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Coca Cola Goes Green; The Launch of Coke Life
In June 2013, The Coca-Cola Company (TCCC) launched Coke Life, a naturally sweetened but sugar reduced carbonated soft drink. Coke Life complemented TCCC’s established product line consisting of Coca-Cola Classic, Diet Coke, and Coke Zero. Coke Life substituted a portion of the sugar component with stevia leaf extract and contained 35 per cent less sugar than Coca-Cola Classic. TCCC claimed that “Coke Life is for adults looking for a great tasting Coke [one with] fewer kilojoules and [that is] sweetened from natural sources”. Affected by government interventions, such as the implementation of special taxes and warning labels, the consumptions of soft drinks had slowed down significantly, which had cause leading soft drink manufacturers to introduce “green” product modifications of their traditional beverages. When TCCC launched Coke Life, the market for carbonated soft drinks was highly competitive and was shrinking in part due to concerns over soft drinks contributing to obesity and type 2 diabetes. Was Coke Life likely to be successful? Or was it simply a “greenwashed” product in a highly segmented market?
The key objectives of this case are to comprehend the impact of changing consumer behavior on the financial performance of a company; to understand the concepts and importance of market segmentation, positioning, and branding; to analyze value propositions and value creation; to critically evaluate marketing decisions from a financial and an ethical perspective; and to critically discuss the role of governmental policy making in order to intervene in worrying consumer behaviour.
Using the case Analysis Method you are to consider the following factors (Students should choose those that they believe are most important)
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Discussions regarding the Impact of Changing Consumer Behavior on Companies
Consumer behavior is an extremely dynamic concept and as explained by Osborne (2011), it keeps on changing and varying continuously because of innovation and changing factors related to the buyers. Hence, one of the most important things that companies need to change in accordance with such changing behavior is their products and services. The decision making theory of consumer behavior suggests that consumers first establish their needs and then evaluate the existing products and services based on their ability to fulfill their needs before making the final selection (Darley et al 2010). It is thus necessary for companies to deliver products and services that cater to these needs and as behavior of consumers keeps changing; the companies are also required to alter their offerings to cater to their changing needs. The adopted strategy of introducing a new product, Coke Life by TCC was also an outcome of changing consumer behavior. The study of the global soft drink market as given in the case study demonstrates that the sales of carbonated soft drinks (CSDs) decreased in the US in 2014, whereas the sales of non-alcoholic ready-to-drink (NARTD) drinks increased (Koch, 2016). Fletcher et al (2010) have also supported the discussions presented by Koch (2016) that increasing obesity and scientific research establishing negative health impacts of carbonated drinks has led to lower consumption of carbonated drinks across the world. Tiffin et al (2015) also argue that purchase behavior of consumers in beverage and soft drinks industry is continuously changing as consumers are becoming health conscious and hence prefer sugar-free and low calorie drinks as compared to the regular drinks. Hence, the introduction of Coke Life by TCC was a response to the changing consumer behavior and it can be established that changing consumer behavior does has a significant impact on products and services offered by a firm.
It is however not only the products and services of companies that change, but even the segmentation, targeting and positioning of companies tend to change with changes in consumer behavior. Gunter and Furnham (2014) explain that the STP (segmentation, targeting and positioning) process of any firm is based on the attractiveness of the target market for the firm so that its sales and revenues can be increased massively and hence as the behavior of consumers change, the attractiveness of different groups of customers may also change. It can be hence said that the companies must change their STP strategies and processes according to changing needs of customers so that the marketing objectives are met. Kotler et al (2015) also discuss that STP is the first stage of developing a marketing plan and hence companies are required to understand their customers, their feelings and environment before developing these strategies, which suggests a strong impact of changing consumer behavior on the STP and branding strategies of a given firm.
The case study of Coke Life also demonstrates the same. It has been found that the target market segment for Coke Life was completely different from that of TCC’s earlier products. The original product, i.e. Coke Classic was targeted at customers who were taste-oriented, whereas the bottled water was targeted at bottled water products. Discussions by LaTour et al (2010) reveal that Coca Cola used to segment its market based on age of consumers and targeted younger consumers because they are more likely to consume soft drinks on a regular basis. However, the discussions by Loudon and Simpson (2015) revel that with the changing needs and concerns of consumers, the segmentation has also changed. TCC now segments its market based on health and taste preference of consumers. The marketing operations adopted by it for Coke Life also seem to demonstrate change in its targeting strategies. The company instead of introducing Coke Life first in the developed countries, introduced in Argentina. This can be attributed to the fact that the sales of soft drinks went down in the US by 1% (Koch, 2016). Also, it has been established by World Atlas (2016) that Argentina is among the top consumers of soft drinks in the world. Hence, changes in the attractiveness of different markets due to changing consumer behavior led to changes in market targeting strategies of the firm.
TCC even adopted differential positioning and branding strategies for Coke Life. According to the discussions by Yeon Kim and Chung (2011), an important aspect of consumer behavior is the way products are used and since the positioning and branding strategies of a brand are required to motivate consumers to purchase it, it is important for companies to change their branding and positioning strategies with consumer behavior. Though it can be argued that the actual usage and application of a given product would remain the same irrespective of its positioning and branding, Vinerean et al (2013) argue that it is the perceived usage that matters. Vinerean et al (2013) explain that positioning of every brand affects its perceived application and usage by consumers and hence when the consumer behavior changes, the needs of consumers also change and thus the companies must alter their positioning to make sure that it communicates and conveys the desired usage to target buyers.
TCC also positioned its Coke Life in a different way to enhance and effectively communicate its perceived usage. It positioned itself as a drink that is meant for adult consumers who prefer consuming Coke that tastes great but has fewer calories. This positioning and its green branding were completely different from its earlier products of Classic Coke and Coke Zero. It has been established by researchers Yazicioglu and Borak (2012) that people still prefer the taste of original Coca Cola but are hesitant to consume it now because of high content of sugar, which according to recent researches, has been proven to be harmful. Thus, TCC kept this changing need of consumers in mind and positioned its product in a way that it caters to both these needs of buyers.
While these discussions establish that changing consumer behavior tends to affect the marketing strategies adopted by firms, Oliver (2014) argue that the strategies adopted by a firm also have major impacts on purchase behavior of consumers. Findings by Jani and Han (2011) who have carried out primary surveys to evaluate factors affecting consumer behavior have also established that marketing strategies adopted by the brand are extremely important in affecting the purchase behavior of consumers and hence the rationale behind companies changing their strategies based on consumer behavior thus seems questionable. This point can be hence clarified based on discussions presented by Arnold et al (2011), who argue that the change in purchase behavior of consumers affects financial performance of firms because of change in sales and it is thus crucial for brands to study these changes to incorporate them in their strategies. The data presented by Koch (2016) reveals that overall sales for TCC had dropped by almost 2.4% in 2012 and the same was attributed to the decline in demand for soft drinks around the world due to high calorie content. Although, the sales after a few months of launch of Coke Life increased by almost 4.9% for the entire trademark. It can be thus deduced that change in consumer behavior has major impact on the financial performance of a firm and every firm must devise its strategies according to the same. However, Erwin (2011) argues that companies need to provide transparent and true information to its customers to ensure that they don’t feel cheated and prefer their products.
The evaluation of the case study of Coke Life and theoretical discussions supporting it has established that consumer behavior is extremely important for decision making of a firm. Consumer behavior involves consumers to assess the available products based on their needs and perceived usage of the products and thus as this behavior changes, companies must also change their strategies to make sure that they are able to cater to these changing needs and requirements to achieve higher financial growth.
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