for Nespresso

Here, Nespresso deals mostly with FMCG products i.e.., Fast moving consumer goods products which means Consumer channel structure would be a perfect fit and applicable channel structure. Nespresso’s channel structure would be as below,

The main players of this channel

1. Manufacturer- This is the main parent company which wants to distribute its product to end customers by creating a channel distribution (Nespresso).

2. Retailer- This person would be the last point of contact between the customer and manufacturer. To sell and explain the importance of the brand, Nespresso has to set up outlets around the geographical location.

3. Wholesaler- These people who would purchase the inventory in bulk amount from the manufacturer and then sell it to a retailer.

4. Agent- These people deals between an end retailer and Nespresso or the wholesaler.

5. Consumer- The end customer

Flow of the channel:

Flow 1 - Nespresso sells to any applicable retailer or Nespresso can open its own retail outlets.

Flow 2 – Nespresso sells to any wholesaler who in turn would sell the products to retailers.

Flow 3 – Nespresso would have a middleman or otherwise an agent or a broker who sells the products directly to large retailers.

Flow 4 – The agent or the broker may sell to any wholesalers who in turn would sell to retailers.

Uniqueness of this channel

· In no scenario, Nespresso sells the products directly to the customer. There would always be a middleman.

· In FMCG industry breaking the huge players always plays a big role in this type of channel structure.

· There are always too many per day transactions in the Consumer channel structure compared to industrial channel.

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