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The Coca Cola Company has been in place since the 1800s. It has been one of the most dynamic and growing companies of the modern business world with a brand name that is highly valued and recognized in most parts of the globe. The Coca Cola Company sported a product that spread rapidly and was accepted in almost every market, with people from all walks of life being able to accept it. This was then followed by the addition of other products to its portfolio apart from the signature cola. This included Fanta, Sprite and other beverages including variants of the existing products. The company has been recognized as employing various marketing techniques to sell its products in an increasingly competitive carbonated soft drinks market. The global spread and significance of the Coca Cola Company and its string of products became apparent when it established bottling plants in some of the most embattled of African states, showing that it is a globally recognized and demanded brand that can operate in the toughest of environments (Heritage Timeline 2009).
The company has been very successful in terms of retaining a high market share. With strong competition from Pepsi at an international level and the emergence of many local brands, Coca Cola has been able to retain its strong grip on the market and turn up consistent revenues despite occasional criticisms and problems. In increasingly saturated markets, the company has successfully been able to employ a range of product differentiation techniques along with creating goodwill to sustain its position. Product differentiation is basically emphasizing the differences of a particular product and therefore making it appear different from other similar products (Coca-Cola Case Study 2009). This is an attempt to create a competitive edge in the market for the product by making it appear unique and better than the others so consumers are prepared to buy it in preference to substitute products. Horizontal differentiation is when products are priced at marginal cost and consumers only differ by what they choose as best. Vertical differentiation is when consumers have similar preference order but products are preferred based on quality (Economic Survey of Europe 2009).
Coca Cola employs a variety of selling techniques of which product differentiation is a crucial part. First of all it diversified the product range over the years since its inception, to appeal to a wider market. This was in part due to the change in times as Coca Cola had originally marketed its cola as a product for quenching thirst. When through the years it became apparent that the cola could not quench thirst, it had to launch new lines such as Sprite which were launched with the tag line of quenching thirst. Similarly as the world became more diet conscious, Diet Coke had to be introduced and to cater to the needs of the health conscious people, the company devised the spring water brand Pump (Coca-Cola Case Study 2009). This was followed by product promotion and aggressive advertising which was to try and create unique selling points and to create an aura of superiority of the Coca Cola products among the public. The original slogan of Drink Coca Cola was very successful in this regard in the early days and has seldom waned in popularity. The use of drink has an imperative sense in encouraging consumers to buy the product and enjoy it. Another such advertising gimmick has been through effectively making use of current affairs. In the era of the Second World War, the company manages to make posters illustrating rival soldiers standing together, enjoying the cola drink (Coca-Cola Case Study 2009). This promoted the perception that Coca Cola encouraged friendliness and bonding that even went over bitter enmity which was something appealing to the consumers, prompting them to buy coke even though it was the same product as some others in the market.
The company further made use of sex appeal as a way to differentiate their product. The advertisements of the 1950s featured a boy and girl drinking coke together and a relationship was implied between them. In that society, it helped make an impression that the drink increases your appeal with the opposite sex and hence should be bought (Coca-Cola Case Study 2009). In current times, similar adverts with sports stars and sponsorship of sporting events by the company has promoted a sporty image of the products. This has been managed by sponsoring the Olympics in 1928, becoming one of the official sponsors of the Cricket World Cup in India and even sponsoring every FIFA Football World Cup since the year 1978 (Tripodi 2001). This has been appealing to the youth and that interested in a sporty image and therefore has been helpful in prompting them to consider coke as better for sports and their image compared to the substitute products in the market.
Another landmark development in terms of product differentiation was the unique shape of the Coke bottle (Coca Cola Case Study 2009). In a time when similar products were saturating the market with the label on top being the only differentiating factor, something different needed to be done. Since the carbonated soft drinks needed to be kept in cold storage, with only their tops visible, the signs did not function effectively either. The company then developed its elegant shaped curved bottle and started supplying the product in it. This allowed consumers to not only pick Coke by its shape as they wanted, it also made it seem unique and better compared to the other drinks. The same is the case with the Coca Cola labels on each bottle. It was printed in a different and appealing font, compared to the monotonous way some other local brand names were frequently printed. This was against a red back drop which has been shown to be the most stimulating color and the first one noticed by people. Changing policies by the changing times and pouncing on opportunities has been very effective on the part of the company. When consumers started becoming environmentally cautious, it started packaging with recyclable material and advertising it too to appeal to those concerned regarding the environment.
Product differentiation is beneficial for the Cola Company in the current era. This is grounded in modern marketing theory as well. It is important because in modern business, the big picture needs to be focused on at all levels (Tip the Scales in Your Favor 2009). One needs to understand the foundation of what makes a product truly successful and then manipulate strategic marketing principles according to it. This is in accordance with the view that to sustain a good level of differentiation against substitute products in the market, the product must keep some competitive advantage for itself, preferably on multiple levels. This requires a careful analysis of the four Ps of marketing as they are known and formulating a combination of them such that an advantage for the product can be achieved. Thus whether you are a supplier, the manufacturer or the retailer, the requirements of modern marketing dictate that the product should be developed to address the particular need of a consumer which should be understood at every level of the chain of product development and not just create a product with hopes of selling it. There have rarely been such successes, apart from some such as the walkman . Thus every link in the chain needs to be familiar with the behavior, attitude and demographic composition of the market so as to meet the requirement, which is the basis for sustaining a competitive advantage for the companys products.
The product part of the marketing needs to work well to create a good product which customers need. It needs to satisfactorily differentiate from substitute offerings so as to present a value proposition (Tip the Scales in Your Favor 2009). This Coca Cola has done through introducing diet Coke as the demand by diet conscious consumers arose. The Sprite brand was launched to cater to the demand of those who wanted to quench their thirst with some soft drink. Similarly, the Winnie the Pooh series was launched for children. This allowed the reach to a wider market segment and therefore increased the penetration of the country as well as sales. The placement of the product, with regards to distribution, is very important for the product nowadays to maintain a competitive advantage. Where the manager decides to offer the product can be seen to dictate how the other elements of the marketing mix are brought into play and can help further differentiation. For Coca Cola, there has been the advantage of its products being low priced and hence in the range of a majority of the public of different classes. This has allowed it to try and distribute the products in as much of a geographical area as possible so as to increase sales. This has a psychological effect on the consumers as they become more familiar with a product that is available everywhere and may prefer it because of standardized quality and goodwill.
Product differentiation is further beneficial because it tilts the purchasing decision of the customer in your favor (Dickson 1987). Many factors go into this decision which carries different weights. Many are thought to choose simply on the basis of emotional appeal, which is where advertising comes into play. Differentiating thus makes consumers perceive that the product provides unique benefits which makes customers buy it more. Caution needs to be applied as to how far this can be taken because if it is made to appear too different, consumers may not rate it in the category they are evaluating for their purchasing decision. For example, electric cars are not bundled together in the category of normal cars and hence this hinders their purchase to some extent (Dickson 1987). Thus all these factors if properly viewed and analyzed can tip the purchasing decision in your products favor and result in increased sales and more percentage of the market share. As Coca Cola has been able to retain that, it speaks for the importance of product differentiation by the company.
Taking a view at the carbonated soft drinks industry, one can see why this is very necessary for Coca Cola. The industry is ripe with local and multinational brands offering more or less the same type of products to the market at usually the same prices. Slight differences in terms of cola, orange, lemon, diet and fruit juice categories arises but they can effectively be said to be interchangeable for the broader market, except possibly the health conscious ones (Walsh 2002). This therefore shows the need for such marketing measures to be employed by the company. This can be seen more apparently by the amount of research conducted in the carbonated soft drinks sector. One in Ireland shows that the industry consists of 178 brands which are operated by 13 firms with more than 40 product characteristics. In such an industry, the Coca Cola Company is seen to enjoy 52 percent of the market share over the years from 1992 to 1997 (Walsh 2002). However, qualitative aspects of the report indicate that this dominance in terms of market share is not because of the companys success in its flagship cola product. It is more because of its move of establishing a portfolio of brands across 91 percent of the vertical segment of product differentiation (Walsh 2002). The other local competitors feature in the industry due to their specialization into numerous horizontal and vertical segments of the market. This brings to the forefront the necessity of product differentiation in the carbonated soft drinks industry on the part of Coca Cola.
An additional need for product differentiation is from a more economic perspective. The market consists of different customers with varying tastes over product variants or individual preferences for choice which basically implies a preference for variety in aggregate demand subject to horizontal product differentiation. The firm that makes use of such techniques also benefits in the form of internal returns to scale in production (Economic Survey of Europe 2009). The aggregate income of a given population in an economy is fixed. Since most carbonated soft drinks are priced similarly and low enough to be in the range of ordinary people and the masses, it results in all the different products competing for the same fixed income of the consumer. This requires making sure consumers have a good perception of the product relative to all the other substitutes and that it sticks out compared to the lot. It should also have unique features, as perceived by the customer, for him to spend a portion of that fixed total income on the product. With so many products vying for that, it becomes crucial that not only does the product stand out but that unique lines are dedicated to catering specific requirements of customers which may arise in a population so that consumers are more willing to part with their money for the product.
In the competitive industry, if one needs to consider the needs for something, its alternatives have to be considered. If the company had instead employed product standardization, it would have enjoyed a separate set of unique advantages. Since the product would have been standard, it would have brought down costs of production. The same process would have been used at each facility to produce the same product with the same specifications and it would probably have led to a rise in production quantity as well. Furthermore, all the resources of the company that are spent for a variety of advertisement and promotional campaigns for catering to the varying segments and continuous innovation for each would have been saved. This would have had further impact on costs and this much expending of resources would not have been necessary. However, this approach does not consider the realities of the market. Every product has a life cycle which wanes out eventually and if a company does not employ product differentiation, it soon wanes away among a group of others marketing similar products. Costs alone are not the issue. The product needs to be what the customer requires and likes and in a competitive industry like the carbonated soft drink industry, it is necessary for survival. Since the Coca Cola Company employs this and enjoys a favorable market position, this is testament to the marvels of product differentiation.
Bibliography
Coca-Cola Case Study [online]. BoredofStudios. Web.
Dickson, PR (1987). Market Segmentation, Product Differentiation, and Marketing Strategy , The Journal of Marketing, 51, pp. 1-10.
Heritage Timeline [online]. The Coca Cola Conpany. Web.
THE BENEFITS FROM PRODUCT DIFFERENTIATION IN MODERN ECONOMIES [online]. Economic Survey of Europe. Web.
Tip the Scales in Your Favor With Product Differentiation [online]. Web.
Tripodi, J (2001). Sponsorship- A Confirmed Weapon in the Promotional Armoury , International Journal, 1.
Walsh, PP. (2002). Product Differentiation and Firm Size Distribution: An Application to Carbonated Soft Drinks [online]. University College, Dublin. Web.
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