Introduction
Coca Cola is one of the largest producers of non-alcoholic beverages like Coca-Cola classic, Diet Coke, Dasani, Fanta, Sprite, Schweppes, PowerAde, etc. for the purpose of this memorandum we will contrite on only four brands i.e. Coca Cola classic, PowerAde, and Diet Coke. Here we will present the market segmentation that we intend to follow for Coca Cola in Chicago for these four products, and the pricing strategy that will developed for these products. Before we start our analysis, we must briefly understand the demographics of Chicago city.
Market Segment
Chicago has a total population of 2,833,321 as in 2006 (US Census Bureau). The target customers of Coca Cola are people from the age group of 10 years to 65 years. In this target, Chicago has 82.2% of the population (US Census Bureau). The market share of Coca Cola co. is 42.7% in 2008, which has dropped by 3.1%. The best performing brand of the company is Coca Cola classic, which has a market share of 17.3% among all brands in the US in 2008. This too dropped by 2.5% in 2008. Further, in the overall soft drinks market in the US faced a slump in revenue and units sold (Beverage Digest).
Given this condition of the soft drinks market in the US, market segmentation need to be done carefully.
The market segmentation is done based on the preferences of the products and the usability or benefit derived by the consumer from the product. This is a form of behavioral segmentation. Here it must be noted that segmentation is based on four categories – health conscious, non-health conscious, and gain energy from drink. Based on demographics it can be observed that the most avid drinker of Coca Cola is within the age group of 10-19 years. This age group is keener on classic coca cola. The second demographics group is 20-35 years. This group of people is more health conscious and hence has a greater demand for diet coke. The third group is 35 and above is the age group who are more inclined in consumption of caffeinated products.
Pricing
The pricing for these products must differentiate based on third degree differentiation. In this case, we differentiate between the three segments of consumers. Here we see that the consumers can be segregated on the benefits they derive from the drink. Coca Cola is a non-alcoholic beverage, which is targeted mainly at teenagers as they feel that consumption of the product will bring in coolness. In this segment, again the people who are avid sports enthusiasts and those who have high degree of physical activity can be targeted by PowerAde. Further, Diet coke can be targeted at people who are health conscious. The pricing must be differentiated based on these segments.
Thus, the pricing for Coca Cola should be lowest among all the three brands. This is so because the target customers are mostly young adults who have limited spending power. The price of diet coke should be above that of Coca Cola classic, however, less than that of PowerAde, because it targets to diet conscious people as an alternative to classic Coca Cola brand. Therefore, cannot be priced at a very high price. PowerAde being a sports drink enjoys a niche positioning. It is targeted at sportspersons and people who have high-energy consumption. This can be also being positioned as a rehydrating drink. Thus, its pricing should be higher as this will allow the customers perceive their value to be higher and produce a greater impact on sales. This pricing strategy will also help to differentiate PowerAde from the rest of the drinks.
Conclusion
The price discriminating strategy that must be followed for coca cola in Chicago must be based on third degree price discrimination. The segmentation is done based on usage and demographic segmentation. In conclusion, it can be stated that pricing of coca cola should depend on these two segmentation rules.
References
Beverage Digest. “To 10 CSD Results 2008.” 2009. Web.
US Census Bureau. Chicago (city), Illinois. 2009. Web.