Evaluating Coca Colas understanding of its Consumers Behaviour Essay

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1.0 Introduction

A consumer is a individual who spots a demand or desire, and so looks for the best manner to fulfill his or her demand either by purchase or acquisition ( Solomon et al, 2010 ) . Consumer behavior as defined by Solomon et Al ( 2006 ) is “ the procedures involved when persons or groups select, purchase, usage or dispose of merchandises, services, thoughts, or experiences to fulfill demands or desires ” . Customer keeping is critical these yearss and administrations are looking for the best manner to delight and fulfill the involvement of their consumers. Harmonizing to Fill ( 2009 ) , the apprehension of the purchasers ‘ behavior makes selling schemes and program come out successful. The Coca-Cola Company is soft drink industry that has been able to construct its trade name trueness with its consumers over its old ages of operation, despite the extremely competitory market ( Euromonitor, 2010 ) . But this success would non hold been realistic without understanding who the consumer is, what the consumer demands and how the consumer behaves. The Economic recession was a seeking clip for companies which led to the closings of some and loss for bulk, the soft drink industry is non an exclusion and Coca- Cola which falls under the soft drink industry will be analysed on how effectual the direction of their consumers was to in guaranting their endurance in the recession.

1.1 A brief sum-up of The Coca- Cola operations

The Coca-Cola Company ( TCCC ) is the largest maker, distributer and seller of non alcoholic drink, dressed ores and sirups in the universe. Coca-cola has a portfolio of more than 3,300 drinks, from diet and regular twinkle drinks to still beverages such as 100 per centum fruit juices and fruit drinks, Waterss, athleticss and energy drinks, teas and javas, and milk-and soy-based drinks, which are now sold in more than 200 states in the universe. ( Coca-cola, 2010 ) .

Coca- Cola foremost got to Britain in the twelvemonth 1900, after Charles Candler brought a jug of sirup along on a visit to England. Soon after, in the early 1920s, it went on sale at the London Coliseum and in Selfridges. Since so coca-cola Britain has come up with advanced soft drinks viz. : Coca-cola ; Diet Coke ; Coca-cola nothing ; Sprite ; Sprite zero ; Fanta ; Fanta Zero ; 5 Alive ; Schweppes ; Schweppes zero ; Powerade ; Powerade zero ; Kia ora ; Kia ora ( no added sugar ) ; Dr. Pepper ; Dr. Pepper nothing ; Lilt ; Lilt Zero ; Oasis ; Oasis excess visible radiation ; Glaceau vitamin H2O and Relentless. ( Coca-cola, 2010 ) With approximately 4,650 employees, Coca-cola GB claims to hold sold 228million instances in 2008.

Pic. 1.1 – The Coca-Cola Company Great Britain trade names

Available on this link- hypertext transfer protocol: //www.coca-cola.co.uk/brands/

1.2 An overview of the soft drink industry in Great Britain

Mintel ( 2010 ) stated that “ close to one-fourth of companies in the UK soft drinks market is turning at more than 10 % per twelvemonth ” . Some of the chief participants in the UK soft drink industry include Coca-cola, Pepsi Cola UK, Tropical UK, Nestle UK etc to advert but a few. The British Soft Drinks Association ‘s 2010 UK Soft Drinks Report found that the overall market grew by 1.7 % in 2009, with entire ingestion making 14,140 million liters, at a retail value of ?13.224 billion ” ( Mintel, 2010 ) . The British Soft Drinks Assocaition ( 2010 ) stated that “ it was promoting to see that the soft drinks market was keeping up during the economic downswing ” . Harmonizing to M intel ( 2010 ) , for the 2nd twelvemonth running, Coca-cola topped interbrand ‘s best planetary trade names table, puting it above its rivals in the soft drink industry. The coca-cola company has continued to concentrate on spread outing its concern through taking tactical topographic points in niche soft drinks manufacturers, by buying a interest in UK smoothy manufacturer, Innocent Drinks ( Euromonitor, 2010 ) .

1.3 The recession in United Kingdom

Recessions occur during the down or contraction stage of the concern rhythm. The term concern rhythm refers to the familiar ups and downs of economic activity. ( Pearce and Michael 2006 ) . Furthermore, Pearce and Micheal ( 2006 ) opined that recessions cause important diminutions in resources available to the house because clients spend less, loaners lend less, and competitory competition additions. Initially, the behavior of consumers alterations during recessions. They have less money to pass and cut back personal disbursement in response to the overall diminution in economic activity. Industrial and concern clients may go unpatriotic, demand renegotiated contract footings, and alter purchase forms. Besides by Pride and Ferrell ( 1995 ) , recession is “ a phase in the concern rhythm during which unemployment rises and entire purchasing power diminutions, smothering both consumers and concern peoples ‘s leaning to pass ” .

The UK economic system was turning faster than the norm for the Euro zone throughout most of this decennary. However, an disconnected lag began in 2008 and the economic system entered a recession in the 3rd one-fourth. Harmonizing to Euromonitor ( 2010 ) , existent gross domestic net income fell by 4.9 % in 2009, doing this the UK ‘s longest post-war recession. The UK has been harder hit than many states because of its big fiscal sector. The financial place has deteriorated over the past several old ages. The shortage was pushed even higher as a consequence of the bailout of big Bankss. The figure of unemployed besides rose by 50 % during the recession with 800,000 occupations being lost ( Euromonitor, 2010 ) . The recession led to concern closings, occupation losingss and a deficiency of employment chances in the UK ( Athey, 2009 ) . This first planetary recession in the new epoch of globalisation, started in the US, spread to Europe, and finally became planetary ; it ‘s the worst economic crisis since the great depression. ( Stiglitz and Joseph, 2009 ) .

1.4 The Coca-Cola Company and the recession

TCCC ‘s gross net income border decreased to 64.2 per centum in 2009 from 64.4 per centum in 2008, chiefly due to foreign currency fluctuations, inauspicious geographic mix as a consequence of enlargement in their up and coming markets, current focal point to maneuver better sensible enterprises across different major markets and unfavorable channel and selling mix in some certain markets. ( Coca-Cola, 2010 ) .

Even though there was a little lessening ( 0.2 % ) in their net income border compared to the old twelvemonth, TCCC arguably performed good despite the economic downswing.

The unit instance volume in TCCC is one of the steps of the cardinal strength of the company because it helps to mensurate advancement at their consumer degree. In Europe, the gross revenues volume of twelvemonth ended 2009 versus twelvemonth ended 2008 shows that the unit instance volume in Europe decreased 1 per centum, caused chiefly by the on-going difficult macroeconomic state of affairss in most portion of Europe. These difficult macroeconomic conditions influenced major markets and caused a diminution in the unit instance volume of 8 per centum in South and Eastern Europe, 4 per centum in Iberia and 2 per centum in Germany. The volume declines in these markets were partly made up for by 6 per centum unit instance volume growing in France and 4 per centum growing in Great Britain. ( Coca-cola, 2010 ) .

Table 1.1- Financial consequence of The Coca-Cola Company

Year Ended December 31, 2009 2008 2007 2006 2005

( In 1000000s except per portion informations )

Summary OF OPERATIONS

Net runing grosss $ 30,990 $ 31,944 $ 28,857 $ 24,088 $ 23,104

Net income attributable to stockholders 6,824 5,807 5, 981 5, 080 5, 872

GROSS PROFIT 19,902 20,570 18,451

GROSS PROFIT MARGIN 64.2 % 64.4 % 63.9 % — — — — — — — — –

PER SHARE DATA

Basic net income $ 2.95 $ 2.51 $ 2.59 $ 2.16 $ 2.04

Diluted net income 2.93 2.49 2.57 2.16 2.04

Cash dividends 1.64 1.52 1.36 1.24 1.12

BALANCE SHEET DATA

Entire assets $ 48,671 $ 40,519 $ 43,269 $ 29,963 $ 29,427

Long-run debt 5,059 2,781 3,277 1,314 1,154

1.5 Scope of Study

The involvement of this survey lies chiefly with The Coca-cola Company, concentrating on Coca-cola Great Britain as the range of survey. This survey besides examines the degree at which the recession affected the gross revenues in coca-cola and the consumers attitude towards the purchase of coca-cola.

Chapter TWO

2.0 Cardinal Consumer Behaviour Aspects

Harmonizing to British Soft Drinks Association, ( 2010 ) , “ Consumers are loyal to the drinks they know and trust but remain unfastened to advanced merchandises and trade name extensions which meet their ever-evolving demands. The industry ‘s ability to supply the populace with a broad scope of gratifying and low-cost drinks will guarantee it remains resilient despite the tough economic clime. ”

Three cardinal consumer facets have been carefully selected from Jiang ( 2010 ) as explained in the Consumer Behaviour Lectures ; the undermentioned facet of the consumer behavior may hold influenced the uninterrupted purchase of coca-cola merchandises despite the economic downturn- the purchasing procedure, Attitude formation and Motivation.

2.1 The Buying procedure

“ A purchasing determination devising procedure is the choice of an option from two or more alternate picks ” ( Jiang, 2010 ) . Coca-colas consumers can be explained in Consumer as a Problem Solver ( Habitual Decision Maker ) . A accustomed determination shaper makes picks that are characterised by an impulse made with small attempt and without witting control ( Solomon et al, 2006 ) . Coca-cola ‘s trade names are low engagement merchandises and so necessitate small information hunt. Most determinations made by people who consume coca-cola are with small or no witting attempt. Coca-cola consumers purchase Coke for illustration based on a wont that has been formed over clip.

Besides the Evaluation of options can be used to explicate the trade names opposition to the recession, much of the consumers attempt that goes into a purchase determination develops at the phase in which a pick must be made from the accessible options ( Solomon et al, 2006 ) . In many instances, there are a figure of options ( such as H2O, soft drink or intoxicant ) a consumer could see in fulfilling a biogenic demand, i.e. to suppress thirst. A consumer that has formed a wont overtime to buy diet Coke for illustration will ever hold in head a diet coke whenever he ‘s thirsty. Stigmatization can besides be an influence on the rating of options. In a study of Global Brands, Inter Brand and Business Week identified the significance for companies to make communities around their merchandises and services, which gives the clients the chance to experience as if they own the trade name ( Solomon et al, 2006 ) . Fill ( 2009 ) besides supported that “ as a trade name becomes established with a purchaser, so the psychological benefits of ownership are preferred to viing offerings, and a signifier of relationship emerges ” Coke is non merely seen as a drink by its consumers, but seen in the visible radiation of its heritage and relationship with them ( Payne,2007 ) . Trade names besides create feelings and strong feelings so much that when people see the coke bottle with its ruddy label, and the content, people all of a sudden feel thirsty and the demand to hold a drink ( Riesenbeck and Perrey, 2007 ) Harmonizing to Mintel, ( 2010 ) , the Interbrand ranked Coca-cola as the figure one planetary trade name in the twelvemonth 2009 and 2010 severally. Trade names can act upon a consumers pick in a determination devising procedure, in a survey conducted, 51percent of consumers preferable Pepsi over Coke, while in an unfastened trial, merely 23percent preferable Pepsi over coke ( Jenkinson, 1995 ) . In my sentiment, Coca-cola consumers have developed a relationship with the trade name, which makes them to take coca-cola ‘s trade names amongst all other options even in a recession. The economic downswing did non affect consumers picks, wonts did non alter despite the recession ; coca-cola consumers did non alter their merchandise penchants because a wont has been formed over clip.

Table 2.1 – Buying Decision devising procedure

Evaluations

After – purchase behaviour/feeling

Engagement

Information hunt

Need acknowledgment

Need

Purchase

Decision

Identity Options

Source- ( Jiang, 2010 )

2.2 Attitude Formation and alteration

“ Attitude is a individual ‘s erudite sensitivity, inclination to react to an object in a systematically favorable or unfavorable manner ” ( Allport, 1935 ) as cited by ( Jiang, 2010 ) . An attitude formed, lasts over a period of clip, an attitude towards what a individual eats or imbibe or developing an attitude towards different trade names ( such as imbibing diet Coke instead than imbibing diet Pepsi ) or besides holding an attitude towards a general ingestion form ( such as eating twice to eating one time in a twenty-four hours ) ( Solomon et al, 2006 ) .

The Utilitarian Function which is related to the basic rules of wages and penalty will be used to explicate why TCCC was non wholly affected by recession. Attitudes are formed based on the presumed merchandise qualities ( either pleasance or hurting ) ( Solomon et al, 2006 ) . Attitudes influence a consumer ‘s determination devising and the end of a seller is ever to make a positive attitude towards a merchandise or alteration bing attitudes ( Fill, 2009 ) .

In a recent research conducted by TCCC to measure consumers ‘ attitudes towards its trade names, it revealed that coca-cola is the trade name most associated with felicity ( Coca-cola, 2010 ) . The consequence of the study revealed that over a half of the people that participated in the research said ‘it ‘s the gustatory sensation that makes them smile ‘ others said ‘sharing a bottle of coca-cola with household and friends can supply an chance to pass clip together ‘ ( Coca-cola, 2010 ) . Coca-cola consumers have developed an attitude overtime, so the recession would non alter their merchandise penchant but might merely change their ingestion form ( such as cut downing the consumption of one three bottles per twenty-four hours to two bottles per twenty-four hours ) . The subject of the TCCC besides stresses directly forward benefits ( Coca-cola… .Open Happiness ) . TCCC develops schemes to perforate their consumers ‘ life style to go through a message. In order to advance Coca-Cola Zero ( one of Coca-Cola ‘s trade names ) , TCCC partnered with the Twentieth Century Fox and manager James Cameron ‘s for his epic-adventure and blockbuster movie Avatar. This promotional scheme helped to organize an attitude towards Coca-Cola Zero and raise its consciousness. They besides use promotional activities and sponsorship of events such as the Olympic Torch Relay in 11 states, and the Vancouver 2010 Olympic Winter Games ( Coca-Cola 2010 ) and besides

Attitudes towards coca-cola could besides be formed by the annual coca-cola adverts, as supported by Pearce and Micheal ( 2006 ) “ aggressive selling runs may be more effectual during recessions, as rivals experiencing the pinch might try to prevent losingss by cut downing their advertisement ” . During the recession, TCCC, engaged in monolithic paid advertisement to reenforce their trade names in the heads of the consumers. Besides towards the terminal of each twelvemonth, coca-cola does an advert, utilizing the Christmas subject to convey its message to its viewing audiences. The viewing audiences ‘ feelings about the context in which an advertizement appears can besides act upon trade name attitudes ( Solomon et al, 2006 ) . Wishing this Christmas themed adverts would of course associate us to Attitude Formation ( three hierarchies of effects ) , Affect, Behaviour and Beliefs. Affect ( like the trade name ) , behavior ( purchase the trade name ) , belief ( experience satisfied with the trade name ) or belief ( create consciousness of the trade name ) , behavior ( purchase the trade name ) , affect ( like the trade name ) or belief ( create consciousness of the trade name ) , affect ( like the trade name ) , behavior ( purchase the trade name ) .

Attitude formed over clip influences a consumers purchase behavior, in malice of the recession, it can be argued that the attitude of the coca-colas consumers did non alteration, and at that place was a continual procedure in consumers purchase form. Coca-cola was non so affected by the recession because of the consumers ‘ attitudes towards their merchandises

Table 2.2 – Three Hierarchies of Effectss

Attitudes based on cognitive information processing

Affect

Attitudes based on behavioral acquisition procedures

Behaviors

Behaviors

Behaviors

Beliefs

vvv

Beliefs

vvv

Beliefs

vvv

Attitudes based on hedonistic ingestion

Affect

Affect

Source- ( Jiang, 2010 )

2.3 Motivation

“ Motivation is the driving force within persons that impels them to action, this driving force is produced by a province of tenseness which exists as the consequence of an unfilled demand ” ( Jaing 2010 ) . Every action is done for a ground. Motivation refers to the procedure that cause people to act as they do, motive occurs when a demand ( Utilitarian-consumers practical benefits or Hedonic-consumers emotional benefits ) is aroused that the consumers wants to fulfill. The coveted end- province is the consumers ‘ end. The grade of rousing is called a thrust ( Solomon et al, 2006 ) . The intent of buying a drink would be to fulfill a biogenic demand, i.e. to suppress thirst. For a consumer to now take a diet coke because he ‘s thirsty is called psychogenetic. Coca-cola motivates its consumers through its themed message ( Open Happiness ) , and this can be explained in the hedonistic demands ( Consumers emotional benefits ) The study TCCC conducted for their consumers shows that the ‘taste ‘ of coca-cola makes them happy. What motivates a consumer might be different compared to the other consumer. A regular coke consumer willing to cut down his sugar ingestion will be happy to exchange to coke zero which has no sugar and less Calories. Besides sing it from the Consumer engagement angle, TCCC besides motivates its consumers by linking with 1000000s of them every twenty-four hours through their trade names ‘ Facebook pages, Twitter and influential web logs, making a duologue that allows TCCC to construct their trade name assets and beef up their consumer relationships. Solomon, ( 2006 ) defines ” engagement as a individual ‘s sensed relevancy of the object based on his/her built-in demands, values, and involvements ” . Through this Fans page on facebook, consumers can entree their advertizements, Coca-Cola applications and downloads, and acquire unrecorded updates from the Company. Besides TCCC involves their consumers through the Coca-Cola Freestyle, this makes the consumers beverage pioneers by giving them picks and assortment to do more than 100 different branded drinks at the touch of a button, this provides merriment, and a relationship that connects the company with its consumers. ( Coca-cola, 2010 ) . TCCC motivates their consumers by tie ining with things that will be of involvement to the consumers, for illustration ; on their web site is a reckoner used for look intoing sum of Calories and measure of drinks consumed every hebdomad so as to assist consumers supervise their Calories intake in holding a healthy diet and life style. This can assist actuate a consumer to buy TCCC ‘s merchandise because they have shown the consumer the consumer that in every bit much as they want to do net income, they besides care about them and their wellness. The recession did non truly affect TCCC ‘s gross revenues because of the motive TCCC tries to make and the relationship they have been able to construct overtime with their consumers.

Decision

3.1 Decision

Understanding consumers ‘ behavior is cardinal to holding a successful company ; sellers need to intensify their research on their consumers because the consumers are going aware of the of import function they play in their ingestion form. Rivals are ever besides looking for tactics to turn and act upon new consumers, and any administration that does non run into up with consumer ‘s outlooks would be losing a consumer. Companies should look for ways to retain their current clients and besides concentrate on acquiring new 1s “ pulling new clients should be a precedence in a recession ” ( Pearce and Michael 2006 ) . Administrations should actively prosecute their clients more than earlier.

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