Coca-Cola and Pepsi-Cola Companies’ Marketing

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Executive Summary

Since the advent of soft drink industry in United States, the business has expanded to other parts of the world. Today, varieties of soft drinks are circulating in the market. The major companies in this industry are Coca-Cola and Pepsi-Cola. These companies produce a variety of soft drinks ranging from energy drinks to diet drinks. The current diet drinks in the market include Diet Coke and Diet Pepsi that are manufactured by Coca-Cola Company and Pepsi-Cola Company respectively. The two drinks do not contain sugar and were manufactured to cater to a market segment that comprises diabetic and health-conscious markets. The two companies depend on experienced employees, finance, and brand names as their strengths in competing for market share. However, complacency by the two companies has hampered their effective exploitation of the market.

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The incorporation of technology in the production and promotion process is helping the companies cut down on production costs while at the same time increasing their efficiency. Apart from the current restriction on sales of carbonated drinks in schools, the industry has limited restrictions giving the companies an ample environment for running their businesses.

The companies’ customers are sensitive to brands and their health. Consequently, the companies ensure that they use a constant production formula for their specific drinks across the globe. Generally, the companies have segmented their markets based on their taste and preference. Diet Coke and Diet Pepsi were manufactured to cater to a market segment comprising of diabetic and health-mindful customers. Consumer needs take the first priority when it comes to manufacturing of the soft drinks. To effectively reach their customers, the companies used convenience stores, retail stores, and petrol stations. The Internet has helped companies effectively promote their products. The industry’s future is promising as there are numerous potential markets that the companies have not yet exploited. It is therefore the responsibility of these companies to conduct a market study to identify the needs in these markets.

Investigate the idea and process of marketing

Compare various definitions of marketing

According to American Marketing Association (2007), the word marketing stands for a group of organizations, activities, and procedures aimed at developing, distributing, and swapping products and services that have value for society, partners, and customers at large. This term was invented from the initial perception of visiting the market in a bid to buy or sell goods and services. The American Marketing Association emphasizes the need for marketing to add value to the customer. The association does not consider the management process to play a vital role in improving the marketing process of an organization.

On the other hand, Chartered Institute of Marketing perceives marketing as the management practices that are vital for recognizing, predicting and satisfying clients’ needs profitably. Unlike the American Marketing Association, Chartered Institute of Marketing does not emphasize on the need of ensuring that the marketing process add value to customers. Instead, the institute emphasize on making profit out of the process.

Kottler, Gary, Wong and Saunders (2008), defines marketing as the process through which organizations draw customer attention to goods and services. Through marketing, organizations come up with sales strategies, business development and communication. Consequently, marketing is a comprehensive practice that helps companies nurture strong relationships with customers as well as ensure that they have added value not only to themselves but also to customers. Just as the American Marketing Association, Kottler et.al emphasize on the need for a marketing process to add value to an organization as well as customers.

identify the main characteristics of a marketing oriented organization

A market oriented organization is one that put more emphasize on customer needs when manufacturing and selling its products or services. There are numerous characteristics that distinguish a marketing oriented organization from other organizations. One of these characteristics is that the organization conducts a thorough market analysis to identify customer needs and wants. In addition, the organization conduct research and development to ensure that they have developed products that best satisfy customer needs. The organization decides on the usefulness of the products or services to customers. A marketing oriented organization put more emphasis on its distribution process. This is to ensure that it avails its products to customers at the right place and time.

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For Coca-Cola and Pepsi-Cola companies, they conduct thorough market research to identify the taste and preference of their different market segments. This makes them ensure that they have come up with products that best satisfy the needs of the different market segments. To ensure that their products reach the market on time, the two companies look for various distribution channels as well as franchisees.

explain the various elements of the marketing concept

There are numerous elements of marketing concept that Coca- Cola and Pepsi-Cola Companies employ to help the attract more customers and increase their sales volume. These include customer orientation, competitor orientation and inter-functional co-ordination. The two companies understand the need of ensuring that they effectively understand their target markets. This is to ensure that they not only increase their sales volume but they have also come up with products that effectively satisfy their customers. To achieve this, the two companies have come up with varied soft drinks for different target markets. It is after they realized that there was a section of the customers that was conscious of its health and hence could not use the available soft drinks that the two companies resolved to come up with Diet Coke and Pepsi Diet respectively. The companies conduct regular customer analysis to understand how their products add value to them. In addition, they forecast the future changes in customer value and look for strategies to ensure that the products they produce are aligned with these changes.

It is imperative that every company expediently analyze its current and potential competitors. This is to identify some of the strategies used by these competitors in meeting customer needs. It is through this strategy that a company can be capable of identifying some of its short-lived capabilities as well as the strategies devised by its rivals. Coca-Cola and Pepsi-Cola companies have been found to suffer from complacency. The two companies have dominated the market for a long time. This has led to the management in the two companies developing a perception that no incoming companies can be able to overthrow them from the soft drinks industry. As a result, the two companies do not emphasize on analyzing their rival competitors. In stead, the two companies analyze one another as they believe they are the only companies competing in the industry. This has given companies that once concentrated on manufacture and distribution of mineral water an opportunity to gradually creep into the market and acquire a market share. With time, Coca-Cola and Pepsi-Cola companies will be forced to share the market with these emerging companies.

The success of any organization depends on a good coordination between the different departments. Despite an organization laying down a strong marketing plan, it can not achieve its objectives if there is poor coordination between its different employees. It with this respect that Coca-Cola and Pepsi-Cola companies have ensured that have acquired the most qualified workforce and integrated it appropriately. As they have been in soft drinks industry for a long time, the two companies know how to gather the requisite physical resources and exploit them in meeting customer needs.

Identify and assess the benefits and costs of a marketing approach

There are varied benefits that companies accrue from using marketing approach. These include increase in organizational profit, achievement of organizational long-term goals, improvement of customer loyalty and improvement of organizational brand. On the other hand, the company incurs cost with respect to finance and time.

Through market research and analysis, Pepsi-Cola and Coca-Cola companies are able to identify the different needs for their varied market segments. This helps them come up with different brands that best meet the customers’ needs for the different segments. It is this factor that makes the two companies make significant sales hence increasing their profit. By ensuring that they have developed products that meet customer needs, the two companies do not only benefit from increased profit but they also win customers’ trust thus making them loyal to them. Most customers wish to be associated with the companies as they believe that they manufacture quality products.

Marketing approach has helped the two companies achieve their long term goals one of them being to capture the soft drinks industry. Coca-Cola and Pepsi-Cola companies have been able to expand their operations to varied countries across the globe. This has helped them capture the soft drinks market in most of the countries. By manufacturing products that meet the needs of varied customers, customers have developed a perception that the two companies are conscious of their needs. This has helped the companies develop and maintain good reputations in the market.

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Despite the numerous benefits accrued from marketing approach, the two companied have been forced to heavily invest in the approach. It is hard for the two companies to effectively use the marketing approach without them having qualified employees. Consequently, the two companies have invested in acquiring and retaining qualified employees to help them achieve their goals. Besides, marketing approach require organizations to conduct thorough market analysis so as to manufacture their products based on the identified customer needs. This has cost the two companies with respect to time and resources used in conducting market analysis.

Explore the concepts of segmentation, targeting and positioning

Identify and explain macro & micro environmental factors which influence marketing decisions

Political factors

Soft drinks industry is one of the industries with limited trade restrictions. This has helped the companies develop a variety of soft drinks to cater for its different customers. One of the trade restrictions affecting this industry is with respect to ingredients and preservatives used in manufacturing the products. Companies that manufacture sweetening products have restricted against their products being mixed with those from other companies. Consequently, companies in this industry have bee forced to use sweeteners from one company. In addition, these companies are pressurized by their main suppliers to use a particular ingredient in manufacturing their soft drinks. For instance, pressure from Wal-Mart led to Coca-Cola using Splenda sweetener in manufacturing its Diet Coke (AllBusiness.com, Inc. 2005). Today, different schools and companies are imposing restrictions on sales of carbonated soft drinks. This is due to the claims that these drinks are contributing to increase in the rate of children suffering from obesity.

Economic Factors

Globalization coupled with economic growth in most parts of the world has created a wider market for the industry. Currently, most of the people have good and reliable sources of income making it possible for them to afford buying the soft drinks. Despite the inflation rate that had been caused by recent economic crisis, economies of most countries have started stabilizing. This implies that rate of purchasing diet drinks in these countries is expected to rise with time thus potential markets for the companies.

Social Factors

With time, people are valuing their health. As a result, they are switching from using products with high sugar content to products with low sugar contents. It is with this respect that companies in soft drinks industry have embarked on manufacturing diet drinks with low sugar content. Different age brackets use different types of soft drinks. For instance, older people have been found to be strongly attached to one variety of the drinks while the younger generation tries different varieties. This has guaranteed the companies dealing in this industry continued sales of their old and new products.

Technological factors

Technology has significantly helped in improving production rate in soft drink industry. Initially, the companies used traditional methods of mixing their sweeteners. This took them a lot of time before the mixtures dissolved. Introduction of PDX 25 in the industry has led to rate of mixing sweeteners being improved. For instance, it was difficult to mix aspartame and thickening compounds without them leaving some scum on processor walls (Mercer 2005). Introduction of this technology in the industry has helped in eliminating this problem as well as saving the amount of energy consumed in the industry. In future, production cost in the industry is expected to go down leading to the companies making good profit.

Since the two companies have for a long time dominated the soft drinks industry, they have been able to have some influence over suppliers’ bargaining power. They manufacture quality products thus transferring the cost to customers. Generally, the customers are willing to purchase their products despite them being offered at a higher cost as they believe that they are of superior quality.

propose segmentation criteria to be used for two products in different markets

Availability of different customers in soft drink industry with varied tastes and preferences has led to companies coming up with market segmentations. Different diet drinks have been manufactured to cater for needs of different market segments. Diet Coke was manufactured to cater for diabetic people as well as those who are health conscious. With time, customers started drifting from using Coca-Cola soft drinks due to them having a lot of sugar. To counter this, the company came up with Diet Coke that had no sugar. This helped the company retain its customers. Initially, the company came up with Tab that targeted women (Jackson 2009). Finally the company decided to come up with diet drink that would cater for the entire family. This is how Diet Coke came into being.

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Conversely, Pepsi-Cola came up with Diet Pepsi as a way of catering for a market segment that required a drink that had low sugar content and did not have a specific preference with respect to diet or image. This group comprised of customers who were health minded.

Outline the factors which influence the choice of targeting strategy

Two factors play significant roles in determining the targeting strategy to be employed by any organization. These are the attractiveness of the target market and the stability of the target market. For an organization to decide to the approach to use in targeting a specific market, it is imperative that it conducts a thorough market analysis so as to ascertain the trend in market growth, the current and potential competition in the target market, the possibility of making substantial sales in the target market as well as to come up with a projection of the market share the company is likely to get after venturing into the market. Coca-Cola Company understands that targeting a wider range of market may not help it increase its profit due to stiff competition that is likely to be present (Cateora & Graham 2007). Consequently, the company develops its products targeting a small segment of the market. This is what is has done with Diet Coke. The company aimed at addressing the needs of customers who were diabetic and those that were health conscious.

On the other hand, Pepsi-Cola uses the same strategy. The company has realized that targeting a wide range of market may lead to it not making significant sales. This is the reason that has made the company target the young generation as its main segment.

Apart from the market attractiveness, market suitability is another factor that determines the choice of targeting strategy. Before an organization come up with targeting strategies it has to ensure that the target market will help it achieve its objectives, will make use of its available resources as well as determine the repercussions of venturing into that market.

Explain how buyer behavior affects marketing activities in two different buying situations

As the two companies deal with soft drinks, there is no clear distinction between their customers. The two companies deal with customers that exhibit similar characteristics. Basically, most of the customers who buy from these companies are health conscious. As most of the soft drinks contain sugar, these consumers are gradually shifting to use of bottled water. This is the major reason why the market for soft drinks is going down. Diet coke and Diet Pepsi were produced as a way of countering this. With time, most of the consumers who cared about gaining weight have become older. Today, these people no longer care about their weight. As a result, they have stopped using diet drinks greatly affecting the performance of these drinks in the market.

Customers in soft drink industry are brand-sensitive. They significantly incorporate brand in their decision making process. On discovering that the original brand of a specific soft drink has been changed, these customers may end up declining to use the new product. This was evident when Coca-Cola decided to change the initial formula used to manufacture Coke. To these customers, the company’s brand does not only mean a soft drink (Golan, Karp & Perloff 1999). Rather, they embrace the brand as a culture that they always like being associated with. According to these customers, changing the brand drastically affects product-differentiation as well as the flavor. This is not received well by customers who are strongly attached to the product.

A change in taste and preference by most consumers has led to drastic fall in the market share covered by the diet drinks. In 1990, the drinks accounted for thirty percent of the total market covered by soft drinks. As more consumers become health conscious, the market for diet drinks has fallen to twenty four percent. Of the total market share for diet drinks, Coca-Cola owns between 37% and 43% while Pepsi-Cola owns between 27% and 33%. The rest is owned by other companies that have ventured into this industry.

In its effort to reach its market, Coca-Cola employs the strategy of product differentiation. For its Diet Coke, the company targets all sorts of customers including those that are health conscious. To ensure that it has catered for all consumers, the company has come up with a variety of Diet Cokes (Tanner 2010). The company has Diet Cokes with and without caffeine. This has helped the company segment its market into one that require caffeine and one that do not prefer caffeine. Basically, the company targets mostly the older generation. Management in Coca-Cola Company believes that the older generation has a high tendency of being attached to a specific brand. To them, the younger generation likes being adventurers thus tending to use every new brand released in the market.

In its side, Pepsi-Cola segments its market based on lifestyle. The company believes in focusing on core market rather than the entire market. The company believes that the younger generation has high propensity of trying a different product from that being used by older generation. With grater percentage of the older generation being attached to Diet Coke, the company knew that it had a high chance of winning loyalty of the younger generation. Consequently, the company targeted them. This significantly helped the company increase its market share.

Identify and analyze the individual elements of the extended marketing mix

Describe how products are developed to sustain competitive advantage

In producing their diet drinks, the two companies have been sensitive to customer demands. The different needs by the customers have led to the companies coming up with a variety of diet drinks. Currently, there are Diet Coke and Diet Pepsi that contain caffeine while others do not contain caffeine. This is in bid to ensure that they have captured the entire market. Both the Diet Coke and Diet Pepsi have been developed with ingredients that contain limited amount of sugar. This is in line with the demand by some consumers to have diet drinks with low amount of sugar.

explain how distribution is arranged to provide customer convenience

To effectively reach the market, the two companies employ similar distribution methods. Diet Coke and Diet Pepsi are sold in retail stores, petrol stations as well as in convenient stores. Besides, there are numerous vending machines in hospitals and schools for distributing the drinks. Through these distribution channels, the companies are able to reach all their target customers.

Explain how prices are set to reflect an organization’s objectives and market conditions

Generally, Coca-Cola products are sold through retail stores, in petrol stations and in convenient stores. Hence, prices of the products are set by these stores. In most cases, Coca-Cola products are sold at a fixed price by convenient stores and petrol station owners. There are instances of the products being sold at a competitive-based pricing method. At such instances, the product prices are set based on those of their rival competitors (Berrera 2008). In addition, the company uses psychological pricing strategy to lure customers into buying its drinks.

Competition waged by Coca-Cola Company in soft drinks market leads to Pepsi-Cola opting for a competitive based pricing strategy. To make substantial sales, the company sets prices of its different products based on the current prices of substitute products from rival companies. Hence, on identifying that Coca-Cola has lowered prices of its products; Pepsi-Cola takes the step to lower its prices also so as to retain its market share.

Illustrate how promotional activity is integrated to achieve marketing objectives

In bid to attract and win customer loyalty, companies in soft drink industry use different promotional strategies. Pepsi-Cola came up with a strong slogan that helped it increase the sales volume of its Diet Pepsi. For instance, in bid to effectively compete with Coca-Cola Company, Pepsi-Cola came up with the slogan “You’re in the Pepsi Generation.” This helped the company greatly capture the market by luring the younger generation into using its diet drinks. On the other hand, Coca-Cola Company has been known for using product positioning and differentiation in competing for market (Behera 2010). The two companies have also employed different channels in advertising their products. For instance, it is very common to find their advertisements in social sites such as Facebook, twitter and MySpace. These promotion strategies have helped the companies create brand awareness to their different market segments.

Analyze the additional elements of the extended marketing mix

People

Coca-Cola and Pepsi-Cola companies are sensitive to their customers. Consumers’ taste and preference makes the two companies conduct cross training of their employees so as to ensure that they come up with a uniform product across the globe. The companies understand that the success of their brand s lies in the hands of their employees. Consequently, they regularly conduct employee development and training to equip them with the necessary skills. The lesson learnt after Coca-Cola changed the formula of producing Coke led to the two companies emphasizing on the quality and consistency in manufacturing their products.

Process

The incidence of customers declining to use Coca-Cola drinks due to change of formula of manufacturing them acted as a good lesson the companies. Today, Coca-Cola ensures that it has a uniform formula for manufacturing all its products across the globe. On the other hand, Pepsi-Cola relied on barter system in distributing its products to Eastern Europe. The strategy proved unsuccessful making the company look for alternative strategies. In response to the call for curbing the spread of diabetes in the world, the two companies decided to come up with products that have low sugar contents (Johnson 2006). It is from this move that Diet Coke and Diet Pepsi were manufactured.

Physical evidence

In distributing their products, the two companies use different strategies. They have come up with pamphlets that educate the public about the benefits accrued from using their products. This has helped customers make informed decision when deciding on the product to buy. Desire by some consumers to use diet drinks with low sugar content led to the company coming up with a variety of brands (Johnson 2006). Te companies went further to educating the public about the differences in their drinks thus helping them buy the right drink. In addition, they use different advertisement techniques to inform the customers on where to get the products and their nutrient contents.

Apply the extended marketing mix to different marketing segments and contexts

Recommend marketing mixes for two different segments in consumer markets

For Coca-Cola to effectively increase its market share among the older generation, it has to invest heavily in people and physical evidence. The company has to ensure that its employees have the required skills to manufacture quality soft drinks. In addition, it has to ensure that it has thoroughly educated the target market on some of the changes that have been made to its brand and the benefits of those changes to consumers. This is the ultimate way through which the company will be able to attract more customers to using the Diet Coke.

Pepsi-Cola on the other hand has no option but to invest in promotion. Despite its slogan helping it effectively draw the young generation; it has to ensure that it has use channels such as mobile phones and social sites to inform its target market about the product.

Explain the differences in marketing products and services to organizations rather than consumers

There are some significant differences that arise when marketing products and services to organizations compared to selling to customers. One of the differences is with respect to promotion. In most cases, organizations do not heavily emphasize on product or service promotion. It is hard for a company to win trust from an organization by using a mere promotional strategy (Cateora & Graham 2007). On the other hand, promotion significantly helps an organization win consumers’ trust.

Unlike selling products to customers that require an organization to use different channels of distribution based on the nature of the target market, selling products to organization does not require intermediate parties in distribution of products or services. The company can sell direct to the respective organizations.

Give explanations on how and why global marketing differs from home marketing

Both domestic and international marketing share some characteristics. These are features such as conduction of market analysis to ensure that the manufactured products meet all customer needs. Nevertheless, international marketing is accompanied by numerous challenges compared to local marketing. For international marketing, one is confronted with different legal requirements as well as consumers with different tastes and preferences (Bothma 2009). This requires an organization to conduct a more comprehensive market analysis so as to ensure that it complies with the necessary regulations.

Reference List

AllBusiness.com, Inc., 2005. Leading soft drink companies consider voluntary restrictions on sales in schools. Web.

American Marketing Association, 2007. Definition of marketing. Web.

Behera, M., 2010. The 7Ps of marketing mix. Web.

Berrera, L., 2008. Promoting and pricing strategies of Coca-Cola. Web.

Bothma, C., 2009. The difference between domestic and export marketing. Web.

Cateora, P. R. & Graham, J. L., 2007. International marketing. New York: McGraw-Hill.

Chartered Institute of Marketing, 2008. Definition of marketing. Web.

Golan, A., Karp, L. S. & Perloff, J. M., 1999. Estimating Coke and Pepsi’s price and advertising strategies. Web.

Jackson, J. B., 2009. Product positioning strategy. Web.

Johnson, B., 2006. Coca-Cola mulls over Diet Coke positioning. Web.

Kottler, P., Gary, A., Wong, V. & Saunders, J., 2008. ‘Marketing defined.’ Principles of marketing, 5th edition. New York: McGraw-Hill.

Mercer, C., 2005. New technology targets diet soft drinks makers. Web.

Tanner, S., 2010. Branding of Diet Coke. Web.

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BusinessEssay. "Coca-Cola and Pepsi-Cola Companies' Marketing." December 23, 2021. https://business-essay.com/coca-cola-and-pepsi-cola-companies-marketing/.