Marketing Mix: Coca Cola - Essay Example

Marketing Mix: Coca Cola Introduction Coca Cola boosts of having the highest brand equity in the world. According to surveys, one of the most recognized words in the world is “Coca Cola”. The product Coca Cola continues to dominate the carbonated drinks market despite sturdy headwinds and is well ahead of its competitor Pepsi. This is owing to the success of its recipe which includes four key ingredients: product, price, promotion and place which are described below. Product The company’s mantra is that its product- Coke does not compete with other carbonated beverages but with “human liquid consumption” (water). The Coke beverage has, therefore, been targeted at every household to the extent that it should be within an arm’s reach. Although the product appeals to the mass market, the product’s primary target group is individuals aged between 10-25 years and secondary target group is those between 25-40 years of age. Coca Cola’s brand essence is happiness, energy, emotions and getting together. The core product is the strong taste of Coca Cola, whereas, the augmented product is the brand experience that has been attached to the consumption of Coke. Using Maslow’s social hierarchy, the product has been positioned to cater to customers’ need of belonging and being loved. The brand has been associated with being trendy and evoking a positive lifestyle along with being associated as young, enthusiastic, sunny and innovative. Furthermore, the use of somatic markers in the branding of Coke is visible since people readily identify the Coca Cola drink with “red” although its color is brown (The Coca Cola Company, 2012). The product in this case is, therefore, not limited to the invigorating taste and texture of the drink but includes the powerful brand persona of Coke. Price As far as the pricing of Coke is concerned, it has been priced in line with that of its competitors, mainly Pepsi. Considering that the two drinks are viewed as substitutes by majority of customers, the pricing strategy of Coke cannot be analyzed without mentioning Pepsi. Hence, the product is mainly affordable and capturing a large market share has remained one of the biggest considerations when pricing Coke. This is due to cut-throat competition in the carbonated drinks market with rivals such as Pepsi striving for gaining the top position currently secured by Coke. When Pepsi reduces prices, Coke follows suit and vice versa (Edward J. Hoff, 1989). Therefore, both are engaged in what is known as the prisoner’s dilemma. As far as pricing is concerned, Coke and Pepsi engage into cartel agreements in order to strike a mutual balance since the carbonated market is generally oligopolistic. Furthermore, In order to penetrate foreign markets, Coke uses market penetration strategy of lowering prices to raise awareness of this product in such markets. In other words, a low pricing strategy is used for Coke which enables the company increase the volume of the drink sold. Once it achieves a target level of market share and awareness, it then increases prices to reposition as a premium product. Although there are minor increases in price (up to 4%) in response to inflation, the prices are generally low (Rappeport, 2011). Such a strategy has helped provide financial cover to the company during times of recession as the drink continues to rack up profits despite global recession and inflation. Promotion From partnerships with renowned international brands to using celebrities in advertisements to keep the youth hooked, Coke has effectively been promoted through all promotional media. In 2006, for instance, Coca Cola distributed approximately 70 million codes of songs inside Coke’s packs which were redeemable at Apple’s i-tunes store (Telecomworldwire, 2006). Users of Coke were also entitled to giveaways of 1,500 i-pods in Germany the same year (Telecomworldwire, 2006). In another campaign, the company exploited the 20-30 year old target market for Coke by entitling them to win diamonds worth a million dollars through giveaway in Hong Kong (Hargrave-Silk, 2004). The diamonds had three shapes namely round, marquise and princess each of which corresponded to personalities attached to Vanilla Coke, Lemon Coke and Coke Light respectively(Hargrave-Silk, 2004). This was one of the most expensive promotional campaigns of its times beating its rival products such as Pepsi. This strategy also reflects how Coke’s lifestyle-oriented promotions aim at aspiring young, exuberant, contemporary men and women. The attributes of the Coke drink are reflected in its advertisements. For instance, one of the ads depicted a confident, bold and sexually appealing customer at a restaurant where Coke was sponsoring a giveaway(Hargrave-Silk, 2004). As mentioned earlier, Coca Cola has effectively used psychological marketing in its promotional mix. The company has also partnered with Parts Connection (a motor trade dealer) whereby a can of Coke is given with every purchase worth $100. The can is worth $1,000 of petrol(Motor Equipment News, 2009). At the end of a particular period, the labelled cans can be used for drinking Coke(Motor Equipment News, 2009). This has given cash starved customers another reason to purchase spare parts from this dealer. The product has such a huge fan following that some of the company’s promotional efforts have fallen short of its customers’ expectations. As part of its regular line of promotion, the Coke brand has been running an online loyalty program for its Coke fans which has become a source of disappointment for its loyal fans. These fans claim to have collected several codes from bottle caps in return for points only to discover that few of the expensive products (against which the points are redeemable) have run out of stock (Clifford, 2008). Therefore, despite several successful campaigns, the company does face challenges in terms of promoting Coke to millions of loyal fans worldwide. Even though prizes, giveaways and sponsorships have been an integral part of Coke’s promotional strategy, its promotional activity through advertisements cannot be ignored. Most of the ads used by Coke have triggered an instant desire for the drink amongst the youth. Playing with the psyche of anxious and upbeat teenagers, a sense of urgency has been created among Coke fans to consume the drink. In most countries, famous celebrities including film stars have been used as brand ambassadors for Coke. These endorsements have created a strong bondage between the product and its users as users can associate themselves to the endorsers. In most of its ads, Coke has made effective use of music and catchy jingles to promote the product to its target market. For instance, the brand has used Harry Nilsson’s popular song “Coconut” in one of its ads and altered the wordings to include the word ‘Coke’(Kurtz & Boone, 2009). Most importantly, the product has been heavily advertised world over during the breaks between cricket matches and other sports. A lot of funds have been allocated on advertisements, sales promotions and the construction of Olympics pavilion by Coke. In general, Coke’s ads are uniquely placed between world cups, major tournaments and Olympics in order to create a desire to quench the thirst of audience that is high on adrenaline. Therefore, the company cleverly makes use of the audience’s subconscious desires and ties it to events that are likely to boost sale of its Coke beverage. In another instance, push strategy has been successfully used by Coke to entice retailers to stock its product. As part of summer promotion, the company offered millions of dollars worth discount to its bottlers(Wall Street Journal, 1997). Furthermore, its global partnership with Mc Donald’s has given Coke an edge over its competitors. Various promotions have utilized colors and personality traits in the up gradation of the design of the Coke cup. Research indicates the collaboration of Coke to promote “branded entertainment” of various reality shows and other entertainment shows. In essence, this form of promotion is product placement in disguise. For instance, the popular show American idol featured the placement of Coke cans in its shows which was a subtle demonstration of the product’s usage. In another research that explores the concept of “advertainment” Coke’s massive partnership with Harry Potter’s movies involved the manufacturing of children’s spectacles to the “junk beverages”(Kretchmer, 2004). Hence, using product placement in movies and television shows has evolved as a highly profitable means of promotion. In all these cases, although there was no obvious focus on the product, it produced the effect of being subconsciously absorbed by the viewers while watching the show/film. Therefore, subliminal marketing strategy has been successfully deployed by Coke here. The use of subliminal and neuromarketing strategies in Coke’s promotion are not new. In the “Pepsi Challenge” that was performed decades ago, Coke came out as the winner in tests where participants were told which brand they were about to taste (Shimp, 2010). This indicated that Coke has maintained its attractive image through effective promotion throughout the years so much so that past experiences and associations with Coke’s promotions led them to prefer Coke over Pepsi. Ads containing slogans showing Coke as “the real thing” and consumers “buying a world of coke” have resulted in positive resonance with most of its customers(Shimp, 2010). The Coke brand has been promoted as being associated with happiness which means consumers who buy Coke, in fact, buy happiness. Place The company has succeeded in developing a pull strategy for its product Coke owing to the product’s high popularity and strong brand name. The constant high demand means that the product needs to be in stock at all times to avoid stock out. It is not surprising, therefore, that the product is ordered on a daily basis in high demand regions. Inventory management is highly efficient as stock gets sold out rapidly, leaving for little stock to be stored as buffer. Usually, company owned vehicles carrying the Coca Cola logo are used to transport the beverages from one location to another. As far as its distribution channels are concerned, the company’s bottlers either sell the product directly to customers or to vendors who then sell it to the customer. Coke has, therefore, partnered with its bottlers to make, put together, retail and distribute the final product to customers and vending partners (The Coca Cola Company, 2013). These bottling partners are known to have close working relationships with customers that include restaurants, grocery outlets, convenience stores, cinemas and theatres, amusement parks, street vendors and various others (The Coca Cola Company, 2013). The company targets locations with high customer traffic for this beverage. The strategies executed by these partners are localized with respect to the region in question. These intermediaries then sell the product to the final consumers. Furthermore, the Coca Cola Company owns most of the bottling partners used for Coke, thereby leading to an integrated, synchronous supply chain. However, some of its bottlers are also franchise-owned. Recommendations Although the marketing mix of the Coca Cola beverage has been successfully managed since its inception, there are few suggested areas of improvements. Firstly, the company has made little efforts to shun the negative image associated with this carbonated drink. Although the formulation of the product cannot be changed, its brand image needs to cater to the health-conscious segment that is fast moving towards non-carbonated beverages. Showing that Coke is ‘safe’ for all individuals in its promotions should be considered. Secondly, Pepsi remains a strong contender for Coke especially since the former has taken the lead in terms of buying out bottlers (resulting in more efficient distribution system). Coke, therefore, needs to work towards establishing strong partnerships with supply chain partners through buyouts. Furthermore, the company needs to redefine and innovate Coke’s packaging since by shifting from the Classical Coke bottle to more recyclable packaging. Conclusion To conclude, the marketing mix of the Coca Cola beverage demonstrates effective use of emerging marketing concepts including branded entertainment, somatic markers, resonance branding and “advertainment”. Its strong brand positioning, targeting and segmentation have further enhanced its brand equity. However, as suggested earlier, competition in the carbonated drinks segment remains stiff with brands such as Pepsi competing edge-to-edge with Coke. Maintaining Coke’s leading market share shall, therefore, remain a primary concern to the company because of which it is worth considering a change in packaging, distribution and place as suggested above. References Clifford, S. (2008, September 1). Is a Coke Promotion Betraying Its Loyalists? . New York Times, p. 5. Edward J. Hoff. (1989, March 8). Coca-Cola Versus Pepsi-Cola (A). Boston: Harvard Business School. Retrieved from csinvesting: http://csinvesting.org/2012/03/08/uncivil-cola-wars-coke-and-pepsi-confront-the-prisoners-dilemma-case-studies/ Hargrave-Silk, A. (2004, April 23). Coke partners DTC to give away diamonds. Media: Asia's Media & Marketing Newspaper, pp. 5-5. Kretchmer, S. B. (2004). The Evolution of Product Placement as a Mass Media Marketing Strategy. Journal of Promotion Management, 10(1-2), 37-54. Kurtz, D. L., & Boone, L. E. (2009). Contemporary Business (12th ed.). Mason: South-Western Cengage Learning. Motor Equipment News. (2009, September). Tenth anniversary for Parts Connection Coke promotion. Motor Equipment News, pp. 8-8. Rappeport, A. (2011, June 2). Coca-Cola chief defends pricing strategy. Retrieved from Financial Times: http://www.ft.com/cms/s/0/457977fe-8d42-11e0-bf23-00144feab49a.html#axzz2SoCODcn4 Shimp, T. A. (2010). Advertising, Promotion, and Other Aspects of Integrated Marketing Communications (8th ed.). Mason : South-Western Cengage Learning. Telecomworldwire. (2006, August 2). Apple's iTunes to give away 70m songs through Coke promotion . Telecomworldwire. The Coca Cola Company. (2012, November 15). Making the famous “Coke Red” color. Retrieved from Coca Cola Conversations: http://www.coca-colaconversations.com/2012/11/making-the-famous-coke-red-color.html The Coca Cola Company. (2013). Our Company: The Coca-Cola System . Retrieved from Coca Cola Journey: http://www.coca-colacompany.com/our-company/the-coca-cola-system Wall Street Journal. (1997). Coke promotion. Wall Street Journal - Eastern Edition, 229(104), B8-B8. Read More