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Brand, Distribution Channel Conflict, Marketing Strategy, Uncategorized
Who needs whom more? Costco vs. Coke
You might have seen the following if you were shopping for Coke during your Costco run over the last week or so ” At present we are not carrying Coke products because we cannot provide the value our customers deserve.”
A devoted Diet Coke fan and Gold card carrying member of Costco, it is probably no surprise to you then that I buy my diet coke at Costco. So imagine my surprise last Wednesday, the day before Thanksgiving, when I couldn’t buy my Diet Coke during my Costco run.
I guess Coke won’t provide Costco the preferred pricing they had in the past citing conflicts with their local bottlers. As a result, Costco pulled all Coke products from their shelves.
So a stand-off ensued.
I understand Costco’s perspective. Their value to their members is wholesale or seemingly wholesale prices. It is the primary reason why people join wholesale clubs.
I understand Coke’s perspective, pricing when you have a complex distribution strategy is always tricky.
The stand-off will come down to who needs who more. Does Costco cave and not deliver on their brand promise offering Coke products at a price that I can get them at the grocery store? Or does Coke upset the apple cart with their local bottlers or perhaps make pricing adjustments in other channels in order to eliminate or minimize this channel conflict just so they can keep Costco as a distribution point? From Coke’s perspective, they have almost 100% household penetration in the U.S. across their product lines. Will losing Costco impact their market share? As much as I enjoy my Costco membership, I have to think that it won’t. But with their desire to be ubiquitous, this can’t be an easy decision for them either.
But for Costco to accept pricing no more advantageous than other Coke distribution points (and there are many), means they have to forgo their promise to their members. Is having Coke products in the stores just as a convenience worth the price of their brand promise? Making concessions with Coke could put Costco on a slippery slope with other suppliers and cast doubt in the minds of their member about their resolve to deliver on wholesale type pricing.
Despite being a Diet Coke fan who is sensitive to the recent increases in Coke products, I hope that Costco holds it ground because I expect them to provide me products and services at a discount or additional value over other places I shop.
In the meantime, I’ll get better at watching for Diet Coke specials because I don’t think I should pay $4.99 for a twelve pack. With the new year upon us, perhaps switching to water could be a good New Year’s resolution to add to my list.
What do you think?
A long time in coming
This is the first post for The Brand at WORK blog. Having studied social media the past year and consulted with clients on how to use it, I appreciate the benefits of a blog and know it is time for me to walk my talk.
The goal for this blog is to share practical, real-world insight and ideas on how a brand and marketing can work. During my career, I’ve seen how a solid brand and effective marketing can achieve the market share, revenue and profitability targets of a company. I’ve also seen from the same vantage point, how the failure to exercise discipline in the marketing function, from strategy through execution, can have the exact opposite effect: reduced market share, declining sales, customer turn-over and lower profitability.
I’ll also share my experiences in the journey to small business from Corporate America. Besides the business lessons, there are also personal lessons. Many in Corporate America contemplating a move out might not yet appreciate the shift in mindset necessary to succeed in small business. At the same time, some in small business believe those in Corporate America are out of touch with the customers they serve. I’ll provide some insight from the lessons I’ve learned to hopefully bridge this gap.
This blog has been a long time in coming. I’ve put off beginning this blog for two reasons worth sharing. First, it has never been second nature for me to draw attention to myself. So the idea of putting my thoughts and ideas out on the world wide web honestly took time to get my head around. Second, I wondered how I was going to fit a blog into my already very busy life. I was going to say “work week” instead but right now there is no such thing as a Monday to Friday work week. My work and my life run seven days a week, sometimes 24X7.
Yes, having a blog is a commitment in time if it is done well. And, my thoughts are out there for all to see. The benefits however of adding my voice to the conversation on the subjects of brand and marketing far outweigh the extra discipline and courage I will muster to make this work. I’ll no doubt make mistakes along the way in addition to the success I find. My hope is that you will learn from my process of contributing to and managing a blog.
In reading and following blogs the last year, I’ve learned that a blog is not a one-way communication vehicle for a blogger to espouse their thoughts. Done right, a blog sparks a thought-provoking dialogue and is the reason why it is considered social media. My objective is to create a dialogue. So please come back to keep me honest in this process and contribute to the conversation.
