Thursday, April 23, 2009

Marketing Communication Mix

As defined by Gary Armstrong and Philip Kotler, "A company's promotion mix consists of the specific blend of advertising, public relations, personal selling, sales promotion, and direct-marketing tools that the company uses to persuasively communicate customer value and build customer relationships." Coca-Cola uses a marketing communication mix to communicate customer value and build customer relationships. Coca-Cola's marketing communications mix consists of:

Advertising: According to Gary Armstrong and Philip Kotler, "Advertising is any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor." Coca-Cola has used advertising to build an image for it's company. Here are some of the types of advertising that Coca-Cola uses:

Public Relations: As stated by Gary Armstrong and Philip Kotler, "Public relations allows companies to build good relations with the company's public by obtaining favorable publicity, building good corporate image, and handling or heading off unfavorable rumors, stories, and events." Coca-Cola handles public relations by including a press center on its website: http://www.thecoca-colacompany.com/presscenter/index.html. This section of the website allows consumers to view press releases, executive speeches, and statements made by the company regarding current information. In the statements, Coca-Cola can address law suits, rumors, stories, new products, and activities. There is also a section of the website devoted to investors. Here, current, or future, investors can access financial statements and up-to-the-minute stock information.

Personal Selling: Coca-Cola has many salespeople, who are individuals representing the company to communicate, sell, service, and build relationships with customers. These salespeople promote their product to different customers within their regions, and once they sustain a customer, they sell their products to them and service them many times per week. These individuals form close relationships with the customers in order to continue business with them.

Sales Promotion: A sales promotion is an activity that is implemented to boost the sales of a product or service temporarily. Coca-Cola often runs sales with stores to quickly increase sales. Coke gives its product to the retailer for a lower price, and in-turn the retailer sells the product on sale. To advertise for these sales, the retailer generally runs an ad in their store sales circular at attract consumers.

Direct Marketing Tools: Coca-Cola uses direct marketing in many ways. First, the company partners with various restaurants, movie theaters, ect. to carry it's product. This way, when a customer orders a drink, the only brand they are offered is Coca-Cola, which forces them to buy a drink from that brand. By doing this, Coke forces out other competition, and keeps the restuarants, or other businesses, purchasing their product over and over again. Coca-Cola also uses it's name for sporting events, like the Allentown Iron Pigs baseball field. The Coca-Cola Field offers a fun time for family and friends while only serving Coke products. This also allows for salespeople to invite retailers to one of the many Coca-Cola boxes for great food, fun, and some "business talk", as well. Next, Coca-Cola has begun to use mobile advertising. According to mobilemarketingmagazine.com, Coke uses mobile graphics and texts to appeal to markets on a more personal level (http://www.mobilemarketingmagazine.co.uk/2007/05/cocacola_goes_m.html). Last, Coca-Cola uses viral marketing. The brand became a giant because of individuals telling their friends, family, or coworkers about how great Coke products were. Today, the company can still use viral marketing to their advantage. For instance, when Coke produces a new product, and someone on their lunch break purchases that new product, and enjoys it, they will tell others in the office about how great the new product is. This will cause others to purchase the product, and in-turn increase sales.

Wednesday, April 8, 2009

Coca-Cola's Pricing and Distribution

Pricing:

To first determine it's price, I believe Coca-Cola used a cost-based pricing system for it's Original Coke. They first designed the product, the original coke, determined the costs for the product (product costs, capital costs, and operational costs), set a price based on the cost of Coke, and finally convinced the consumers of the soda's value. From there, I think that Coke chose to use market-penetration pricing for it's price. Here, they set low initial prices in order to attract a large number of buyers quickly, to gain a large market share.

Coca-Cola uses the following pricing strategies for Original Coke:
  • Coca-Cola uses the psychological pricing strategy for their Original Coke. For instance, on April 8, the price of a 2-liter bottle of Original Coke was $2.49 (http://shop.netgrocer.com/shop.aspx?&sid=28580561&sid_guid=93f0e5bc-1c27-4eb6-a3dd-e8fd84d5ae82&strid=2D462&sc=wwwNG_D1A024EE&strtab=Grocery&catL0=570&catL1=-1&catL2=-1&catL3=-1&HasProducts=0&ForceMenu=1&shopurl=browse.aspx&ns=1). They set the price to end in a 9, because this makes customers think the price is less than $2.50, to appeal to the customer.
  • Coke also uses the promotional pricing strategy. In store that cell Coca-Cola, prices are often temporarily priced below the list price to increase short-run sales. It gives the product a sense of urgency and customers purchase the product because of the lower price.
  • Coke uses the segmented pricing strategy for its Original Coke. For instance, Coca-Cola offers liter bottles, 6-pack cans, 6-pack bottles, and 12-pack cans of the same product, all for seperate prices. By their product in different sizes and at different costs, they get to increase their revenue, because there is not much difference in the costs required to produce the products.
  • Coke also uses the international pricing strategy. For instance, the price of a 2-liter bottle of Coke in the United States is different from the price of the same product in China. This has to do with the difference in economic conditions, competitive situations, and laws.

I think Coca-Cola's pricing strategy is working well. Based on financial reports (http://www.thecoca-colacompany.com/presscenter/earnings04212004.html), Coca-Cola has increased profits and income, which means that customers are purchasing more of the products, and because of this, seem to be generally satisfied with the pricing. If they were not satisfied, they would choose another brand over Coca-Cola.

Distribution:

Coca-Cola has a strong distribution system. It's shelf-space is extensive, giving it an advantage over much competition. Along with having wide shelf-space, Coca-Cola also has intensive distribution. Coke is found in as many stores as possible. Coca-Cola is available to consumers when and where they want them, giving Coke maximum brand exposure. This means that Coke also has many marketing intermediaries involved in the process of delivering a superior product to consumers. For this reason, inventory management and good dealer relationships are difficult to maintain. I believe that this form of distribution works well for Coca-Cola. Coke's brand is so large, that they would be forced to downsize if they wanted a more close-knit distribution system. Also, they would not be able to enjoy such extensive shelf-space and brand exposure.

Coca-Cola has such an expansive distribution system, that the company is beginning to formulate ways how the company can do more positive things with it's system. Coca-Cola is beginning to use part of its large distribution system to carry life-saving medicines to parts of Africa. More information about the project can be found at: http://www.worldchanging.com/archives/008319.html