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Coca-Cola is Shaking Things Up

Tom Sullivan

August 15, 2017
Tom Sullivan

What We Can Learn

 

As of 2017, Coca-Cola ranks fifth in brand equity value for companies at $56 billion. It also spends over $4 billion annually in advertising. To add meaning to this, you should first know that brand equity is mathematically determined by the following equation:

Brand Equity =  Market Value (stock price x outstanding shares) – (Tangible Assets + Working Capital)

So, when you examine Coke’s financial reports, you realize that about 50% of their $190 billion market value is actually intangible value. That’s another way of saying it’s the value contributed by the brand name, iconography and brand perceptions that exist in consumers’ minds as a result of marketing.

So, since brand value is largely influenced by brand assets which are brought to life and grow through marketing and advertising, are you surprised the new CEO eliminated the Chief Marketing Officer (CMO) position as a first order of restructuring?  He replaced the CMO position with a Chief Growth Officer. What does this event mean for chief marketing officers, or any marketing experts for that matter?

Let me first offer my take on Coke’s new Chief Growth Officer role. I believe this is a branded way of differentiating the new CEO’s focus on market-driven growth for a company that has been struggling during a transition away from a business model built on sugar water. Coke has been rapidly acquiring and building a portfolio of innovative products that are generally healthy, with low to zero sugar, and are delivered in a more sustainable and environmentally-responsible way. Shareholders will like that as much as millennial moms who want healthy choices for their kids.

I also don’t think Coke’s move portends the widespread elimination of the CMO position at other companies. But if CMOs want to create value for their companies and beat their 4.1 year average tenure in major companies, there are three lessons to learn:

 

  1. Customer Knowledge – Make sure you continually monitor the pulse and sentiments of your customer segments because they are changing rapidly. Failure to do so will mean loss of trust, relevance and brand equity faster than ever before. Marketers should be integrating marketing communications investments with marketing research and feedback loops on social channels to drive insights into what customers need and value most. These insights should be used to personalize consumer advertising and content and to drive product innovation and refinement.

 

  1. Business Model Innovation – Examine the weaknesses in your business model. Ask: what more does my brand deliver beyond the benefits inherent in our products and services? Also, be aware that we live in an age of unprecedented disruption and customers who care as much about how the brand is delivered as the brand itself. For example, consumers today can purchase their dog’s food from petsmart.com, amazon, or, directly from their favorite manufacturer’s e-commerce site. Marketers must also understand that speed, convenience and price can be evaluated quickly on any mobile device. Business models must be evaluated, modified,  and monitored on a continuous cycle.

 

  1. Marketing ROI – We are finally in the age of realizable and measurable ROI. The tools, media technologies and data warehouses are all in place to measure inputs and outputs. However, most companies still complain they lack clarity regarding marketing ROI. The CMO needs to be up to speed on the rapidly advancing world of marketing metrics and must advocate for the financial and operational investments to connect the dots between marketing investments, sales and lifetime value of customers.

 

I believe the CMO role has more relevance to an organization than ever before – as long as they are defining their roles and influencing the fundamentals of their business by advancing customer knowledge, business model innovation and marketing ROI.