rethinking coffee houses: the house of wisdom

Izmir Vodinaj, Jiayi Ge, Asher Zhao, Soohyun Kwon, and Jue Gao

April 23, 2015

Outlining Our Talk

Introduction to our idea

Talking about the industry

Crafting A Business Model & Testing the Idea

Targeting, Segmenting, Positioning, and Analysis of the Situation

Analyzing Product Features, Distribution, Pricing, and Promotion

Traditional Coffeehouses

Feature Problem

Take out products Waiting period is too long

Study or read a book Too much noise

Business Meeting No privacy

Community Engagement Rarely anything organized

Presenter

Presentation Notes

Traditional Style Coffee houses are boring

Design Library Style-Civic Houses that

contribute towards building informed,

active, and vibrant communities.

New Coffeehouses

Presenter

Presentation Notes

New coffee houses are energetic, vibrant and community oriented.

Analyzing The Industry

Supplier Power = WeakMany avenues to get products

Threat of New Entrants = HighNo barriers to enter this industry.

Threat of Substitutes = LowLow Prices Low Elasticity

Buyer Power - WeakLarge number of consumers

Degree of Rivalry = MediumMany Coffee Shops AvailableUnique value prepositionMedium Exit barriers

Rivalry

Presenter

Presentation Notes

Analyzing the industry

Crafting A Business ModelKey Partners

Coffee Suppliers

Book Stores & Libraries

Colleges & High Schools

Farmers

IT Firms

Key ActivitiesPrepare and sell productsCreate and hold community dialogues

Bring together experts to have lectures

Value Proposition

Community Learning & Engagement

Organic Products

Unique Store Design

Accessibility & Convenience

Customer Relationships

Membership Program

Reward Programs

Weekly Specials

CustomerSegment

Geographic:Local Communities

Demographic:Upper/Middle Class

Psychographic: Educated, Community Oriented IndividualsKey Resources

• Employees & Management team

• Launch up capital• Building,

machines, school supplies

Channels• Word of mouth,

posters, email..• Free coffee

samples• In Store• Post sale

(Customer Reach)

Cost StructureRent & Other Fixed Costs

Raw MaterialsMarketing

Information Technology

Revenue StreamsMonthly Membership Fee

Sale of products and services

Presenter

Presentation Notes

Bulding a

Surveys Yes NoQuiet Study Area 80.43% 19.57%Office & School Supplies 67.39% 32.61%Organic line Food/Drink 63.04% 36.96%Relaxation Room 80.00% 20.00%Social Community 50.00% 50.00%Social Dialogues 76.09% 23.91%Story Sharing 76.09% 23.91%Give Lectures 65.22% 34.78%Membership Fee 52.17% 34.78%

Testing The Idea: 46 Surveys & 3 Interviews

Pros

Convenience

Healthy

Beneficial Services

Research Insights

Suggestions

Better usage of space

Consider the American busy life

Concentrated Strategy

Targeting & Segmentation

Geographic Segmentation: Lakewood, OH

Income Segmentation:Middle & High Income $$$

Family Life Cycle Segmentation:Young SinglesYoung Married without ChildrenMiddle Aged with or without childrenOlder Unmarried

Psychographic Segmentation:Educated Community Oriented

What is Lakewood like?

Categories DataPopulation 51,143

High school students 10,453

College and Graduate School Enrolled 4,428

College Graduates and Professionals 17,492

Proportion of population between 16 and 35, 35 and 50, and over 50

33.1%, 21.1%, 29.7%

Average Income $27,858 > National and State Averages

Coffee Houses 3 Serve Espressos + 5 Dunkin’ Style

Schools & Libraries 2 Universities, 2 High Schools, 1 Library

Testing The Waters

15 Coffee House Observations

0

5

10

15

8:00 am - 11:00 am 11:00 am - 3:00pm 3:00 pm - 7 :00 pm

Number of People Alone Studying, Reading, or Using

Computers

Number of People Alone Studying, Reading, or Using Computers

SWOT Analysis

StrengthsCompany CultureWell trained baristas & managementHigh Quality productsCommunity oriented business model

WeaknessesNo trademark, No patent.Initial CostsComplex project

OpportunityGrowing learning communitiesCollaboration with Libraries and Schools

ThreatsCompetition: Local coffee shops

Positioning Map

Luxury

Community EngagementDunkin’ Donuts

Starbucks

Root’s Cafe

Panera Bread

The House of Wisdom

A Sample of The Ideal Customer

Ibrahim’s Time• Drinks Coffee Daily• Participates in

Dialogues Weekly• Participates in story

time biweekly• Gives monthly lectures

at the Coffee House• Posts his essays and

ideas in the discussion board.

• Very engaged in the community.

Characteristics• Income: $94,000 • Education: PhD• Profession: Teaches at

Case Western• Age: 42• Married

Ibrahim

Basic Innovation• Improved Quality of Coffee• Health line Organic Products• Mix of coffee house and library

Sustaining Innovation• School supplies available

Printers and Fax Machines• Quiet Study Space• Top 10 Books of every discipline

Available

Breakthrough Innovation• Dialogue Circles• Story Time• Community Scholarship

Knowledge Sharing

Disruptive Innovation• Relaxation Area• Organized Posting Board

Product Innovation Matrix

Product Lines

Beverages Food Services

Coffee & Tea Products Organic Sandwiches & Salads Study Areas

Other Organic Beverages Organic Yogurts & Sweets Community Engagement

Beverages: organic cappuccinos, teas, smoothies, milk shakes, natural sodas, etc.

Food: organic cakes, cookies, bread, sandwiches, salads, etc.

Services: quiet study area, relaxation space, school supplies, discussion board, books, magazines, newspapers, regular community based activities, etc.

Getting the Products

Organic coffee products directly from a sourcing company, traders/farms

Sustainability

Low inventory

Book stores and libraries

Office Supply Store

Organic Foods from farmers

Books-used book store/magazine

Product processing

Long contract with suppliers

IT Firms

Management relation system

Beverages

Food

Suppliers Coffee House Customer

Services

Presenter

Presentation Notes

How are we gonna make a profit ? Reservation of room/individual seat- can ppl afford it? If money make w/ coffee drinks- what’s the unique difference between starbucks? Through events (how many times?) Do you really think people will come? (American study style fit in?)

Setting the Right Price

Roots CoffeeCoffee $1.6

No Frapuccinos

Panera BreadCoffee $1.69Mocha Frap.

$4.95

Erie IslandCoffee $1.7

Mocha Frape$3.90

Starbucks Coffee $1.75Frappuccino

$3.95

ObjectiveProfit-Oriented

StrategyPenetration pricing

Prestige pricingBundled Membership

Presenter

Presentation Notes

We reached our pricing objective profit-oriented by the process of elimination. We eliminated ‘Status Quo Pricing’ since our vision is quite different from the visions of our competitors. We want to set ourselves apart from common coffee shops. We eliminated ‘Sales-Oriented Pricing’ since we are not only selling products. Our space is limited. It is impossible to handle so many customers at the same time. Furthermore, we want the reasons that customers choose our coffee shops is that they love the vision of our coffee shop: a place for people to study, improve themselves and share knowledge spontaneously instead of cheapness. So we choose profit-oriented pricing objectives. However, since our vision is to build a coffee shop where people can study, share knowledge and relax and our targeted customers students and workers who have limited money, we do not pursue high profits and decided to use ‘ROI return on investment’, by which we are able to get well known of how long we can cover the costs and when we can expand our business. Through collecting the data, there are 10 coffee shops in lakewood. we planned to use penetration pricing strategy at the beginning to attract customers, to let people know here comes a new innovative coffee shop. For people who buy membership, we will give them rebate for coffee and food. However, compared to other huge companies like Starbucks, cheapness is not our advantage. After we have a certain amount of customers, we will raise the price a little bit higher to promote a high quality image to tell the customers we are not ‘fastfood’ but ‘michelin’.

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6

7

IntroductionGrowth

MaturityDecline

Introduction Growth Maturity DeclineCoffee Price 1.7 1.75 1.8 1.8Membership Fee 3 4 5 5

Penetration Pricing

Life Cycle Pricing

Bringing Awareness

New media• Videos• Social Media(LinkedIn,

Twitter, Foursquare)• Smartphone App• Yelp• Emailing list • Website, SEO

Traditional media• Word of mouth (Inspired

through Videos, Academic discussion, cooperation with student organizations)

• Artistic store interior design• Flyers (around the city) • School magazines, School

newspapers, Local newspapers, Local magazines.

• Mailing List

Evaluation• Events: (Free coffee sample once a week,

Free lectures, dialogues, forums) Post-sale• Special gifts to members yearly• Personal interview with customers• Suggestion box • Management Open Door

Inspiring Action

Thank you!!!