Soft drinks are smartphone apps are very different in nature and in terms of the market, those are in a different stage in PLC. Colas are mostly in slow growth matured stage while smartphone apps are mostly in the growth stage and growing slowly. We will try to focus on matured markets here since the smartphone reach in some of the emerging economies is not that great. But in matured markets like Europe or USA cola has reached a significant amount of population and significant part of the population have access to smartphone and mobile internet. But we need to remember that there are millions of apps available on the app store of Apple and Google, some are already being used by millions of users, but as a category of product as a whole, apps came to existence may be a little bit over a decade back. So with a comparison to Cola or soft drinks smartphone apps is a very new segment. We would try to explore the differences between markets for both these, in terms of consumers and competitors and how that impacts marketing.
Differences between the markets in terms of consumers and competitors?
Colas came in to existence more than a century ago. And all of us are aware of names like Pepsi and Coca-Cola. We have seen the advertisements on TV, in stadiums, in stores basically everywhere. Coca-Cola was first introduced on 8th May, 1886 per Wikipedia, and there is no doubt that the market for colas are matured.. Although Coke has a competition as Pepsi and some other local store brands too try to grab some market share. Globally Coke has more than 48% market share, Pepsi has 20.5% and others colas sell almost 31% (Statista.com, n.d.). After launching in 1886 Coke instantly had first mover advantage. Pepsi was launched in 1893 per Wikipedia and Pepsi has significant market share and it exists as number 2 of cola market. Colas have a wide range of customer, from teenagers to elderly people, anyone can consume the drink. Colas are not too pricey either so just anyone can consume colas. Since market for Cola is matured, there is hardly any growth left, with increasing population sales might go up, but the main factors are introduction of new products in existing categories and line extensions, like introduction of new flavors. Speaking brand agnostically, recently cola brands have introduced diet colas that as a product targeted health conscious people who do not want to consume sugar in their drinks. And then colas in different flavors, such as cherry coke are also introduced, although some of them failed to impress, but these are all good examples of line extension of new products. So, introduction of new products such as diet cola or line extension such as cherry coke are few ways cola companies tried to boost their sale. I am intentionally avoiding discussing other categories such as fruit juice, snack offered by Coke and Pepsi, since our main discussion point is only Cola. The competition between Coke and Pepsi is also intense. Both these brands have similar products, in main category or any extended product category. For example both Coke and Pepsi offer regular cola and both of them offer diet cola along with flavored colas. Coke compete hard to maintain their number 1 position and Pepsi tries hard to get market share from coke or at least to remain a close number 2 in market. Other cola companies are small in size and brand name. They offer flavored colas too and try to offer cola for cheap to gain market share.
For smartphone apps, the category was introduced to us by late Steve Jobs when he introduced the first smartphone. And after that Android phones did not wait much longer, and now a decade later we have thousands of smartphones and millions and new apps in app stores. Google, Apple, Microsoft, Adobe and every big and small name launching apps. The industry is growing, and the competition is fierce. Since this category is in a growth phase, we see acquisitions, for example, Facebook bought Instagram and WhatsApp. The consumers are also excited about new apps. As long as marketing managers can put something new and exciting in front of the eyes of smartphone users they usually try those. And one vital factor is in most of the cases these apps are free. For example. Snapchat was introduced for teenagers and this app gained immense popularity in USA. App market is versatile, lot of apps are being released every day, and people have tons of choices. There are lot of “Me too” products. For example, there are many messaging apps, such as hangout from Google or Facebook messenger. User or customers often get a better app later and switch to that. For example, after the launch of snap chat, Facebook lost a significant amount of users. But then with innovation and creativity smaller names like Snapchat created a better product and popular app that Google. Facebook or Microsoft could not replicate. The consumer for these apps are mostly teenagers and millennials. Anyone with a smartphone is a potential consumer though. But I would say the target segment for any particular app is smaller than target segment for any cola. The competition is way too intense in the world of smartphone apps as there are thousands of companies and individual app developers fighting for market share. Cola companies do not have so many new entries like app companies do.
How are the decisions on price, advertising, and distribution channels different for the two brand managers?
Since for Colas the market is matured, and there is not much competition in terms of new entries in markets, the acceptable price range is already discovered by the industry and all branding managers for big companies set price in the same range. Although the store brands and local brands offer the product for cheap to gain market share from the number 1 and number 2.
For the brand manager of a smartphone app, it is difficult than that. Since there are lots of competition, new products are being launched every day, and for most of the types, the initial expenses are not very big. Any coder can code and create an app on app store, so if the app is not sophisticated and offers any feature that nobody else does, there won’t be any pricing power. That is why we see most of the apps are free and some are minimally priced. The reason behind that is the brand managers want to gain market share, penetration is their sole goal.
For advertising, the Cola brand manager targets the segment, which is huge and potentially everyone. They offer regular sugary Cola, sugar-free Cola, and since everyone can drink Colas legally at any age, so the target segment is mass population. So the brand managers try to grab the attention of a maximum number of people at a time, like sports venues, music concerts, popular TV programs, super bowl. In store or in crowded places like Times Square in New York City.
For the brand manager of smartphone app, the target segment is comparatively smaller. The target segment is a smartphone user, so most of the time the app is advertised in the app store. Sometimes, some apps are reviewed on popular tech magazines, online and print to gain some more awareness. But this advertising is much more niche and not mass like for Cola. But apps would have a networking effect that might be stronger than colas. Someone using a particular app might refer his or her friends and families that is why most apps promote referring more and more people to grow the network of users.
The distribution channel is how products reach to customers. For Cola, most customers get it from supermarkets, big box stores like Walmart, and now there are online grocery stores, so customers can order Colas from online sites.
Smartphone apps are available on app store based on mobile operating system, apple app store and Google Play store. Apps are not physical or tangible unlike Colas, so these are distributed digitally, and across the globe, the apps can be distributed over the internet. Cola is tangible, and usually, the distribution is done from bottling plant to warehouses and from there to supermarket and stores selling cola.
Winer, R., & Dhar, R.(2011). Marketing management (4th ed.). Boston; Prentice Hall.
Retrieved on 2/27/2018. Retrieved From https://www.statista.com/statistics/387318/market-share-of-leading-carbonated-beverage-companies-worldwide/
Retrieved on 2/27/2018. Retrieved From https://en.wikipedia.org/wiki/Pepsi
Retrieved on 2/27/2018. Retrieved From https://en.wikipedia.org/wiki/Coca-Cola