The Situation:
The Coca-Cola Company (NYSE: KO) is the world’s largest beverage company, refreshing consumers with more than 500 sparkling and still brands. Led by Coca-Cola, the world’s most valuable brand. The company’s portfolio features 16 billion-dollar brands including Diet Coke, Fanta, Sprite, Coke Zero, vitaminwater, Powerade, Minute Maid, Simply, Georgia and Del Valle. Globally, Coca-Cola is the No. 1 provider of sparkling beverages, ready-to-drink coffees, and juices and juice drinks. Through the world’s largest beverage distribution system, consumers in more than 200 countries enjoy these beverages every day.
It all started back in 1886, when an Atlanta pharmacist created a caramel-colored liquid and brought it down the street to Jacobs’ Pharmacy, where it was mixed with carbonated water and sold for five cents a glass. The beverage caught on, and sales took off from the initial average of nine drinks a day, to today’s total of 1.7 billion Coke-owned beverages consumed daily. The success spawned bottling plants, six-pack cartons, international distribution . . . and imitators. For example, Pepsi followed in 1902 and today is a $29 billion conglomerate with vast holdings.
Both companies (Coke and Pepsi) spent decades marketing a single brand, Coke or Pepsi. But over the course of the twentieth century, they both expanded their product lines by introducing drink alternatives such as Fanta, Sprite, TAB, Fresca, and Diet Coke (Coca-Cola) along with Diet Pepsi and Mountain Dew. The relatively simple segmentation that these offerings suggested has since grown increasingly complex and sophisticated, especially as the competitors have expanded their international sales into hundreds of diverse country markets. Although they face a number of smaller competitors, the primary focus in this mature market is to take customers away from its main rival or find a way to encourage existing customers to drink more cola—both challenging tasks. For Coca-Cola, the best solution is to pursue extensive product development for new and different market segments.
MARKET SEGMENTATION STRATEGY:
In a tightening, competitive consumer market, Coke has developed unique products for various specific market segments. Because these unique products appeal to specific groups, Coke has been able to increase its sales without cannibalizing the sales of its other products. In addition to the products already mentioned, for example, the company launched caffeine-free versions of both Coke and Diet Coke to appeal to cola drinkers who wanted to cut back on their caffeine intake but preferred colas to lemon- lime–flavored drinks. By introducing these decaffeinated versions of traditional sodas, Coca-Cola increased the number of sodas it sold each day, without hurting sales, because the consumers targeted by these products already had been avoiding or minimizing cola consumption to reduce their caffeine intake.
DIETERS:
As more Americans expressed concerns about their weight, Coca-Cola began by introducing Diet Coke, which became the number one selling diet soft drink in the United States within a year of hitting shelves. In 1986, Diet Cherry Coke joined the brand, followed by Diet Coke with Lemon. Diet Coke with Vanilla and Diet Coke with Lime followed quickly, along with Diet Black Cherry Vanilla Coke. Then new trends in the market led diet conscious consumers to pay more attention to their overall health, not just calorie content. Thus the company introduced Diet Coke Plus—the familiar version of the beverage but with added vitamins and minerals.
REAL MEN:
Women hoping to drop a dress size may turn to diet sodas, but real men don’t want to be caught with a girly diet drink. Coca-Cola had a response for them too: the high-profile launch of Coke Zero, which consistently avoided the dreaded word “diet.” The successful introduction instead has relied on advertising featuring such masculine images as James Bond to target men through its packaging, promotions, and image. By appealing to men between the ages of 18 and 34 years who wanted to drink a low-calorie cola but would prefer not be seen buying or sipping Diet Coke, Coca-Cola increased its sales of Coke-branded products by one-third.
Do it Yourselfers (DIYs):
Soda fountain sales have remained an important part of Coke’s business since the company’s inception. To boost its cola sales in restaurants, Coke combined the soda fountain concept with the “do it yourself” trend to offer customers up to 104 individualized flavor choices in a new machine. The Freestyle machine was created by the designers of Ferrari race cars. Size-controlled shots of concentrated flavors get released into carbonated water mid-stream, so the drink is mixed in the air; special technology keeps one consumer’s beverage from picking up the flavors from the last drink poured. The Freestyle also allows moms to have a Diet Coke with Lime, while dads sip their Coke Zero with Lime and the kids select between a Caffeine-Free Vanilla Coke or a Caffeine-Free Diet Cherry Vanilla Coke.
MARKETING VALUE TO SEGMENTS:
A successful new product introduction needs to combine an innovative product with a marketing campaign that communicates the value of that new product to the targeted segment. The Coke Zero launch provides a perfect illustration of this point. Coca-Cola designed a campaign supported by advertisements on television and radio, in print, on outdoor billboards, and online as well as widespread sampling programs and opportunities.
Television commercials for Coke Zero show male athletes such as Pittsburgh Steeler Troy Polamalu in a remake of the popular “Mean Joe Greene” commercial. Others play on jokes about gender roles and modern relationships by promising that Coke Zero is like enjoying the benefits of having a “girlfriend without the drama.” The ongoing media strategy has been to expose as many men as possible to the new product, with a significant bulk of the media budget spent on outdoor advertising.
As part of its ongoing marketing efforts, Coke Zero partnered with the NCAA during March Madness. The campaign challenged basketball fans to prove they were “real fans” and share their stories online using the designated hashtag: #proveit.
RESULTS OF COCA-COLA’S SEGMENTATION EFFORTS:
By using gender to segment the diet cola market, Coca-Cola was able to customize the advertising for Coca-Cola Zero to appeal to men, whereas Diet Coke ads could concentrate on women. In turn, Coke gained closer connections for its different products with each product’s targeted market segment, and Coke Zero became one of the most successful launches in the company’s long history. The Freestyle dispenser began in only a few test markets, but in stores in which it was available, the machine bumped up beverage sales by 10 percent at a time when fountain sales on the whole were slipping. In response, several national restaurant chains, including Five Guys and Burger King, decided to roll out Freestyle machines in all their franchises.
Through its efforts to identify and target such specific market segments, Coca-Cola has grown its stable of consumer brands to more than 450 products. Coca-Cola remains the most valuable brand, but Diet Coke and Coca-Cola Zero are not weak siblings: They have joined it as billion-dollar products in their own right.
Follow Up Questions:
1. How did Coca-Cola position Coke Zero and create a sense of value in the minds of the target segment, “Real Men”?
a. By understanding what “Real Men” wanted in a diet cola
b. By using the information about “Real Men” to craft advertising and marketing that would resonate with them
c. By satisfying “Real Men” needs and wants for a low calorie cola without the word “diet” on the package
d. All of the above
2. Coca-Cola’s global distribution strategy demonstrates its competitive strength within which element of the Marketing Mix (the 4 Ps)? ?
a. Product?
b. Price?
c. Place?
d. Promotion
3. Coke’s Freestyle machine enables customers to create over 100 cola flavors. This machine helps Coke deliver value to its customers by ________.
a. Allowing customers to interact with the brand
b. Encouraging customers to personalize their cola
c. Satisfying a variety of customers’ needs and wants
d. All of the above
4. In order to sustain a competitive advantage over the Pepsi products and other competitors, Coca- Cola has created and maintained one of the most recognized brand names worldwide. This is an example of which macro strategy for developing customer value?
a. Locational excellence
b. Customer excellence
c. Operational excellence
d. Product excellence
5. Suppose that prior to segmenting the market, Coca-Cola conducted a SWOT analysis. During the SWOT analysis, the marketing team identified a growing trend in health conscious males who wanted a diet cola they were not embarrassed to drink. This finding eventually lead to the development of Coke Zero. ?Which component of the SWOT analysis would lead the team to identify this group of consumers with unmet needs? ?
a. Strength?
b. Weakness?
c. Opportunity
d. Threat
6. Based on the information provided in this case, how many market segments did Coke Zero aim to target in the diet cola market? ?
a. One
b. Two
c. Three
d. Four
7. In order to monitor the success of the various Coca-Cola product offerings, the company regularly preforms a portfolio analysis using Boston Consulting Group’s Matrix. Based on the information provided in this case study, which quadrant would Coke Zero mostly likely fall into?
a. Stars
b. Question Marks
c. Cash Cows
d. Dogs
8. Suppose the trend of health conscious males who want a diet cola they were not embarrassed to drink is projected to stabilize (stop increasing and maintain at a constant level) in the next 10 years, which quadrant would Coke Zero mostly likely fall into after year 10?
a. Stars
b. Question Marks
c. Cash Cows
d. Dogs
9. The case states, “Although they face a number of smaller competitors, the primary focus in this mature market is to take customers away from its main rival or find a way to encourage existing customers to drink more cola—both challenging tasks.” ?The task of encouraging existing customers to drink more cola is an example of which growth strategy?
a. Market penetration
b. Market development
c. Product development
d. Diversification
10. What part of the 4E Framework was Coke Zero trying to get fans to participate in with the #proveit online campaign?
a. Excite
b. Educate
c. Experience
d. Engage
11. Coca-Cola worked with corporate partners such as production plants, distribution channels, marketing firms, and retailers to market and distribute Coke Zero successfully. This success is due (at least in part to) Coca-Cola’s understanding and command of which part of the Marketing Environment Analysis Framework?
a. Macro-Environment
b. Micro-Environment
c. External Environment
d. All of the above
12. Which social trend in Coca-Cola’s macro-environment likely lead to the development of Coke Zero?
a. Greener consumers
b. Privacy concerns
c. Thrift
d. Health and wellness concerns
13. The case states, “… but real men don’t want to be caught with a girly diet drink. Coca-Cola had a response for them too: the high-profile launch of Coke Zero, which consistently avoided the dreaded word “diet.””
According to the types of risk presented in Chapter 6 of the text, what type of risk does Coke Zero help “Real Men” mitigate?
a. Social risk
b. Psychological risk
c. Physiological risk
d. Performance risk
14. Which segmentation method did Coca-Cola use to categorize the diet cola beverage market?
a. Geographic
b. Demographic
c. Benefits
d. Psychographics
15. By positioning different colas to different segments of the market, Coca-Cola successfully employs with targeting strategy?
a) Undifferentiated/mass market
b) Concentrated
c) Micro-marketing/one-on-one
d) Differentiated