Coca Cola: Market Segmentation and Market Research Coca-Cola was first served in 1886 by Dr. John Pemberton, but its name was chosen by his bookkeeper based on its ingredients (coca leaves and kola nuts). Since then, Coca-Cola company has grown to become a global soft drinks manufacturer. It employs more than 700,000 individuals from diverse cultures and communities. It has around 500 brands that serves 1.7 billion people in more than 200 countries. Coca cola established its office in UAE and Oman in 1988 with the purpose of manufacturing, packaging, merchandising, and distributing branded beverages to customers. Coca-Cola provides a range of brands to comply with individuals’ tastes and preferences in Oman and UAE to reach 18 brands. Its mission to consumers is “Refresh through diverse portfolio” (http://agl.cocacola.com/company-profile.htm). 1. Market Segmentation: 1.1. Market Segmentation and its Importance for Companies: Camilleri (2018) argued that it is very hard for a business to satisfy the needs of all customers since they have different preferences. It is rarely finding out one product to satisfy all customers. So segmenting market to offer suitable products\services is important (Mora Cortez, 2021). The first one who proposed market segmentation is Wendell Smith as an alternative of product differentiation (McDonald & Wilson, 2016). Armstrong et al. (2019) defined market segmentation as “dividing market into distinct groups of buyers who have different needs, characteristics, or behaviours and who might require separate marketing strategies or mixes.” Singh (2013) stated that market segments should be measurable to identify the number of potential customers. It should also be accessible through different means of communication and distribution. Market segments should be unique that requires different marketing mixes as well. There are many advantages for segmentation. Through segmentation a company can increases its focus on segments of market that would result in better returns. It provides insights about customers’ needs and wants. For example, car companies began narrowing its focus on small car segments to increase its profitability. Further, segmentation increases a company competitiveness which leads to increasing market share and brand loyalty. So new competitors are less likely to enter the market. Further, it improves the connection between organisational strength and customers’ needs. This creates a long-term competitive advantage of customers (Dolnicar et al., 2018; Singh, 2013). Moreover, segmentation enables companies to expand its market in nearby geographical areas and with similar products for same demography. For example, Reebok targets fitness enthusiasts and expands with fitness range of clothes and accessories. Segmentation also leads to retention of customers and enhances customers’ life cycle (Singh, 2013). So, it has a potential for growth (Dolnicar et al., 2018). For example, Titan provides its showroom with various products segmented by price and age so that customers become loyal. Segmentation raises the rate of communication with target customers. Without segmentation, identifying target market is hard and thus communication does not happen. Knowing the age, psychology, and geography of buyers makes marketers choose the best way to communicate their message (Singh, 2013). It also enhances team building within an organisation since an organisation should assign a team for different departments to conduct segmentation (Dolnicar et al., 2018). Segmentation fosters brand equity, brand recall, and customer satisfaction and thus profitability. For example, it is very rare to see customers of BMW or Nike negotiate with the price because they target individuals who do not need bargaining (Singh, 2013). Dolnicar et al. (2018) claimed that market segmentation enables companies to serve a small group of customers with customised products and services. This leads to what is called finer segmentation which becomes evident in e-commerce where each consumer represents their own market segment. 1.2. Methods of Segmentation: Tracy (2014) argued that marketing experts claim that the success of any business depends on its ability to segment market accurately. Hassan and Craft (2012) argued market segmentation can be on micro or macro basis or both of them depending on company marketing strategic objectives. Companies who seek local positioning strategies use micro analysis. Armstrong et al. (2019) stated that there are various ways to segment consumer markets. Among them are geographic, demographic, psychographic and behavioral. Geographic Segmentation: marketers divide market into geographical units such as regions (nations, countries, cities) so that a company can operate in one or two or even many geographical areas but attention must be paid to the differences in needs and wants for each geographical area. Population density (urban, suburban, rural), city size (area size, population size, rate of growth), and climate (units with similar pattern of climate) can also be a technique to segment the market (Tracy, 2014). For this reason, many companies nowadays exert their efforts to localize their products, promotions, advertising and services to match the needs of specific regions. For instance, some large retailers like Target Corporation opens stores to fit the locals of each region. Demographic segmentation: demographic segmentation involves dividing market into segments of age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, family size, and generation. Some consider demographic factors are popular to segment customers because usually customers’ needs and wants are different based on demographic variables. Even when marketers first define segments using other bases, such as benefits sought or behavior, they must know a segment’s demographic characteristics to assess the size of the target market and reach it efficiently (McDonald & Wilson, 2016). If age and life-cycle stage taken for segmentation as an example, it can be observed that wants and needs of consumers change with their ages, so companies offer different products and use different marketing approaches for different ages as Crest company does. Psychographic segmentation: Based on this segmentation, consumers are divided into different segments according to their lifestyle, social class, interests, self-image, values, attitudes and personalities. Segments with similar demographics might have different psychographic characteristics (Tracy, 2014). Behavioral segmentation: customers are divided into segments according to their attitudes, knowledge, responses and uses of a product (first or regular), brand loyalty, price consciousness occasions (Eids, national day, mother day). Some marketers believe that behavior variables are the best starting point for building market segments. 1.3. Coca-Cola Market Segmentation: Coca Cola owns a big portfolio of beverages, drinks, juice, water, coffees, teas, and sports and energy drinks and it owns a distribution network all over Oman. Segments can be seen more in urban and suburban geography rather than rural areas. For Coca-Cola, demographic variables are basics to divide customers into groups (age, occupation, life style, religion, race, generation, nationality, social class) because they have different preferences, wants, and usage rates and it is easier to conduct surveys on demographic segmentation. Coca Cola mostly targets youth due to their need for refreshment and energizers to conduct daily activities. Coca cola targets both genders, but it has different products to suit different personalities. Coca-cola also presents products that comply with individuals’ modern life style and their interests and activities. Coca-cola also prepares products for special occasions. For promotion purposes, Coca-Cola introduces prizes in the top cover. Coca cola targets young generation with products full of energy and happiness. Coca introduces diet products to comply with diet people needs. Marketing matrix of coca cola contributes to its success. Further, dissolving in different cultures to provide relevant products and packages is the key to success. Coca use behavioral, psychographic segmentation to identify customers’ need. In Oman many consumers adopt healthy lifestyle, so a drink with sugar reduction is introduced. To have sustainability, coca reduces using plastics in packing. 1.4. Evaluation of Market Segmentation Approaches and which one Coca-Cola company should use: Nowadays businesses focus on customers’ satisfaction, relationship, and loyalty to increase its profitability and market share. Market segmentation is essential for that. Market segmentation is an important task of marketers which assists companies offering customised products or services for specific segments. Choosing the best approach of segmentation that suits business is essential for business success. Coca cola introduced Jianchi drink which is inspired by ancient Chinese wisdom. They utilise vending machines to gain more profits at educational institutions. Moreover, coca expands its products with no or low-calorie beverages. Next section would discuss marketing research. Tracy (2014) stated that US companies allocate billions of dollars on market research to find out whether introducing a new product or service or expanding in a new market is profitable. 2. Marketing Research: 2.1. Marketing Research Approaches: Marketing research is defined as “the systematic design, collection, analysis, and reporting of data relevant to a specific marketing situation facing an organization.” Marketing research provides marketers with information about motivations and satisfaction of customers. It gives insights about customers’ purchasing behaviour. Market research also evaluates potential markets and share and also evaluates the effectiveness of marketing mix of 4 P’s (product, price, place, promotion) that create competitive advantage. Some firms have their own market research department and some hire external specialists to conduct researches for them. In some cases, firms buy data about potential market to help them taking decisions (Armstrong, 2017). According to Armstrong (2017) there are four steps in marketing research process which are identifying the problem and setting research objectives, developing and implementing a plan of research to collect and analyze data, and finally interpreting and reporting the results. The objective of the research determines the design of research (exploratory, descriptive, causal) which should be undertaken. If the marketer aims to collect preliminary data which helps in defining the problem and suggesting hypothesis, he conducts exploratory research. Descriptive research is conducted when the aim is describing product market potential or consumers’ demographics and attitudes. Causal research is carried out to examine hypothesis pertaining cause and effect relationships. For instance, would a 20% reduction of selling price of coca-cola drinks increase purchasing rate which substitute reduction of fees? Generally, marketers start with exploratory research and then follow with casual or descriptive research. Marketers in Coca-Cola would start by conducting exploratory research to find out whether population in Oman like coffee or soft drinks most. Then, it should move to descriptive research to segment population and their preferences. For example, people in rural areas and above 40 years might like coffee most. But young people in urban area might like fanta more. 2.2. Research Sampling Techniques It is very hard for Marketing researchers to study the whole consumers so that a sample is taken. The sample is defined as individuals chosen from the whole population for marketing research. The sample must be representative to have accurate predictions about consumers’ thoughts and behaviors. Armstrong (2017) stated that there are two types of samples which are probability sampling and nonprobability sampling. There are three types in probability sampling namely simple random sample (each individual of target population has an equal opportunity of selection), stratified random sample (target population is divided into mutually exclusive groups (such as age groups), and random samples are drawn from each group), cluster (area) sample (the population is divided into mutually exclusive groups (such as blocks), and the researcher draws a sample of the groups to interview.) Coca-Cola would adopt random sampling technique for exploratory research to identify motivation of population towards coca products. From analysis of exploratory data, marketers would use stratified random sample to divide population into groups of similar segments and recognise their attitudes through descriptive research. 2.3. Sampling Size: Armstrong (2017) argued that reliable results can be obtained from large samples. However, Large samples cost much and it is not necessary representing the entire population. Dolnicar et al. (2014) claimed that sample size in market segmentation research is considered adequate if it equals 70 times the number of variables. Oman population is 4.5 million in which 61.2 % are Omanis and 38.8 % are expatriates. So, if Cola has 10 variables such as age, gender, marital status, education level, citizenship, location..etc., then sample size should not be less than 700 individuals. 2.4. Research Instruments: There are different instruments that can be used to collect data from market segments including surveys, internal sources, website data, social media profiles, secondary data sources, experimental studies (Dolnicar et al., 2018; Tracy, 2014). Cola would implement an inexpensive survey through mailing, telephoning customers, or social media. The survey has demographic questions like age, education, nationality, living area and then five-Likert attitudinal questions about existing and potential products. 2.5. Validity and reliability: Tracy (2014) stated that successful marketing campaigns depend on good market research which is characterised by reliability and validity. Weathington (2012) state that a reliable instrument generates similar results each time we apply it on participants and valid instrument measures accurately what is intended to measure. 3. Recommendation: Coca Cola is required to distinguish its products from its competitor Pepsi which has a market share in Oman. So, it should segment market more to innovate products that customers need. Coca-Cola is advised first by conducting exploratory research to find out whether population like coffee or soft drinks most. Then, it should move to descriptive research to segment population and their preferences. For example, people in rural areas and above 40 might like coffee most. But young people in urban area might like Fanta most. People above 40 might like diet coke. Coca is required to invest more to advertise products. 4. Conclusion: Market segmentation enhances profitability and long-term relationship since the resources are directed towards targeted customers. It aggregates individuals into groups that have similar needs, behaviours, and characteristics and requires certain products or marketing mixes. For Coca Cola, it differentiated its products into juice drinks, sports drinks, bottle water, diet drinks. It has a dynamic culture which allows continuous innovation to comply with customers’ needs and preferences. References: ARMSTRONG, G., KOTLER, P. & OPRESNIK, M. O. 2019. Marketing, Harlow, Harlow: Pearson Education, Limited.
