When Nespresso opens a boutique cafe, it sees sales spike online in that same geographic region.
The halo effect that its boutiques have on online sales is one reason Nespresso opened its thirty-ninth boutique this November in the University Village Mall in Seattle.
The modern boutique boasts a colorful mural by a local artist, a millennial pink countertop for sipping coffee inside and a walk-up window for to-go orders brewed from a B2B version of a Nespresso machine. While people are in the shop, they can check out the Nespresso machines on display and the rainbow assortments of Nespresso capsules. A handful of those people go home with a machine, while others end up closing the deal online.
The physical presence of the boutique is a force multiplier for Nespresso’s marketing efforts. Nespresso predates the direct-to-consumer (DTC) brand bubble, although it could be considered an OG DTC because of the capsules it sells straight to owners of its machines. And like many other DTC brands (including those it shares space with at the outdoor mall), it’s using a storefront to build brand equity.
“One of the number-one things we’ve realized through our data is that our best customer is shopping omnichannel,” said Jessica Padula, VP of marketing and head of sustainability at Nespresso. “The most engaged, highest-long-term-value customers experience the brand in many ways.”
So, while traditional retailers look at metrics like sales-per-square-foot to gauge the success of a location, Nespresso has a bit more leeway in how it gauges the success of its stores.
“We look at the physical presence of the brand as a brand-equity driver, versus just a sales driver,” Padula said.
That means Nespresso looks at more KPIs than just in-store sales. It sees its boutiques as a way to welcome and engage new members, so it looks at the number of tastings the boutique can do to win over potential customers, as well as how the presence of a store affects new memberships.
“If you’re too focused on boutique metrics, it can actually constrain the value of omnichannel,” said Jason Webber, the company’s VP of sales.
Brewing Up A New MMM
Measuring the impact of the boutique on its digital marketing shows up in the data – but it’s not an end all.
Because of signal loss, media mix modeling (MMM) is back in fashion again. Nespresso already used MMM, but it needed faster insights than typical once-a-year reports. “By the time you get the report, it’s too late to action for the following year,” Padula said.
To pick up the pace of its measurement, it went for something that wasn’t an old-school MMM, but wasn’t multi-touch attribution (MTA) either. Now Nespresso receives quarterly reports from Analytic Partners that give it enough time to use learnings from one quarter to apply to the next quarter.
But even MMMs come with caveats. One is the time it takes to set up; the Nespresso team spent close to a year setting up data feeds. Another caveat is that MMMs can only measure what they see. The model “won’t tell you to go buy a new channel,” Padula said.
Depending on the KPI Nespresso wants to focus on, the MMM model will spit out different results. No single right answer exists. For example, Nespresso has three different KPIs and focuses on different ones depending on larger business goals or the season.
The MMM will have one result if Nespresso wants to drive capsule sales, and another if it focuses on machine sales, and still another result if it wants to focus on brand consideration, its most upper-funnel goal.
The move to a quarterly MMM model has made it easier for marketing and finance teams to communicate. “The finance team understands media in a fundamentally different way than they did a few years ago,” Padula said.
Because “it’s fact-based, we understand it, we trust it, and it makes us more efficient and effective,” Webber said. Having a trusted model makes collaboration easier across different stakeholders.
And an MMM model makes it easier to gain a better, though still imperfect, read on the entire marketing and sales picture. Nespresso sells its product in a complex mix that spans its boutiques, its website, Amazon and sales in Macy’s and Williams-Sonoma. So the more it understands how sales in one area influence another, the more it can correctly tune its investments – and validate its plans for the next boutique.
