Coca-Cola loses faith in TV commercials
Getting viewers' attention remains a challenge for the company, which spends billions every year on advertising.
Coca-Cola's (KO) first commercial was produced in conjunction with a television special featuring ventriloquist Edgar Bergen and his dummy Charlie McCarthy. It ran on Thanksgiving Day 1950. "With ad-skipping rampant, the company has lost faith in the effectiveness of traditional ads in comedies and dramas, save for the Super Bowl, 'American Idol' and other programming that consumers watch live and talk about the next day around the Coke machine," according to MediaPost.
Coca-Cola isn't abandoning the boob tube entirely. It is planning a major Olympics push this summer, but the company believes that a traditional 30-second spot can no longer stand alone. The company is a huge advertiser, spending $11 billion globally over the past two years, so its views about TV should give investors some pause.
For Coca-Cola, as with most major brands, advertising is all about targeting demographic groups -- and the younger, the better. Advertisers believe, perhaps wrongly, that older consumers are more set in their ways and less apt to switch brands. Unfortunately for media companies, such as ABC parent Walt Disney (DIS), CBS (CBS) or Comcast Corp. (CMCSA), the audience for broadcast television tends to skew older. Viewers also are watching less cable TV, whose audiences are often younger, which is bad news for Viacom's (VIA.B) Nickelodeon, Time Warner's (TWX) TBS and TNT, and News Corp (NWS), whose cable holdings include FX.
The Atlanta, Ga., beverage company is hardly alone. Kantar Media notes that the top 10 TV advertisers spent $10.1 billion in 2011, down 0.8% from 2010. Four of the top 10 -- Procter & Gamble (PG), AT&T (T), General Motors (GM) and Verizon Communications (VZ) -- spent less on the medium last year than they did in 2010. Procter & Gamble, the No. 1 advertiser, raised spending on magazines at the expense of television, still the foundation of its marketing spending. How long that view will hold remains to be seen.
Rich Greenfield of BTIG has argued that 2012 will be the first year in history that traditional TV consumption will decline. That is forcing networks to get creative to find ways to squeeze more money out of advertisers. For instance, it's no coincidence that the judges on "American Idol" drink out of glasses emblazoned with a Coke logo and that the stars of "Pawn Stars" chow down on Subway sandwiches. Though 30-second commercials can be annoying, at least people are able to tell the difference between content and commercial.
Jonathan Berr is long Coca-Cola.
OKAY EVERYONE...
let's settle this once and for all.
• If you believe that Coke is better than Pepsi, click on the THUMBS UP.
• If you instead believe that Pepsi is better than Coke, click on the THUMBS DOWN.
Let the voting determine the winner!
By the way...for the record, my vote is for Coke!
The whole reason commercials have become ineffective is due to the major networks increasing the amount of commercials in a 30 minute progam. As consumers, we know that we have enough time to do other things during the commercials ... and why not? I know I've got 3-5 minutes to do other things. If we knew that there would be only 30 seconds of commercials then we would be more likely to sit through it in order to not miss the program. You need only compare a sporting event to a sitcom to see this.
I think it is very simple. Take that $11 billion and cut the cost of all coke products accordingly. The best advertising they could have would be a sign on the coke rack at every sales venue that read: 2 liter COKE products: $1.00.
In Puerto Rico, (an island some 1,000 miles from the U.S. where everything must be shipped in), 2 liter bottles of coke sell for $1.00 (the last few times I was there). The culture is one of juice drinkers, not cola drinkers. If Coke can manufacture coke on the mainland, ship it 1000 miles and still sell it for $1.00, they could do it here, too.
I'm always amazed at the "cola wars". One week Coke is on sale and the next week it is Pepsi. Each always the same price and the same sale price. It seems that more than just a little collusion is going on.
If Coke is so worried about their profits falling, maybe they better take a look at their prices. In most area's across the nation Coke is one of the more expensive brands to purchase. Most grocery stores consider it a sale when they have coke at $1.60 or so for a 2 ltr. Alg price I have seen is almost $2.00 a 2 ltr. Prices that a little over a year ago were considered 'high' by convince stores. Yet other major companies keep their prices at a decent level $1.10 or under. The vendors that 'deliver' coke products get a cut of the daily sales they make, so they jack the prices, and the stores have to jack it up to make their profit share....but the bottom line is that coke has gotten so greedy (and the mentality has run rampant from the top of the company, down to the people loading the trucks) that they are pricing themselves out of business.....
Its their own fault.....
Let me put it another way...
... Do any of your remember the first commercial Cindy Crawford did for Pepsi? These two boys were hanging on a post fence with their eyes open wide and their mouths agage. The camera pans to Cindy Crawford dressed in Daisy Dukes just walking in slow motion. Yeah... just like me your eyes focused on that image - and what an image it was. Whewee!
My jaw dropped too.
Then the two boys in unison uttered an expressive, "WOW," which was exactly what I was thinking - but apparently for a different reason.
Yeah, I watched that commercial a half dozen times before I realized it was for Pepsi. (a "new can?" nothing wrong with her old one, I mean....)
And that ad... I'm still a Coke drinker.
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