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Market Research Project

Impact of Advertising on Sales & Profits-A Study on

Carbonated beverage Market


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Table of Contents

Introduction Page 3

Literature Page 6

Research Methodology Page 8

Analyzing & Interpretation Page 9

Results & Discussions Page 15

Conclusions Page 16

References Page 17

Appendix Page 18


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Impact of Advertising on Sales & Profits-A Study on

Carbonated beverage Market

1. IntroductionThere are few products that target all segments of a market. Certain niche products cater only

to one segment; there is a product specialization like Milk and a market specialization like the

motor industry. Then there is the rare case of the Carbonated Beverage industry with full

market coverage. In such a scenario where one is trying to target the entire market is largely

affordable, the message being sent across to the consumer becomes extremely crucial.

What's great about this country is America started the tradition where the richest consumers

buy essentially the same things as the poorest. You can be watching TV and see Coca-Cola,

and you can know that the President drinks Coke, Liz Taylor drinks Coke, and just think, you

can drink Coke, too. A Coke is a Coke and no amount of money can get you a better Coke

th the e the b the e i d i ki All the C ke e the e d ll the C ke


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With low switching cost and aggressive competition, consumer loyalty and relationship is the

only way through which one can maintain market share. So while one objective of targeting

is to increase the market share, another major one is to increase the market size. Also, is there

a possibility that the existing customer could consume the product in a greater quantity? With

all these objectives to fulfill, the two main competitors in the country (as in the World), play

the game of one-upmanship to be the market leader. Obviously, the promotions through

advertising will differ for various segments. This makes it all the more difficult for these

companies as extensive research must go into the unique segments. In a diverse country like

India, this is an altogether new challenge. The Carbonated beverage Industry has the highest

percentage of its revenue spent on advertising amongst all industries. Thus, it is important to

gauge the impact. Through this project, we study the various components of consumer

behavior through primary research and use of secondary data.

1.1. Carbonated Beverage Market in India

Coca Cola was the first soft drinks major to enter India in the early 1970s, which was then

dominated by domestic brands. Soon, it became the market leader. However, it had to exit the


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The size of the beverage industry is pegged at Rs. 35 billion out of which juicesaccount for Rs. 5 billion.

With increasing awareness and disposable incomes, people are moving towards juicesand health drinks.

While health drink sales are estimated to grow by 14%, Carbonated Soft Drinks areestimated to grow at about 5%.

1.2. Media, Advertisement & Consumer BehaviorAdvertising through mass media can be through various means like television, radio and

more recently through social media. Companies also undertake other marketing activities likesales promotion, public relations etc. The mass communication tools trade off the advantage

of personal selling and the opportunity to tailor a message to each prospect, for the advantage

of reaching many people at a lower cost per person. Kotler (1988) sees advertising as one of

the four major tools companies use to direct persuasive communications to target buyers and

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behaviour analysis is conducted to assess the complexities of marketing operations. Finally,

and most importantly, companies must conduct regular market surveys to stay in touch with

the needs and aspirations of the consumer. He expectations of a consumer change from time

to time and market research on the ground can be the most relevant data for a company to

position its brand.

2. Literature Review

In case of the competitive sectors of the economy, such as consumer goods, companies tend

to have aggressive advertising campaigns that publicize the quality of their products over

those of their competitors. We need to understand how the advertising campaigns impact the

demands of products because inaccurately measuring or ignoring advertising would lead to

biased estimates of consumer price and advertising responsiveness. Also we need to know

whether the advertising is informative or persuasive which is an important basis for

competition to know how advertising affects the demand.

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campaign which has an alpha male chasing Thums Up and performing stunts. The change in

demand and sales would reflect the reason Thums Up moved away from its earlier

communication strategy of showcasing extreme levels someone would go to for a taste of

thunder which was quite effective.

Sprite

Sprite always comes up with fresh witty commercials that never fail to make us laugh. The

bunch of ads rolled out by Sprite with new faces and smart writing never cease to amuse us.

The commercials are simple with a nice jingle and the hint of sprite mischievousness.

Although they have changed their tagline from Sprite Bhujaye Sirf Pyaas, Baki Sab

Bakwaas to Rasta Clear hai which is not that cool and different, but still works.

Pepsi

After a series of commercials, Pepsi for the first time has brought together cricket and

football for their latest ad. The commercial brings together both the sports on a common

platform and features the biggest names of the world of cricket and football. Supported by a

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are known because of their great advertising techniques. Their campaigns have put their

product on the map. Advertising increases the sales to some extent because people like

buying a name they feel they know. This is one of the main reasons people refuse to buy the

products of a generic brand because they are not aware of the name and have never been

given a reason to trust the product.

3. Research Methodology

Market research on the impact of advertising in the Carbonated beverage Industry was

conducted. The survey below consists of indirect questions relating to consumer preferences

regardless of advertising, currently developed loyalties as well direct questions with regard to

potential changes in preferences due to advertising. Visibility of various brands and relative

ratings were also included.

Data for the study were collected by using the random sampling method among 120 urban

respondents by means of a structured questionnaire. All respondents consume carbonated

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4. Analysis and Interpretations

The majority of the respondents are from the age group 20-25 (83.33%)while the age groups

of 15-20 and 25-30 are the other significant contributors. With youth being the dominant

consumers of these products, the implications of the finding can present a reasonably clear

picture in terms of impact.

The graph below denotes factors behind consumer preference sans any external influences.

While the loyalties are well and truly developed, the initial questions tries to the weight of

other factors in the decision making progress. Do these factors ultimately lead to the brand

preference? If the preferred brand differs, is it due to the impact of advertising? These are

some the key questions to be answered from this part.

Rating (on a scale of 5) for various factors affecting sales


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would not switch. The results could vary to a large extent if the majority of respondents were

from rural or Tier-II or Tier-III cities.

4.1. Positioning, Personality and Preference

Question based on personalitywas asked in the context of positioningof brands. Adjective

options were provided and respondents were asked which attributes they associated

themselves with and a respondent could select multiple options. The attributes were aligned

closely with positioning of various carbonated beverage brands. This is then correlated with a

direct question of brandpreference.

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4.2. The Test of Loyalty

The ultimate aim of any brand is to establish a dedicated group of loyal consumers. We set

about asking our respondents as to whether they were loyal to any particular brand. 56%

people stating that they were loyal to one particular brand. For these loyal folks, it is observed

that they either only consume the brand that they are loyal to or do not consume a rival brand

of the same category (eg-cola). Majority of people who prefer coke said they are loyal to the

brand (75.8%) as compared to only 50% for pepsi. While segregating brands in terms of

frequency of sales, we asked respondents to state how often they consume a particular brand.

This was to study the variety consumed and rigidity adopted in selecting a brand.

Frequency of Buying

Row Labels [Pepsi] [Coca-Cola] [Sprite] [Thums Up] [Appy Fizz][Mountain

Dew]

Never 33 13 31 33 61 44

Occasionally 68 65 72 53 50 59

Regularly 20 43 18 35 10 18


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towards youth representation, it is to be noted that the Cola drinks are the primary drinks of

these companies (the corporations are named after the primary Cola drinks!).

Brand Visibility

Brand Pepsi Coca Cola Thums Up Sprite Mountain Dew

Visibility 3.90 3.97 3.50 3.29 3.22

Visibility, however, need not necessarily define sales. With Thums Up and Sprite being the

top two soft drinks and Mountain Dew the fastest growing, maybe the balance is to be

adjusted. The question then becomes: should companies focus more on growth areas or the

primary colas which seem to be lagging in comparison. Thums Up in this case has an

advantage as the longest surviving among the above mentioned drinks and is fairly visible

across the rural spectrum as well.

While for these brands, the focus is largely on mass media, localized campaigns have been

gaining ground recently. Below the Line campaigns like Coke Happiness have seen

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A local flavor to campaigns definitely helps in connecting with the consumer. This also

explains why companies run localized campaigns for the Southern, Eastern and Western parts

of India involving local stars, local languages and local cultural influences.

4.4. The Impact

Finally, we asked our respondents if they switch to any brand based on advertising. An

overwhelming 87% responded in the negative. An even lesser number of people, less than 10

% said they would switch to another brand if their favourite actor/sportstar jumped ship to a

rival brand. There can be various reasons for this.

Respondents may not fully aware of their behavioral patterns. Marketing survey has alimitation that it does not account for Transference. As shown by Louis Cheskin, a

persons assessment of a product not only based on the product itself, but also on the

secondary associations with the product. But when asked directly about the reason for

preference, people rationalize it and are not able to state the actual reason for their

choice. He was able to show that even though peoples choices were affected by

factors such as packaging and color, they denied that such changes had any affect on


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our original objectives. Two of the objectives were to increase the market share and increase

sales amongst current users. In the case of the second objective, we see a positive response

with respondents agreeing that sales would indeed drop if advertising were reduced.

5. Results and DiscussionsThe above inferences clearly illustrate that brand preference exists amongst consumers in the

carbonated beverage market. While advertising affects the quantitative results in sales, it may

not necessarily bring about changes in preference. This is perhaps because in our pursuit of

looking for major effects like change in preference. Big and immediate effects of advertising

do occur when the advertiser has something new to say. Then it is easy for us to introspect on

its effect.

The real impact of advertising is much more subtle and with minor effects which have a

cumulative impact in the long run. These minor effects are not obvious but they are more

characteristic of the way advertising works. It is obviously difficult to quantify and measure

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6. Conclusions Advertising is responsible for subtle changes in consumer mindset and over a long term

have a cumulative effect in consumer choices. This time frame is relatively shorter for the

younger population.

For existing consumers, decrease in advertising may result in lower volume of sales andvica versa.

It is important to have localized campaigns in terms of culture, language and celebrities.Campaign themes should also include this. The eventual positioning of the brand is a mix

of these and the aim is to connect with the consumer. Innovative BTL campaigns in areas

urban congregations can have a major impact as well. Most brands have already developed a fair share of the market. In terms of product life

cycle they are between growth and maturity. However, these seem to be over long very

long terms and may seem to be in perpetuity from a static point.

There is a positive correlation between identifiable personality traits and brandi i i Thi i d i h h l i h i h l Th i i


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References

http://www.aef.com/on_campus/classroom/book_excerpts/data/1504 Carl F. Mela, Sunil Gupta, and Donald R. Lehmann, The Long-term Impact of

Promotion and Advertising on Consumer Brand Choice, 1996

http://www.unilorin.edu.ng/studproj/cis/0766nc005.pdf Thomas Michael, V.R. Nedunchezhian, Impact of Media on Consumers Brand

Preference - A Study on Carbonated Beverage Market with Reference to Coca-Cola,

2012

Gladwell, M. Blink: The Power of Thinking Without Thinking, Back Bay Books,2005."

Arens, Williams F. Contemporary Advertising. USA: Richard D. Irwin, A. TimesMirror Higher Education Group Inc. Company, 1996

Kotler, P. Marketing Management: A South Asian Perspective, Pearson Education,2009

Chowdhury, Abdur R. Advertising Expenditures and the Macro Economy: Some NewEvidence.International Journal of Advertising, No.1, 1-14, 1994.


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Appendix

Form Floated

Carbonated Drinks Industry

This is a survey to study the consumer preferences and the impact of advertising campaigns

and commercials on customers.

* Required

Age *

15 20


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Which soft-drink do you prefer? *

Pepsi Coca-Cola Sprite Mountain Dew Thums Up Appy Fizz Fanta Mirinda 7Up

On a scale of 1-5 rate the following on the basis of their importance when buying a soft drink


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Are you loyal to a particular brand? *

Yes No

Do you switch to a brand based on advertising? *

Yes No

Do you think there is a drop in your purchase of a particular brand if the advertising is

reduced? *

Yes


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Which attribute(s) do you associate yourself with? (you can fill multiple options) *

Macho Adventurous Chilled out Sharing Happiness Feel Good Other:

Which particular campaign for Pepsi you liked the most? *

Change the Game Yeh hai Youngistan Meri Jaan

Y h P h i B di


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Thanda Matlab Coca Cola Coca cola Brrrr

Which particular campaign for Mountain Dew you liked the most? *

Dar ko maaro Dew Darke aage jeet hai Cheetah bhi peta hai Do the Dew

Which particular campaign for Thums Up you liked the most? *

Aaj kuch toofani karte hai


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Low Impact No Impact

Rate the following brands interms of their visibility by advertising( on a scale of 1-5 ; 5 being

the most visible) *

1 2 3 4 5

Pepsi

Coca-Cola

Sprite

Thums Up

Mountain Dew


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"0


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"1


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"2


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"3


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"4

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