Monday, June 14, 2010

Differentiation Strategy Coca Cola

Differentiation Strategy Coca Cola
A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers and that customers perceive to be better than or different from the products of the competition. The value added by the uniqueness of the product may allow the firm to charge a premium price for it. The firm hopes that the higher price will more than cover the extra costs incurred in offering the unique product. Because of the product's unique attributes, if suppliers increase their prices the firm may be able to pass along the costs to its customers who cannot find substitute products easily.
Coca Cola Company spends round about 20% of their total advertisement budget for maintaining its differentiation strategy. Similarly coca cola has created its differentiation by utilizing soft sell approach. Company has successfully positioned itself on the following standards;
·         Corporate reputation for quality and innovation.
·         Successful communication of perceived strengths of the product.
·         Symbol of fun and enjoy
Why this definition, Coca-Cola has unquestionably chosen a differentiation strategy.  This has always been Coca-Cola’s strategy since the early days of the company’s life as evident by Woodruff refusing to match Pepsi’s 6 cent 12 ounce bottle. (Pendergrast, 2000) Coca-Cola hopes to isolate their competition away from the market by creating a strong, brand loyal customer base.  They have dropped in market share lately and thus they need to create stronger advertisements that will once again provide a sturdy customer base.  This strategy is a good choice for Coca-Cola, however it can be detrimental if they are not careful.  A couple more years of slipping market share may take Coca-Cola into the Stuck-in-the-Middle category of which it can be very hard to climb out.  There is a fine line between being confident in a company and being content.  Coca-Cola better be careful that they do not mistake confidence with being content as their overwhelming success over the past century could and very well may lead to ignorance of their current situation.  Therefore if Coca-Cola wishes to not only exist but also prosper in the future, a much stronger concentrated effort toward a differentiation strategy will prove to be highly beneficial. 

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