The Value Framework: How to market PowerBlastTM for Coca-Cola in Great Britain

Coca-Cola and Marketing Strategy

In the following I will apply The Value Framework to provide a set of well-supported recommendations.

1. Value proposition of PB

1.1. Creation and Capturing of PB’s Customer Value

The Value Framework¹ provides a comprehensive framework on how Coca-Cola could create (Chapter 1–3) and capture customer value with its new energy drink (Chapter 4).

Fig. 1: Creation and Capturing of PB’s Customer Value by applying The Value Framework (adapted)

First, the Situation Analysis helps me to evaluate the business potential by analysing the opportunity to create value from PowerBlastTM for Coca Coca-Cola’s customers (Chapter 1). Second, the S-T-P Analysis offers me a concept to formulate the business strategy by framing the energy drink’s value proposition to the target customers (Chapter 2–3). Third, the 4Ps Analysis provides guidance to me to realise the business potential of PowerBlastTM by capturing value from customers (Chapter 4).

1.2. Business Potential of PB

The first concept of The Value Framework, Situation Analysis, provides methods to analyse the external and internal environment of Coca-Cola to develop the value proposition of PB in the UK. First, I will use the 5C Analysis to provide an overview of the external and internal environment. Second, I will detail the situation analysis by applying the Porter’s “Five Forces” and PESTEL Analysis for the macroenvironment and the Customer Analysis and SWOT Analysis for the microenvironment.

1.3. Value proposition of PB

By applying the high-level 5C Analysis, I would recommend the following value proposition of PB.

Fig. 2: Value proposition of PB by applying 5C Analysis (adapted)

Customer

The value proposition of PB satisfies its sustainability-oriented Digital Native customers’ needs to have a first fully organic energy drink — delivered online via subscription. The product solves their problem to stay awake but in an organic and sustainable way.

Company

Coca-Cola is renowned for its capabilities to combine Coke with the health and dietary trend with its product Coke Zero and Coca-Cola light. Similarly, the move into the energy drink sector combines its strength in caffeinated drinks with the new trend in organic and sustainable food.

Competitors

Where its toughest competitor, Pepsi, failed and instead diversified into a broad range of unhealthy soft drink brands, Coca-Cola succeeded by repositioning themselves into the healthy food market.

Collaborators

A collaboration with an App provider, offers the possibility to provide more value to the customer by maintaining a nutrition profile, food share, organic and health-oriented sports community.

Context

The change in society — specifically accelerated during COVID-19 — to organic and sustainable eating and the corresponding regulations regarding organic farming and politics regarding health programs build the basis for the product.

1.4. Macroenvironment of PB

By applying Porter’s “Five Forces”, PESTEL Analysis, and customer analysis, I will provide a deep dive into the macro-environmental factors that affect PB’s business potential and value proposition, specifically its market, competitors, context, and customers.

1.5. PB’s market potential and competitors

The detailed analysis of Porter’s “Five Forces” such as competitors, suppliers, substitutes, buyers, and potential entrants, confirms the large business potential of PB in the UK. Specifically, the large size of the organic energy market and its expected high market growth after the adoption stage offer the possibility to create value for the customer. The not yet existent competition in the organic energy drink industry provides a first mover advantage to Coca-Cola.

Fig. 3: Market potential and competitors by using Porter’s “Five Forces” (adapted)

The rivalry among existing competitors is low because none of Coca-Cola’s competitors like Pepsi or Red Bull are yet in organic energy drink sector. An increasing organic drink industry growth in line with the market adoption is expected. The recommended differentiation of PB also decreases the competition in the industry.

In addition, the threat of potential new entrants into PB’s industry is low because of the high barriers to entry. Manufacturing a non-industrial caffeine similar to Blasticine® requires high economies of scale and capital requirements for non-drink manufacturer. The high product differentiation of PB creates another entry barrier because the organic energy drink is “only one of its kind” — and until now difficult to imitate.

1.6. Context of PB

The PESTEL Analysis of the context of PB shows a similar favourable market potential in the UK. With the PESTEL Analysis I assessed the external factors such as technology, government, economics, demographics, and culture which affect PB’s value proposition. Especially the governmental regulation, economical shift to health and sustainability, and the demographic increase in wealth and education have a positive impact on the value creation of PB.

Fig. 4: Context of PB by applying PESTEL Analysis (adapted)

Governmental regulation offers a favourable level playing field for organic drinks. The trend in the British Government to add legislative constraints for unhealthy food will continue. The political developments regarding governmental health programs are expected to accelerate. In addition, I assume that local UK laws will favour sustainability.

COVID-19 decreased in general economic health indicators in UK such as unemployment, economic growth, but accelerated the economic shift to healthy and sustainable food and drinks. The pandemic fostered high growth in the organic, sustainable, and regional eating industry.

Demographic increase in wealth and education yields increasing economic (online purchasing-) power of Digital Natives. Furthermore, the aging of the population creates a customer group for PB of high income, digital native Baby Boomers.

1.7. Customer of PB

The customer analysis across the three dimensions needs, behavioral, and descriptors provides an opportunity to assess the value PB creates for these potential customers (see Target Segment Chapter 2). Coca-Cola should address the identified sustainability-oriented, digital, and active customers to solve their customer problems.

Fig. 5: PB’s customer by applying customer analysis (adopted)

The customers who the organic energy drink should address are Millennials, Generation Z and Baby Boomers (Descriptors). Millennials and Gen Z are health-conscious and sustainable. The 60 years plus Boomers have often the best health, are active, and sustainable-conscious (“Greta Effect”). The digital native, community-based Millennials and Gen Z are heavy organic and energy drink users with low organic price sensitivity (Behaviors). The consumption-friendly and digital literate Baby Boomers buy organic food frequently and have a low price sensitivity for food in general. The Millennials, Gen Z, and Baby Boomers want to eat healthy and organic food and drinks without sugar and industrial caffeine (needs). They want to stay awake and active and increase lifetime in a healthy manner.

1.8. Microenvironment of PB

By applying the SWOT Analysis, I will detail the micro-environmental factors that affect Coca-Cola’s value creation for PB, namely the company and its capabilities.

Fig. 6: PB’s microenvironment by applying SWOT Analysis (adapted)

Coca-Cola could create value through PB by leveraging its strengths. The differentiated PB product profits from Coca-Colas worldwide standardised soft drink quality. The recent global reputation change of the firm to healthy soft drinks like Coca-Cola Zero and Coke Light offers a good opportunity to market PB. In addition, the efficient upply chain and manufacturing process builds the basis for the subscription-based online delivery of the new energy drink. Furthermore, the strong “Coke” brand and strong customer brand loyalty paves the way for the new organic product.

1.9. Market research

The Conjoint Analysis² would address the evaluation of PB’s business potential outlined above. Therefore, I would encourage Coca-Cola to carry out a Conjoint Analysis to measure sustainability-oriented consumer preferences and design PB product in more detail e.g., through product-use analysis or computer cookie tracking. It would measure the attributes which should be included into the new PB product, the potential market share for the PB’s design, and the features which create the most value to Coca-Cola.

2. Segmentation, targeting and positioning strategies for PB

2.1. Segmentation, Targeting, and Positioning

After developing the value proposition of PB based on the Situation Analysis in the previous chapter, the S-T-P Analysis³ offers the concept to formulate the business strategy of PB in the following (Marketing Plan). Its elements — Segmentation, Targeting, and Positioning — help to frame the energy drink’s value proposition to the target customers.

Fig. 7: Segmentation, Targeting, and Positioning by using S-T-P Analysis (adapted)

First, the Segmentation shows that the large and growing customer segments are the Millennials and Gen Z, financially secure Generation X, and sustainable-conscious Baby Boomers. Second, the Target Market Selection narrows the target segment down to Millennials, Gen Z, and Baby Boomers. Third, the Positioning identifies the superior value proposition of PB to offer an organic, sustainable, and energy drink with the goal to satisfy target customers’ need to stay awake and active in a healthy way.

Segmentation

First, to segment the PB’s customers I will use the Three Step Approach to Segmentation which is based on the value proposition of PB.

Fig. 8: Segmentation of PB’s customers by using Three Step Approach to Segmentation (adapted)

The demographic and psychographic approach to segmentation identified three customer segments — Millennials, Gen Z, and sustainable-conscious Baby Boomers in contrast to financially secure Generation X (Demographics). Millennials and Gen Z are digital native, community-based, individual, health-conscious sustainable, and socially responsible. The sustainable Baby Boomers — the 60 plus generation — have often the best health and a strong purchasing power, are consumption-friendly and active, digital literate, and sustainable-conscious. In contrary, the well-educated and materially secure Generation X — aged 40 to 60 years — are independent, individualists, and search for meaning (Psychographics).

By applying the behaviours-based segmentation approach I found that digital native Millennials and Gen Z value online communities to connect and mobilize around causes and interests (Usage). They do not want to own products, they just want to have access them (Loyalty). Gen Z and Millennials are eager to more personalized products and are willing to pay a premium for products highlighting their individuality (Price sensitivity). They are part of the Fridays for Future movement. They value ethics of sustainability and social responsibility. The “Greta Effect” means for Coca-Cola that Gen Z and Millennials demand brands to act sustainable and socially responsible. In contrast, the Generation X values independence, individualism, and search for meaning. They are well educated and work to afford a materially secure life (purchase power). The majority shops online and reviews from other users are factored into their purchasing decisions. Their goals are financial security with simultaneous separation of private and professional life as well as a work-life balance.

The approach to segment based on needs shows that the organic energy drink is solving the customer problem that Millennials, Gen Z, and Baby Boomers want to stay awake and active but in a healthy manner (Goals). They only eat healthy and organic food and drinks without sugar and caffeine. They do not have time to sleep because they are busy and active professionally. They think the effort for preparing coffee at home or buying unhealthy energy drinks in store is too much. Since the COVID-19 lockdown they turned completely to organic, sustainable, and regional food. They got used to the convenience of online shopping and home delivery of food and drinks. Their most pressing problem is the only unhealthy sugar and caffeinated energy drinks in the UK market.

PB drink would solve the customers’ health and sustainability problems by enabling them to eat and drink what they love, where they want, and when they want (Needs). The app-based platform enhances their loyal feeling to Coca-Cola and creates a sense belongingness to their regional community. The online Organic Energy Club and the organic, sustainable, and regional energy drink satisfy the Millennial’s ethical needs for a healthy and sustainable world.

Targeting

Second, to identify the target segment or the market gap with the best strategic fit of PB’s value proposition (Market Opportunity Analysis), I will apply the 5C Analysis as a Targeting Framework.

Fig. 9: Targeting by applying 5C Analysis (adapted)

Millennials, Gen Z, and Baby Boomers build the target customer segment for PB. Millennials, Gen Z, and Baby Boomers have goal to stay awake and active and increase lifetime in a healthy way. They make up a large majority of food and drinks market (size), with increasing growth.

Coca-Cola has the resources and capabilities required to fill the market gap with its new product. The firm has efficient supply chain and manufacturing resources set up for online delivery. The strong “Coke” brand and customer loyalty fosters the market adoption. In addition, Cola has proven product marketing capabilities for launch of Coke Zero and Coca-Cola Light.

The target segment is not diverted by competitor products because there are no substitutes yet and there are only low rival capabilities due to their focus on unhealthy drinks.

The digital literate target segment fits the digital additional services provided in collaboration well. The planned collaboration with app platform providers enhances PB’s value for customer.

The market gap for PB’s value proposition is increased by the context Coca-Cola operates in. In the UK there is an accelerated trend in society to organic and sustainable eating. Additional legislative constraints for unhealthy food are expected to be brought up. The UK government will increasingly launch of governmental health programs.

Positioning

Third, the following positioning summarises two Chapters Segmentation and Targeting above. Therefore, it provides the essence of PB’s value proposition. The goal is to create an image of PB’s brand and place it in the minds of Coca-Cola’s target customers with respect to its competition.

2.2. Positioning Statement

The positioning statement focuses the activities of the positioning. The statement defines the target customer segment, develops a unique Point of Difference, states the frame of reference and the competitive advantage.

Fig. 10: Positioning Statement

I would recommend Coca-Cola to use the following internal statement to plan all further positioning activities.

For sustainable-oriented Millennials, Gen Z, and Baby Boomers who seek to stay awake and active in a healthy way, PowerBlastTM is the “first of its kind” organic energy drink without sugar and industrial caffeine among all organic and energy drinks in the UK because of Coca-Cola’s manufacturing resources, healthy product marketing capabilities, and additional services collaboration.

2.3. Market research

To address the problem of formulating the PB’s business strategy (S-T-P Analysis) I would recommend Coca-Cola to carry out Ethnographic Research⁴ in addition to the Conjoint Analysis. It can be questioned whether traditional market research can effectively explore customer needs. Ethnographic Research would offer the possibility to identify the most valued features for PB’s design, analyse the product adoption process for target market selection, and refine the innovation profitability of the new PB product by identifying market gaps.

3. Branding of PB

In addition to the PB’s Positioning in the previous Chapter, branding⁵ offers a broader set of associations in the minds of customers about the product.

3.1. PB’s brand differentiation

Brands can be used as augmentation of a product. A brand differentiates a product because it has dimensions that rationally or symbolic differentiate the company’s product from his competitors. By differentiating PB through branding, Coca-Cola could create value that can translate into financial gains.

Fig. 11: Brand differentiation of PB by using Brands as augmentations (adapted)

Coca-Cola’s PowerBlastTM brand differentiation should stem from symbolic, emotional, and intangible dimensions, instead of rational and tangible.

Coca-Cola’s core elements are its organic energy drink based on a natural caffeine substitute (“Core” Layer). The Expected Layer which differentiates PB in the mind of its customers are the high organic quality level, customizable packaging, the organic lifestyle product, smooth subscription-based online shopping (ease of use), the strong Coca-Cola PowerBlastTM brand name, and the patented ingredient Blasticine®. PB provides additional, unexpected but highly appreciated benefits to customer. The Augmented Layer comprises the app-based platform to engage with latest nutrition profile (novelty), additional food share service (ancillary), and organic and sports communities (resale value). The smooth community-based app platform offers positive surprise and can cause an excess of customer expectations.

3.2. Value of PB’s brand

Coca Cola’s PowerBlastTM trademark brand and patented ingredient Blasticine® create value for Coca-Cola and for its customers.

From the customer perspective, Coca Cola should brand PB to play important roles for its customers. It helps the customer to know whether PB satisfies their needs or not. By leveraging their knowledge about Coca-Cola, they can make faster decisions and reduce their search cost. The trademark associated with the patent helps the customer to reduce the purchase risk. For example, the customers know that it has a global standardised quality (functional risk), they want to show their organic- and sustainability-oriented lifestyle (social risk), etc.

From the company perspective, the trademark and patent offer means to legally protect the unique organic caffein substitute and therefore maintain Coca-Cola’s first mover advantage. The brand should be used as a signal for the worldwide standardised quality level — also transferable to new organic drink market. The image its successful brand launches such as Coke Zero and Coca-Cola Light creates in the minds of their customers, helps to transfer the unique associations of “no-sugar” and “non-caffeine” to its new organic product. By branding PB with Coca-Cola’s strong brand, the opportunity to spill-over the high financial value to the new PowerBlastTM trademark is evident.

3.3. Brand equity of PB

PB should be branded as such that the knowledge of the Coca-Cola brand has a differential effect on how consumers respond to its marketing (brand equity). The association with the strong Coca-Cola brand will incite customers to act in favour of the product — positive brand equity.

Fig. 12: PB’s brand equity by applying The two sides of the brand equity coin (adapted)

PB’s branding should create both a high level of awareness of the brand and unique brand association in memory. Frist, the Coke Zero brand awareness will help PB to be in the memory of the customer, on the mental purchase list for no-sugar and non-caffein drinks and chosen over other energy drinks.

Second, Coca-Cola should create a strong, favourable, and unique brand association with PB through creating a positive brand image. I would recommend Coca-Cola the consistent brand message “organic energy drink to stay awake in a healthy and sustainable way”. The new organic drink brand has relevance to the Millennials, Gen Z, and Baby Boomers. The positioning is a positive organic and healthy lifestyle brand. The brand differentiates itself through the community-based online platform and therefore provides PB with a sustainable competitive advantage over early adopters.

3.4. Market research

To measure the performance of the PB brand, I would advice the company to assess the sources of brand equity via the Brand Value Chain. The Brand Value Chain would allow Coca-Cola to trace the value creation process from both the businesses’ and the customer’s perspective. Therefore, it offers the firm the opportunity to assess PB’s health, uncover its sources of brand equity, and propose measures to improve and leverage that equity.

4. Key elements of PB’s potential marketing mix

The third concept of The Value Framework, the 4Ps Analysis⁶, offers guidance on how to realise the business potential of PB (Marketing Mix). It provides a framework across four dimensions to capture value from PB’s customers: shape value (Product), communicate value (Promotion), deliver value (Place), and extract value (Price).

Fig. 13: PB’s Marketing Mix by using 4Ps Analysis (adapted)

PB’s Marketing Mix should consist of a premium pricing strategy, organic lifestyle energy drink product, digital and in-store advertising, and multi-channel distribution strategy.

The premium pricing strategy should be based on a high price range (stability pricing). The high willingness to pay of PB’s customers offer the possibility to value-based pricing and the app-based online shopping platform enables customised pricing. The PB product should be market as an organic, healthy, and high-quality lifestyle product with smooth subscription-based online shopping value and additional community services through app-based platform. The promotion should be both online and offline — specifically through personalised digital, social media ads, free give-aways and prototypes in store, and community-based digital endorsements. For the distribution of the new product a multi-channel strategy is recommendable, both a basic distribution via traditional retail chains and new organic supermarkets and the app-based online shopping platform.

4.1. PB product

The product is “the first of its kind. This means that customer have to adopt the product. Digital Natives and Silver Surfers seem to have a high propensity to buy new products quickly, called innovators and early adopters.

Nonetheless, Coca-Cola should mitigate with its product development the factors which influence PB’s adoption. Its combination with community-based digital services gives PB a relative advantage over new entrants. The firm should put an emphasis on the communicability of the product by clearly stating how it solves its customers’ problems.

4.2. PB’s relative advantage

Within the product value creation, the company has to take into account the relevancy of the proposition to the customer. A competitive advantage can only be created through customer relevancy. Customer relevancy is the ability to see business from a customer perspective and conduct business on terms which are meaningful to customers.

Therefore, the PB value propositions to be effective requires that the product not excels in all product dimensions but displays good performance on all the basic dimensions and excels in one or two.

Fig. 14: PB’s relative advantage

PB’s competitive advantage should be build on the excellent dimension of an organic, healthy, and high-quality energy drink product. The second point of excellence should be the differentiating factor of the digital community-based additional services. On the other key attributes price, service, and access PB should display a good performance.

4.3. Channels of PB

Regarding the distribution channels (Place) of its new product, Coca-Cola should use a multi-channel strategy to address digital literate customers’ channel preferences.

Channel length and channel breath

The channel length should be comprising both the basic distribution via traditional big retail chains and new, fancy organic supermarkets and the app-based online shopping platform with collaborative additional services.

Regarding the channel breath, the company should limit the number of retailers and organic supermarkets to create the perception of an exclusive good.

Fig. 15: PB’s channel length and channel breath (adapted)

Channel structure

The decision for the above mentioned state-of-the-art multi-channel design is based on the following factors.

Fig. 16: Channel structure of PB (adopted)

The product characteristics such as the app-based packaging customisation require PB to be distributed through an online shopping experience. The customer characteristics of an high frequency and low size of daily lifestyle product purchase require distinguished subscription-based online delivery. PB’s early product life cycle stage makes limited distribution through exclusive retailers recommendable. The newness of PB requires an exclusive launch with the help of the intermediaries’ characteristics. The company’s characteristics such as supply chain efficiency act as a basis for the subscription-based online delivery. The competitive advantage of customer relationship requires Coca-Cola to play across all three channels.

4.4. Communication of PB

As PB is a highly differentiated lifestyle product, its value needs to be effectively communicated to its customers.

The marketing communications should create awareness of the value proposition (get attention), the value the product offer (hold interest), persuade the customer of its relative advantages (arouse desire), and reassure the customer after the purchase (obtain action).

PB’s communication objectives and tasks

Coca-Cola should incorporate the following four communications objectives and promotional tasks to market PB effectively.

Fig. 17: Communication objectives and tasks (adapted)

In the cognitive stage, Coca-Cola should create attention through personalised digital and in-store advertising. The firm should create awareness through a fancy matt organic lifestyle product ads.

In the affective stage to spark the customers interest, Coca-Cola should use special through organic food bundled special offers in retail stores and organic supermarkets. In addition, offering the possibility try and evaluate the unknown, new PB product through prototypes and free give-aways in-store promotes the product adoption.

At the behavioural stage, the company should convince the customer to make a buy decision and confirm by community-based endorsement through app-based value-added services.

4.5. Pricing of PB

In line with the key principles of effective pricing PB should adopt a premium pricing strategy in combination with value-based pricing and customised pricing.

With the fact that the real price is what the customer “gives up” in mind, PB’s pricing should be aligned with the Coca-Colas broader positioning strategy as well as adopted to the customers’ propensity to pay.

The premium price strategy consists of a high price range (stability pricing) to encourage favourable perceptions of healthy and sustainable lifestyle product. The product offers an intangible lifestyle surplus value with its organic communities. The perception of PB is a high organic reputation and distinction and pure quality. Therefore, the premium price is reasonable due to very low price elasticity for organic food and drinks. In addition, the value-based pricing offer the possibility to account for the fact that sustainable-conscious consumers willing to pay more for organic drinks. Furthermore, the customised pricing build on the opportunity the app-based online shopping platform offers to charge customised prices.

4.6. Market research

To address the issue realising the business potential through value-based pricing, I would recommend the company to develop a demand curve model by examining customers’ propensity to purchase the new PB product according to different price levels. In addition, I would advise Coca-Cola to determine how sensitive customers are to price changes through a price elasticity testing.

5. References

[1] Khwaja, A. (2021) Seminar Marketing 1/12. Cambridge: University of Cambridge

[2] Khwaja, A. (2021) Seminar Marketing 2/12. Cambridge: University of Cambridge

[3] Khwaja, A. (2021) Seminar Marketing 3/12. Cambridge: University of Cambridge; Sarvary, M. (2006) Segmentation, Target Market Selection, and Positioning. Boston: Harvard School Publishing. April 17, 2006

[4] Merlo, O. (2020) Strategic Marketing. London: Amazon

[5] Merlo, O. (2021) Seminar Marketing 9/12. Cambridge: University of Cambridge

[6] Merlo, O. (2021) Seminar Marketing 10/12. Cambridge: University of Cambridge

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Victoria Riess, MBA

Victoria Riess, MBA

Engagement Manager @McKinsey | WomenTech Global Award | TechWomen100 | Ex-Corporate Strategy | Speaker | Cloud DevOps Engineer | Data Scientist