12, interesting thought. The marketing definitely fits, no doubt at all.
The question management will be pondering as to whether to proceed or not will be (among other questions):
1) Who are our competitors? Pepsi, Coke, Fanta, Schweppes, Kirks..other carbonated brands
2) What is our target Share of Market for our brand?
3) How much Advertising $$ dollars do we have to compete and get 'share of voice' with consumers to achieve our share of market and dollar sales?
'Share of Voice' is a term used to measure 'share of what consumers hear' (TV, social media..etc). ie if the manufacturers for drinks spend $100 on advertising in total per year, how much of the advertising is Coke, Pepsi, Fanta...etc. It means that, if FOD has $2 to spend then their SOV is 2% based on the total spend of $100.
SOV (share of voice) is a very important measurement in holding or growing 'share of market'. Generally speaking, a brand will invest a SOV roughly in line with its SOM (share of market) to maintain that SOM. This means, if a brand has 20% share of sales of the market it will spend approx 20% of the total amount of advertising for the brand category to keep that SOM position. (This amount of advertising for the category is measured by third party ie AC Nielsen) For example, for an established brand with a long heritage with market leadership, let's say the brand has a solid 40% SOM then it would be reasonable to assume it would spend $40 to maintain it's SOM. (However, if it is a dominant brand then it may be able to keep the SOM of 40% with only a 30% SOV. This implies the consumers are VERY loyal to the brand. but this is secondary to my example).
Let's say....
Scenario 1 Total category advertising $100
Brand A. $40 40% SOV 40% SOM
Brand B $30 30% SOV 30% SOM
Brand C $20 20% SOV 20% SOM
Brand D $5 5% SOV 5% SOM
FOD. $2 2% SOV 2% SOM
other $3 3% SOV 3% SOM
Alternatively, a second tier brand wanting to grow SOM from a current 30% may in fact decide to invest $40 in advertising to attract more consumers. (Scenario 2) So this where brand advertising strategy comes in.
As a second, third or fourth tier player wants to grow SOM then it will need to spend disproportionately more SOV $ than the market leader to grow their SOM. This is where the concept of 'media inflation' comes in.
If spending in the total brand category increases based on second, third and fourth tier brands increasing their budgets, the net effect could be worse for some brands.
Scenario 2 Total category advertising $110
Brand A. $40 36.3% SOV ? SOM
Brand B. $40 36.3% SOV ? SOM
Brand C $20 18.2% SOV ? SOM
Brand D $5 0.045% SOV ? SOM
FOD. $2 0.018% SOV ? SOM
other $3 0.027% SOV ? SOM
The problem then begins as all the big players up their spending as competition grows and each brand strives to maintain their SOV strategy to hold their SOM. If the market then increases to $200 of total advertising and FOD only continues to spend $2 then their SOV drops to 1% ($2/$200)
This basically means that FOD needs to double spending just to maintain its market position.
If not, there are dire consequences for brand health and sales as consumers disconnect with the brand
Scenario 3 Total category advertising $200
Brand A. $80 40% SOV ? SOM
Brand B. $80 40% SOV ? SOM
Brand C $40 20% SOV ? SOM
Brand D $10 5% SOV ? SOM
FOD. $2 1% SOV ? SOM
other $3 1.5% SOV ? SOM
Net......not looking too good to compete in carbonated drinks.
Believe me, current management know fully well these scenarios...
IMO, of course.
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