Advertising Strategy of Coca Cola - Case Study Example

Advertising Strategy of Coca Cola The industry and the brand The carbonated drink industry is dominated by the two major brands, Coca Cola and Pepsi Cola. The beverage that is now known as Coca-Cola was invented by Dr. John Stith Pemberton, as a concoction of coca leaves and kola nuts imitating the Vin Mariani, a French coca-wine, in 1886. The exact formula of the drink has remained a trade secret to date although competitors have developed close alternatives. Despite the successful formula, Dr. Pemberton began selling shares of his company due to failing health and his morphine addiction. As Dr. Pemberton was looking for investors in the company and offloading shares, Asa Candler, an Atlanta druggist took control of the company indirectly. After Dr. Pemberton’s death in 1888, Candler took over the company (aol). Candler’s successful marketing made Coca-Cola an American favorite drink. The drink was first planned to be sold at soda fountains but later was merchandised in bottles, the shape of which became the standard pattern for all cola drinks that followed. It was Candler who began the company’s aggressive marketing strategy based on innovative advertisement campaigns. Especially after bottling of the drink began in 1916, the company began advertising with more urgency. Through the Great Depression, despite fears of the economic crisis affecting consumer preferences, Coca-Cola’s campaign, “The pause that refreshes”, doubled the company’s sales. This was, however, also the time when Coca-Cola’s dominance was threatened by a new competitor, Pepsi, which began selling double the size of a similar cola bottle at the same price as that of Coke (Wikipedia). The brand, Pepsi-Cola was born in 1898 when pharmacist Caleb Bradham changed the name of his carbonated drink from Brad’s Drink to Pepsi-Cola after the two main ingredients, pepsin and cola ruts. In 1902, Bradham acquired patent for the trademark and the next year, he began selling the drink from a rented warehouse, advertizing it as “Exhilarating, Invigorating, Aids Digestion” (twoop). By the 1920s, however, Pepsi-Coa turned bankrupt and the company had to be sold before Bradham died in 1934. The brand of Pepsi-Cola was bought initially by Craven Holdings Corporation and in 1931, by the candy company Loft. Through the 1930s, Pepsi-Cola was positioned as a cheap drink and the advertisement of price advantage resulted in sales growth and franchise developments across the US, Canada, Argentina and Soviet Union. After the World War II, Pepsi repositioned itself as a drink for the young and introduced the canned drink and Diet Pepsi. Many celebrities like Joan Crawford, Michael Jackson, Lionel Ritchie and Tina Turner appeared in the Pepsi commercials since then and the 1980s, leading to an image change and its emergence as a tough competitor to Coca Cola, for long the global leader in the beverage market. In 1999, Pepsi Bottling Inc. became a public company and through the decades of 1980s and 1990s, it has grown to be a global beverage and snack company (Twoop). The strategic challenges for PepsiCo is to maintain its market share in the face of threats from substitutes and more aggressive marketing campaign by Coca Cola, its main competitor in the carbonated drink market. Over the recent past, it has been aggressively increasing its advertising budgets in a bid to overthrow its strongest rival. However, this involves huge costs and the returns are usually slow to come. In carbonated drinks, the mainstay of the company, PepsiCo has a market share of 32 percent while Coca Cola has 44 percent is 2004 (Beverage Digest). The major threat of new entrants in the market is from private labels like Cott Corp that holds 8 percent of the market. Both Pepsi and Coke have so long maintained the market share through the distribution channel by providing large retailer margins (Angelkov et al, 2003). The two majors, through extensive marketing campaigns that are usually conflicting, produce the end result of holding the market. For new entrants, the product differentiation of Coke and Pepsi through established marketing campaigns in the past have been the most important entry barriers. Few companies would be able or willing to take the huge financial risks of competing in this near-oligopoly market. The target market The Coca Cola brand has grown to be the icon of American culture, particularly the teens and young adults although the campaigns refrain from using children. Its advertising campaign has in fact affected American culture. Among its many successes, Coca Cola is credited with the invention of the concept of Santa Claus as an aged man in red and white garb, the cola’s trademark colors. Although the image existed even earlier, Coca Cola’s campaign initiated in the 1930s made it immensely popular. After Candler, Robert Woodruff, who worked for the company even after his retirement till his death in 1980, was the most aggressive executive that Coca-Cola had. Woodruff was responsible for establishing quality standards for the product and various successful ad campaigns, including the “Quality Drink” campaign. Since the 1980s, Coca Cola and Pepsi Cola has been engaged in serious advertising battle. Pepsi Cola began with taste tests showing the fifty percent of participant who said they preferred Coke actually chose Pepsi while purchasing a cola. Coca Cola Advertising strategy In 1969, the advertising agency, MacCann Erickson, began the campaign, “It’s the Real Thing”. The song, “I’d like to teach the world to sing” was composed by the agency’s creative director, Bill Backer, along with song writers, Billy Davis and Roger Cook. The song ran as “I'd like to buy the world a home and furnish it with love,/ Grow apple trees and honey bees, and snow white turtle doves. / I'd like to teach the world to sing in perfect harmony, / I'd like to buy the world a Coke and keep it company. / [Repeat the last two lines, and in the background:] / It's the real thing, Coke is what the world wants today.” It was filmed on top of a hilltop in Rome with young boys and girls from different countries in their national attires. The jingle was inspired by the theme of connected across national boundaries that a bottle of Coke could result. The song became such a hit that the song arrangers, New Seekers, became a celebrity group. Eventually, the song began to be sold on its own without reference to the brand (memory, loc). The Coca-Cola Company waived royalty of the song and donated $80,000 to UNICEF. The song remains relevant to this day when harmony among nationalities is waning. Even in the 2000s, song writers like Oasis have been accused of plagiarizing the jingle and competitors like 7-Up have parodied it. Through the years, Coca Cola has undertaken a number of memorable campaigns including “The pause that refreshes”, “I’d like to buy the world a coke” and “Coke is it”. The message Both Coca Cola and Pepsi Cola have gone beyond the “product business” to the “image business” as they have realized that there is little product differentiation between the two. Both use celebrities in their campaigns. Pepsi Cola has used Michael J. Fox, Madonna, Patrick Swayze and Robert Palmer, among others, while Coca Cola has George Michael, Don Johnson, Wayne Gretzky and Robert Plant, among others, under their banner. Music and entertainment have been key tools in increasing the brand recall of both the brands. As both brands have been on an internationalization spree, they have adopted music and entertainment as the key advertising strategy since these cross the barriers of nationality, sex and race. Hence, over the recent years, the brands have focused less on the brand and more on the image, buttressed by the ability of celebrities being able to provide entertainment (McGill, 1989). Since the 1990s, Coca Cola has focused on international markets, going beyond its image as an American product. Its first global campaign launched in 1998 was targeted at the Islamic world, with television ads for the Ramadaan month. The campaign entitled “Charity” ran in 20 Islamic countries, including Malaysia, Indonesia, Pakistan, Bangladesh, the United Arab Emirates, Turkey, Egypt, Lebanon, and Morocco. In the ad, a mother and son visit an orphanage, the mother gifts a basket of food while the boy gifts a bottle of Coca Cola and after playing with the kids at the orphanage, the boy returns home for breakfast along with Coca Cola. Following the success of the Charity campaign, Coca launched a number of ads under the campaign “Coca Cola Enjoy” in the new millennium. The campaign has had various versions targeted at regional markets, using local celebrities. In India, in particular, the campaign has been hugely successful by using popular movie star, Amir Khan, as a fun character. The campaign around the world has focused on delivering the message of fun and magic provided by the cola. The product is projected as the most inexpensive item that can give a touch of magic in everyday life. The theme has had 140 versions in different languages and local colors. In one particular ad, called “First Experience”, shot in a remote area of Morocco, a boy tastes Coca Cola, which feels like a kiss (Memory). As Sergio Zyman, the most successful marketing director of Coca Cola writes in his book, The End of Marketing as We Know It (1998), ''We didn't run big ads that said, 'Drown your sorrows in Coca-Cola.' Instead, we adjusted our mix of ads to send a balance of basic messages, ones that celebrated life and ones that suggested comfort and dependability. The changes we made were subtle, but the important thing was that we were looking, and listening, and learning, and acting. And it worked'' (Hays, 1999). Current Issues in the campaign The most critical problems of the cola industry presently are the health issues. Even as both the leading brands are fighting over the respective image and taste tests, both have given insufficient focus on changing the social psyche on the adverse image created by activists. There have been criticisms around the world of the product over the toxicity levels and calories. Although the courts have overruled the allegations, the company has not really taken much effort in rectifying the tarnishing of image that such cases have incurred. Besides, nutritionists have opined that regular consumption of carbonated drinks is hazardous for children’s health. Since the product is mainly a youth and children market, such criticisms result in adverse publicity. There have also been criticisms of using high fructose corn syrup instead of sugar, thereby altering genetic alteration of plants and that of pesticides in the cola, as happened in India in 2003 (wikipedia). Such issues have more or less been bypassed in the advertisement campaigns of Coca Cola, which focuses mainly on the enjoyment and fun aspects. The strategic challenges of both cola majors are that of breaking into newer markets in order to become truly global companies. For this, they may need to collaborate in some markets, a step that both have so far avoided. Instead, Pepsi and Coke have often indulged in advertising campaigns that ridicule each other’s product, like Pepsi did in India (Angelkov, et al 2003). Pepsico and Coke also need to overcome the ethical hurdles that portray the carbonated drink manufacturers adversely. Although no connection has conclusively been established between obesity and consumption of carbonated drink, the popular perception has been so. PepsiCo and Coca Cola may collaborate in order to overcome this image by increased research and encourage distribution in schools. Works Cited Aol. Some Coca-Cola History, http://members.aol.com/rcrown/Coke/CokeHist.htm Memory.loc, The “Hilltop Ad”: The Story of a Commercial, http://memory.loc.gov/ammem/ccmphtml/colaadv.html http://en.wikipedia.org/wiki/I'd_Like_to_Teach_the_World_to_Sing http://en.wikipedia.org/wiki/Coca-Cola McGill, Douglas C, The Media Business: Star Wars in Cola Business, New York Times, March 27, 1989, http://query.nytimes.com/gst/fullpage.html?res=950DE0D71139F934A15750C0A96F948260 http://memory.loc.gov/ammem/ccmphtml/colahist.html Hays, Constance L, The Media Business: Advertising; Coca-Cola's former advertising philosopher sees the end of marketing as he knows it, May 24, 1999, http://query.nytimes.com/gst/fullpage.html?res=9C0CE6DE1531F937A15756C0A96F958260 Angelkov, V et al, Pepsi’s Strategy in the carbonated soft drinks market, McCombs School of Business, University of Texas at Austin, 2003, http://www.mcafee.cc/Classes/BEM106/Papers/UTexas/2003/Pepsi.pdf Read More