Marketing Communications Strategies - Case Study Example

Comparative analysis of Marketing Communications strategies and mix for the Cola drinks in the UK Marketing has moved from customer acquisition (winning new customers) through customer retention (keeping customers for life) towards customer selection (dumping unprofitable customers while selectively seeking and keeping the more profitable ones). The development of marketing communications is the major role of the promotional strategy component off the marketing mix. The marketing mix is essentially a conceptual framework that helps to structure the approach to each marketing challenge. At the heart of a marketing strategy is the target market strategy stemming from the markets segmentation process of segmentation, targeting and positioning. A marketing strategy specifies the segments to target, the brand or product positioning required to appeal to these targeted customers, plus the competitive advantage to be exploited versus rivals. Without a marketing strategy, the marketing mix activities are unlikely to bring significant benefits to the organization and probably will fail to satisfy and retain targeted customers. Core to a marketing strategy is the understanding of competition and the identification of a differential advantage - something unique to one supplier and highly desired by targeted customers. In terms of the overall competitive strategy, there are four broad options : (a) intense growth, when current products and current markets have potential for increasing sales; (b) diversified growth, which occurs when new products are developed to be sold in new markets; (c) integrated growth, owing to forwards, backwards or horizontal integration; and (d) maintenance, of the status quo. The marketing strategy should specify marketing objectives so that marketing performance can be monitored. UK - Soft Drink Industry Review : The roots of the soft drink industry have been engraved in the soil of United Kingdom for hundreds of years. The soft drink industry continued to grow steadily as the nineteenth century progressed. The current UK soft drinks market is 9 billion litres in volume. If adult juice drinks reached this proportion of the total market, the segment would be 360 million litres. The size of the target market must be set in context with the sales by volume of the leading carbonated soft drinks in the UK. Brands such as Lucozade and Lilt have sales of around 100 million litres, while Coca Cola is a massive 1.4 billion litres by volume. Overview : Coca Cola and Pepsi Cola can be identified as market leaders in the Cola drinks industry. They possess significant market share within the soft drinks industry. Coca Cola is a 100-year-old soft drink that started out as anything but soft. It was introduced as a medicine. "A delicious, exhilarating, refreshing, invigorating beverage in addition to being a cure for all nervous afflictions, sick headaches, neuralgia, hysteria, melancholy" said an early advertisement. Coca- Cola is enjoyed all over the world. The figure indicates that 1.6 billion gallons is sold every year, in over one hundred and sixty countries. Coca Cola's main challenger world wide is the Pepsi Cola most commonly referred to as Pepsi. Pepsi follows exactly the same brand and business model. Its differentiation is based on the fact that it was introduced more recently than Coke, and did not create the category. As a challenger, its brand image and market grip are lower. It challenges the leader on three facets: price, product and image. Price : it is a dime cheaper than Coke, at consumer level, but this creates a higher pressure profitability. Product : since it is not the referent, Pepsi is more daring and permanently works on the product to beat Coke on palatability and taste ('Pepsi challenge'). Its formula is actually preferred to Coke in most blind tests. It pushed Coca- Cola Corporation to make the marketing blunder of the century launching New Coke in 1985 to replace the classic coke. More innovating by necessity, it practiced line extensions such as Diet Pepsi well before Coke. Image : Pepsi is younger than Coke. Capitalizing on the only durable weakness of Coke, its advertising positioning makes Pepsi the choice of the new generation. Pepsi's essence is 'soft drink for today's taste and experience'. To secure a presence for Pepsi-Cola on premises and circumvent the barriers to entry created by Coke, the PepsiCo company had to diversify into restaurant and fast food chains. Other rivals to Coke have had an even harder time. In February 2000, Richard Brason of Virgin admitted his defeat in its war against Coca Cola and Pepsi Cola. On reviewing the brand and business model that is common to both Coke and Pepsi, it is easy to understand why Virgin Cola failed everywhere but in the UK, its domestic base. Even here it won less than 5 percent of the market. Brand is not enough. Target-Market Strategies : Market Segmentation is the strategy of dividing a market into groups of consumers with relatively similar characteristics, wants and needs, and purchasing patterns. These sub market based upon market attributes would include the size of the market, the geographic location, and the demographic description of purchasers or potential buyers. Each submarket is evaluated by size, accessibility, behavioral differences, and degree of current need fulfillment. An analysis of consumer behavior will determine those customer market segments that can best be served by the firm. Lifestyle segmentation strategy attracts customers by demonstrating that the firm's products fit with customers' activities, interests or opinions. Product differentiation strategy in a broad sense helps consumers perceive the product as being different and better than competing products. These perceived differences may involve physical features such as adding or deleting sugar from the product or non-physical ones such as image or price. Coca Cola and Pepsi-Cola use strategies of market segmentation, lifestyle market segmentation, and product differentiation either alone or in consort. There are some target-market strategies that are used for attaining competitive advantage. For example, Coca Cola's introduction of Tab, the original diet soda, prompted Pepsi to introduce Diet Pepsi. Tab was originally targeted for the female market, and eventually Coca-Cola desired to broaden its base by appealing to men and the entire family. Therefore, Diet coke was introduced to satisfy these objectives, but it damaged the Tab brand in the process. Many marketing professionals would content that this was a sound strategy, although the impact of the Tab brand was diminished. Pepsi, with a strategy of targeting a core market instead of the total market, demonstrated the opportunities created by narrowing the target market. Coke's strength was its tradition, which meant that older consumers had a strong attachment, whereas younger consumers would more easily switch brand. In many instances, younger customers would want to drink something different than older consumers. The Pepsi Generation campaign capitalized on younger consumers desires to drink something different. Teenagers drinks more soft drinks than any other market segment. All age groups purchase substantial quantities of soft drinks, and his appeal also attracted consumers who perceived themselves as young and physically active. Thus Pepsi was able to close a wide gap between the market leader and itself by effectively using a lifestyle - segmentation strategy. Diet Coke and Diet Pepsi with and without caffeine use strategies of market segmentation and product differentiation to reach their target markets. Tab was introduced in 1963 as a diet cola positioned for women, and in 1983 caffeine-free versions of Coca-Cola, Diet Coke and Tab were positioned for health-oriented consumers. Coca-Cola also launched Minute Maid Soda as a fruit-based drink in reaction to Pepsi's introduction of Slice. Minute Maid is positioned to attract a market segment that likes fruit juice as well as to health and nutritious consumers. 7-Up popularized the appeal of the health- oriented market segment with a lemon-lime entry positioned to consumers who like a lemon-lime flavor. Coca-Cola fought back with Sprite with the lemon-lime market. Coca-Cola and Pepsi-cola dominate the cola market. A direct challenge to the cola market is the lemon-lime segment of the market. The 7-Up brand has presented as "Uncola" challenge, but Coca-Cola owns Sprite, so the impact of this assault has been diminished. Such has been the competition from Sprite that Cadbury Schweppes is planning to reformulate its 7-Up drink by making it less sweet and giving it a crisper taste. One problem for Cadbury Schweppes is that some of the licensed bottles of their product line also distribute Coca-cola and Pepsi- cola products. Cadbury Schweppes is one of the largest British- owned confectionery and soft-drink companies in the world. The company has been better known in the past for its ginger ale and its Schweppes and Canada Dry products. Dr. Pepper and 7 -Up are more recent acquisitions. The dominant position of Canada Dry and Schweppes in the soft-drink market has made the task of obtaining shelf space somewhat easier, since these product lines are not confronted with keen competition. However, the Dr. pepper and 7-Up product lines face heavy competition, and adequate shelf space for these product lines is more difficult to obtain. The challenges that face marketing communicators have grown in complexity and promise to become even more formidable in coming decades, making this an exciting time to be involved in the marketing communication enterprise. The key to the distribution system for the soft- drink industry is product availability. Soft drinks are available in just about every location. The list ranges from bowling alleys to colleges, gasoline stations, hospitals and hotels, parks and places of amusement, restaurants, and transportation depots. More recently efforts have been made to place vending machines in nail salons and beauty parlors. This strategy of widespread distribution is known as intensive distribution and is especially appropriate to the marketing of soft drinks. Soft drinks have a relatively low unit cost, need constant replacement, and can be sold to a mass market. The objective is to provide saturation coverage to the market, enabling the consumers to purchase soft-drink purchase with a minimum of effort. There are tens of thousands of outlets where the soft drinks can be purchased. The buyouts by Coca Cola's bottler allow the firm to consolidate operations in order to improve production and distribution to widespread markets as well as to gain better control over the market. The major reason for the continuous sales and prompt availability of soft drinks is the effectiveness of the franchise system. Recent trends are for the consolidation of single ownerships into multi franchise groups because of escalating production, distribution and packaging costs. The ability to maintain high price margins has made Coca-Cola and Pepsi-Cola profitable operations. High profitability in the soft drinks industry means high volume, which must be achieved through promotion and intensive distribution. Coca Cola enterprise is a separate organization designed to administer the bottling system of Coca-Cola. The trend is for consolidation of bottling operations. Pepsi- Cola has the same objective, but has not yet been able to spin off a separate organization to administer its bottler system, a move that is considered advisable. Though Virgin Cola proposed a cheaper price than Coke or Pepsi it failed, reason being it never got the distribution, it never accessed the consumer. Branson's whole idea was to save on advertising and thus make a cheaper price possible by taking advantage of the Virgin umbrella brand. Unlike the two world-leading carbonated soft drink companies, which both follow a product brand policy (one brand per type of flavor), Virgin's only brand asset as its core brand, which has been extended to all type of categories and in the process gained worldwide awareness. As well as a low volume of advertising and selling a large volume on promotion. Virgin had a small sales force, a sure handicap for trade marketing and store-by-store direct relationships. Finally, Virgin Cola was not able to work in the market without a portfolio of soft drinks to support it. This is necessary to access the on-premise consumption sector, and is also the only way to make a true national sales force economically possible. As a rule, extension failures are immediately attributed to some image-based reason that it is impossible for the brand to extend to the new category. The brand and business perspective shows us that this explanation is superficial. It was not the Virgin brand that was the source of the failure, but the fact that Virgin could not compete on the same brand and business model as its two Goliath competitors. Thus, we can conclude that to do better in distribution systems it is essential to have a real sales force and a real portfolios of brands and products. Promotion and Price Strategies : Promotional support by the brand owner, whether it be Coca-cola, Pepsi-Cola , Cadbury-Schweppes, or Triarc, is an important motivators for bottlers and retailers to carry their products. Consumers are stimulated by advertising and encouraged by consumer promotions to continue buying or to switch brands. Although 7-UP did make some inroads with their Uncola promotional campaign, the soft drinks promotional wars have been mainly between Coca-Cola and Pepsi-Cola. Coke and Pepsi are continually battling in promotional efforts. Coke was way ahead in market share but grew complacent, and Pepsi had emerge from a weak second to a strong second place in the soft drink industry. Each company has used a different approach in its promotional campaigns; however, Pepsi has on many occasions ranked higher in advertising recall. Pepsi's creative and imaginative campaign has captured many in a new generation. Pepsi has altered its image from marketing what consumers perceived as a bargain product to marketing a product of quality. Pepsi's advertising budget in 1939 was substantially less than Coca Cola's with an allocation of approximately $600,000 compared to $15 million. In 1942 Pepsi targeted the concept of offering consumers twice as much for their money. The jingle emphasized a larger size bottle : Pepsi-Cola hits the spot. Twelve full ounces, that's a lot Twice as much, for a nickel, too Pepsi-Cola is the drink for you. The jingle was translated into fifty five different languages, and in 1949 Life magazine called it immortal. In 1955 Pepsi Cola was reborn by Alfred Steele, who married Joan Crawford, a well known movie actress. Steele was a flamboyant showman who had a gift for promotion and whose wife, added a glamorous image to the Pepsi-Cola brand. Bottlers and their wives were enchanted by meeting Joan Crawford at numerous social gatherings, and these events became a strong tool for gaining bottler loyalty and participation in promotional events. Steele innovated by directing Pepsi to introduce bottles of various sizes: 8-, 12-, and 6 - ounce categories. Price strategy allowed Pepsi to provide much more of the product than Coca Cola. Coca-Cola bottlers have invested millions in the 6 -ounce bottle size, so a change in bottle size would have meant that much of that investment would have been lost. When Coca- Cola finally did change bottle sizes, it was perceived as copying Pepsi. Pepsi used promotional campaigns to segment the market by age. The Pepsi generation campaign was a strategic move. Implicit in the message was that Pepsi was the beverage of the young at heart. This strategy was quite different from the Coca-Cola strategy of portraying as timeless and ageless rather than trendy. Pepsi had effectively used life style segmentation to appeal to middle and upper-middle class in advertisements. It is an old axiom of marketing that it is possible to eliminate the wholesaler, but it is not possible to eliminate the functions performed by the wholesaler. Initially, Coca Cola shifted several functions, including packaging, transportation and selling to retailers, to their bottlers. For Coca Cola this was a cost-saving measure, as efforts were made to enlarge the market for their product. In the 1990s, Coca-Cola is engaged in the strategy of vertical integration. This means that in purchasing bottlers, Coca Cola will itself need to perform functions such as storage, transportation, packaging, and marketing to retailers. The problem is that Coca Cola will now assume the costs of distribution that were previously assumed by the bottlers. If marketing functions can be performed effectively, then cost savings can accumulate. The end objective is control over the entire distribution network. Because of increased intense competition, technological innovations, and a shortened product life cycle, reallocation of marketing functions may further strengthen the competitive position of Coca-Cola. While the end product is not changed, Coca-Cola now operates at different levels and recent acquisitions include Wichita Coca-Cola Bottling and Coca-Cola Bottling based in Billings. Coca-Cola has been outstanding in developments of new products for different markets and also has efficiently enlarged markets. Classic coke and Diet coke are targeted to different markets and are the best sellers in their categories. Through acquisition, Barq, the number one root beer, has been added to the product line. Mr. Pibb was developed to offset Dr. Pepper and Sprite is positioned against 7-up. All of these brands have been successful in their target- market segments. A successful strategy had been the ability of Coca-Cola to locate its product in multiple places, such as beauty and tanning parlors, and to enlarge upon its primary market. Starting in the middle 1980s, Coca-Cola convinced consumers' to drink Coke in the morning instead of coffee. This new market is composed primarily of young people. Coca-Cola is selling a brand with universal appeal and has been placed in accessible locations. In summary, Coca-Cola has been successful because of its high brand identity, and profits have been derived through volume sales. Distribution strategies have made the product convenient and accessible, and vertical integration has been widely employed. Moreover, new markets have been penetrated by developing new products that satisfy the needs of these new markets. REFERENCES Kimmel, Allan (2005). Marketing Communication: New Approaches, Technologies and Styles. Oxford University Press. Yeshin Tony (1995). Integrated Marketing Communications : The Holistic Approach. Elsevier Publishers. www.coca-cola.com www.pepsi.com Read More