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Marketing Research

PROJECT PROPOSAL

FEASIBILITY OF OPENING A CAFÉ 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.

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PROJECT PROPOSAL

RESEARCH QUESTION: To check the feasibility of opening a Café 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. It’s 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

café chains such as Barista, Café Coffee Day and Qwiky’s.

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 cafés 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 overhaul—new logo, new cup and crockery designs, new wall

paint and, even, coffee machines that produce better brewed coffee—is starting in Bangalore

and will soon spread to other cities. As a strategy to reduce operational cost and maximize

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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 CCD’s 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 CCD’s 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. That’s 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 se

the young segment of custome

Source: Agrawal, Richa. M

Another thing that was found

essentially looking for a good

“product selling” to “experien

background elements such as

were installed in the cafés so t

be used in the positioning of o

As part of the image makeove

by-line that read “A Lot Can H

Thus, CCD in its new “avata

being oneself and about having

At the time of the survey, the

average bill size at CCD rem

determine the feasibility of o

expected (as predicted by the

average, it will not be feasible

seen from the below graph. Thus, we will be

mers in our research.

Marketing Review (Café Coffee Day), Fall2009

und was that more than a cup of good coffe

od experience. Thus CCD employed a chang

ence selling”. This strategy resulted in giving m

as colour, lighting, and music to pep up the am

o that customers could listen to their favourite

f our CCD.

ver, their old tagline “Just the Place to Be” was

n Happen over Coffee”.

atar” was therefore about good coffee, about h

ing a nice time.

there were 500 footfalls per café per day on a

emained Rs.120 only. This data will be used

opening a new CCD in kunnamangalam. If

the research, taking errors into account), is les

le to open the CCD.

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e primarily targeting

009, Vol. 9 Issue 3

ffee, customers were

nge in strategy from

g more importance to

ambience. Jukeboxes

te music. This would

as replaced by a new

t hanging out, about

n an average and the

ed by us in order to

If the no of footfalls

less than the current

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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 café formats such as lounge cafés, garden cafés,

music cafés, book cafés, highway cafés, cyber cafés and sports cafés . These were mainly

introduced to redefine “the café 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 consumer’s 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

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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 Café Coffee

Day’s 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 Café Coffee Day.

A particular brand say, Café 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 Café 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

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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 Interview-

FGDs 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

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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 we’ll 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.

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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. I’m Mr. Neil. We are here to discuss about young people’s

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:

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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 doesn’t work for you Heeral?

Response:

CCD charges exhorbitant price. About 5 to 10 times what you pay for snacks or filter

coffee. It’s also very far from hostel. As I don’t own a vehicle have to hire an auto to

go to city. So can’t go to city for CCD exclusively.One of the CCD’s is near a

hospital. I don’t 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?

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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 CCD’s 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.

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APPENDIX II: Survey questionnaire

The complete form can be viewed at

https://spreadsheets.google.com/viewform?formkey=dDlmYmpaMHNoTzdZenJFWDNjWX

puQ2c6MQ

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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(Café 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