Marketing Communication Strategies and Marketing Mix for Cola Drinks - Case Study Example

Comparative Analysis Of Marketing Communication Strategies and Marketing Mix for Cola Drinks in UK Introduction The "cola wars," which describes mainly the on-going battle between Coca-Cola and Pepsi for supremacy in the soft drink industry, date back to the 1950s when Pepsis corporate focus became "Beat Coke" (Yoffie, 2004). Since then, they have battled domestically and globally for market share and sales, with a tremendous amount at stake. Both of them seem to be regularly updating the information about their rival as there seem to be no secrets in the beverage category, with Coca-Cola and Pepsi typically releasing new products in unison. Research Methods Generally research can be carried out by listening to the consumers, questioning the consumers and the company people, preparing a questionnaire and getting it answered from the consumers, analysing surveys, and interpreting the reports of concerned companies. Analyzing quantitative and qualitative data is often the topic of advanced research and evaluation methods courses. To study the cola-war, the best sources are the Newspapers and advertisements visible in all types of media. Business journals are the other reliable sources of an insight into the strategic moves of the cola companies. We live an environment where we cannot remain untouched with the feelings for a company or brand. Therefore our own experience and assessment will form the part of resources. Market Overview The Cola war is indeed a copy book depiction of one of the most interesting and stiff competitive environment in the soft drinks industry. Coca-Cola originated as a soda fountain beverage in 1886, selling for five cents per glass. The first year of operation ended with the figures of $50 worth of sales Vs the production cost of $70 i.e. a net loss of $20. During this journey of more than a century the company has seen many ups and downs to become one of the world famous brands. The market started knowing the brand ‘Coca-Cola’ only after the start of bottling systems. Over the years the Coca-Cola bottling system has grown up with roots deeply planted in local communities. This heritage serves the Company well today as consumers seek brands that honour local identity and the distinctiveness of local markets. It was on August 28, 1898 that Pepsi-Cola, the name was used for the first time by Caleb Bradham, a New Bern, North Carolina pharmacist, when he renamed "Brads Drink," a carbonated soft drink created by him to serve his drugstores fountain customers. Subsequently he patented Pepsi-Cola in 1902. The competition or Cola-War dates back to the early 20th century which was quite apparent even at that time when Pepsi Cola also started writing the name ‘Pepsi-Cola’ on the bottles and bottle crowns exactly in the same manner as was being done by Coca-Cola. Subsequently, in order to create product differentiation the company went in for logo changes in 1905, in 1906 and subsequently during WW-II. It was in late 90s that Pepsi started a new era in competition by targeting the young and fresh, with the unveiling of the GeneratioNext campaign. With the exception of brief bankruptcy stints in 1923 and 1932, Pepsi-Cola kept its place firmly at the heels of Coca-Cola through its creation of an extensive franchise bottling network and distribution outlets (Yoffie, 2004). On the other hand The Virgin Drinks group first launched the Virgin Cola company in 1994 with Virgin Cola in UK. And Virgin has been very fierce in its marketing efforts, with Richard Branson in the forefront. Markets in which Virgin Drinks are currently being locally manufactured and sold include UK, USA, Canada, France, China, Switzerland, Italy, Sweden, Japan, Bangladesh, South Africa, Tunisia, Afghanistan and Iraq. Virgin Drinks is also present in the French West Indies through export opportunities. In fact UK market has one more serious contender for the market share in the form of Sainsbury, which has its own committed batch of consumers relishing on its non-alcoholic range including Elderflower crush, Watermelon crush, Spiced Indian tea, Fruit punch, and Quick lemonade. At one time it also provided some bubbling effect to the already fierce cola war, but now it has more or less opted out of the war syndrome. Analysis and Discussion As far as the Cola war is concerned, it is limited to the two main rivals in the UK markets which is quite apparent considering the following facts; i. Virgin is a relatively new entrant. ii. Though Virgin has given good competition to both Pepsi and Coke as it has eaten up into their market share, but the ‘War’ mechanism remains within Pepsi and Coke because Virgin is eating up the share of both companies in equal measure. iii. Apparently the Airlines business is the main business for Virgin, and to supplement this very business, Virgin has launched the soft-drinks. For example way back in 1946 when sugar supply was rationed, Pepsi CEO Walter Mack purchased a sugar plantation in Cuba which proved to be highly profitable for Pepsi, but that did not result in Pepsi becoming a sugar giant. Similarly Richard Branson wished to have his own brand of cold drinks, he came out with Virgin. But he is not too bothered with its limited growth over the years. Now Virgin has started strategically placing the drink in many more countries and markets. Virgin mega-stores too are visible in downtown which reminds us of the brand called Virgin. iv. Richard Branson is known for unorthodox business methods, flamboyant publicity stunts and taking on industry giants. Right from selling records by mail-order way back in 1970 to the setting up of Virgin Atlantic airways in 1984, he experimented with many ventures and successfully maintained them for many more years, but was never able to drive out the market leader/s out of business. Only the Airlines business has been taken up with all sincerity. The experimentation continues with Virgin Galactic, a "space tourism" company offering suborbital flights to the paying public. v. The major advertisement campaigns of both Coke and Pepsi are continuing targeting each other, without any glances towards any other producer. vi. Events like World Cup Soccer etc. still continue to be the hotbed of cola-war, amongst Pepsi and Coke. vii. For Pepsi and Coke Soft-Drink is the mainstay, while other producers like Virgin have so far felt content in being a low-profile, or they just pretend to be! Indeed the presence of other producers in the fray has made both the major player more cautious in their approach and forced both Pepsi and Coke to devise newer localisation strategies in line with changing face of globalisation. Localisation becomes necessary in international marketing for consumer’s products, as it is important that the products suit one’s taste, preferences and fulfils one’s needs. Both cola majors have continued changing, improving and developing new drinks to appeal to local tastes. In general there are two principal routes of localization. The first is based upon the use of global sources of advantage, but it involves the MNC adapting its marketing mix to make that global asset more suited to local emerging market conditions. An alternative strategy is to develop new market-specific resources, a more direct but more costly and probably a slower approach than adaptation. This strategy is starting to be seen in the form of a number of MNCs acquiring local brands that are added to their portfolio alongside global counterparts. In Japan, for example, Coca-Cola carries a number of locally-oriented brands, such as Georgia iced coffee, that enable it simultaneously to meet local taste segments and to derive greater economies of scope from its sales and distribution investments in the country. Marketing Communication Strategies Traditional marketing mix concept, first proposed by McCarthy in 1960, consists of Product, Price, Place and Promotion (better known as the 4Ps). Each particular marketing mix adds up to a certain amount of effort the company is making for the purpose of generating sales. Any plan to develop a competitive advantage must be based on a sound analysis of the company’s competitors. Communication forms a crucial part of managerial activities. Marketing communication in turn helps a company in building a brand, creating brand loyalties, increase in sales, cutting costs, etc. UK market is a very diverse market in general which caters to customers/ consumers from different walks of life, different cultures, ethnic groups and age groups. In today’s market driven economy concept, the art of communication to existing consumers as well as prospective consumers takes a great deal out of the managerial brain storming sessions. The communication is said to be successful if ‘a customer goes to buy the shoes of a particular brand, not for keeping his feet warm and dry but because the shoes make him/ her feel masculine/ feminine, rugged, young, glamorous etc.’ Now a days corporations are supposed to remain in continuous touch with customers, suppliers, bankers, government and the general public. Some of the communication happens to be casual, some is made to be informative while some other is designed to be persuasive (Kotler, 1974). Cola war basically believes in persuasive communication strategies. Coke and Pepsi form a duopoly in the soft drink market. The term ‘Cola War’ cropped up only after the launch of aggressive advertising campaigns of mutually-targeted television commercials and marketing campaigns in the 1980s and 1990s between Coke and Pepsi. UK market in general and some of the big cities in particular like London, for example, can be classified having class, design, retailing, and a big share of the resulting income and wealth. Companies therefore take stock of the size of the market, competitor’s presence, and their communication strategies. At times it is advisable to plan out the communication strategy taking a leaf out of the strategies of existing companies. This holds particularly useful during the cola-war period. We are witness to a war minus the shooting, involving ‘Ambush Marketing’ techniques as well. Ambush marketing i.e. piggy-backing on a big sporting event by non-sponsors has grown steadily since the practice burst out of bounds a decade ago. Both Pepsi and Coke have displayed it couple of times in the past. For example, In the late-1990s, Pepsi launched its most successful long-term strategy called Pepsi Stuff. Consumers were invited to "Drink Pepsi, Get Stuff" and collect Pepsi Points on billions of packages and cups. These points can then be redeemed for free, high-quality, Pepsi lifestyle merchandise. After experimenting and analysing the marketing communication program results for over two years, Pepsi launched Pepsi Stuff, which was an instant success. Tens of millions of consumers participated. This helped Pepsi in going ahead with ambush marketing and Pepsi outperformed Coke, the lead sponsor of the games, during the 1996 Atlanta Olympics - held in Cokes hometown. Similarly after this years’ launch of Coke’s Powerade Option team television commercial for energy drink, Pepsi filed a lawsuit against Coke for showing the Gatorade energy drink in poor light. In May this year, Pepsi took a swipe at Coke with a tongue in cheek ad for Pepsi Max, with the catchline, “Max Taste, Zero Hype”. Both the companies have been continuously on the lookout of opportunities for being seen at the place of action, be a big sports event, a corporate gathering, celebrations, community festivities or other such high profile events. Corporate social responsibility is also an integral part of marketing communication strategy as it strives to show, the cola companies in good stead. Coca-Cola considers corporate social responsibility as woven into every aspect of its business and an integral part of its mission and values which includes (Coke, 2006); To refresh the world……..in body, mind, and spirit. To inspire moment of optimism….through brands and actions. To create value and make a difference………everywhere the company engages. Similarly, Pepsi too gives due importance to Community involvement as it considers that it’s (Pepsi, 2006) ‘products touch the lives of so many people’. To support this contention Pepsi-Cola makes numerous in-kind and monetary donations each year to support local and national charitable organizations. Pepsi has been associated with YMCA, Save the Children, paediatric AIDS care centers, national food distribution programs and disaster relief organizations. Both Coke and Pepsi have come out with many innovative ideas in ad campaigns, both of them have been endorsed by a many renowned and famous personalities from films, sports, etc. but both the cola majors have maintained a distinct identity as well in their marketing campaigns. Pepsi appears to have a leaning towards the appeal of celebrities, popular music, and young people in television commercials, while Coke seem to rely more heavily on nationalistic feelings, traditional values images of happiness and togetherness, and always trying to cash in on its original lead, behaving as the elder brother, sort of more mature and responsible in its approach. On the other hand Pepsi seems to promote hip and happening. Both of them have had their share of windfalls in their respective territories. This rivalry is visible on the stock market as well. During the last part of year 2005, the Cola war rooms were abuzz with the news that PepsiCo has become no.-1 for the first time in terms of market capitalisation displacing Coca-Cola to no.-2 position. On this eventful day Pepsi closed up 31 cents at $59.31 to give it a market capitalization of $98.4 billion while Coke closed down 36 cents to $41.15 for a market capitalization of $97.9 billion. Market analysts point out that while Coke was busy building its global soft-drink empire, Pepsi grew its business through acquisitions of non-carbonated soft drinks such as Tropicana and Gatorade and of snack makers by its Frito-Lay unit. It’s a big boost for Pepsi because at one point of time Coke had three times the market cap of Pepsi. Nowadays, theres a lot of talk about measuring ROI on advertising. With direct advertising and marketing campaigns it is easier to monitor the returns. Small businesses can tally the customers or contracts they receive as a result of ad campaigns. But when it comes to mega-brands like Coke and Pepsi, the picture becomes totally different. The marketing campaigns are seen as a way of investing in consumer loyalty and other intangible benefits. Shareholders too never accuse the management of "over-spending" on marketing communication and advertising. In fact, company executives are supposed to cut other costs (like production, labour, etc.) so that the company can invest even more in marketing and advertising. The irony is, in the modern management principles advertising is being viewed as an investment, while costs like labour are being viewed as pure costs. But lot of input is needed to have an effective ad campaign. An ad campaign should be able to shift brand perceptions, which of course can be measured using suitable marketing research techniques. And in order to shift perceptions, ad content matters as much as the money spent on it. Choice of an appropriate media to carry the message is equally important. At times a sloppy ad campaign may stick in the minds of consumers but it may not be able to change his perception if even if the ad keeps repeating time and again. For this very reason, ad campaigns happen to be market specific, country specific, region specific or segment specific. Moreover, now a days the consumer has become a smart buyer, as he keeps weighing the alternatives and benefits from time to time. Therefore, marketing communication principle tells that once a brand gets "hooked" on advertising, especially TV advertising, they should almost never consider reducing spending just because sales remain flat after a campaign. Instead to avoid becoming stale in its approach the company is supposed to come out with new campaigns. Cola war is witness to numerous such campaigns for grabbing the attention of the consumers with both Pepsi and Coke coming out with innovative ideas for marketing communication. Besides the numerous TV commercials, Radio jingles and print ads, some recent Marketing communication strategies adopted by both the Cola Majors are; Making sports persons and film stars as their brand ambassadors. Sponsoring new movie releases. Such sponsorships comes not only in the form of helping in promoting the movie, but the Cold drink brand has started becoming a partner during the film making itself, with some visual clippings of the Cold Drink brand in the movie. Coke was a major partner of the world cup soccer held in Germany in June-July this year. Coke organised the first “FIFA World Cup Trophy Tour by Coca-Cola” to 31 cities in 28 countries from January to April 2006. This was the first tour of the trophy outside the winning countries and a grand marketing communication campaign for Coke. In October 2006, Coke marked the 35th Anniversary of its famous and most recognisable ‘Hilltop’ Commercial. Coke also celebrated with much fanfare the 75th anniversary of Santa Clause, created 75 years ago by Swedish-American artist, Haddon Sundblom for a series of holiday advertisements for Coca-Cola. Pepsi has come out with a big budget commercial video called Pepsi DJ Division comprising well known DJs like Eric Cubeechee, Quicksilva, Drama, DJ Enuff, Kim James etc. Using wireless advertising disguised as a game played on cell phones e.g. PepsiCo’s "Pepsi Foot" was a fantasy soccer game played by exchanging short text messages using cell phones Coke too has its own its own fantasy soccer game. Conclusions and Recommendations The Cola war is on for couple of decades now and during this ‘war’ Coke and Pepsi were challenged by many other soft-drink brands, but none could match the marketing acumen of these companies. The war continues with more input in the form of finances and innovative form of advertisements. The market size too is on the rise. Other producers appear to be content with whatever they can grab from these two warring giants. One direct outcome of this ‘War’ is, The consumer has benefited in the form of quality drinks and reasonable pricing; Society benefited in the form of the largesse extended by these two companies for the sake of environment and other corporate social responsibility issues Ad agencies and marketing communication companies kept getting regular assignments, which gave these agencies room for thinking and innovation No new entrant is able to consolidate his position in term of capturing matching market share References: 1. Virgin Drinks (2006), http://www.virgindrinks.com/ 2. History of Pepsi, http://www.pepsiworld.com/ads_and_history/legacy 3. Yoffie, D, (2004). Cola Wars Continue: Coke and Pepsi in the Twenty-First Century. Harvard Business Review, 9-702-442. 4. Branson sees America as his virgin territory., By: Wilke, Michael, Advertising Age, 00018899, 03/24/97, Vol. 68, Issue 12 5. History of bottling (Coke) http://www2.coca-cola.com/ourcompany/historybottling.html 6. Philip Kotler, (1974), Marketing Management, 2nd Ed., Prentice Hall. 7. Choueke, Mark (March 2006), Pepsi sues Coca-Cola over Powerade Option ad claim, Marketing Week, 3/23/2006, Vol. 29 Issue 12, p6-6 8. Marketing Week (June 2006) Pepsi Max ad takes swipe at Coca-Cola Zero launch, 6/22/2006, Vol. 29 Issue 25, p12-12 9. Traditional refreshment, Sainsbury, http://www.sainsburys.co.uk/drinkguide/non_alcoholic/traditional_refreshments.htm Read More