Contemporary Business Environment

1. Introduction

The contemporary business environment is extremely competitive and hence coping with such pressures calls for modern marketing which can go beyond developing a good product, pricing it attractively and making it accessible. Communicating with the present and potential stakeholders and the general public is no longer a matter of luxury but competitive necessity. Marketing gurus like Kotler and Keller (2006) believe that every company is inevitably cast into a role of a communicator and promoter. However, the main concern in the age of technology is not how to communicate but rather what to say, to whom and how often (Kotler and Keller, 2006). This is where marketing communications strategy comes into picture. This report will attempt to comparative analysis of Marketing Communications strategies and mix for the Cola drinks in the UK.

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Prior to diving into the crux of the report it is essential to have a understanding of the modes of communication which are generally included in the communication mix to form a communication strategy. Most of the experts entail five major modes of communication vis-à-vis Advertising, Sales promotion, Public relations and publicity, personal selling, Direct and interactive marketing (Fill, 2006).

• Advertising: Advertising can be defined as any paid form of non-personal presentation and promotion of ideas, goods and services by an identified sponsor (Kotler and Keller, 2006).
• Sales Promotion: Activities included under sales promotion can be described as a variety of short-term incentives to encourage trial or purchase of a product or service (Kotler and Keller, 2006).
• Public Relations and Publicity: These are a set of communication programs designed to promote and protect the company’s image or its individual product (Kotler and Keller, 2006)..
• Personal selling: These include all face-to-face interactions with one or more prospective purchases with an aim of making presentations, answering questions and procuring orders (Kotler and Keller, 2006)..
• Direct and interactive marketing: This is a product of the technology revolution and includes the use of e-mail, post, telephone, fax or internet to communicate directly with or solicit response or dialogue from specific customers and prospect (Kotler and Keller, 2006).

Keeping the above descriptions in mind an analysis of the communications strategy employed by the lead players in the soft-drink market can be attempted. However, any comprehensive analysis would need to follow a specific blue-print to lend credibility to the conclusions drawn as a result of the analysis. The next section would provide a brief overview of the methodology employed by the author.

2. Research Methods

The methodology is a plan for collecting, organising and integrating collected data so that an end result can be reached (White, 2002). In order to prepare this report the author employed both primary and secondary data. To begin with the report analysed the current market situation to aid a better analysis of the communications strategy employed by the companies. The data collected for this review was primarily collected from industry reports like the Keynote reports. Search string of ‘soft drink industry’ was entered in following database: Business source elite, Emerald and Ingenta Connect. Followed by a thorough industry analysis current communications strategy for Coca-cola, Pepsi and the Supermarket brands were analysed. The company websites and current adverts were the predominant source for this information. However, Datamonitor company profiles were employed to provide reasoning for the company’s choice of the strategy. Textbooks like marketing management by Kotler and Keller and the others mentioned in the reference section at the end of the paper were employed to give a sound theoretical background to all the discussions made about the communications strategies.

3. Market Overview

Traditionally the soft drink market has been dominated by two giants fighting it out at the top vis-à-vis Coca-cola and Pepsi Cola. Coke has however been the market leader for a long time now. However, the proverbial ‘Cola war’ as it has definitely not died out. According to the Keynote Drinks market review, the UK soft drinks market was worth more than £7.3bn in 2005 (Fenn, 2005). Moreover, soft drinks accounted for 30% of total commercial beverages consumption (Fenn, 2005). However, the carbonated soft drink category has experience overall softness the last several years (Phillips, 2006). The communications strategy adopted by the players in the industry would be affected substantially by the changes in the industry dynamics and the best way to take a look at the relevant changes would be to employ a PEST analysis.

2.1 PEST analysis

2.1.1 Political

Government pressures led the US and the UK soft drink industry to ban fizzy sodas from Elementary schools. Political, guided by high profile figures line California’s governor Arnold Schwarzenegger, and public forces alike are pushing hard to extend the ban into High schools (Mercer, 2005). The Cola companies thus need a strategy to communicate a healthy image.

Public health advocates and health researchers in the US and the UK have proposed a consumer paid Obesity Tax on carbonated drinks in a bid to reduce consumption and fight the global epidemic that is obesity. (Datamonitor, 2006b). This would require a even more forceful pursuit to produce an image make over into s drink that does not contribute to obesity in both the male and the female target audience.

2.1.2 Economic

The 2000 US census indicated that the upper-income consumers were growing and the lower income declining rapidly, yet consistently (Ferrell and Hartline, 2005). This, in turn, lead to a trend in consumer spending and association with more luxurious things like music.

2.1.3 Social.

Most of the lifestyle changes are closely related to the corresponding economic shifts. As mentioned above, on the one hand lifestyle awakenings towards healthier food and drink customs in developed countries possibly will fetter profitability, on the other hand heightened consumer spending power in developing countries like India and China have paved the way for a double digit increase in international sales of soft drinks (Fenn, 2005).

2.1.4 Technological

Technology, today, is the single most imperative weapon for a firm to procure, enabling it to combat most threatening situations, ranging from reducing the cost of production to coming up with new-fangled healthier alternatives and novel strategies for communication. In a era where communication is a two way process, internet has helped the soft-drink industry in creating more awareness than ever before.

4. Analysis and Discussion

On the basis of the industry situation entailed above the next few sections would analyse the current communications strategy employed by Coca-Cola, Pepsi and the Supermarket brands like Tesco Cola.

4.1 Coca – cola

The Coca-Cola Company (Coca-Cola) manufactures markets and distributes non-alcoholic beverage concentrates and syrups (Datamonitor, 2006a). The syrups, concentrates and beverage bases for Coca-Cola and nearly 400 other soft-drink brands are manufactured and sold by the Coca-Cola Company and its subsidiaries in nearly 200 countries around the world. More than 60% of its products are sold outside of the US (Datamonitor, 2006a). It is headquartered in Atlanta, Georgia. The company recorded revenues of $23,104 million during the fiscal year ended December 2005, an increase of 6.3% over 2004. The company’s net profit was $4,872 million in fiscal year 2005, an increase of 0.5% over 2004 (Coca-Cola annual report, 2006). The company is a clear leader in the soft-drink market, especially in the UK. The European Union segment is the largest revenue segment of the company.

Moreover, Coca-Cola is the world’s leading brand. Business-Week and Inter-brand, a branding consultancy, reckoned Coca-Cola as the leading brand in their top 100 global brands ranking in 2005 (Datamonitor, 2006a). All the above has been achieved with the aid of a very carefully planned marketing communication strategy consistently over the years. To attract younger consumers to its flagship cola, Coca-Cola launched new marketing and ad campaigns in 2003. It also changed graphics on Coke bottles and adopted a traditional look for its cans.

On observing Coca-cola’s latest adverts and promotional activities it is clear the organisation’s target audience continues to be the young generation. The company has a tie up with Apple computers and provides free iTunes song on every bottle cover as a promotional activity. Given the popularity of Apple’s iPod among the young audience a promotional collaboration with the computer giant sends a very strong message to the consumers. The new colourful campaign labelled by the company as ‘the coke side of life’ reinforces the youthful image of the brand. There has always been an attempt to create a fun image for the drink, which till now the company has managed to communicate extremely effectively.

Besides this the company has launched the new range of Coke Zero, which is an attempt to meet the industry requirements of health conscious drinks. Although diet Coke was already present, it was predominantly communicated as a female drink. Hence to expand its target audience to include the males, Coke had to launch a new drink communicating a fresh unisex message.

Another trade-mark Coca-Cola way of promoting its products has been the use of high-profile sports events to promote its brands. The company was been chosen as one of the official sponsors for the FIFA World Cup 2006 in Germany, as well as the Olympics Games 2008 in Beijing, China (Datamonitor, 2006a). The company has the opportunity to use these two high-profile events to strengthen its brands even further.

Hence it is quite clear the target audience for the communication strategy is the younger generation. To provide a better a break down of the communication strategy employed by Coca-cola in terms of the communication mix is provided below.

• Advertising: The maximum amount of investment made by the company is in this area by employing leading personalities from sports, movies and other arenas. The advertisement costs for the company have been astronomically high and it has been highly criticised for it in the past (Datamonitor, 2006a).
• Sales Promotion: There are constant offers that come with a bottle or can of coke, be it free song on iTunes or a buy one get one free offer, there is always an incentive to buy.
• Publicity and Public relations: As mentioned earlier, Coke as a brand has been the first one to set a trend of sponsoring big occasions and creating strong opportunities for publicity.
• Personal selling and direct marketing: The only means of direct consumer interaction seems to be the internet which has a highly interactive and colourful website. Moreover, it has a barrage of competitions and opportunities to win a prize for its visitors thus providing another form of incentive.

4.2 Pepsi Cola

PepsiCo is a leading global snack and beverage company. The company manufactures markets and sells a range of salty, convenient, sweet and grain-based snacks, carbonated and non-carbonated beverages and foods (Datamonitor, 2006b). The company operates in 200 countries besides the US and Canada (Datamonitor, 2006b). It is headquartered in Purchase, New York. The company recorded revenues of $32,562 million during the fiscal year ended December 2005, an increase of 11.3% over 2004. The net profit was $4,078 million in fiscal year 2005, a decrease of 3.2% from 2004 (Datamonitor, 2006b). It is however the second-largest manufacturer of carbonated soft-drinks in the world, second only to Coca-cola.

There is not much to differentiate between Pepsi and Coke’s current campaign elements. The reason and timing of the launches might be different and are discussed later on in the report. Pepsi has similar to Coke made music a part of its communication strategy by joining hands with yahoo music. Although not as attractive was the Coke campaign, the message is still louder, clearer and younger than ever before. Pepsi is sponsoring and flaunting a lot of sports personalities in its adverts as well ranging from rugby to cricket.

Pepsi’s new message says ‘it’s the cola’ which is in synchrony with Pepsi’s tradition of structuring its messages to induce and assert choice over Coke. The communication mix is pretty much the same as that of Coca-cola.

4.3 The Supermarket Cola

Supermarket colas include the likes of Tesco, Somerfield, Lidl etc. The primary aim of these colas is to give value for the customer’s money, in coherence with its main business objective. All supermarket brands have designed their communications strategy to achieve this main objective. For instance, the Tesco Cola would have price written on it in big font. Moreover, the label design and the content colour is similar to that of Pepsi and Coke to ensure that the customers are aware that they are getting the same product for a much more cheaper price. However, since this is not a very big segment of revenues for these supermarkets, specific communications based on promoting these drinks are not found.

4.4 Discussion

Based on the above analysis a few crucial issues need be discussed to provide a deeper insight into the choice of the communications strategy chosen by each of the organisations.

4.4.1 Target Audience

It is apparent from the above analysis that the communications strategy of all the three organisations is primarily based on identifying the target audience i.e. market segmentation. This could be a broad category based like the younger generation in case of Coke and Pepsi or a people shopping at the supermarkets in case of Tesco cola or other supermarket brands. The fundamental idea is to perform an image analysis and choose a communication strategy which would define a desired image (could be different from the present one). Moreover, this would also differ from product to product i.e. a diet coke is targeted more at the health conscious women. The current communication strategies in all three instances above seem to be hitting their target, however Coke as usual seems to be pulling out the best suited tricks with Pepsi just following suit i.e. taking music on board the communication strategy with iTunes seems to have boosted Cokes position much more while Pepsi’s association with yahoo music came only as an after thought.

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4.4.2 Communication objective

In cokes case the objective seems to be to maintain its strong brand identity and constantly renew it to keep the youthful feeling going. Since Coke is the market leader the communication objective does not have to attempt to change either the cognitive, affective or behavioural responses from its consumers. Pepsi on the other hand seems to be attempting to generate a liking among its target audience and capture Coke’s share of the market. However, this does not seems to be working evident in Pepsi’s decreasing sales in the UK and the US (Datamonitor, 2006b). As far as the Supermarket brands are concerned Tesco cola’s communication objective is quite straight forward i.e. inducing preference among its customers to buy its product over the bigger brands by keeping the prices low and providing more value for money to its customers.

4.4.3 Message design

The message design needs to reflect the communication object and appeal to the target audience. Coke’s latest message says ‘the coke side of life’, while Pepsi has been trying to woo its customers by ‘it’s the cola’ and the supermarket cola’s attempt to design the bottles similar to that of the bigger brands and add the word ‘value’ to the label. The messages from each of the three players seem to be in synchrony with their objectives, Coke’s message design seems to have the right emotional selling proposition (ESP).

4.4.4 Message source

The message for Pepsi and Coke are delivered by attractive and fit people predominantly from the sporting arena. This again reinforces the ‘health conscious’ image of the new drinks like Coke Zero. Moreover these are both male as well as female promoting zero calorie drink to expand the target audience from women to include men. However, how much the consumers trust the credibility of the people who communicate these messages to them remains to be seen. The supermarket Colas don’t have to use these as their primary aim is to communicate to the consumer that it is a cheaper alternative and it is cheap because of meagre expenses in advertising.

4.4.5 Communication Channels

Considering the size of the target audience the mode of communication chosen by Pepsi and Coke are justified i.e. the main channel of communication is television and internet. Adverts in papers, magazines and streets are commonly employed as well. However, the most cost intensive means is the television with each advert requiring a gargantuan amount of money. As mentioned earlier the supermarket brands cannot afford a high communication budget on solely marketing the colas especially at the price they need to sell it for.

5 Conclusion and Recommendations

Taking into consideration all the points discussed above it can be concluded that the current communication strategy and mix employed by the organisations under scrutiny are a result of the changes in their external environment and are in synchrony with their apparent communication objectives. However, overall degree of influence exerted by the Pepsi communication message seems to be lower than its arch rival. While a consumer survey would be required to add credibility to the above statement the analysis and discussion do provide a useful insight into the communication strategy formulation process and the choice of the communication mix based on which few recommendations can be made.

• Identifying the target audience is the most crucial step towards developing an effective communication strategy. Moreover, while identifying the target audience and developing communication objectives the marketer needs to ensure that any gap between the current public perception and the image sought are covered.
• When deciding the marketing communication mix a cost benefit analysis of each tool needs to be done to ensure that the most effective strategy is produced within optimum budget.
• It is imperative to measure the marketing communication effectiveness by asking the target audience to recall the message, frequency etc in order to make any effective changes to an existing strategy.