CPGmatters: Coca-Cola Aims to Connect With Recession-Weary Shoppers

Discussion
Aug 25, 2009
John Karolefski

By
John Karolefski

Through
a special arrangement, presented here for discussion is a summary
of a current article from the monthly e-zine, CPGmatters.

Coca-Cola
is mounting a major marketing offensive as it tries to connect
with shoppers keeping a tight grip on their purse strings in these
challenging economic times.

“We
believe these pressures are real and that they’re not going to
change quickly even if the economy does rebound,” said Diana Wallace,
the vice president of shopper marketing, speaking at a Shopper
Insights in Action conference hosted by the Institute for International
Research (IIR) in Chicago recently.

In
her presentation, Ms. Wallace listed four components of Coca-Cola’s
shopper solutions:

Occasion-Based
Approach

“This
has been a significant shift for us over the last couple of years,” said
Ms. Wallace, “but it’s a tried and true approach that has worked
in other global markets for us in tough economic times. It’s really
getting very relevant about what you offer with what shoppers are
looking for. ”

She
explained that Coca-Cola has placed a value on the occasions when
people drink beverages. It is focusing on two occasions: Chilling
Out at Home Watching TV and Eating Meals at Home.

“People
are eating at home a lot more. It’s a phenomenon which is occurring
and we don’t think it will change drastically. So that’s one of
the reasons why we’re going at this approach,” she said.

Shopper
Segment and Merchandising

“This
is something we put into the market last year and we’re fine-tuning
it this year,” she said. “Each store has a different mix of shoppers,
needs and occasions occurring. It’s the store’s shopper DNA.”

Coca-Cola
has created smaller segments and tailored solutions to each of
them. Then it merchandises against the predominant shopper cluster
within each outlet.

“This
gives us the ability to connect with shoppers at outlet levels,” she
said. “We have to segment what we’re doing. That’s how we get really
distinctive and tailored at a chain or outlet level by product.”

Bundled
Solutions

“This
has been a very important strategy for us this year and it will
be into next year in terms of how we create the most relevant and
innovative bundles out there,” she said.

She
described bundled solutions as the best combination of product,
food and beverage in stores for shoppers.

“Bundling
enables you to group things together on price points, which also
gives you a unique opportunity to begin to separate yourself out
from the everyday deep discounting that sometimes can occur in
some of our categories,” she said.

Packaging
Solutions

As
an example, she pointed to the contour two-liter bottle of Coke,
a package that lifted sales by double digits. Another new product
is the 16-oz.-99-cent “entry” package offered cold in stores.

“One
of the things that we’ve learned,” she said, “is we’ve got to think
very differently about how we talk to shoppers in store and create
various sizes and shapes, improving our messaging. Putting the
right package on those merchandising racks has been one of the
most important elements of our plan and has reaped wonderful results
for us in markets where we’ve been able to execute it.”

Discussion
questions: Which of Coca-Cola’s shopper solutions – Occasion-Based
Approach, Shopper Segment and Merchandising, Bundled Solutions,
Packaging Solutions – will do most to boost sales in the current
climate? Which will likely prove least effective or most challenging?

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10 Comments on "CPGmatters: Coca-Cola Aims to Connect With Recession-Weary Shoppers"


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Dr. Stephen Needel
Guest
11 years 8 months ago

My vote is for segmentation–this is Marketing 101, putting the right products in the right places.

Steve Montgomery
Guest
11 years 8 months ago

The easiest solution for Coca-Cola to implement is the Packaging Solutions because it has complete control over it. The entry level 10 oz. package for $.99 has proven to be effective because the alternative 20 oz. had been too expensive. Occasion based marketing again is something that Coca-Cola has a reasonable level of control over.

However the other two Solutions require far more effort. Bundling can be effective but requires promotional partnerships that can be difficult to manage. In my experience bundling works best when you can place these items in the bundle adjacent to each other during the promotion. Depending on the items involved that can be difficult at retail.

The customized approach of Shopper Segment and Merchandising requires a tremendous amount of analysis and to be done on a site by site basis will prove difficult to execute. Clustering stores by channel of trade and then across a limited number of demographic clusters would seem to be a more practical solution.

Anne Howe
Guest
11 years 8 months ago

I am in favor of the bundling solutions, primarily because I believe it’s time for retailers and manufacturers to get over the power struggles and work to please the shopper.

Coke is one of a handful of CPGs that invests heavily in shopper insights and knows what shoppers really want. Yes, it’s hard to cross merchandise effectively. But if it works, then do the work, please the shopper, and call it a good day at work when the same store sales rise and both parties are counting money.

Joan Treistman
Guest
11 years 8 months ago
It’s probably me in that I’m not sure I saw how the several strategies outlined by Diana Wallace of Coca Cola have been implemented. However, there were details of this tactical approach: “Coca-Cola has created smaller segments and tailored solutions to each of them. Then it merchandises against the predominant shopper cluster within each outlet.” If I understand the strategy, it is based on providing the bottle size and type that fits the wants and needs of each segment. In other words, Coke is offering the product variety that aligns with consumer usage patterns. I think this is viable and sustainable. It seems perfect for all economic situations, not limited to recessions. Given Coca Cola’s reputation for superior research, I am sure the following has been considered. I raise the point for all those who would simply follow in Coke’s footsteps. It pays to know how the segments are impacted by economic and other considerations…in the present tense. Has the segment changed in any significant way? Are their buying habits very different from the way… Read more »
Phil Rubin
Guest
11 years 8 months ago

The challenge for Coca-Cola driving incremental sales is relevance. Of all the four components they are incorporating–Occasion-Based Approach, Shopper Segment and Merchandising, Bundled Solutions, Packaging Solutions–our expectation is that shopper segment and merchandising will be their biggest leverage point.

The right merchandise in the right place for the right customers will sell. Always.

Cathy Hotka
Guest
11 years 8 months ago

OK, I’ll vote for occasion-based marketing. It’s important for product manufacturers to know why consumers are purchasing their products. Most soda purchases in grocery stores are to moms who are also shopping for dinner ingredients…it just makes sense.

Jonathan Marek
Guest
11 years 8 months ago

These are great ideas, but Coca-Cola could take them one important step further by incorporating a rigorous Test & Learn approach. For example, rather than just segmenting stores based on shopper demographics, then merchandising against pre-defined segments, testing can enable Coke to determine exactly which merchandising solutions actually work best, outlet-by-outlet. Often, this difference is worth tens of millions of dollars in pretax profit for a company the size of Coke.

Ralph Jacobson
Guest
11 years 8 months ago

As mentioned before, Coke is one of the best marketers in any industry, and in any region of the world. There are multiple best practices that CPGers as well as other companies can glean from Coke. They have the most recognized brand in the world. Among the strategies named in the article, an additional insight must be to also avoid potential future obstacles to growth, including government intervention that made lead to future legislation that may all but ban soft drinks based upon nutritional value. This is not as far fetched as it may seem.

Coke needs to ensure its viability based upon customer demands of health, wellness and nutrition and respond to perceptions that may prove otherwise. The leadership of Coke is second to none and I have the utmost confidence that they will succeed in their marketing strategies.

Tim Henderson
Guest
Tim Henderson
11 years 8 months ago

Each of the four solutions has merit, but I particularly like occasion-based schemes and shopper segmentation. That said, what’s more important here is that Coca-Cola is trying new ways to reach a changed and changing consumer. The recession changed how consumers shop and shopping behaviors will change again as consumers enter the post-recession. Smart brands stay abreast of such changes and respond with new tactics.

Bill Hanifin
Guest
11 years 8 months ago
This article begs for a follow up as I would be most interested in one example of how Coca-Cola will execute on each tactic. My guess: Occasion based approach – Print/media advertising depicting the product being enjoyed in the settings mentioned. Similar to how beer advertisers wish to connect the beverage with a favorite sporting event. Shopper Segment & Merchandising – Are the segments created by qualitative and demographic elements i.e. male 18-24? Or has Coca-Cola progressed further by tapping into data from MyCokeRewards or through data from grocers such as Kroger which are connecting shoppers to products purchased? Bundling: Is this a merchandising solution which is dependent on negotiations with store chains for product positioning in combination with complementary foods and other products, or is there something more here? Packaging: This is a sleeper that still draws the consumer eye and breaks some products out of the pack. Looking at the bottled water industry, the cold case is packed with choices and the unique packaging solutions do make the eye stop for a closer… Read more »
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