Coke Branding and Line Extensions
December 8, 2005 at 8:55 pm by Will Crawford in MBA | 7 CommentsThe notsocommoncents blog asks Is it too late for Coke? Worth thinking about – Coke’s market share has been declining, and their core business is purely branding. As I learned a few weeks ago, brown fizzy water is brown fizzy water, regardless of whether or not it’s in a Pepsi bottle or a Coke bottle. After all, if there was a real difference restaurants would serve both. I’ve yet to find one that does. The company needs to get the buzz back.
However, the Coca Cola Company has seen a success lately, in Coca Cola Zero, which may turn out to be a textbook example of how to get a brand extension right. I haven’t actually seen the sales numbers, but by retaining the Coca Cola name they created a drink that consumers associate with the core product, rather than with Diet Coke. My highly unscientific survey, based on the contents of the soda machine on the third floor of the MIT Sloan School of Management, shows Coca Cola gaining share at the expense of Diet Coke.
Anyway you look at it, this is not a bad thing. My local Star Market does not discount Coca Cola Zero the same way they discount Diet Coke. Since I started drinking it, I’ve been spending more, so somewhere in the value chain margins have gone up. This is true for converts from Coca Cola, too. Actual new sales (from people who didn’t like Diet Coke and didn’t like the calories in regular Coca Cola, and brand-switchers) are gravy.
This is all a bit speculative since I don’t actually have any numbers, but I there are two fundamental lessons here. First, extend your brand into areas that make logical sense. Second, cannibalizing your own sales is a good thing – if you can shift the consumers to something with a higher margin.
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I’m not a diet drink – drinker. But I’ll have to agree with you here. We’ve tackled the Coke Zero issue once before I’ll have to admit that they got this one right as far as product design. Where they are lacking is execution.
First if Zero is the new Diet (as they’ve come out with “Zero” variations of their other products) they could have chosen a better name, Secondly, they shouldn’t have introduced additional diet drinks (Such as Diet Coke with Splenda) during the same timetable as Coke Zero, and lastly if Coke Zero is truly the better product and the future of the Coke Brand they should begin phasing out the inferior Diet Coke. You can’t exactly convince restaraunt owners (And fountain machine owners) to stock two different Diet Coke products, so go with the better of the two, and relegate Diet Coke to grocery store aisles.
Comment by Mikal Lewis — December 8, 2005 #
I certainly agree on the Diet Coke with Splenda point. That was a product decision that I just can’t figure out, although an uneducated guess suggests that there are two different teams working on line extensions, and they’re just not coordinated.
I rather like the “Zero” name, though. It’s a bit risky, but it’s fairly descriptive without being tedious. It also communicates the value proposition without being overtly a “diet” drink. “Diet” is at best a neutral term for the consumer, once they understand the product attribute, and for some people it’s a negative–associated, at best, with an unpleasant chemical taste.
Comment by Will Crawford — December 8, 2005 #
I agree with your assessment of Coca Cola Zero. We just took our marketing exam on this stuff and my brain is burnt out, so I have no further commentary.
Comment by Jon — December 11, 2005 #
One more thing – there is no way that they’ll ever phase out Diet Coke. Many MANY people I know drink Diet Coke and ONLY Diet Coke. They will not touch the Diet Coke with Splenda or regular Coke or anything else. Phasing out Diet Coke would be a bigger fiasco for Coca Cola than New Coke was way back when.
Comment by Jon — December 11, 2005 #
But how many of those “Diet Coke Only” drinkers will knuckle under and have a Diet Pepsi when that’s all that’s in the soda fountain? I won’t buy Diet Pepsi in the supermarket, and I won’t buy it at a soda machine. But when it’s all that’s on the catering table, I’ll drink it rather than go without.
But I agree that taking Diet Coke off the market would be a rather bad idea. Yes, it keeps the options consistent for restaurants, but as Jon points out the brand is so well established that full (or majority) conversion to some other product would be pretty close to impossible.
Comment by Will Crawford — December 11, 2005 #
[...] William Crawford of The Integrative Stream writes about Coca-Cola’s branding. [...]
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Then I raise another question. Why spend the dollars developing a new “Diet” brand in Coca-Cola Zero, Sprite Zero, etc. if its a dead in brand? For temporary sales? This is why my original assesment was that Coke Zero is dead end, because their line-up is way too muddled.
And if a product is superior, there is nothing wrong with replacing the Diet Coke brand, or any other brand, with a superior product. I’d be interested to view the Diet Coke numbers but my bet would be that the sales are decreasing, if that is the case the company would be hurt more by inaction than by a well executed phase out. And should Coke replace Diet Coke (which I only think is the best option if its clear that Coke Zero is the superior product), I’m not suggesting getting rid of it, just placing it as a 2-Liter brand and not a fountain soda brand.
Forward thinking and innovative companies are the ones which can make the tough decisions and read the facts without the emotional bias. Often its best to replace your greatest product with a greater one.
Comment by Mikal Lewis — December 13, 2005 #