Marketing Research PROJECT PROPOSAL

FEASIBILITY OF OPENING A CAF COFFEE DAY (CCD) IN KUNNAMANGALAM, CALICUT

Akshay Jadhao, Indian Institute of Management, Kozhikode

Note: This is Just a Project Proposal and Methodology document (NOT a research paper). Actual research is being conducted at Indian Institute of Management (IIM), Kozhikode by the author on this project and original research paper will be available soon. The sole purpose of this document is to help students and researchers who are interested in marketing research, especially in Indian coffee market.

PROJECT PROPOSAL RESEARCH QUESTION: To check the feasibility of opening a Caf Coffee Day (CCD) in Kunnamangalam, Calicut, Kerala (India) INTRODUCTION As per the research done by KPMG (KPMG Report on Consumer Market, 2005) on the consumer markets in India, greatest potential for growth opportunity in the organized retail sector is in the food and beverage sector. Its projected that food and beverage retailing will grow at 9.2 percent over the next five years against a total GDP growth rate of around 7 percent. An important factor to be considered is the changing pattern of spending by the Indian consumer. There is growth in the disposable incomes and as a result the markets are changing fast and are leading to more urbanization kind of lifestyles. India as a market is more relevant because of the demographic advantage it has over other economies. As a result here young working populations drive personal consumption. The rise in coffee drinking is part of the transition to more branded consumption in India, and is led by the growth of branded coffee caf chains such as Barista, Caf Coffee Day and Qwikys. STRATEGIC CHANGES IN POSITIONING As per research done by Harish Bijoor Consultants (Balasubramanyam, 2010), in India CCD are having about 70% of all coffee outlets. But according to Bijoor though the consumption demand in India is not very high as compared to US or European countries, but it still exceeds the supply. In his words, If CCD can add another 1,000 cafs in India over the next three years, it is going to be invincible and will see partnership opportunities in overseas markets coming its way (Balasubramanyam, 2010) Healthy battle has been brewed among the coffee retails in India. The main competitor Barista has started radical experiments with food in its outlet with success. So CCD has also turned its focus towards more food items in its outlet .CCD started as a coffee center which will provide both well-brewed coffee and Internet access .Now it is trying to energize and stratify its brand. The branding overhaulnew logo, new cup and crockery designs, new wall paint and, even, coffee machines that produce better brewed coffeeis starting in Bangalore and will soon spread to other cities. As a strategy to reduce operational cost and maximize
2

profit, CCD concentrates on opening its new outlets only in cities where it can open a number of outlets. SYNTHESIS AND APPLICATION (Research done on CCD) As per the research conducted by Mr S. Ramesh Kumar in his book Consumer Behaviour and Branding: Concepts, Readings And Cases-The Indian Context, CCD projects coffee with the special coffee experience in the luxurious outlets which arouse the sense of Pleasure seeking. This is reinforced by the research conducted by Ms Richa Agarwal (Agrawal Richa, 2009) which asked the respondents to consider CCD as a person and come up with the various characteristics they associate with that person using the projective technique. They came up with characteristics like young, fashionable, sophisticated, lively. Even some older people are attracted towards CCD because of CCDs young generation orientation (youth element) .Loyal customers are delighted by positive reward associated with product and service. The research findings can be classified under the following heads: Entry Barrier: CCD uses cluster approach to raise the entry barriers for the competitors or new entrants in a particular geographic region. It is done by setting up many outlets in a particular city. This supports our research objective of opening another CCD in Kunnamangalam, Calicut as there are already other CCDs established here. Culture Diversity Advantage: The beverage preferences of North Indians and South Indians is very different. It was observed that North Indians prefer Tea while South Indians coffee as it part of their culture. Thus, this reinforces our research objective of studying the feasibility of opening a CCD in the city of Calicut in South India. Success secret: CCD has the strongest point that even if coffee is a old age drink CCD has marketed itself successfully in youth markets of metro cities and associated itself with relaxation and socialising. Thats why people prefer this place more often after their home or office. This would be continued in the new CCD also, for which this research is conducted. Also, other findings of the research conducted (Agrawal Richa, 2009) included that the highest footfalls (more than 80%) at various CCD outlets came from the customers belonging to the demographic breakup of 15-29 years. Thus they realised the need to appeal to the

young generation as can be seen from the below gra graph. Thus, we will be primarily targeting the young segment of customers in our research.

Source: Agrawal, Richa. Marketing Review (Caf Coffee Day), Fall2009, Vol. 9 Issue 3 Another thing that was found was that more than a cup of good coffee, customers were essentially looking for a good experience. Thus CCD employed a change in strategy from product selling to experience selling. This strategy resulted in giving more importance to background elements such as colour, lighting, and music to pep up the ambience. Jukeboxes were installed in the cafs so that customers could listen to their favourite music. This would be used in the positioning of our CCD. As part of the image makeover, their old tagline Just the Place to Be was replaced by a new by-line that read A Lot Can Happen over Coffee. e Thus, CCD in its new avatar was therefore about good coffee, about hanging out, about being oneself and about having a nice time. At the time of the survey, there were 500 footfalls per caf per day on an avera and the average average bill size at CCD remained Rs.120 only. This data will be used by us in order to determine the feasibility of opening a new CCD in kunnamangalam. If the no of footfalls expected (as predicted by the resear research, taking errors into account), is less than the current average, it will not be feasible to open the CCD.

Another key finding of the survey was that people preferred table service over self-service and thus table service was introduced at all CCD outlets instead of self-service. Also, customers preferred food along with their coffee, so they also began to serve light meal reparations, such as pasta and biryani as accompaniments with coffee. They extended the CCD brand to cookies, wafers, mints, and other merchandise which were available only at their outlets They also have a variety of caf formats such as lounge cafs, garden cafs, music cafs, book cafs, highway cafs, cyber cafs and sports cafs . These were mainly introduced to redefine the caf experience. These options will also be considered in the research and will be incorporated in the new CCD according to the preferences of the demographics. From the article by Ellen Mermelstein (Mermelstein & abu-shalback, 2006) we see that how the taste of Americans towards high quality coffee has evolved over the years. This could be attributed to so many world renowned coffee outlets like Starbucks, Dunkin Donuts Inc. If this trend replicates in India then coffee consumption and number of customers are expected to grow for CCD. This would further increase our market and thus support our research objective. From the article in Journal of Foodservice (Moskowitz & Katz, 2007), we find that innovation in coffee flavours in necessary to increase footfalls (and hence feasibility of opening a new outlet), and they should be decided based on the preferences of the consumers of that area. In order to identify which attributes affect a consumers judgement process, we will be using components of cue valuation and cue integration which are defined by researchers of social psychology as: Cue valuation, how one interprets and uses the cues for judgment, and b) cue integration, how one combines these interpreted cues for judgment (Park 1974) These can be used for data analysis, once the data has been collected. Consider an example attributes of coffee; say if you have a scale which rates the service quality and proximity to office/home on a scale of 5 ranging from extremely important to extremely unimportant, then the relation can either be compensatory i.e. an extreme of one attribute may make up for the deficiency of other or the relation can be non-compensatory such that the deficiency of one attribute may be sufficient to reject the product/brand. Similar
5

to non-compensatory model is the conjunctive model which is most appropriately used in the case in which a product has an attribute whose absence becomes a sufficient condition for rejection but whose presence is a necessary condition for not being rejected (Park 1974). This model will be used in case of questions like what is the caffeine content of Caf Coffee Days coffees? In this case a 5 or 7 point scale cannot be used since it would be difficult for customers to actually rate and quantify. Hence a binary scale is used like adequate or inadequate caffeine. So in these cases, the conjunctive model will come to play, because if the caffeine content is inadequate, then the person will stop coming to Caf Coffee Day. A particular brand say, Caf Coffee Day may either have several extremely important attributes or only one extremely important attribute. In such a case, the cue integration process of the consumer would be different and thus it would affect his judgment process. Apart from this while preparing our questionnaire, there will be two kinds of questions which will be necessary to cross-check the cue integration and cue valuation process. One set of questions would be like how important is proximity to home/college an important factor in determining the coffee brand you choose, the options can range from extremely important to extremely unimportant. Similarly other set of questions could be like, how do you rate the service quality of Caf Coffee Day? The options can range from excellent to poor (can be a 5 point or 7 point scale). But both kinds of questions should be mixed so that the candidate does not give biased answers. Thus we can conclude from the research paper of Park, C. Whan. (1978) that extremely important and very important attributes will affect the cue integration process and hence the judgement process of the consumer. METHODOLOGY Qualitative methods: 1) Exploratory Research: This research will be used to explore the situation to provide the insights and understanding for the market potential of new outlet of CCD. a) It will be used to develop the hypothesis b) Establish the priorities for further research
6

c) Gain an insight for developing an approach to the problem Methods used: a) Pilot surveys case study- Here in this case Me too perception case was used (Agrawal Richa, 2009) b) Secondary data is used for the qualitative analysis is computerized data base in form of bibliographic Database.(Malhotra 2010) For e.g. http://ebscohost.com/ online research database Focus Group Discussions and InterviewFGDs are conducted in informal environments which are qualitative in nature. Also Interviews of CCD retail shop crew will be conducted which will be qualitative as well as quantitative. Quantitative Methods: 2) Descriptive Research: Surveys and interviews will be conducted to get the quantitative descriptive data. Suitable multivariate techniques will be used for data analysis part. Sampling 1. Sampling Population: Student community at IIMK 2. Sampling Frame: The PGP Database for 13th and 14th batch 3. Sampling Technique: Stratified sampling We will be using the probability sampling technique, stratified sampling. The reason we are doing probability sampling is because we want to have conclusive data regarding the research problem and the population is heterogeneous. The entire population will be divided into two strata. 1. Students who have work experience more than 1 year 2. Students who are fresher or have work experience less than 1 year
7

The reason behind dividing the population based on work experience was based on the following assumption 1. Both groups will have different spending and consumption pattern 2. The prior experience will be different for both the groups We analyzed the population and found out that the ratio of fresher to work experience students is 25:40. So the sample that well be taking will be having proportionate number of fresher and work experience students. 4. Sampling size: 150 students (a convenient number chosen so that there will be enough responses to do the data analysis) 5. Execution of Sampling process: From the stratum of fresher we will be selecting 60 students and from the stratum consisting of work experience students 90 students will be randomly selected. Generate a between 1- 10. If the random number is an odd one we will consider the student from PGP13 and if the random number is an even one then PGP14 database will be referred. Again generate a random number between 1- 320. Find the student having the same roll number as the random number and check his/her experience. If the work experience is more than 1 year put him/her in the stratum of work experienced student, else in the fresher stratum. The process will continue until the quota of 90 for work experience students and 60 for fresher is achieved. Measurement and scaling The scales used vary from nominal, ordinal to interval scales. We have used balanced and odd scales in case of the 5-point Likert scale to ensure unbiased and accurate results. The questions have been designed to ensure construct and content validity.

APPENDIX I: Focus Group Discussion This was a sample FGD conducted among ourselves to understand the parameters we would be targeting in our research, especially the questionnaire. Topic: Feasibility of CCD outlet in Kunnamangalam Participant: 1. Recruited from Calicut residents 2. 5 members in a group 3. They are of similar age group 20 to 25 years and working people Names: Akshay, Manikandan,Heeral, Kavya ,Vardhan

Environment: 1. Comfortable in AC room 2. Seated in circular seating The order of seating counter clockwise: 1.Akshay, 2.Manikandan, 3.Heeral, 4. Kavya , 5.Vardhan 3. Minutes of meeting noted Moderator: 1. Name: Nila Lohita 2. Pre-determined questions are asked 3. Moderator also took the role of taking the MOM. Interview MOM: (9.15 pm 22-01-2010) Moderator: Hello everyone. Im Mr. Neil. We are here to discuss about young peoples preference for multiplex in your lovely city of Calicut. So the results will be used by CCD to see the attractiveness of the shop outlet in Calicut. You are selected as you guys fall under the age group of 20-25 and you are all working people and most importantly residents of Calicut. So your views are going to give good inputs on the subject matter. My role here is to guide the discussion. Please refer to each other by their first name. Moderator asked the following questions:
9

1.

What is the frequency of going to a coffee shop in a month presently. Response: Akshay-2, Manikandan-3,Heeral-4, Kavya-1 ,Vardhan-1/2

2.

How many of you have visited a CCD before, please raise your hands? Response: All hands rose.

3. How do you rate your experience of going to the CCD in Calicut on a scale of 5? Response: Akshay-4, Manikandan-4, Heeral-2, Kavya-4.5 ,Vardhan-4 4. Why do you rate so low Heeral? Response: Not enough food options Its too far from my hostel.

5. Can you elaborate further on why CCD doesnt work for you Heeral? Response: CCD charges exhorbitant price. About 5 to 10 times what you pay for snacks or filter coffee. Its also very far from hostel. As I dont own a vehicle have to hire an auto to go to city. So cant go to city for CCD exclusively.One of the CCDs is near a hospital. I dont like the location. 6. Why do you guys like CCD? Response: Premium service quality Good crowd Nice hang out place Clean Food and beverages are good More options of coffees Faster takeaway service High speed internet connectivity

7. Do you want any more services that should be provided in CCD than what you got so far?
10

Response: (in order of seating) More food options Parking space Good outdoor sitting space More couches for sitting karaoke

8. Will your average spending increase if one or more extra services are provided? Response: all raised hands. 9. How many of you think the CCDs in Calicut is too far for their comfort? Response: all raised hands. 10. Would your frequency of going to CCD increase if CCD outlet is opened in Kunnamangalam, raise hands? Response: all raised hands. 11. Where would you want your CCD to be , in kunnamangalam? Response: (in order of seating) No preference Near shopping area Near IIMK Gate Near IIMK Gate Near IIMK Gate

12. Last question, would you switch to CCD from other coffee shops if you have one here in Kunnamangalam? Response: 5 out of 5 hands rose.

Finally a synthesis of the behavioural and attitudinal aspects of FGD is to be done to get the accurate insights. After setting the actionable priorities we can obtain the optimal result at the end of whole process of Market Research on the basis of data obtained from FGD.
11

APPENDIX II: Survey questionnaire

The complete form can be viewed at https://spreadsheets.google.com/viewform?formkey=dDlmYmpaMHNoTzdZenJFWDNjWX puQ2c6MQ

12

REFERENCES 1) KPMG Ltd., Consumer Market:Consumer markets in India- Next big thing?,2005, p1-21 2) Balasubramanyam K. R., Business Today, 5/16/2010, Vol. 19 Issue 10, p38-47 3) S. Ramesh Kumar (IIM, Bangalore), Consumer Behaviour And Branding: Concepts, Readings And Cases-The Indian Context, Pearson Publication, p76-77, p124 4) Agrawal Richa, Marketing Review(Caf Coffee Day), Fall2009, Vol. 9 Issue 3, p251-271, 21p 5) Mermelstein, Ellen; abu-shalback zid, Linda. Marketing Management, May/Jun2006, Vol. 15 Issue 3, p4-4 6) Moskowitz, Howard; Katz, Rachel; Krieger, Bert; Cappuccio, Roberto. Journal of Foodservice, Feb2007, Vol. 18 Issue 1, p7-22, 16p 7) Park C. Whan, Journal of Marketing Research (JMR), May78, Vol. 15 Issue 2, p243-249, 7p 8) Naresh Malhotra, Marketing Research (An applied orientation), Pearson Publication, e/6, p109

13