Target Market Strategy

Target Market Segment Strategy

Randall Crater intends to cater to people who want a guided tour on their first spin around the Internet and to experienced users eager to indulge their passion for computers in a social setting. Furthermore, Randall Crater will be a magnet for local and traveling professionals who desire to work or check their email messages in a friendly atmosphere. These professionals will either use Randall Crater’s PCs, or plug their notebooks into Internet connections. Randall Crater’s target market covers a wide range of ages: from members of Generation X who grew up surrounded by computers, to Baby Boomers who have come to the realization that people today cannot afford to ignore computers.

Market Needs

Factors such as current trends, addiction, and historical sales data ensure that the high demand for coffee will remain constant over the next five years. The rapid growth of the Internet and online services, that has been witnessed worldwide, is only the tip of the iceberg. The potential growth of the Internet is enormous, to the point where one day, a computer terminal with an online connection will be as common and necessary as a telephone. This may be 10 or 20 years down the road, but for the next five years, the online service provider market is sure to experience tremendous growth. Being the first cyber-cafe in East Hampton, Randall Crater will enjoy the first-mover advantages of name recognition and customer loyalty. Initially, Randall Crater will hold a 100 percent share of the cyber-cafe market in East Hampton. In the next five years, competitors will enter the market. Randall Crater has set a goal to maintain greater than a 50 percent market share.

Market Trends

A market survey was conducted in the Fall of 1996. Key questions were asked of fifty potential customers. Some key findings include:

35 subjects said they would be willing to pay for access to the Internet.

Five dollars an hour was the most popular hourly Internet fee.

24 subjects use the Internet to communicate with others on a regular basis.

Service Business Analysis

The retail coffee industry in East Hampton experienced rapid growth at the beginning of the decade and is now moving into the mature stage of its life cycle. Many factors contribute to the large demand for good coffee in East Hampton. The University is a main source of demand for coffee retailers. The climate in East Hampton is extremely conducive to coffee consumption. Current trends in the Northeast reflect the popularity of fresh, strong, quality coffee and specialty drinks. East Hampton is a haven for coffee lovers.

The popularity of the Internet is growing exponentially. Those who are familiar with the Internet are well aware of how fun and addictive surfing the Net can be. Those who have not yet experienced the Internet, need a convenient, relaxed atmosphere where they can feel comfortable learning about and utilizing the current technologies. Randall Crater seeks to provide its customers with affordable Internet access in an innovative and supportive environment.

Due to intense competition, cafe owners must look for ways to differentiate their place of business from others in order to achieve and maintain a competitive advantage. The founder of Randall Crater realizes the need for differentiation and strongly believes that combining a cafe with complete Internet service is the key to success. The fact that no cyber-cafes are established in East Hampton, presents Randall Crater with a chance to enter the window of opportunity and enter into a profitable niche in the market.

Business Participants

There are approximately 16 coffee wholesalers in the County. These wholesalers distribute coffee and espresso beans to over 20 retailers in the East Hampton area. Competition in both channels creates an even amount of bargaining power between buyers and suppliers resulting in extremely competitive pricing. Some of these major players in the industry (i.e. Joey Brothers Coffee Co., Inc. and Coffee Corner LLC.) distribute and retail coffee products.

The number of online service providers in East Hampton is approximately eight and counting. These small, regional service providers use a number of different pricing strategies. Some charge a monthly fee, while others charge hourly and/or phone fees. Regardless of the pricing method used, obtaining Internet access through one of these firms can be expensive. Larger Internet servers such as America Online (AOL), Prodigy, and CompuServe, are also fighting for market share in this rapidly growing industry. These service providers are also rather costly for the average consumer. Consumers who are not convinced they would frequently and consistently travel the Internet, will not be willing to pay these prices.

Distribution Patterns

The dual product/service nature of Randall Crater’s business faces competition on two levels. Randall Crater competes not only with coffee retailers, but also with Internet service providers. The good news is that Randall Crater does not currently face any direct competition from other cyber-cafes in the East Hampton market. There are a total of three cyber-cafes in the state of Randall Crater: one located in NYC.

Heavy competition between coffee retailers in East Hampton creates an industry where all firms face the same costs. There is a positive relationship between price and quality of coffee. Some coffees retail at $8/pound while other, more exotic beans may sell for as high as $16/pound. Wholesalers sell beans to retailers at an average of a 50 percent discount. For example, a pound of Bat beans wholesales for $6.95 and retails for $13.95. And as in most industries, price decreases as volume increases.