Marketing Strategies for Soft Drinks Coca Cola
Our local marketing strategy enables Coke to listen to all the voices around the world asking for beverages that span the entire spectrum of tastes and occasions. What people want in a beverage is a reflection of who they are, where they live, how they work and play, and how they relax and recharge. Whether you're a student in the United States enjoying a refreshing Coca-Cola, a woman in Italy taking a tea break, a child in Peru asking for a juice drink, or a couple in Korea buying bottled water after a run together, we're there for you. We are determined not only to make great drinks, but also to contribute to communities around the world through our commitments to education, health, wellness, and diversity. Coke strives to be a good neighbor, consistently shaping our business decisions to improve the quality of life in the communities in which we do business. It's a special thing to have billions of friends around the world, and we never forget it.
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Marketing Strategy of Coca-Cola
Coca Cola's marketing strategy in China is linked to its place in the history of China distinguishing the company and its product in the Chinese market. The introduction of coca cola into the Chinese market was initiated after the conclusion of the First World War with the establishment of the company's first bottling plant through joint venture with Hong Kong based business firms. However, in terms of product marketing Coca Cola became the first US based company to distribute its products in the Chinese market immediately after Deng Xiaoping catalyzed the opening of China to foreign investors towards the end of 1970s. Since then, Coca Cola has maintained a significant and growing market share in China. At present, Coca Cola holds ownership interest in twenty four bottling plants through join ventures with Hong Kong based companies that the company also owns in part such as Kerry Group and Swire Beverages. Apart from joint ventures, Coca Cola also holds ownership interests in a completely foreign-owned firm, based in Shanghai, which produces beverage concentrates. It is also through this company that Coca Cola entered into a joint venture with another beverage concentrate producing firm located in Tianjin. Coca Cola has utilized joint venture in establishing twenty four bottling operations and several beverages concentrate producing operations in mainland China and Hong Kong. (2001)
It was Coca Cola's long-term goals of localizing production and building of infrastructure through strategic partnerships with domestic companies as well as the Chinese government have pushed the company to achieve nationwide operations resulting to strong market presence. Due to these strategies, the company has control of 35 percent of the country's carbonated beverage market. Coca Cola is also able to generate yearly sales amounting to $1.2 billion. The company earned an increasing profit from sales in China since 1990. Thus, Coca Cola has established a hold over the Chinese economy by contributing 15,000 employment opportunities and supporting the viability of various supply, distribution, wholesale and retail companies employing around 400,000 people. Apart from this, Coca Cola has also contributed to the technological enhancement of the beverage industry in terms of the updating of old facilities, introducing of quality testing, and providing training programs for managers involving $1.1 billion worth of investments into the Chinese market. ( 2001)
7.1 Market Segmentation and Product Positioning
Coca-Cola's market is distinguished according to geographic location and age. Geographic location pertains to determination of whether the consumer comes from the rural or urban areas. Although, there are more potential consumers in the rural areas, most of Coca-Cola's customer base is located in the urban areas. This manner of segmentation is supported by the economic diversity of China so that it is imperative that it should not be considered as a single market. China's market diversity stems from the disparity in income between rural and urban areas since the per capita disposable income in urban areas is at a level of three times more than in rural areas. Apart from this, there is also a disparity in income among urban areas based on the level of economic development and the concurrent standard of living. The imbalance in economic development in different geographical regions of China affects the purchasing power of consumers in the different regions. In considering the top four largest cities in China, these accounted for only 4 percent of the population but responsible for 15 percent of retail sales while the remaining small cities and provinces represent 80 percent of the population accounting for a little more than 50 percent of retail sales. ( 2003)
Age as the other criteria for market segmentation of Coca-Cola consumers refers to the segmentation of the company's consumers according to consumers below 45 years old and 45 years old and over. The age distinction is based on the young generation during the time of the reintroduction of Coca-Cola in China in the 1970s. It was this generation, aged 45 and below, that comprised the initial customer base of Coca Cola and integrated consumption of company products into their food and beverage purchases. The generation before them do not have a similar attachment to Coca-Cola products.
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Coca-cola has a strong brand equity ( 2005) attached to its products. The value of its brand comes from the reputation of the company of developing a good tasting soda beverage that families and friends can share. Coke is all about tradition and stability. This was observed by the consistency of the company's approach, message and product development. The strengths of coke come from its ability to be consistent, a product that is always there. When coke introduced New Coke in 1985, a product with a sweeter taste, the public reaction to the change was devastating to the company. The change represented a deviation from the values of stability and consistency attached to the brand equity of the company. Coke relies mainly on its brand equity to sell its products. Although, coke also got involved in celebrity endorsements, it withdrew from this race and continued with its equity-based campaigns. Thus, Coca-Cola has positioned itself in the international market and in China as a traditional and consistent company that will always be there to provide its products to the market.
7.2 Marketing Mix
The marketing mix of Coca-Cola comprises the factors that the company controls in order to provide customer satisfaction in the targeted market segments. Through the strategic blending of these factors, Coca-Cola ensures that it is able to generate a positive response from its targeted market segments.
Coca-Cola has been able to diversify its products to include carbonated drinks such as Coke Classics and other soda products such as Sprite, Fanta, Barq's Root Beer and Dr. Pepper as well as bottled water, RTD tea drinks and juice drinks under the brand names Qoo, Sensation, Tianyudi and SMART. The diversification to other soft drink sectors was influenced by the growing demand for healthy beverages in its targeted market.
The diversity of the quantity of demand and the cost of packaging has also affected the products of the company. The companies packaged their products in glass bottles of different sizes and shapes. However, after the development of plastic containers the packaging shifted to plastic containers especially for larger volumes of soda making it lighter when carried. At present, the demand for better convenience resulted to the packaging of sodas in cans. Coca-Cola products are sold in glass bottles, plastic containers and cans.
The pricing strategy of Coca-Cola is based on the pricing dynamics relative to its competitors as well as the value of its products. In China, as is true in the international market, the fiercest competitor of Coca-Cola is Pepsi so that pricing is in a way influenced by the interplay of these competitors in a given market. However, Coca-Cola holds the advantage in pricing because it had a head start of several years giving the company a stable market share relative to Pepsi, which suffered several bankruptcies. The product price of Coca-Cola became the industry benchmark. The strategy of Pepsi then was to sell its products at half the price of Coca-Cola. The company was able to gain a share in the market. ( 2003). This pricing dynamics between Coca-Cola and Pepsi continue today. In supermarkets, the price of coke is still higher by 15 to 20 cents when compared to Pepsi.
The higher price given by Coca-Cola to its products is supported by the value of the brand equity of its different soft drink products. Coca-cola was able to sell at a higher price than its competitors because of its stable share market share due to its marketing communications message linked to brand equity of product stability. This makes Coca-Cola a true leader in the industry due to its ability to determine the industry pricing benchmark. Despite its slightly higher pricing, it is still able to maintain a market share by establishing a high value for its products through associations with consistency and dependability.
Coca-Cola applies consistency and dependability even in its promotional activities. The company actually makes use of pattern advertising ( 2003). The company develops advertisements containing its determined marketing communications message. The manner of advertising adheres to various specific audiences. However, despite the consistency of its advertising framework for its different markets around the world, Coca-Cola also implements local adjustments. The adjustments cover the 1) translation of words and lyrics in the local dialect of particular markets and delivered in a manner appropriate and acceptable to the local culture, 2) basic adjustments to the advertising format such as the use of locally significant words, phrases, messages and the arrangement of these elements to deliver a cohesive promotional campaign aligned with the basic marketing communications message of the company; 3) audio-visual adjustments made to the advertising format such as colour scheme, character selection, video stream and other audio-visual aspects of the campaign.
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Apart from pattern advertising, Coca-Cola also adheres to product differentiation ( 2003) by withdrawing from the explicit cola war with Pepsi. The cola war persisted until the late 1900s with taste-tests and celebrity endorsements of competing personalities. In succeeding years Coca-Cola reverted to its marketing strategy of appealing to the stability and consistency found in the value accorded to family and friendship differentiating the company, product and brand from its competitors.
All the soda brands are marketed in the common channels of distribution except in the exclusive retail venues that companies bid to have. In supermarkets, these brands are sold side by side in the display shelf not giving a single brand any edge relative to the buyer. The rivalry over the channels of distribution was elevated to obtaining exclusive selling contracts in restaurants, places for vending machines, recreation areas, and popular events.
In China, the focus of Coca-Cola is in direct-to-retail distribution through the establishment of a minimum of one sales centre in cities with a total population of 1 million. The sales centres that also serve as warehouses are completely owned and operated by Kerry, Swire and other bottling firms with which the company has entered into joint venture agreements. For logistics support, delivery trucks numbering around twenty in large cities are on standby in the sales centres to cater to retail orders. Apart from its own distribution centres, Coca-Cola also partners with large wholesalers with valuable experience in the area of retailing and independent wholesalers able to reach out to local communities. Apart from this, Coca-Cola also builds strong partnerships with government units by sponsoring welfare programs.
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