Chapter 13 – Marketing: Helping Buyers Buy
13-46
PPT 13-27
Defining the Problem or Opportunity
DEFINING the PROBLEM or
OPPORTUNITY
13-27
LO 13-3
• What’s the present situation?
• What are the alternatives?
• What information is needed?
• How should the information be
gathered?
PPT 13-28
Collecting Secondary Research Data
• Secondary Data — Existing data that has
previously been collected by sources like the
government.
COLLECTING SECONDARY
RESEARCH DATA
13-28
LO 13-3
• Secondary data incurs no
expense and is usually
easily accessible.
• Secondary data doesn’t
always provide all the
needed information for
marketers.
Secondary research is cheaper and often easier to gather than
primary research, but may be outdated.
PPT 13-29
Collecting Primary Research Data
COLLECTING PRIMARY
RESEARCH DATA
13-29
LO 13-3
• Primary Data — In-depth
information gathered by
marketers from their own
research.
• Telephone, online and
mail surveys, personal
interviews, and focus
groups are ways to collect
primary data.
Primary data are timely, but can be expensive and time-
consuming to gather.
Chapter 13 – Marketing: Helping Buyers Buy
13-47
PPT 13-30
Focus Groups
• Focus Group — A group of people who meet under
the direction of a discussion leader to communicate
opinions.
FOCUS GROUPS
13-30
LO 13-3
PPT 13-31
Analyzing the Data and Implementing
the Decision
ANALYZING the DATA and
IMPLEMENTING the DECISION
13-31
LO 13-3
• Marketers must turn data into useful information.
• Must use their analysis to plan strategies and
make recommendations.
• Finally, marketers must evaluate their actions and
determine if further research is needed.
PPT 13-32
Key Benefits of Marketing Research
KEY BENEFITS of MARKETING
RESEARCH
13-32
LO 13-3
• Analyze customer needs and satisfaction.
• Analyze current markets and opportunities.
• Analyze the effectiveness of marketing strategies.
• Analyze marketing process and tactics currently
used.
• Analyze the reasons for goal achievement or
failure.
1. This slide identifies the key benefits of marketing re-
search.
2. As discussed early in the chapter, marketing is about
understanding customers’ wants and needs. To ac-
complish this goal marketers must conduct marketing
research.
3. Ask students: How has the Internet changed the way
market research is conducted? (The Internet has
made gathering both primary and secondary infor-
mation easier and quicker. Also, information can
now be gathered via blogs and social networks.)
Chapter 13 – Marketing: Helping Buyers Buy
13-48
PPT 13-33
Ways to Find Out What Consumers
Think
• Conduct informal consumer surveys
WAYS to FIND OUT WHAT
CONSUMERS THINK
13-33
LO 13-3
• Host a customer focus
group
• Listen to competitor’s
customers
• Survey your sales force
• Become a “phantom”
customer
1. The goal of market research is to better understand
what consumers are thinking.
2. This slide addresses some of the ways that organiza-
tions can discover consumer wants and needs.
PPT 13-34
Scanning the Marketing Environment
• Environmental Scanning — The process of
identifying factors that affect marketing success.
SCANNING the MARKETING
ENVIRONMENT
13-34
LO 13-4
• Factors involved in the
environmental scan include:
– Global factors
– Technological factors
– Sociocultural factors
– Competitive factors
– Economic factors
Environmental scanning is the process of identifying factors
that affect marketing success. The environment of marketing
is changing faster than at any time in history. Companies that
don’t keep up, will fail to survive. Today’s marketing envi-
ronment is influenced by the global marketplace and the ex-
plosion of the information age. To be fully prepared, a com-
pany must recognize and understand: cultural influences;
governmental and political influences; demographic and life-
style trends; local, national, and world economic trends; the
strengths of multi-national competitors; and the influence of
technology on physical distribution.
PPT 13-35
Two is Better Than One
TWO is BETTER THAN ONE
13-35
• China is setting aside its strict one-
child policy and allowing two
children if one of the spouses is an
only child.
• Legos are far more expensive in
China and part of that is due to
distribution costs.
• By building a factory near Shanghai,
Lego hopes to take advantage of
the potential market growth and
lessen the price for families.
Chapter 13 – Marketing: Helping Buyers Buy
13-49
PPT 13-36
The Marketing Environment
The MARKETING ENVIRONMENT
13-36
LO 13-4
To effectively understand the marketing environment, it is
critical that companies continually scan the environment.
PPT 13-37
The ABCs of Marketing
The ABC’s of MARKETING
13-37
LO 13-4
• Always be customer-focused.
• Benchmark against the best firms.
• Continuously improve performance.
• Develop the best value package.
• Empower your employees.
• Focus on relationship building.
• Goal achievement is the reward.
1. This slide identifies keys to marketing success.
2. One point on this slide mentions the empowerment of
employees. Ask the students: Why is empowering
employees a key to successful marketing? (Answers
will vary, but should focus on how empowerment
should lead to greater employee motivation, creating
a more customer-focused environment.)
3. A key to marketing is understanding the organiza-
tion’s strengths and weaknesses and its ultimate cus-
tomer.
4. Once you have identified your strengths and weak-
nesses, what you really sell and to whom, and have
reviewed your communication to the target market,
you need to ensure that the message resonates with
the consumer positively. You can do that by engag-
ing in savvy public relations (newsletters, press re-
leases, etc.).
PPT 13-38
The Consumer and B2B Market
• Consumer Market — All the individuals or
households that want goods and services for
personal use and have the resources to buy them.
The CONSUMER and
B2B MARKET
13-38
LO 13-4
• Business-to-Business
(B2B) — Individuals and
organizations that buy goods
and services to use in
production or to sell, rent, or
supply to others.
The buyer’s intended end use of the product determines
whether a product is consumer or B2B.
Chapter 13 – Marketing: Helping Buyers Buy
13-50
PPT 13-39
Test Prep
TEST PREP
13-39
• What are the four steps in the marketing research
process?
• What’s environmental scanning?
• What factors are included in environmental
scanning?
1. The steps in the marketing research process are as
follows: (1) Define the problem and determine the
present situation, (2) collect the research data, (3)
analyze the research data, and (4) choose the best so-
lution and then implement it.
2. Environmental scanning is the process of identifying
factors that can affect marketing success.
3. The factors in environmental scanning include glob-
al, technological, sociocultural, competitive, and
economic influences.
PPT 13-40
Marketing to Consumers
MARKETING to CONSUMERS
13-40
LO 13-5
• The size and diversity of the consumer market
forces marketers to decide which groups they
want to serve.
• Market Segmentation — Divides the total market
into groups with similar characteristics.
• Target Marketing — Selecting which segments an
organization can serve profitably.
PPT 13-41
Segmenting the Consumer Market
SEGMENTING the
CONSUMER MARKET
13-41
LO 13-5
• Geographic Segmentation — Dividing the market
by cities, counties, states, or regions.
• Demographic Segmentation — Dividing the
market by age, income, education, and other
demographic variables.
• Psychographic Segmentation — Dividing the
market by group values, attitudes, and interests.
Chapter 13 – Marketing: Helping Buyers Buy
13-51
PPT 13-42
Segmenting the Consumer Market
SEGMENTING the
CONSUMER MARKET
13-42
LO 13-5
• Benefit Segmentation — Dividing the market
according to product benefits the customer prefers.
• Volume (Usage) Segmentation — Dividing the
market by the volume of product use.
PPT 13-43
Segmenting the Consumer Market
SEGMENTING the
CONSUMER MARKET
13-43
LO 13-5
PPT 13-44
Segmenting the Consumer Market
SEGMENTING the
CONSUMER MARKET
13-44
LO 13-5
Chapter 13 – Marketing: Helping Buyers Buy
13-52
PPT 13-45
Marketing to Small Segments
• Niche Marketing — Identifies small but profitable
market segments and designs or finds products for
them.
MARKETING to
SMALL SEGMENTS
13-45
LO 13-5
• One-to-One
Marketing— Developing
a unique mix of goods
and services for each
individual consumer.
PPT 13-46
Mass Marketing vs. Relationship
Marketing
MASS MARKETING vs.
RELATIONSHIP MARKETING
13-46
LO 13-5
• Mass Marketing —
Developing products and
promotions to please large
groups of people.
• Relationship Marketing—
Rejects the idea of mass
production and focuses toward
custom-made goods and
services for customers.
1. Mass marketing uses little market segmentation.
2. The goal of relationship marketing is to keep cus-
tomers happy by offering products that meet exact
expectations.
PPT 13-47
Keys to Successful Relationship
Marketing
KEYS to SUCCESSFUL
RELATIONSHIP MARKETING
13-47
LO 13-5
• Effective relationship marketing is built on:
– Open communication
– Consistently reliable service
– Staying in contact with customers
– Trust, honesty, and ethical behavior
– Showing that you truly care
1. Relationship marketing is all about moving away
from mass production and toward custom-made
goods and services.
2. This slide identifies the keys to successful relation-
ship marketing.
3. The goal of relationship marketing is to retain indi-
vidual customers over time by offering them new
products that meet their expectations.
4. Nike uses relationship marketing creating custom
made-shoes via NikeiD. Explore NikeiD in class at
www.nike.com to see relationship marketing in ac-
tion.
Chapter 13 – Marketing: Helping Buyers Buy
13-53
PPT 13-48
Steps in the Consumer Decision–
Making Process
STEPS in the CONSUMER
DECISION-MAKING PROCESS
13-48
LO 13-5
1. Problem recognition
2. Search for information
3. Evaluating alternatives
4. Purchase decision
5. Postpurchase evaluation
PPT 13-49
Turning Negatives to Positive
TURNING NEGATIVES to POSITIVE
13-49
• Online product reviews have changed the
consumer decision-making process.
• But the reviews are not always valid because they
could be written about the experience instead of
the product.
• Amazon hopes to correct this issue and has
started a program in which the site’s most trusted
reviewers are sent products to write about.
PPT 13-50
Key Factors in Consumer Decision
Making
KEY FACTORS in CONSUMER
DECISION-MAKING
13-50
PhotoCredit:PeterHilton
LO 13-5
• Learning
• Reference Groups
• Culture
• Subcultures
• Cognitive Dissonance
• Learning: Creates changes in consumer behavior
through experiences and information.
• Reference groups: Reference points in forming be-
liefs, attitudes, values or behaviors.
• Culture: The set of values, attitudes, and ways of do-
ing things passed from generations.
• Subculture: Values, attitudes, and ways of doing
things from belonging to a certain group.
• Cognitive dissonance: Psychological conflict that
may occur after a purchase.
Chapter 13 – Marketing: Helping Buyers Buy
13-54
PPT 13-51
Top Marketing Challenges
TOP MARKETING CHALLENGES
13-51
LO 13-5
• Marketing can be challenging in both the B2C and
B2B markets.
• Common issues are:
– Brand awareness
– Social media
– Converting leads into customers
– Budgeting
– Increasing profit
Source: Entrepreneur, www.entrepreneur.com, accessed November 2014.
PPT 13-52
Business-to-Business Market (B2B)
BUSINESS-to-BUSINESS
MARKET (B2B)
13-52
LO 13-6
• B2B marketers include:
– Manufacturers
– Wholesalers and retailers
– Hospitals, schools and charities
– Government
• Products are often sold and resold several times
before reaching final consumers.
PPT 13-53
B2B Market Differences
B2B MARKET DIFFERENCES
13-53
LO 13-6
Chapter 13 – Marketing: Helping Buyers Buy
13-55
PPT 13-54
Test Prep
TEST PREP
13-54
• Define the terms consumer market and business-
to-business market.
• Name and describe five ways to segment the
consumer market.
• What is niche marketing and how does it differ
from one-to-one marketing?
• What are four key factors that make B2B markets
different from consumer markets?
1. The consumer market consists of all the individuals
or households that want goods and services for per-
sonal consumption or use and have the resources to
buy them. Business-to–business markets consist of
all the individuals and organizations that want goods
and services to use in producing other goods and ser-
vices or to sell, rent, or supply goods to others.
2. Geographic segmentation is the process of dividing
the market by cities, counties, states, or regions. De-
mographic segmentation involves dividing the mar-
ket by age, income, education level, religion, race,
and occupation. Psychographic segmentation is the
process of dividing the market by values, attitudes,
and interests. Benefit segmentation involves deter-
mining which benefits to promote. Volume or usage
segmentation is the process of determining how your
customers purchase and use the product.
3. Niche marketing is identifying small but profitable
market segments and designing or finding products
for them. One-to-one marketing means developing a
unique mix of goods and service for each individual
customer.
4. The four key factors that make B2B markets different
from consumer markets are as follows: (1) customers
in B2B markets are relatively few as compared to
households in the consumer market, (2) B2B custom-
ers tend to be geographically centered, (3) B2B sales
tend to be direct, and (4) in the B2B marketplace
sales are based on personal selling.
Chapter 13 – Marketing: Helping Buyers Buy
13-56
lecture
links
“Consumers are statistics. Customers are people.”
Stanley Marcus
“Before you build a better mousetrap, it helps to know if there are any mice out
there.”
Mortimer B. Zuckerman
“Market research can establish beyond the shadow of a doubt that the egg is a sad
and sorry product and that it obviously will not continue to sell. Because after all,
eggs won’t stand up by themselves, they roll too easily, are too easily broken, require
special packaging, look alike, are difficult to open, won’t stack on the shelf.”
Robert Pliskin
“Your most unhappy customers are your greatest source of learning.”
Bill Gates
“It’s really hard to design products by focus groups. A lot of times, people don’t
know what they want until you show it to them.”
Steve Jobs
lecture enhancer 13-1
UPDATING THE MARKETING CONCEPT
As we noted earlier in the chapter, the marketing concept was developed in the 1950s to meet the
consumer needs of the time. Now that we’re in the 21st century, marketers have to readjust their strategies
to meet the needs of modern consumers. That means each of the elements of the marketing concept—a
consumer orientation, a service orientation, and a profit orientation—all have to be updated. Let’s explore
each of those changes next.
From Providing Customer Satisfaction to Exceeding Expectations
Marketing’s goal in the past was to provide customer satisfaction. Today, the goal of some Six
Sigma quality firms is to exceed customer expectations by providing goods and services that exactly meet
their requirements. One objective of a company’s marketing effort, therefore, is to make sure that the re-
sponse to customer wants and needs is so fast and courteous that customers are truly surprised and
pleased by the experience.
You don’t have to look far to see that most organizations haven’t yet reached the goal of meeting,
much less exceeding, customer expectations. Retail stores, government agencies, and other organizations
may still irritate customers as often as they please them. Nonetheless, global competition is forcing organ-
izations to adopt quality concepts, which means, above all, adapting organizations to customers.
Chapter 13 – Marketing: Helping Buyers Buy
13-57
Businesses have learned that employees won’t provide first-class goods and services to customers
unless they receive first–class treatment themselves. Marketers must therefore work with others in the firm,
such as human resource personnel, to help make sure that employees are pleased. In some firms, such as
IBM, employees are called internal customers to show the need to treat them well—like customers.
Benchmarking and Uniting Organizations
As we explained in Chapter 8, determining whether organizations are providing world-class ser-
vice and quality is done through competitive benchmarking. That means that companies compare their
processes and products with those of the best companies in the world to learn how to improve them. Xer-
ox Corporation, for example, has benchmarked its functions against corporate leaders such as American
Express (for billing), Ford (for manufacturing floor layout), Mary Kay Cosmetics (for warehousing and
distribution), and Florida Power & Light (for quality processes).
Manufacturers, unfortunately, cannot always exceed customer expectations on their own. They
need the cooperation of suppliers to assure customers that they are getting the finest parts. They need
close relationships with dealers to make sure that the dealers are providing fast, friendly service. We will
discuss the close relationships among marketing intermediaries in Chapter 15.
Maintaining a Profit Orientation
Marketing managers must make sure that everyone in the organization understands that the pur-
pose behind pleasing customers and uniting organizations is to ensure a profit for the firm. Using that
profit, the organization can then satisfy other stakeholders of the firm such as stockholders, environmen-
talists, and the local community.
It has been estimated that reducing by 5% the number of customers who defect—that is, who
switch from buying your products to buying another company’s—can increase profit by as much as 85%
(though this figure varies by industry). Some of that profit comes from increased purchases and some
from referrals. Thus, customer relationship management is becoming an intimate part of any organization
seeking to maximize profits.
lecture enhancer 13-2
PAT CROCE’S TEN COMMANDMENTS
Pat Croce, a minority owner and former president of the Philadelphia 76er NBA team, can be de-
scribed as the fusion of promotion and customer service. He is best known for revitalizing the failing
franchise through promotional stunts and “wanton acts of customer and employee pampering.” He once
rappelled 110 feet from the rafters of the First Union Center. He has climbed to the top of the Walt Whit-
man bridge to unfurl a 76ers banner. Since he joined the 76ers after the 1995–1996 season, the 76ers have
increased attendance by 64%.
Before coming to the 76ers, Croce used his experiences in training athletes to found Sports Physi-
cal Therapists. The 1980s fitness boom was in full swing, and Croce was able to attract well-known ath-
letes, including NBA legend Julius Erving. Ten years after he opened his first center, there were 40 stores
in 11 states.
Pat Croce’s philosophy of customer service developed during his days at SPT. A story from these
years illustrates his obsession with customer service. On his way to an executives–only meeting at SPT,
Croce stopped in a lavatory to find an overflowing towel bin, toilet paper on the floor, and clothing dan-
gling from half-closed lockers. He gathered his execs and marched them into that lavatory, where, scrub
brushes and buckets in tow, he conducted the meeting.
Chapter 13 – Marketing: Helping Buyers Buy
13-58
To communicate his philosophy to employees, he developed his “ten commandments.” He says
he wanted a “cookbook” for his employees to follow using the strength-training principle of KISS: Keep
it simple, stupid. His employees knew all 10. He had the commandments posted in every cubicle and eve-
ry office in the facility. “I wanted to make sure people used first names, that they listened, that ‘Do it
now’ was always at the forefront of their minds.” These principles came from his own life experiences. “I
put them down in a very instructive way for people to use. People need that; they need ABCs.”
Croce’s Ten Commandments with His Comments
• Every customer gets a hello and a goodbye. “It’s common courtesy. I love it when someone
says hello to me. Goodbye requires a little more caring and passion. If I make all the guards say
‘good night’ to people as they leave, they’re more likely to come back.”
• Establish a friendly, first-name basis. “I believe a name is the sweetest sound to anyone’s ear.
And if you say thank you with it, that’s all the better.”
• Listen, listen, listen. “That is really one of the secrets to my success. I learned at an early age
that opportunity sometimes knocks very softly, so you truly have to listen.”
• Communicate clearly. “It’s the back half of ‘listen, listen, listen.’ You have to communicate so
that you don’t leave any windows of miscommunication open.”
• Be neat, clean, and fit. “Everyone likes an environment conducive to business. I don’t care if it’s
bubble-gum on a seat or lying on a treatment table and there’s rain-soaked stains on a drop ceil-
ing. That kills me. We never had it.”
• Be prompt and professional. “Tardiness is a lack of discipline. I don’t think you should disre-
spect anyone’s time. Carpe diem! But it’s hard to seize the day if someone’s messing with it.”
• Be positive. “Life has a way of becoming a self-fulfilling prophecy. So think success. If you go at
something as if you can’t fail, many times you won’t. Do you know how many people said I
couldn’t get the 76ers?”
• Extend compliments. “When you feel better about yourself and the world, you’re more apt to
give an encouraging word to someone.”
• Have fun. “Most people don’t, so it’s a commandment. It’s easy to be caught up in the drudgery
of work. Try to make it fun. It’s contagious.”
• Do it now. “If you wait till tomorrow to use what you learned today, you’re two steps late.”i
lecture enhancer 13-3
SMALL BUSINESSES GOING MOBILE
In this digital age, setting up shop online is vital for most retail businesses. But having a presence
on computers alone isn’t enough anymore. As iPhones and Androids have grown in popularity, so has the
public’s interest in using their phones to shop. Big retailers are already mining the smartphone market for
a fortune. Amazon, for instance, earned more than $1 billion from phone purchases in 2009.
Translating a company’s current online presence into something suited for a smartphone isn’t dif-
ficult for large retailers with vast resources. For small businesses, however, migrating to the mobile medi-
um can be tricky. The array of devices available and lack of uniform design standards presents a chal-
lenge to Web designers, thus increasing the cost of going mobile. But as Amazon’s smartphone sales sug-
gests, making the leap from laptop to touchscreen may become essential for the survival of small retailers.
Chapter 13 – Marketing: Helping Buyers Buy
13-59
In September 2010, matters got easier for businesses hoping to break into the mobile world when
the Boulder-based company mShopper introduced the Mobile Commerce Platform, or mStore. The ser-
vice takes the guesswork out of constructing a mobile site by providing design and search engine tools
along with an analytics dashboard to track traffic and sales. The actual cash from the transaction, though,
goes straight into the retailer’s current online shopping cart in order to streamline records and retain cus-
tomer service processes. mShopper charges a licensing fee on a sliding scale ranging from $99 to $999,
depending on Web traffic. Since mShopper doesn’t get paid if its clients’ stores don’t get hits, the compa-
ny also offers a marketing system that sends out promotional texts and discounts to customers on an
mStore’s mailing list.ii
lecture enhancer 13-4
FAST FOOD’S SECRET MENU PROBLEM
Clocking in at 800 calories with 53 grams of fat and 2,430 milligrams of sodium, Burger King’s
Suicide Burger certainly lives up to its name. This outrageous creation features four patties, four slices of
cheese and loads of bacon all slathered in special sauce. The existence of this burger brings to mind many
troubling questions, not least of which is, “Why would Burger King offer such an abomination to their
customers?” Well, as strange as it may seem, they technically don’t.
The Suicide Burger is a “secret” item that people won’t see on any standard BK menu. Intrepid
customers unburdened by regard for a sensible diet devise these outrageous offerings and spread aware-
ness of them through social media. Other adventurous eaters then head to their local fast food joint to re-
quest these concoctions themselves, often to the staff’s confusion. Some managers keep track of how to
prepare and price the most common secret items. If that course of action fails, though, the customer must
simply explain to the person at the register that yes, they would like a McChicken patty added to their Big
Mac, please and thanks. That’s called a McGangBang, by the way, a name that certainly did not come
from the McDonald’s marketing department.
Brand management may be the least of the industry’s worries when it comes to secret menus,
however. Laws in several states require fast food restaurants to display the calorie counts of their listed
menu offerings. Although secret items and limited-time offerings are exempt from these laws, as time
passes and people talk about things like the Suicide Burger then they will cease to be “secret” anymore. If
these items become common knowledge to customers, fast food chains may be required to post them on
their standard menus along with calorie counts. Just imagine walking into a Chipotle and seeing the
Quesarito—a burrito wrapped in a cheese quesadilla—proudly listed on the board next to an addendum
reading “1,500 calories.” At that point, most companies would likely take the logical course of action and
simply stop offering these monstrosities masquerading as food to the public.iii
lecture enhancer 13-5
BLACK FRIDAY SALES FALL
With another Black Friday in the books, the 2014 holiday shopping season is officially underway.
Just like in recent years, though, many stores didn’t wait until the weekend to get the deals started. Com-
panies like Macy’s, Best Buy and Walmart all opened on Thanksgiving in the hopes of nabbing some ear-
ly bird sales before their competitors. However, another group of retailers took an opposite tactic: Costco,
Home Depot, and specialty stores like GameStop and DSW made a point to announce they’d be staying
closed on Turkey Day.
Chapter 13 – Marketing: Helping Buyers Buy
13-60
The move surprised some analysts who wondered if it was necessary for these companies to take
a stand against such a big sales day. But it’s not just retailers who seem to be getting tired of the ever-
increasing hoopla surrounding Black Friday. This year customers didn’t take to the shopping holiday like
in the past, with brick-and-mortar store sales dropping 11 percent from $57.4 billion to $50.9 billion.
Online sales similarly dropped 10.2 percent while consumers also spent less cash across the board. Some
experts blame the decline on the fact that the recession is still a very real thing for many consumers. Other
analysts contradict this assumption, claiming that people don’t need to mob stores hunting for bargains
with the economy back on the upswing.
Then again, consumers could simply be getting sick of watching news reports of people trampling
one another in a single-minded search for deals. If Black Friday continues to fall out of fashion in this
way, then it could have crippling repercussions on much of the retail industry. That’s why some have
suggested importing the concept of another shopping holiday that has taken China by storm. Started by a
group of students in the 1990s as a celebration of their bachelorhood, Singles Day on November 11 has
morphed into one of the biggest shopping events of the year. The online retailer Alibaba caught on to the
unofficial holiday in 2009, offering deep discounts in an effort to get singles to treat themselves to some
deals. The idea caught on like wildfire, with this year’s sales of $9.3 billion eclipsing last year’s haul of
$5.7 billion. However, retail experts doubt the concept could be easily imported to the U.S., if for no other
reason than November 11 is Veteran’s Day.iv
lecture enhancer 13-6
THE COLA WARS IN INDIA
When it comes to global branding, nobody beats Coca-Cola. The soft drink is the de facto name
for soda in dozens of countries, consistently besting both local and multinational competitors to become
the world’s most recognized brand. That is, with one notable exception: In India, Pepsi—not Coke—is
the catchall word for all cold, fizzy drinks.
Pepsi earned this rare honor simply by arriving in the Indian market before Coke did. Technical-
ly, Coke was the first Western soft drink to hit India’s shores after it set up a small presence there in the
1970s. But government regulations that would have forced Coke to partner with an Indian firm and reveal
its secret recipe sent the company packing in 1977. A decade later, PepsiCo joined up with two Indian
companies and began selling its flagship brand by 1990. Coke tried to enter the market three years later
upon repeal of the previous regulations, but by then Pepsi had a long head start on becoming the nation’s
ubiquitous Western cola brand.
Losing the cola race certainly didn’t deter Coke’s efforts in India, however. Instead of focusing
on increasing the popularity of Coca-Cola itself, the company competes by offering other beverages. Af-
ter all, 90% of Indian beverage brands are tea, milk, or coffee products, leaving less than 5% of the total
market to cola drinks. Since it entered the market in 1993, Coke added many Indian drink brands to its
roster, including a lemon drink called Limca and an orange one called Gold Spot. As its portfolio of
brands increased, so have its revenues. Sales by volume increased by 31% in 2009 along with a 25% in-
crease in sales of Coca-Cola, Diet Coke, and Coke Zero. Pepsi is countering by pushing its nondrink
brands like Frito Lay snacks and Quaker Oats. Though not as successful as its namesake product, retail
sales of Pepsi’s expanded product lineup totaled a healthy $1.5 billion in 2009.v