Strategic management issues: Coca-Cola targets rural India to overtake Pepsi

MUMBAI: Coca-Cola is extending marketing for its flagship brand into rural India with a campaign focused around a Rs 5 price point to encourage sampling as it seeks to overtake its rival Pepsi. This pricing strategy is common in strategic management, especially in low income markets such as Rural India. Penetration pricing reducing switching costs for consumers and encourages them to try out new product, a factor that Coca Cola intends to exploit as it seeks to offset Pepsi as the dominate soft drinks manufacturer in India.

Coca-Cola owns the two market leading brands in the carbonated soft drinks market in Thums Up and Sprite, both of which have a 15% share according to Nielsen data, while the Coca-Cola brand, with an 8.7% share, lags behind Pepsi, on 9.6%. One factor behind these figures is that Thums Up, for example, is widely distributed in smaller towns and rural areas unlike Coca-Cola which has been largely confined to urban markets. That is set to change, according to Debabrata Mukherjee, vice-president (marketing & commercial), Coca-Cola India.

"There are large parts of India which haven't tasted a Coca-Cola till now," she told the Times of India. "This year therefore, as a system, we are working on enhancing the reach and distribution of brand Coke." This will involve the use of "Happiness On the Go" vehicles which will tour rural areas getting new consumers to sample the brand at a low price point of just Rs 5.

Mukherjee added that mobile would also be an important part of the plan. "We will be using the mobile medium to reach places with low mass media penetration so that we can communicate to rural audiences," she said. As a tool for strategic marketing, mobile phones provide immense opportunities for direct marketing and effective interaction with the market.

Personality marketing shall also be used. In personality marketing, celebrities endorse a product or brand with the expectation to inspire their fans to adopt the products. Coca-Cola has also recently recruited two Bollywood actors Deepika Padukone and Farhan Akhtar for a television campaign targeted at younger consumers in metros and smaller cities. The company will no doubt hope to avoid the experience of Pepsi, reported by the Financial Times to be discomfited by the comments of another Bollywood star who was Pepsi's brand ambassador a decade ago. Amitabh Bachchan told students at Ahmedabad's Indian Institute of Management that he had ended his ties to Pepsi when a schoolgirl had asked why he was promoting a product that her teacher had said was harmful.

"It's definitely embarrassing," said Dheeraj Sinha, chief strategy officer in south and southeast Asia for ad agency Grey, but he did not think the comments of a 71 year-old actor would have any significant impact on a target audience of young people. Coca-Cola will seek to maximise on the doubt cast on Pepsi to present a timely alternative to the market, a strategic management tactic that has often proven to be effective in getting underdogs to become giants in various market.

Data sourced from Economic Times, Financial Times; additional content by Warc staff; and http://expertresearchers.blogspot.com/