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.coca-cola.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.)
Nonprobability sampling includes convenience sample (the researcher
selects the easiest population members from which to obtain information),
judgment sample (the researcher uses his or her judgment to select population
members who are good prospects for accurate information), and Quota sample
(the researcher finds and interviews a prescribed number of people in each of
several categories) Armstrong (2017)

2.3. Sampling Size:

Armstrong (2017) stated that there are three factors to be considered when
designing sample. sampling unit, Sampling size, and Sampling procedure.
Regarding 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.
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) suggested some inexpensive techniques to research market
including customer survey, mailing and telephoning customers, using focus
group to tell you about the product, pricing, packaging, and even competitors.

2.5. Validity and reliability:

Tracy (2014) stated that successful marketing campaigns depend on good
market research. Weathington (2012) state that a reliable instrument generates
similar results each time we apply it on participants. Valid instrument measures
accurately what is intended to measure.
 3. Recommendation:
Coca Cola is required to distinguish its products from its competitor Pepsi.
Innovation should be integrated in its strategy. Coca cola should segment
market more to innovate products that customers need.
Invest more to advertise products.
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 more, People above 40 might like diet coke.
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.

References:

ARMSTRONG, G., KOTLER, P. & OPRESNIK, M. O. 2019.

Marketing, Harlow, Harlow: Pearson Education, Limited.