Market and Competitor Analysis:
The Crazy Creator is an exciting new artistic coffeehouse that is looking to break into the growing market of specialty coffee. In recent years, the retail coffee market has demonstrated a shift in customer interests towards specialty coffee with about 24% of spending landing in this segment of the industry -a 10% jump over the last five years (Schalk, 2016). As such, it appears to be the perfect time for entry, for consumer interest is jumping dramatically. The biggest increase lies with millennials, who are known to choose their cup based on how they can experience their coffee and the circumstances in which it was made (Randall Antony Communications, 2017). A unique experience and an ethically-made blend are at the forefront of The Crazy Creator's plan, and this combination will look to set us at the top of the millennial coffee list.
Strengths: The Crazy Creator's ambience has a strong appeal with consumers looking for a space to relax, work, or just enjoy their cup, and with a wide range of drink selection, including flavoured coffee, a variety of lattes, and a number of teas, our menu and environment remain our greatest strengths. Our baked goods and drink selection are all premium quality, locally sourced goods -which is something proved to be of great importance to millennials. We are also a nut-free cafe that offers dairy-free, gluten-free, and vegan-free options, so as to appease a wide audience of people. In addition, our focus on art sets us apart from other cafes and creates a more unique experience -not just for artists, but for anyone looking to delve into their creative side. For example, our “Art Nights” will mark us as individual and unique in the industry, and events such as wine and paint nights should attract a large number of people. Also, brand loyalty is expected to be high because of our reward cards, picture promotion campaign, and focus on understanding and meeting customer needs and wants.
Weaknesses: The Crazy Creator only has one location, so our reach will be poor, for only a small fraction of the market is available to us at the time being. In addition, starting out, it may be challenging to bring in customers because some people are brand loyal to other coffeehouses, like Starbucks and TimHortons. Also, start-up costs are high, which means it will take a while before we begin making a profit -limiting the amount of people we can hire and the amount of advertising we can afford.
Opportunities: The Waterloo region has a high student population, so, by catering our business to young adults, we can look to increase our profits. The Crazy Creator plans to do so by creating a great studying
atmosphere through eclectic music, delicious coffee, and free wifi, while also remaining a fantastic place to unwind, because of our focus on colouring and uniting friends over delicious brews and lunch. Furthermore, merchandising options appear to be a great opportunity to make a profit. As an art-focused cafe, we have the ability to sell the products that we use in house and make a large profit. For example, we expect to sell colouring books, pencil crayons, and paint supplies. Another opportunity for us includes the impressive local art scene. Our business intends to connect with local artists to try and encourage them to host night classes for the public in exchange for selling their art in our café.
Threats: Huge competition exists in the specialty coffee industry which can lead to low profitability. Similarly, a loss of sales can occur due to the number of substitute products available on the market, as make-at-home coffee is improving and art supplies could be purchased else-where. Comparatively, the growing number of entertainment businesses in Uptown Waterloo could detract from the amount of customers who attend our “Art Nights”. In addition, the eclectic and artistic atmosphere of The Crazy Ceator relies on the popular trend of hybrid coffeeshops, where there are more services avaiable then simply the making of an old-fashioned cup. The largest threat however is that the nature of the unique experience at The Crazy Creator could be considered a “one-time-thing”.
Porter's Fiver Forces
Competitive Rivalry: The Crazy Creator will face a strong competitive rivalry force because there are a large number of competitors of a variety of sizes, strategies, and specialties. For example, Settlement Co. Cafe, Crossroads Board Game Cafe, and Starbucks. In addition, there is a low switching cost for consumers to go between each coffeehouse, making it harder to secure customer loyalty (Greenspan, 2017). However, while there are many cafes that will match the quality of The Crazy Creator, there are no cafes or businesses nearby that offer a similar artistic experience.
Supplier Power: Suppliers have little power over The Crazy Creator, for while we are focussed on supporting the locally community and utilizing ethically sourced products, there still remains a large number of suppliers from which we can acquire our beans and other raw materials (“Coffee”, 2017). In addition, we are not acquiring anything particularly unique with our purchases of raw materials for our baked goods, the beans for our coffee, and art supplies, and as such, we have the ability to substitute as we please in order to find the best price.
Buyer Power: The bargaining power of The Crazy Creator's customers is a strong force because there is a large number of specialty coffee drinkers who can easily shift from our business to one of the many substitutes without any additional cost. Consequently, while the purchase size of the individual buyer is small, the ease at which consumers may substitute our coffee demonstrates the importance of the buying power consideration to the specialty coffee business. In saying that, The Crazy Creator does hold some power because our artistic component is entirely original. Some of these aspects include all day colouring sheets, “Art Nights” such as wine and paint events, and customer-voted in house artist tutorials. The imaginative approach to the traditional coffeehouse makes us a unique experience that cannot easily be replaced. This means that while our coffee prices may be determined by the market, our artist fees (“Art Night” events, merchandise, etc.) are not.
Threat of Substitution: The Crazy Creator faces the threat of substitution because of the availability of other speciality coffee places, but, because of our unique artistic hybrid, we are not entirely replaceable by any cafe. Consequently, we must focus on promoting our unique experience in order to remain competitive.
Threat of New Entry: In the coffee industry, small businesses outnumber branded outlets by two to one, and in a market where “artisan” and “indie” are the biggest buzzwords, it is quite clear that independent coffeehouses are the ideal (O'Conor, 2015). This suggests that it is relatively easy to establish a cafe. This is due to the fact that it is relatively quick to set up, of low cost (when compared to other businesses), and does not require much specialized knowledge. As a result, the threat of new entry is a strong force for The Crazy Creator to consider.
Political: The main political factor that The Crazy Creator must consider is the sourcing of raw materials. In recent years, politicians from the West and source countries have held a greater focus on ethically sourced coffee after the truth of the limited social, labour, and environmental standards was exposed (PESTLEAnalysis, 2015). As such, we plan to acquire beans that are Fairtrade because this ensures “better prices, decent working conditions, and fair terms of trade for farmers and workers” (“What Fairtrade Does”, 2017). Not only does this business plan help us to adhere to social and environmental best practice, but it also puts us in a positive political light.
Economic: Buying coffee out is a luxury, so our profits are reliant on the disposable income of the young adult market nearby. As such, if unemployment increases in the Waterloo region, or if tuition or living costs jump, we have the potential to loose business.
Social: The Crazy Creator intends to support the local community by purchasing local when possible and encouraging the local art scene by selling their artwork and offering them opportunities to teach art classes at night.
Technological: The Crazy Creator is a very simple business, going back to the roots of artistic expression. In saying that, the technological evolution of coffee brewing may improve the taste of coffee, or speed at which we create delicious blends. Both of these factors have the potential to increase sales. In saying that, such advancements also mean that at-home coffee is improving and may decrease the number of cafe-goers (Smithison, 2017).
Legal: The Crazy Creator must comply with the health and safety standards of Ontario.
Environmental: The coffee industry is highly reliant on the weather. This is because the harvest of the bean crop is dramatically effected by earthquakes, rain, and drought. If any of these events occur, it can effect the supply, and in consequence the price of coffee.
Marketing and Promotional Strategy:
Target Market: The Crazy Creator's primary target market is young adults between the ages of 18 and 27 located in the Waterloo region. This includes primarily middle-class people in the process of obtaining their post-secondary education who enjoy exercising their creativity. This target was developed partly based on our location, which is heavily populated with students between the named ages, as well as the demographics and psychographics of our competition. In addition, the very nature of our artist cafe attracts a certain group of people -artistic and creative individuals.
Product: The Crazy Creator is an artistic cafe that looks to combine a love of coffee and the desire for a creative and welcoming space in one exciting coffeehouse. We sell high quality and ethically sourced regular and specialty coffee, as well as tea, hot chocolate, and baked goods, like cookies, doughnuts, croissants, and sandwiches. In addition, we set ourselves part as a cafe by offering colouring mats to work on while in store, as well fun “Art Nights” like wine and paint sessions and art classes taught by
local artists. In addition, we sell merchandise that we use in-store, like colouring books, pencil crayons, and paint.
Price: In accordance with the specialty coffee industry standards, we have set our food and drink prices relatively high by utilizing a competition-based pricing method (see Appendix A for our menu). Our intentions are to achieve a target return on investment and create an image as a luxury brand. In regards to our artistic business components, we have followed a skimming price strategy by setting our prices high to make optimum profit because there are few competitors nearby.
Place: The Crazy Creator is a retail business located in Uptown Waterloo. This is an ideal location because of its proximity to our target market who we intend to come to us, whether they plan to take-out their coffee or enjoy our unique creative environment.
Promotion: The Crazy Creator intends to attract customers and motivate them to buy or goods and services through personal selling and advertising. Some of our strategies include social media picture promotion campaigns and reward cards. The picture promotion campaign that we created follows the basic principle that cafe goers will take a picture of themselves and their Crazy Creator drink and share it on social media and tag us with the hashtag “creativecoffee". On a weekly basis, we plan to pick the best photo and the winner will receive a free drink. This is a very affordable method of advertising with a wide reach, where the customers are the ones who share our brand with their friends. This gives the appearance with the public that the people are sharing a brand they love, which registers us as a valuable and favoured cafe with the young adult target market. Our second strategy, the reward cards, will be stamp cards in which the consumer will get a stamp after every drink purchase, and after buying five, they will get one free. This will increase brand loyalty, and we believe the combination of getting the word out about our cafe and building brand loyalty will help us be a successful start up in the Waterloo Region.
How to Manage Customer Relationships: The Crazy Creator intends to remain focussed on our customers by paying attention to their needs and offering opportunities for feedback and recommendations. For example, we plan to offer naming contests in which customers name our drinks, allow them to put in recommendations for our music, and take requests for local artists to host sessions, as well as types of theme nights that the customer finds desirable. Since we are a single company, we can easily adapt to customer demand, so our focus on communication via social media, hint boxes in shop, and personal interaction will play a large role in shaping how we do business.
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