evaluating brand extension - coca cola_srikant rajan_ifmr

8/9/2019 Evaluating Brand Extension - Coca Cola_Srikant Rajan_IFMR

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Objective of the Project Work

This project begins with an evaluation of the failure of the brand extension of Coca-ColaCompany in case of the product Vanilla Coke (VC)

Certain causes are identified and after analysis it is deduced that the extension

opportunity exists wrt to the product vanilla coke

!lternative extension opportunities are then evaluated and a relaunch strategy is

suggested

"



Table of Contents

# $easons for %ailure

## &valuating the extension 'pportunity

! !ctual and esired consumer knowledge about the brand

#dentification of &xtension Candidates

C &valuation of &xtension Candidates

### $elaunch *trategy + *T, !nalysis

! ,roduct

*egmentation

C Target

,romotion

& *uggested ,romotional ethods

#V %inancials

! *ales %orecast

&xpense udget

V $eferences

.



I. Reasons for Failure/

The brand extension here is evaluated on its

•!bility to create salience

• #ts uni0ueness and favorability

• The promotion model employed for communicating the extension

The #ndian soft drink industry particularly in the C* segment is a duopoly with ,epsi and

Coke leading the roost &ach has having specific brand loyal

Thus the twin use of the names Vanilla and Coke in the new product description would have

demonstrated the categor membershi! and created salience.

*trong brand loyalty would have prompted buying 1sampling initially by the coke loyal

2owever3 the nomenclature of 4Vanilla Coke 4may have resulted in the product not have

being perceived as a new product #t would have thus immediately pitted against the classic

Coke %or the Coke loyal3 VC had the promise of a Coke product3 but not the taste of coke

which may have lead to its immediate rejection

"dditionall the high salience creation ma have also contributed to the inabilit of VC

to create a uni#ue association The name Vanilla used along with coke may have created a

different perception #ts clarity as to whether the new drink was a cola or a non cola drink

was not visible *ince Vanilla is associated with ice cream3 it is likely that3 the product was

perceived as an ice$cream % soda and not as a soft drink.

From the favorabilit !ers!ective there are t&o factors o!erating &xternally3 this time

period was that of declining sales of carbonated drinks 'ne of the major reasons was

pesticide and groundwater controversies #n addition3 the health drink and the bottled water

segment were also growing in large numbers 2owever3 blind tests revealed consumer

acce!tance of the ne& taste so it is hard to conclude that the demand for the product would

be low

5



The model ado!ted for communication &as the use of a retro theme. #n terms of reach

the promotion methods had a huge impact with an excess of 4 lakhs smses in just an

estimated 4 weeks. 2owever the sustainabilit of the reach' measured in terms of

favorabilit of the launch theme could not be built by activities such as launch of remix

songs 'ne reason for this could be the choice of a celebrity Vivek 'berai for promotion 2e

conformed to the tagline and lent credence to the launch of a new product as he was also a

newcomer in the film industry winning acclaim. (o&ever' he &as a!!reciated for

unconventional roles and did not fit into the theme of retro. )*ismatch bet&een

!roduct s!ecification )ne& drink+ and !romotion )retro++

The new drink was targeted at the youth in the age group of ". to .62owever its positioning

vis-7-vis other products in the soft drinks market was not clearly defined %ollowing

positioning might have been intended/

• Target group laggard ; the group of consumers highly resistant to change and are

characterized by their conformance to traditional products. The retro feel was aimed

at creating an impulsive behavior by appealing to traditional values.

• In addition !oke also ambitiously banked on high sales to the adventurous by

riding on the "#$ of novelty.

• %ith the & broad segments in hand it was also logically assumed that the third group

of followers would also pitch in.

(o&ever this !rocess did not do &ell for VC' because it conflicted &ith its image of

something ne&. )*ismatch bet&een !roduct s!ecification and !romotion+

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II. ,valuating the e-tension o!!ortunit

". "ctual and esired consumer kno&ledge about the brand

To identify sources of e0uity a mental map is constructed The steps in construction of the

mental map are as flows3

! face to face interview was conducted with 9 respondents3 (8 male : 8 female) in the age

groups of .;-.<3 all were asked the following

• Top of mind recall3 words association that came with the coca cola company1coke

• Colors they would never associate with Coke

• The associations al&as !referred for the /0o color1 association &ith coke(This

is an adaptation if =altman etaphor &licitation Techni0ue(=&T))

Inferences

• Thus the colors red1black is the most favorable associations

To! of *ind "ssociations

0o

Color

"l&as associations &ith the 0o color

association

Tradition3 chilled3 >thanda>3 !mir khan3 friends3

party3 relaxation1recreation3 black3 red3 !iswarya$ai3

?reen

&nvironment3 forests3 nature3 freshness3

mountain dew3 #ndian flag

lue

dynamic3 power3 sky3 ,epsi3 ocean3 music

band(one @ove)3

,ink 4?irlyA3 arbie3 soft toys3 costumes3 smallkids

Bellow flower3 footie3 mango3 jelly3 candy

hite

church3 milky bar3 hospitals walls3 Venice3

Christmas3 pure

<



• The e0uity of cokes is highly dependent on brand ambassador3 !mir Dhan shows a

strong and uniform association with Coke

• Eniform disconnect of Cokes with nature3 freshness3 power3 dynamism3 purity

2. Identification of !ossible e-tension candidates on basis of overall brand

associations

!s seen above white is a strong 4no colorA association for Coke The same respondents

however

• id not pick up vanilla as the most favorable association with the color white

• 2owever when given the option or told about vanilla the immediate association

was with the color white

• Vanilla showed a uniform association with ice cream and age old tradition

2ence

• Coke cannot introduce a product that has any source of association with the color

white

•

Cannot introduce a product using 4CokeA in the product name3

• rinks with any departure from existing color of black3 from the stable of Coke

are suspect of success

• !n association with the color red is acceptable

Thus !ossible e-tension candidates are !roducts that have a traditional a!!eal'

usage among grou!s' on occasions of celebration' recreation or rela-ation and are

consumed cold3chilled The product here is

• ! flavored drink

• lack in color 3 consumed cold

• 2as an association with vanilla3 which in turn has a traditional usage in cold form

F



Thus the alternative !roduct characteristics are ),-tension candidates+' Classic

*i-' Classic Tinge' Coke *i-' Cold $dose' /Thanda1 *i-3Tinge.

C. ,valuation of e-tension candidates

2asis of

,valuation Coke *i- Classic mi-

Thanda

*i-3Tinge Cold ose Classic Tinge

*alienceVer high3 immediate association

with parent Coke rand@ow

(igh as

Thandaword is

usedalmost

interchangeably with

Coke

@ow

(igh as Thanda

word is usedalmost

interchangeablywith Coke

Eni0ueness1

%avorability

@ow as a new association is not

built

! new

association

is built butnot

leveraging

on old

positiveassociation

Ver high

as it

leveragesan existing

favorable

association

to create anew

Go new

association

@ow - ! new

association is built but not

leveraging on

old positive

association

Compelling @ow edium edium @ow edium

The basis of evaluation are defined as

• 4alience the extent to which the extension is able to derive strong category

association

•

5ni#ueness the ability to leverage and existing positive association to build on anew association that shows high match to the product characteristics

• Com!elling the logic of extension evidence

H



The relevance of the extension measure the logic of the new product wrt to the

parent brand 2ere it is high across all alternatives as Coke is launching this

!roduct b leveraging its e-isting !resence in the soft drink segment.

Thus on the basis of the above evaluation the most likel e-tension candidate is Thanda

*i-3Tinge. (o&ever the &ord tinge has a touch of nostalgia )tradition+ hence can create

connect &ith traditional values as com!ared to mi-.

III. Relaunch 4trateg 6 4TP "nalsis

The relaunch strategy has been proposed taking into consideration only the #ndian arket

". Product

• The product to be offered is not vanilla coke but a new drink which is Thanda

Tinge (TT)

• The product is not a cola3 lime or an orange flavored drink but a completely new

drink in a new category of Mixes

• This !roduct s!ecification also gives the freedom of designing future variants

similar to TT sa for instance vanilla orange. "dditionall such a !roduct

s!ecification has clearl defined POP4 and PO4

o POP4 )Points of Parit+/ Carbonated soft drink

o PO4 )Points of ifferentiation+/ ! new variety (ix) of carbonated

soft drink clearly differentiable from cola3 lemon and orange variants

2. 4egmenting

The carbonated soft drink market can be broadly segmented into the following/

" Cola . @emon 5 'range

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The segments are derived assuming the basis of the buying of carbonated soft drink is

solely determined by user preferences with a low degree of dependence on factors such

as/

• ?eographic/ ,arameters such as *tates3 $egion and Geighborhoods

• emographic/ ,arameters such as ?ender3 'ccupation3 and $eligion

%or the $elaunch a similar type of segmentation3 is proposed 2owever3 it is planned to

create a new segment (ixes) which is combination of certain fractions of existing 5

segments 2ence it is planned to have an undifferentiated marketing of the product by

temporarily discarding the prevalent segmentation criteria but targeting the entire market

as a whole

C. Target/ ithin the broadly defined three segments above the buyers can also be

grouped according to their buying preferences into laggards' ambitious and

6



follo&ers The laggards of each group are the loyalists of a particular brand and flavor

That is in the broadly defined carbonated market the cola buyers would include some set

of people who would always buy a cola (laggards)3 ambitious(those who buy cola but are

always willing to experiment ) and finally the followers who always follow others

The target audience for the TT would be the ambitious of each segment population in the

short run Then the promotion campaign would leverage on the increased sales on

account of use by ambitious to promote the use of TT among laggards The advantage of

this &ould be lo&er cannibali7ation of sales of other !roducts. That is to sa that

since the !lan is to target e-isting users in the 8 segments the decrease in sales of a

!articular !roduct in each segment &ould be com!arativel lo& as com!ared to the

!revious dro! in sales of classic coke)during launch of VC+.

. Promotion/

#t is planned to promote the use of TT as a drink for an occasion 9everage on the

traditional use of vanilla as an essence to !romote drinking of TT. The use of vanilla

as an essence is !revalent in ice creams and intuitivel the vanilla ice cream buers

&ould com!rise of laggards and ambitious &ith a major !ortion being laggards.

Phase :; Target ambitious group of buyers in each segment 4tress on novelt factor

and !romote TT as a drink for a dail occasion. TT would initially be available in

small bottles to aid impulsive buying by the consumer who would wish to try the new

product The advantage would be an increase in sale of number of units but margins

would suffer on account of increasing packaging expense

Phase <; The test period is anticipated to be F months as was in the earlier case The

second phase of promotion would leverage on/

• The sales for the past F months (so man !eo!le have e-!erienced the jo of

TT kind=.+

• !nd stress on the traditional use of vanilla( building a new association)

";



The target is laggards soI greater emphasis would be on the second factor The sales are

expected to be constant if not increasing 2ere it is assumed that the ambitious group

would have either stopped the use of Tinge or have considered it as another drink to be

had regularly #n the worst case scenario of first case3 the conversion of even a small J of

laggard group can lead to sustainable sales.

"dvertising media

Phase : Phase <

9aggards "mbitious 9aggards "mbitious

ill

oard1hoardings @ow @ow 2igh @ow

Television @ow 2igh @ow @ow

eb ased Gone 2igh Gone @ow

$adio @ow @ow 2igh @ow

agaKines @ow Gone 2igh Gone

"dvertising 2reaku!

The above table is a rough estimate of the proportions of various media used for

promotion #n the first F months ambitious of each segment are targeted 'ne common

characteristic would be preference for non traditional media hence the promotion

methods place a heavy emphasis on the television and web based media ,resent time

radio makes sense as it is considered non traditional particularly % channels

!t the same time the emphasis on bill board3 radio and magaKine advertising is kept low

as these may impact laggards to a greater degree as compared to ambitious

!fter the first F months that is in the second phase of launch there would be a heavy

focus on radio magaKine and bill board form of advertising *imultaneously reducing

time on television and web based forms This is expected to impact the laggards

,. 4uggested Promotional *ethods

The initial phase can be done by promoting TT as a drink for celebrating small happy

events that are personal and also shareable VT should be promoted as the ideal drink for

such occasions The tag line may be /(ar >hushi me ek mithas hai1/ Vanilla Tinge

should be targeted to urban markets showcasing the subtle typical 4#ndianA daily happy

""



moments common to all such as 3 4! girl smiles to a boyA3 4!ppreciation by bossA3

4#ndia wins a matchA3 4small anniversariesA etc

The above !romotional cam!aign !rovides a carbonated drink for above mentioned

needs' &hich have not been targeted b an of the e-isting similar !roducts in

e-isting markets !resentl.

IV. Financials;

The numbers for TT are forecasted in the following manner/

". Phase :

• *ale of carbonated beverages as a J of total beverage sale (59.< million units

approximately3 8;J of the total beverage sale)

• ! niche beverage sale that resembles the new product being launched specifically

in the novelty factor rating is identified 2ere it is assumed to be the sports based

energy drink in #ndia

• &stimate J contribution of the sale of this drink to the total carbonated beverage

(!pprox L""J)

2. Phase <

• &stimate the population of the major metros3 and find out the distribution among

the different age groups (8; million)

• #dentify the estimated siKe of the target age group (The age group ".-.6 years

approximately 5;J e0uals ". million)

• !ssume the sale of TT to be to the same J of this age group as contributed by the

sports based energy drink to the total carbonated drink sales ("J of ".

million)The reason being3 this group would logically comprise of a higher

fraction of adventurous oriented potential consumers who are the target during

the first phase of launch.

".



4ales Forecast )millions of units+

Year 2009 2010 2011

First 6 months Last 6 months

Sales - Units (Total) 1.2 2 2.75 3.025

Breakup

A!entures 1.2 0 0 0

La""ars 0 2 2.2 2.42

Follo#ers 0 0.5 0.55 0.605

4ales etails;

• %irst F months sale has been assumed to the adventurous of the target age group

• ,ost Fth months it has been assumed that the remaining J of the target age group

shows a .J conversion rate

• BoB growth has been assumed at the industry standard of ";J C!?$

,-!ense 2udget )Figures in *illion' I0R+

Sales $e!enue 12 20 27.5 30.25

Total %&penses 3.024 2.64 3.63 3.993

Breakup

'romotion 2.88 2.4 3.3 3.63

istriution 0.12 0.2 0.275 0.3025

$a# *aterial 0.024 0.04 0.055 0.0605

,-!ense etails

• Cost1 Enit has been assumed the same as existing classic coke($s";)

• The cost of raw material has been marked over the existing breakup for coke

taking into account increased cost of vanilla #nstead of "J of the sales price it

has been doubled

• ,romotion expenses have been assumed to be .<J of the total sales revenue again

doubles the existing breakup since it is planned to aggressively promote only in

the first F months

"5



• istribution cost again industry standards "J of total sales This is a source of

com!etitive advantage as e-isting distribution net&orks can be leveraged

The above analysis indicates a margin of H<J Capital expenditure is not factored in3

however it is assumed that no huge expense would be incurred as an existing line

intuitively may be easily customiKed for manufacture of TT #f that is factored3 margins

are estimated to drop down to F;J which is the current industry standard for carbonated

drinks

V. Reference 9inks

*econdary3 desk research was done %ollowing are reference links

" http/11wwwgooglecoin1searchMhlLen:clientLfirefox-a:rlsLorgmoKilla/en-

E*/official:0LcokeNvanillaNwhyNdidNitNfailNindia:startL.;:saLG

. http/11sxtcglobaltypepadcom1myOweblog1articleO6OwhyOvanillaOcokeOwontOwo

rk1indexhtml5 http/11wwwmarketingprofscom1F1mininni.aspMspL"

8 http/11wwwicmrindiaorg1casestudies1catalogue1arketing"1VanillaJ.;Coke

J.;!htm

< http/11wwwicmrindiaorg1casestudies1catalogue1arketing"1DT!;;.htm

F http/11www"economictimesindiatimescom1articleshowarchivecmsM

msidL""95.H5

H http/11marketingpracticeblogspotcom1.;;F1".1vanilla-coke-wakawhtml

9 http/11wwwicmrindiaorg1casestudies1catalogue1arketing"1VanillaJ.;Coke

J.;J.;htm

6 http/11wwwindiantelevisioncom1mam1special1y.k81wakawhtm

"; http/11marketingpracticeblogspotcom1.;;F1".1vanilla-coke-wakawhtml

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evaluating brand extension - coca cola_srikant rajan_ifmr

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