Marketing Theory Case of The Coca Cola Company

Introduction

This report focuses on specific marketing theory, relevant to The Coca Cola Company, marketing theory include Marketing Orientation, Marketing Mix, Marketing environment and SWOT analysis. The author will make analysis of these theories, with an application to the attitudes and marketing decisions of The Soft-Drinks Manufacturer.

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Marketing Orientation

This is when a company takes into account its customers’ needs when making decisions concerning their services they offer and items of sale. There are many benefits of doing this, as the product will more likely meet the needs of their targeted audience, therefore consumers will be more willing to by the product, there is more of a guarantee the product will sale. However in previous decades, many businesses have opted for a product-orientation approach, this is when a company is more concerned with the production of the product, and the systems that are used in its production. (The Times 100, n.d)

(The Times 100, n.d) states in the recent decades many companies had preferred to be more product-orientated than customer-orientated, because of the increase in competitiveness within the market, these companies that adopted this orientation were losing out, as a company within a competitive market can only should strive to develop products that suit their audience needs, in failing to do so, they will lose customers fast in the competitive market, this demonstrates the need for products to be more consumer focused especially if a company is operating in a competitive marketing environment, if a company prides itself on the quality of its services and products, through the usage of new expensive technologies for example, then it would be understandable as to why they would continue to be product orientated. (The Times 100, n.d) Some companies are adopting both orientations, taking into account both the expectations and needs of the customer as well as the quality of product for the item of sale.

According to the source, many companies like Coca-Cola are moving towards market (customer) and product orientation, in doing this Coca-Cola conduct marketing research to find out their consumer interests and desires, in finding this they will make amends to the production of their product depending on what the results show the marketing managers. (The Times 100, n.d)

The marketing environment

Social-cultural environment

This is the environment that focuses on the understanding of their target audience; the study of this environment will help Coca-Cola understand what motivate consumers to buy their soft-drinks. Coca-Cola is also influenced by society views, for instance because of the issues surrounding the among of sugars presented in Food and Drink, and the Food Standards Agency, the production of Coca-Cola drinks now contain less sugars, and any other ingredients that are deemed artificial and bad for Health. (Brassington, Petttitt, 2007)

According to sources, the Food Standard Agency had in recent years opted for Drink companies to sell their fizzy drinks in smaller quantities, this was in response to the ongoing obesity crisis in the United Kingdom. ‘Drinks with added sugar such as cans of fizzy pop, should be sold in smaller 250ml cans alongside the standard 330ml, it was recommended.’ (Smith, 2010) a study of the social-cultural environment will also lead to an understanding of the demographics. (Brassington, Petttitt, 2007)

Economic/competitive

This is the environment that allows companies to identify both macroeconomic and microeconomic situations in the market, the influences are different, it can affect the sources of long-term and short-term finances available to Coca-Cola, the influences can also effect the consumer demand from their customers, for instance the credit crunch had decreased the among of expenditure available to consumers. (Brassington, Petttitt, 2007) during 2008 Coca-Cola had suffered from economic influences due to the crunch, in which it was estimated that their Bottled water products were experiencing less demand, in key markets such as the US and Europe. Because of the credit crunch bottled water had experienced a high sales growth in 2007, but ‘middle-classed wallets were squeezed down by the economic downturn’. (Anon, 2008)

How Coca-Cola responded to the influences.

Coca-Cola has what is described as a financial muscle, the business was at the time was predicted to not be effected by the ‘economic storm’ as their international competitors, this was arguably because of their successful approach towards brand positioning, which has allowed them to still obtain promotional support, without being disrupted by the economic downturn. (Anon, 2008)Other influences that can be either positive or negative include government policy, taxation, and interest rates. (Brassington, Petttitt, 2007)

Technological environment/innovation affecting

Coca-Cola and many businesses in general, have had new marketing opportunities, because of the advances of technology, such influences are mostly positive, as the production and manufacturing costs of their drinks are mostly likely to have decreased. (Brassington, Pettitt, 2007)

In regard to product of products, technology has also helped increase the product quality, which is important to a company such as Coca-Cola who may focus on product-orientation. For instance, the soft drink’s company experienced new technological advances which allowed them to preserve the fuzziness’ and ice-coldness each of their bottled drinks on sale, ‘By packing new technology into each bottle, so when the cap is twisted off, a mechanism inside will create ice made from the drink itself’. (Hannaford, 2007)

Technology has also helped the advancement of more opportunities for promoting the Coca-Cola brand; the company has opened an online website and has been able to advertise on internet websites which would help increase brand awareness. (Brassington, Petttitt, 2007)

Political regulatory influences

These influences relate to the outside governmental regulatory bodies that have jurisdiction under our national and European parliament to impose restrictions and rules relating to trade and other business operations, such influences include the Advertising Standards Agency, for instance Coca-Cola had to an advertisement banned for ‘claiming it to be nutritious while it contained up to five teaspoons of sugar.’ (Sinclair, 2011)”Because Vitamin Water contained about a quarter of a consumer’s GDA (guideline daily amount) for sugar as well as the added vitamins, we considered that the description of Vitamin Water as ‘nutritious’ was misleading.” (Sinclair, 2011) this demonstrates the impact, as the company had to recall their advertising campaign. To conclude most of these regulations that have jurisdiction over Coca-Colas operates are enforced by law to act as regulators, other regulatory bodies include, trade associations, the EU and the local and national parliament. (Brassington, Petttitt, 2007)

Marketing Mix

The marketing mix strategy is a marketing tool used by many businesses, it helps managers develop their product to suit their customer needs, the tool helps the business set pricing strategies and promotional strategies which are variable, meaning that the company can make changes to their mix to match the external influences such as the economic downturn, the marketing mix is controllable itself, it allows Coca-Cola to adapt more efficiently to environmental influences of the market. (Palmer, 2009, 2004)

Why is it needed?

The marketing mix is needed to match the mix elements to the consumer needs; they are the ‘ingredients to achieve the desired outcome of the consumers.’ (Palmer, 2009, 2004)

Each of the elements relate to one another, for instance pricing (considered the most important mix element), would largely concern the product it self, the quality of the product determines the pricing, if it is a product of high quality then the company may adopt a premium pricing strategy for example, this would also determine the promotion mix element, audiences are different, the premium pricing strategy may influence the business to target wealthy customers, who value high quality premium products or services.

As well as pros, which highlight the positive things a marketing mix strategy can do for The Coca Cola Company, there are also negative aspects of it, issues which put the customer first, such as with the developments of quality services can become lost, to combat this disadvantage it is suggested that there should be an ‘adoption of a more holistic approach by marketing managers to respond to their customer needs’(Palmer, 2009), it would be recommended that managers focus on a product-led approach to marketing. (Palmer, 2009)

Product

For Coca-cola, their main product on offer is soft drinks. With regard to the production of the soft drink itself, the main element to their products on offer is Coca-Cola. The Coca-Cola company is an international global business, and has more than just one product within the soft-drinks market, other products include Fanta and Sprite all owned by the Coca-Cola Company. (n.d, Sharma, Kumar)

Their Products on offer help the company, to motivate the consumer in purchasing the drink. It can be intangible (a service) or tangible, in this case Coca-Cola are providing tangible products. This mix will allow the Soft drinks company to moderate the quality, packaging, quantity of size, all to satisfy their consumers. The moderation is important, it allows Coca-Cola to design for instance their Packaging for different seasons, such as the Christmas season in which they make changing to the style in order to get people into the Christmas spirit, this encourage sells, it demonstrates the changes in the mix allows the company to keep up with marketing opportunities in the marketing environment, it also helps develop their brand image. (Palmer, 2009)

Place (Distribution)

This mix, allows The Coca Cola Company to make sure their products are available in convenient places, wherever the consumer prefers to purchase the items, it allows the company to make new distributions, if their marketing research suggest their target audience prefer to purchase their items in new places. (Palmer, 2009) This mix allows Coca Cola to amend their distributional strategies in place, depending their target audience preference. A good distributional strategy is crucial as an ineffective strategy will impact negatively on the companies’ turnover figures. In marketing distributional decisions, markets must focus on whether the costs of such distribution is affordable and how close the customers are to receiving the product. Marketing managers have an option to adopt strategies such as direct and selective distribution, Coca-Cola products are available in large supermarkets and vending machines, this indicates an intensive distribution, as it is available anywhere at any time (24hr petrol shops) anyplace.

Recommendation for efficient distributional channel

Coca Cola distributes their products to a wide variety of retailers; therefore this would indicate a need for an efficient management of distribution. (Brassington, Petttitt, 2007) The company as a manufacturer would need to deal with stock controlling, transporting their soft drinks products, and finding warehouse facilities for their products.

Pricing

This is the most important mix of all, it is important as adopting the wrong pricing strategy would lead to a loss of profits, however a good pricing strategy, which is affordable to target customers would lead to higher turnover for The Coca Cola Company. The Pricing mix varies from other Ps, as the other mainly evolves around company expenditure decisions.

The Coca-Cola Companies’ Competitive Pricing Strategy

According to sources, the Coca-Cola Company currently adopts a competitive pricing strategy. (Sharma, Kumar, n.d,) this is when companies set their prices according to the current market price,

The marketing had become more competitive with operating companies such as Pepsi entering the market; this forced the company to adopt a competitive pricing strategy in order to stay the cheapest in the market. In this current period, along with their competitive strategy the firm has also had to make les expenditure on their manufacturing process, and more expenditure on their advertising to keep consumer interest from rivals. (Sharma, Kumar, n.d,)

Cost-Based Pricing strategy

Originally they were operating within a niche market, before other competitors such a Pepsi had emerged, because of the new market for Soft drinks, the company did not have to adopt a competitive pricing strategy, instead adopting a cost-based pricing strategy, in which ‘a fixed sum or a percentage of the total cost is added (as income or profit) to the cost of the product to arrive at its selling price’. (Business Dictionary, n.d)

Recommendation on Good Pricing Strategies

‘If the selling price of a product is set too high, a company may mot achieve its sales volume targets. If it is set too low, volume targets may be by achieved, but no profit earned.’

(Palmer, 2009) In order to adopt good pricing strategies, there will need to be some evidence such from marketing research as to what consumers will expect to pay.

Many companies face hard pricing decisions, as pricing cannot be determined alone with the consideration of target audiences, it would be recommended that firms consider the marketing environment, as consumers’ needs changes depending on the current external environment, and the ‘interaction of market forces’. (Palmer, 2009) the pricing strategy is also variable, the company can make on-going changes to their pricing strategy, however such a minor difference can cause a significant change to revenue, e.g. Lower or higher profits. (Brassington, Petttitt, 2007)

Promotion

This mix is used to help with the communication of the companies brand to the customers, through sale promotional strategies, sponsorship and through (PR) Public Relations. This mix helps Coca-Cola decide on their advertising expenditure. (Palmer, 2009)

Promotional Decisions

The promotional strategies along with product and distributional strategy all need to be considered together in order for the company to make better decisions in their mix, it all lies down to evidence, which should give good estimations on their customers likely spending habits and where to target these customers.

Coca-Cola through promotional campaigns want to demonstrate how good their brand is, this can be done through various strategies, such as personal selling (Coca-Cola Stalls at public events) , sales discounts (in shopping centres) Research has shown that, Coca-Cola tends to spend large sums on advertising, for instance in 1987 the company made an expenditure of around ?140 million, in television, radio and Printing publications. (Boy, JR, Walker, JR, 1990) This kind of mass media advertising is essential, as most of their customers are likely targeted this way, it helps keep up their brand image, and in attracting new potential customers. Free tasters are also a good strategy as the company brings out new versions of its drinks; this will lead to a new consumer base, and will help generate more loyalty.

SWOT Analysis

This is the study of strengths, weaknesses and threats (SWOT) This is analysis is needed so that Managers can understand the main threats and opportunities, it helps to get an overall view as to whether the business is profitable or not. It helps with the anticipation of future developments for the company. The SWOT doesn’t include assets of the business; it highlights opportunities for success and potential failure (Kotler, Wong, Saunders, Armstrong, 2005)

Strengths

The Coca-cola has been operating within the market for decades, it was once a niche market for the company, this indicates power-over competitors in relation to its brand image, it has been in the ‘game’ for years, and therefore, there is a high public awareness of their products. ‘Coke is the world’s largest non-alcoholic beverage company. Coke sells more than 500 brands of beverages. The company operates five geographic segments: Eurasia & Africa, Europe, Latin America, North America, and Pacific.’ (Seeking Alpha, 2011) The company is still experiencing a higher profit margin, for these reasons the company has ambitions to ‘double revenue by 2020. They believe that volume will be by the fast-growing markets and improvement in North America.’ (Seeking Alpha, 2011)

Weaknesses:

In order for a business to survive weaknesses need to be identified and then appropriate cautions will need to be put in place so that, any weaknesses are reduced significantly so that they no longer pose a disadvantage to the company. (Kotler, Wong, Saunders, Armstrong, 2005)

The Coca-Cola Company has been able to remain profitable in their many years of operating as a company. As identified before, the Advertising Standards Agency and Food Standards Agency had imposed restrictions on their advertising campaign because of the among of sugar used in their products, this demonstrates a disadvantage for the company, these restrictions could lead to lesser profits, their soft-drinks generally aren’t good for their consumers. For these reasons the company may experience negative publicity which would be a disadvantage.

Opportunities:

New markets:

The Coca Cola had begun operating in the bottled water market, because of the growth, in which the UK market for bottled water alone has an estimation of near to ?1.4 billion. (British Bottled Water, 2009) this is an opportunity because it opens the company to new audiences increasing their brand image.

Threats:

There are many threats that are imposed upon organisations, such as the ability of Pepsi, (Coca-Cola’s closet rival), to take over the Soft-Drinks industry. The fact that Coca-Cola has to adopt a competitive pricing strategy shows that there is major competition within the market. Other substituting non-alcoholic beverages also pose a threat to the company; such products sold by Starbucks can threaten the profitability of the soft-drinks company. With the ongoing regulations imposed by the Food Standards Agency and (ASA) consumer may put their health first and choose healthier soft-drink alternatives, which would cause a lowering of turnover for the company. The fact that there are competitive pricing strategies between the likes of their rivals Pepsi also imposes the likeliness of customers ignoring both companies and choosing even cheaper alternatives such as Sainsbury’s and Asda branded Cola.(Kotler, Wong, Saunders, Armstrong, 2005)

Brand management

Coca-Cola company main asset is their brand image, it is important in retaining their customers. Brand management involves the enhancing of ones brand, keeping customer interest and expanding to new audiences. To do this requires a lot of attention to the customers, getting them to remember the ‘name, term, sign, symbol design or a combination of these that identifies the maker or seller of the product or service.’ (Kotler, Wong, Saunders, Armstrong, 2005)

Brand management is needed, as it increases a company’s ability to get a consumer to add and worship its name and value its quality of product, fending off other competitors by teaching the customer, that their brand is better. There is also an advantage for suppliers, it allows them to Coca Cola understands the importance of its brand image, through the overly use of promotional campaigns and various attempts at direct, and personal selling. It has been said the firm prefer to spend more on its promotional campaigns than its manufacturing costs. The firm has generated a brand image through its logo, which evidently always uses the colour red, in doing this they are reminding customers of their existence whilist increasing their awareness.

Branding strategies

The Coca-Cola Company has introduced major soft-drink of different kinds into the market, each kind has a different image, and this demonstrates an individual branding strategy, through the usage of new brand names for the various new products they have introduced over the years. There are many advantages in doing this, it increases their audience and allows the company to work on new brands, however these new products such as Fanta do not include the original branding, and therefore it could lead to their loyal customers forgetting the Coca-Cola image.

Conclusion

To conclude, The Coca Cola company has implemented good strategies, the managers of the company clearly understand the importance of meeting its customer needs, and enhancing its brand image to retain and remind customers of its good brand, hence the need for such a large expenditure on promotional campaigns, it utilizes the marketing mix well, through the adoption of competitor pricing strategy, it realizes its success can be easily threatened by competitors such as Pepsi, and substitute non-alcoholic beverages such as Coffee and tea. Through its current attitudes and good usage of the marketing mix variables, it is certain this business will continue to dominate and likely double their revenue as they have plan to do so by 2020, however external influences such as social cultural and economic influences could lead to a failure, regulatory bodies imposing restrictions could stop the business from reaching its potential if it continues on producing ‘misleading’ advertisements, however the worldwide recognition of its branding and along with individual brand images, this demonstrates the business has the potential to reach their goal.

Reference and Bibliography

Books:

Palmer, A (2009) Introduction to Marketing. Oxford University Press
Brassington, F & Pettitt, S Essentials of Marketing, FT Prentice Hall 2nd edititon
Doyle, P. Marketing Management and Strategy, Prentice Hall
Kotler, P. (2006) Marketing Management Prentice Hall 12th Edition
Boyd, W. H, Walker, C. (1990) Marketing Management: A strategic Approach International Student Edition IRWIN publishing
Kotler, P, Wong, V, Saunders, J, Armstrong, G (2005) Principles of Marketing 4th European Edition Published by Pearson prentice Hall

Internet Sources:

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Smith, R (2010) ‘Sell fizzy pop in smaller cans: Food Standards Agency’ http://www.telegraph.co.uk/health/healthnews/7527712/Sell-fizzy-pop-in-smaller-cans-Food-Standards-Agency.html {Accessed March 25th 2011]
anon, 2008 Focus – Leading water brands hit by credit crunch http://www.just-drinks.com/analysis/focus-leading-water-brands-hit-by-credit-crunch_id95738.aspx {Accessed March 25th 2011]
Sinclair, L (2011) ‘Coca-Cola in Hot Water Over Nutritious Ad’{Accessed March 25th 2011]
Hannaford, K (2007) ‘New Technology by Coca-Cola allows ice-cubes to form in bottles of Sprite: TEC’ < http://www.techdigest.tv/2007/09/new_technology_1.html> {Accessed March 25th 2011]
Sharma, S Kumar, S (n.d) 4ps Analysis of Nestle and Cadbury Dairy Milk Pvt. Ltd. Delhi Business School {Accessed March 25th 2011]
http://www.scribd.com/doc/31376062/MARKET-SEGMENTATION-AN [Accessed 1st April 2011]
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Seeking Alpha (2011) ‘Just One Stock: Returns, Cash Flow, Emerging-Market Potential for Coke’s World-Class Beverage Brand”http://seekingalpha.com/article/263186-just-one-stock-returns-cash-flow-emerging-market-potential-for-coke-s-world-class-beverage-brand [Accessed 1st Apr 2011]
British Bottled Water (2009) http://www.britishbottledwater.org/vitalstats.html [Accessed 1st Apr 2011]
http://www.scribd.com/doc/16945054/marketing-plan-of-coca-cola [Accessed 1st Apr 2011]
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