Reference no: EM1360811

Analyzing Jones Soda's Target Demographic and Expansion

There are few companies with as intimate a relationship with their target market as Jones Sodas of Seattle, Washington. Jones was started by Peter van Stolk, whose innovative idea of making soft drinks with names like Fufu Berry and Perspiration was a hit with the young, hip counter-culture demographic that was his target market. But how did he take on giants like Pepsi and Coca Cola with such a small business? Well, the short answer is that he didn't. Peter deduced that a small segment of the nearly 70 billion dollar soda market was made up of people largely unsatisfied with the same old colas that everyone thinks of automatically. So the market he was targeting was rebels: people who resisted conformity and eschewed the norm. His product would have to behave the way they did. He started by concocting unique beverage flavors that were a wild departure from the status quo. Drinks with names like "Jelly Donut", "Bug Juice" and "Fun" were an instant hit, but even his awful-tasting novelty beverages like "Turkey and Gravy" were popular for their uniqueness.
The company's brand image employs user-supplied photography on the labels of their bottles and for years their only advertising was via two RVs that travelled the country giving away free sodas and branded gear at high schools and skate parks. The resulting word of mouth drove the fledging company to 35 million a year in sales revenues. The main reason it all worked was that Jones sodas knew their target market, and their target market loved them. When it came time for Jones to expand, however, they made a terrible miscalculation. They assumed that the only way to sell a higher volume of product was to appeal to more mainstream markets, like the kind of people that shop at grocery stores like Walmart and Safeway. To attract that crowd, they started putting their traditional bottle-only sodas into cans and put 12-packs of the stuff on shelves right alongside Coke and Pepsi. Unfortunately for the Jones creator, this not only failed to attract a new market, it cost tens of millions of dollars to get there. Jones had tried to go head to head with a very different breed of competition than the Odwallas and the Hansen's sodas that had shared the premium soda market space. Coke and Pepsi were so big that they didn't even notice the upstart. And despite commercials that were produced by Jone's own customers.... as was their tradition.... the average shopper didn't notice them either. Jones had lost a core of its brand identity, and because this coincided with the recession of 2007, the results were staggering. Profits fell by 98 percent and the stock price fell from 32 dollars a share to below a dollar. Peter van Stolk stepped down as CEO and eventually left the board of directors as well, and it took two different replacements to stabilize the downfall.
To salvage its future, Jones has now returned to its roots, focusing again on bottled beverages and returning to the loyal demographic that had made it an alternative superstar in the first place. In the premium soda market, Jones again enjoys a competitive advantage that it couldn't gain against the giant cola companies. New products which cater to special segments of the market are giving it some growing room. Jones Gaba features a Japanese ingredient innovation said to promote concentration and mental clarity. Jones Zilch is a zero-calorie product that addresses the shift of consumer tastes from the sugary drinks of old to more sensible, lower-calorie fare. Jones sodas enjoyed a great competitive advantage when it first came to market but lost its identity on the road to success. They learned a valuable lesson about the attractive power of just being yourself. But their customers could have told them that for free.

1. During the company's early years, how did Jones Soda differentiate its product from other soft drinks? How did it compete with Coke and Pepsi?

2. Who is Jones Soda's target demographic? How has the company chosen to reach those customers?

3. What mistakes did Jones Soda make during its attempts to expand its market? What effects did these mistakes have on the business?

4. How did the company revive itself and its sales?