Free Marketing Essays - Marketing Strategy of Pepsi
Abstract
The beverage industry in the United States has long been the epitome for other industries across the world because of its sheer size as well as its competitive nature. PepsiCo has always followed Coca-Cola for decades despite its cola production heritage and aggressive marketing strategies. In fact research reveals that PepsiCo has more diversity in its products and brands than Coke, and engage in more creative approach to marketing strategies yet it remains second to the cola giant. The implication is that there is a differential point where both companies have managed to retain its individual position. But that is secondary to the importance of aspects of PepsiCo's marketing strategies which makes is second in position, and what could be done to rectify this position. Although the researcher do not claim to have the solution to the problem therein and guarantee successes in marketing strategies, but the following research aims to enumerate on some of the perspectives which may have influenced PepsiCo in its market positioning and future marketing strategies.
CHAPTER 1: INTRODUCTION
The US beverage industry is one of the largest and most competitive around the world. Manufacturers are competing against each other based on various types of beverages ranging from coffee, milk, alcoholic drinks, and sports drinks to bottled water and vegetable juices apart from the carbonated soft drinks. Together they all produce 10.2 billion cases and make up the $65.9 billion beverage industry according to statistics for 2004 (Sicher 2005). Of this PepsiCo holds the second position, second only to Coca-Cola, and a market share of 31.7%.
With a fairly stable consumption level the industry expects increasing spending level in the years to come and its consequent increasing revenue, and more opportunities for companies to grow. While carbonated soft drinks (CSD) have been dominant core products but in the last two years consumers have changed direction to more health drinks and replaces CSD with bottled water, fruit juices, low calorie and diet drinks. Consequently, manufacturers are forced to adopt brand extensions and introduce new brands and products to withstand their positions within the industry. PepsiCo is no different from the others with a bevy of new product lines like Tropicana, Slice, Gatorade, Aquifina and SoBe etc. to cater to changing consumer trends (Wolburg 2003) while the company is struggling to sustain its position in the market.
Unlike other beverage manufacturers, PepsiCo has realized early on not to invest all its eggs in one basket. CSD remain one of its core products nevertheless over the decades PepsiCo has managed to diversify in product lines such as snacks, fast food chains, breakfast and health drinks through a series of mergers and acquisitions of Frito-Lay, Tropicana, The Quaker Oats Company and Gatorade (Corporate overview 2005). With the diversified company background along with the company's strategy of Sustainable Advantage, PepsiCo has been able to create a competitive edge over its counterparts in the global market place. Sustainable Advantage comprise of:
(1) "Big, muscular brands;
(2) Proven ability to innovate and create differentiated products; and
(3) Powerful go-to-market systems." (Corporate Overview 2005).
Each year PepsiCo creates new marketing formula and strategy to retain existing position and expand into new markets. The underlying theme of these campaigns has been to associate its brands with new generation soft drinks consumers through music, movie and glamour. Campaigns like Pepsi Smash, Pepsi Play for a Billion, Power of One as well as touting celebrities like Black Eyed Peas, Britney Spears and local DJs all are indicative of PepsiCo's strategy to penetrate and attract the young consumers between ages 18-24 years (Hein 2004).
Aims and objectives
However, in the course of the following research it would be revealed that marketing strategies through diversification is imperative but not necessarily profitable in the long run. Research will indicate that strategies should be based on the nature of the competition, drivers as well as the industry life cycle. The maturity of the beverage market indicates that the companies operating within it should diversify in order to profit from operations. However, what kind of dynamics should govern their diversification strategies should be analyzed within the context of the firm as well as the target market. For PepsiCo it has been easy in the last few decades to diversify and extend brands constantly but will such moves prove feasible in the future or not will be the focus on the following research.
Furthermore, the researcher also aims to enumerate on the fact that marketing strategies for mature markets should be based on extension and market diversification instead of product diversification which would prove to be highly risky as well as costly in the long run. Maintaining brands and having the ability to sustain it in a fickle market exposes the company to risks such as failure of campaigns, cost of promos, brand extensions as well as advertising through media.
Consequently, the research will investigate the factors that would help PepsiCo to achieve higher profitability and yet not compromise its profitability.
CHAPTER 2: LITERATURE REVIEW
Marketing strategy
In today's consumer society, a company has to have a marketing strategy effective enough to encompass all aspects of the market and implement it effectively before it can envision success and achieve its goal. According to Tony Proctor (2000) "A strategy is a plan that integrates an organization's major goals, policies, decisions and sequences of action into a cohesive whole. It can apply at all levels in an organization and pertain to any of the functional areas of management." An organization can have various kinds of production, financial, marketing or human resources strategies to aid it in achieving its objectives. A strategy is measured by its effectiveness rather than its efficiency in processing the environment and designing plans to fit between the organization, its resources and objectives within the environment it operate. More specifically a marketing strategy is a plan to satisfy customers' wants and needs, and in the process facilitate the achievement of organizational goals. An effective marketing strategy would be one that finds different ways to satisfy the customers that its competitors cannot (Proctor 2000).
In today's competitive beverage industry marketing strategy is not as simple as the above concepts since competition does not merely involve positioning products in the customer's minds but rather how it is perceived, emotionally entangled and associated with the customers' lives. A marketing strategy is more complex than simply inducing the customers to buy the product. Instead for a beverage company a marketing strategy may include but not limited to environmental factors such as:
"1 the opening and closing of strategic windows
2 the impact of market drivers
3 the nature of competition in the market place
4 the stage of the market or industry life cycle.
5 the assets and skills that a firm possesses or can readily acquire/access." (Proctor 2000)
Thus for PepsiCo, a strategic window helps it determine when its products would be accepted in the market and when to launch it and enable it to anticipate the magnitude of its returns if it decides to launch fruit juice products, fast food or breakfast cereal. Similarly, market drivers such as technological change, latest social trends as well as economic status of its customers will classify its marketing strategy to be a success or failure. With Coca-Cola being its arch rival followed by Cadbury Schweppes, PepsiCo always need to anticipate the changing nature of competition and the market place. The latest being emergence of health conscious consumption trend. In this regard PepsiCo has always been ahead of its competitor in evolving and anticipating its customer's preference on time. This has proved critical in PepsiCo's strategy and sustained it at the top as it realizes the mature nature of it industry life cycle which does not offer much room for the company to evolve. The only alternative is to evolve and innovate through new products, which PepsiCo does effectively (Corporate Overview 2005).
Furthermore, Proctor (2000) also puts forward the concept of competitive strategy. A competitive strategy involves six major components which determine the scope of the business and the product market. The scope of the business partially determines what the product has to offer, what kind of market and opportunities for ensuing business if any. This is known as vertical integration. Factors such as investment resources, product strategy as well as business' market can greatly undermine or elevate the business in the long run in terms of cost, investment returns, feasibility and further expansion of its business units (Proctor 2000).
Typically a competitive strategy for marketing or for the organization comprise of the elements in Porter's Wheel of competitive strategy (see diagram).
According to Michael Porter (1980) Developing a competitive strategy is developing a broad formula for how a business is going to compete, what its goals should be and what points will be needed to carry out those goals (Porter 1980, p. xvi). After having analyzed the competitive environment and its elements, the organization must consider selection of its product market to operate and invest which would reflect on its investment strategies. Strategies then have to be developed and implemented as part of the business management process rather than isolated departmental strategies (Proctor 2000).
For mature firms like PepsiCo, merely establishing a marketing strategy is not enough. Instead, it should evolve and engage in growth strategies which would help it to expand its market as well as diversify its products and scope. Using the Ansoff Matrix (Proctor 2000), one can increase sales of existing products and at the same time maintain current margins on profitable sales by expanding the nominal outlays of the marketing expenditure and getting the first time users to buy the product. Eventually, the same consumers can be induced to increase the frequency of use of the product by promoting new applications of the existing products. As one can see from the diagram below the Ansoff Matrix enables marketing strategists to penetrate new markets or expand into existing ones through market development, diversification and product development strategies.
Table 1: Generic Strategies Based On Ansoff Matrix (Proctor 2000).
Market Penetration Strategy
Product Development Strategy
Increase purchase use by existing customers
New features
Win customers from competition
Different quality levels
Convert non-users
New products
Market Development Strategy
Diversification Strategy
New market segments
Through organic growth
New distribution channels
Through acquisition
New geographic markets
Through joint venture
Previously, the soft drink industry relied on market development by concentrating on transaction cost and its effects on turnover. This has been implicitly linked with the distribution system. Consequently, soft drink giants like Coca-Cola and PepsiCo concentrated on the development of efficient bottlers and distributors. No doubt they have been able to generally and effectively implemented strategies to change "packaging" and set product standardization, as well as achieve cost advantage over distribution systems (Muris, Scheffman and Spiller 1993) however for the future they need to concentrate on a different sort of marketing strategy.
Consumer value
It is clear today for most soft drink manufacturers that sustaining an efficient distributor system is not enough to sustain profitability. Allocation of resources, skills, manufacturing efficiencies and distribution systems do not put anything extraordinary into the product offering. Consumers are not merely looking for products on the shelf but for something that would enhance their experience. As Holbrook (1999) indicates goods are mere objects unless there is some subjectivity inherent in it to attract the consumers. Consumers look for objective as well as subjective qualities of products. In this context "consumer value is (a) comparative (involving preferences among objects); (b) personal (varying across people); and (c) situational (specific to the context)." (Holbrook 1999). Marketing strategists should assess consumer value by studying product relevance and not its relevancy to the competition alone. Subjective relativity assessment will reveal customer value based on situations, customer preference, experience and the extrinsic or intrinsic value of the product to the customer. More importantly, strategists must realize that value is self-oriented. That is to say, individuals usually compare value in terms of how it will reflect and affect him or her - such as my sweater, my computer, my games or my television programs. Sometimes other-oriented value also affects individual decisions such as family, friends, colleagues and peers. Consumers can also be influenced by the community, country or the world depending on the subjective relationship between himself and the world outside him (Holbrook 1999).
Holbrook (1999) writes by combining the different types of values and categorizing it, one can generate a Typology of Consumer Value as shown below which help identify the distinctiveness of value of the consumption experience of a product and how it impacts the consumer (see table below)
Table 2 A Typology of Consumer Value (Holbrook 1999).
Extrinsic
Intrinsic
Self-oriented
Active
EFFICIENCY (O/I, Convenience)
PLAY (Fun)
Reactive
EXCELLENCE (Quality)
AESTHETICS (Beauty)
Other-oriented
Active
STATUS (Success, Impression Management)
ETHICS (Virtue, Justice, Morality)
Reactive
ESTEEM (Reputation, Materialism, Possessions)
SPIRITUALITY (Faith, Ecstasy, Sacredness, Magic)
Holbrook's (1999) typology of consumer value is the starting point for modern marketing strategies. According to O'Shaughnessy & O'Shaughnessy (2003) Emotion, as an experience, is used to cover a variety of mental states and bodily processes that arise from highly positive or negative appraisals of some real or imagined event, action, or attribute." Consumption is triggered by the desire for something that possession of which would result in satisfaction. Hence, in this context a want in the mind of the consumer is represented by the benefits the individual seeks from a product regardless of the poor or good condition of the product. Earlier, marketers had focussed on product description to fulfil emotional wants of consumers. However, recent marketing is more sophisticated as it focuses on glamorizing the product rather than on the factual qualities alone as marketers is realizing that a need is an absolute requirement which any product can offer to the consumer but a wish is something that is unique which only mental and emotional stimulation can appeal and satisfy (O'Shaughnessy & O'Shaughnessy 2003).
Marketing today as most mature companies realize is not inherent in building awareness and commercialism. Instead, companies are learning with the advent of the twenty first century, a commercial tidal wave assumes many forms to replace traditional advertising. Advertisers and marketers have to work in squeezed air time and budgets; consumer preferences and pockets; investors' interests and tolerance towards risks etc. Consequently product placement right from the beginning has become critical in achieving awareness and brand loyalty. PepsiCo and Coca-Cola for example no longer rely on television air time or radio broadcast. Both companies have set new standards of practice for promoting their products by associating with the film industry or such mass media channels. Both the companies realize that their core products are consumed at the point of sale of complementary product such as movies, music, promo events etc. Alliances with media houses like Miramax, AOL Time Warner, and Disney not only guarantee their own promotions but also a good way to interact with the consumers. Appealing through association act as the catalyst for creating brand loyalty as well as awareness for new brands. Understanding this aspect of media and firms' amalgamation allow one's company to become distinguishable in providing value to the consumers without incurring price. The new mode of marketing is not only effective in direct marketing as well but also help in creating brand personality. As Foster and Mcchesney writes:
"It is to give brands personality, and to "brand" that personality on our brains. All of this has precious little to do with the actual attributes of the product or service being sold. As Coca-Cola's chief marketing officer put it in 2002, when people buy a can of Coke, "they are not buying a product. They are buying the idea of the branding imagery, the emotional connection-and that is all about entertainment."" (Foster and Mcchesney 2003).
Another aspect of today's commercialism is the emergence of brand personality and how it affects commercial penetration. The development of brand personality started with the appeal to focus groups such as sport enthusiasts, race car fans and music lovers but as marketers are finding out brand personalities through association is the key to bridging the gap between target audiences and the product. Guaranteed and endorsed by the celebrities, products tend to get the required boost and confidence that allow it to be placed in the right target market. Consequently, recent developments in young consumers especially have followed a series of promotional campaigns featuring television, radio, Internet as well as other media celebrities to endorse products. This is especially pronounced among junk food products, or products and services that pose risks in consumption (Foster and Mcchesney 2003).
Consumer value and risks
Perhaps one of the most important fundamental points about the nature of the consumer is the value they place on the products they consume. There is no clear definition or scale by which consumers make choices. Instead, consumers embody preference judgements which focus on the value of the product related to experience, attitude, effects, evaluation, predisposition, response tendency and value share. The commonality index is difficult to gauge but not elusive to marketers. Preference assessments can be made according to the evaluative judgement as well as the standards, rules, criteria, norms, goals, and ideals consumers hold. Furthermore, such values and can be influenced by opposing values, singular or plural preferences as well as standardization. All related to the consumers in their personality, education, culture and other consumer characteristics. Not only has this posed a great threat to the marketers but also difficulty in determining preferences. The subjective and relativistic preferences incline marketers to categorize their preferences according to typology as introduced by Holbrook (1999) which can be presented in an organized structure and framework.
Consumer value typology and framework not only determine consumer association but also create a systems study of the emotional appeal, preference value, and experiential orientation but also connect the marketers with them. The objective is to meet up with the expectations of the firm as well as consumers through uniqueness, strategic planning, timely launch, top management participation and support as well as anticipate unforeseen product costs etc. (Proctor 2000). Thus, consumer preference evaluation cannot be isolated from business strategy nor business risk. Management must envision risks in new products or extension of existing products by:
"* Establishing the context; look carefully at an organization's strategy, stakeholders and environment.
* Identifying situations that can affect the business objectives.
* Analyzing and assess the risks.
* Designing strategies for managing risks.
* Implementing and integrating management processes.
* Measuring and monitoring the business' efficiency, profitability and vulnerability.
* Reporting the data to the executives who are in charge." (Bodine et al 2001).
Only when marketers work in congruent with the management would the company be able to work within the context of the company's environment, goals, objectives and strategies. To minimize risks organizations are required to understand the different risks associated with products, consumers, production, marketing or policies and procedures. Before the formulation of any product or service organizations must understand that following consumer preference does not guarantee success, calculating the risks involved does. The first step towards a risk management is to devise risk identification system that is flexible, and relative to the company's goals and objectives. Any kind of products or services that is to be launched must be analyzed in the context of brand equity risk; customer satisfaction risk; product quality risk; catastrophic risk; regulatory risk; cultural risk; and trade war risk (Bodine et al 2001).
Bodine et al (2001) also recommend some design response strategies to combat basic risks. These are:
* "Avoid. If the threat associated with an opportunity is too high relative to the potential reward, it may be appropriate to drop the idea. However, some executives--and entire company cultures--may unwittingly encourage risk aversion, which can result in missed opportunities. CPAs can provide data to illuminate whether an option spells trouble or promises new benefits.
* "Transfer. Strategies that CPAs can recommend to shift risk to third parties include buying insurance; using financial instruments, such as derivatives; outsourcing some parts of the process; or creating partnerships or strategic alliances. Transferring risk can be a smart strategy --but part of the due diligence is ensuring that the organization accepting the risk can fulfil its obligations.
* "Mitigate. To increase the chances of achieving objectives, CPAs can help employers or clients establish and monitor critical success factors and key performance indicators, which signal whether a strategy is working or failing. The committee of sponsoring organizations (COSO) of the Tread way Commission and criteria of control project of the Canadian Institute of Chartered Accountants models provide guidance on the design and assessment of control in achieving objectives.
* "Accept. Companies may be able to live with some risks. For example, a gold mining company facing fluctuating mineral prices may conclude the profit opportunities outweigh the risks." (Bodine et al 2001).
Having established that however, other experts are of the opinion that risk management effectiveness depends on top management decisions. According to Gilley et al (2003), upper management risk taking propensity tends to affect the firm's performance and outcome. Top management's ability to influence the strategic choice and organizational performance greatly influences the strategic outcome. Risk related decisions pertaining to the organizational functionality should be based on the financial rate of return as well as risk's relationship with the company. The construct of the risk should be dynamic so as to mediate and change according to the unpredictable competitive environment (Gilley et al 2003).
Within this environment, the consumer has the central role in distorting risk perception and its accentuation. Lederhaus, M. and Sirgy, (1992) identify the fact that consumers are not all knowing or calculating creatures that firms can gauge from a standardized risk medium and structure. Instead consumer behaviours are irrational and advance according to the dynamic environment created by producers. Consumers largely depend on the media to help make calculated choices and consequently minimize risks directed at them. As a result they tend to avoid risk, deviate from making purchase decisions when they face high risk course of action, new products and post purchase risks. Thus, Lederhaus, M. and Sirgy, (1992) pose the theoretical framework that consumers too avoid risk assessed based on their own perception and psychological interpretation. The level of risk tolerance depends on the level of education, awareness, social orientation and status as well as psychological barriers. They regularly face purchase uncertainty but their decision to take risks is based on the above factors. Organizations therefore can help to mitigate consumers' perceived risks through education, awareness, testing, guarantees, product feature descriptions, trails and endorse it by individual's consumer's trust (Lederhaus, M. and Sirgy, 1992). In this context therefore marketing policy is about risk management strategies both from the consumer point of view as well as management.
Conceptual framework
During the 1990s with the acquisition of Frito-Lays, PepsiCo has developed an Equitrak program that would allow it to measure how to manage its array of brands. The brand equity model and measurement system at PepsiCo had been constructed with the view to keep track of its major brands domestically and globally and at the same time to allow PepsiCo's top management to focus on the three major business categories namely soft drinks, snack foods and quick service restaurants. Even at the time PepsiCo realized the significance of benchmarking its brands according to its sensitivity and stability to the consumer needs trends and seasonality. PepsiCo's strategy had been inherent in its brand-consumer relationship across product categories. This relationship can be categorized as (Kish et al 2001):
a. Recognition - Deep and wide recognition and awareness of PepsiCo's brands.
b. Regard - People's regard and feelings towards its brand (Kish et al 2001)
PepsiCo realized the importance of appealing to the consumers through reputation, affiliation, momentum and differentiation and not merely by attributes of its products and services. Satisfactory results are then measured by its Equitrak equity model which is illustrated below:
Through its Equitrak model the company is able to maximize its brand's capacity to expand or extend across the globe. It helps management to foresee a brand's decline and prepare for its revival or extension. Where products are at risk, the Equitrak helps the company to determine strategies to mitigate risks. But perhaps most important of all is that the company is able to track the quality of marketing investment it makes over its products, and justify for the risks it need to take for new product launch, differentiation, extension or expansion (Kish et al 2001).
Murray and Kitchen's (2004) explain such organization as an approach to constructing new ways to view the world by businesses and marketing strategists. Strategists tend to deliberately capture the essence of change agents by envisioning the model that would help drive their products or services and identifying attractors. According to the authors, customers are not born but created. Businesses are successful if they create the market they want to cater to by first becoming involved with the group, develop a creative strategy to develop relationships with consumers and then finally the strategy to attract them. One of the most important aspects in the development process of a marketing strategy is the development of attractors. Attractors represent the market place where the sales depend on price as well as the marketing expenditure. The dimension of the marketing strategy is gauged according to the sales level, price and marketing expense and its relationship with the competitive environment. The decision to implement a new marketing strategy should be congruent with the return it is expected to gain. In the case of PepsiCo, the authors estimated that PepsiCo has always remained at the second position after Coca-cola not because PepsiCo's marketing strategy is not successful. It is because with each initiative by PepsiCo to diversify, extend or expand, Coca-cola retaliates through advertising and promotions and secures back its position. Consequently, future PepsiCo marketing strategies should reflect this counteraction.
CHAPTER 3: METHODOLOGY
Research Methodology
For the purpose of this research, the researcher has chosen to focus on the combination method of both quantitative and qualitative research methodology. This is because the researcher is of the opinion that quantitative and qualitative both would give a fairer picture of the current research scenario and help in identifying the relationship between PepsiCo's products and services and its marketing effectiveness on its consumers.
For the qualitative portion of the research, the researcher has referred to online and offline libraries for secondary and primary resources for review. For the primary resource review, the researcher has referred to peer reviewed articles, publicly published demographics and statistical data from official websites and pre-defined rational opinions from experts on the topic of consumer behaviour and preferences. Through the primary resources the researcher has been able to formulate the conceptual framework and theoretical background. To emphasize from real life examples and facts, the researcher has referred to secondary resources which include articles from magazines, newspapers, trade associations, online web sites and news bulletins. These resources together form the qualitative conceptual basis for analysis of the quantitative data.
For the purpose of gathering quantitative data which would help materialize the above information, the researcher has chosen to use a short survey questionnaire. At this initial stage, the researcher is of the opinion a brief survey would give a pervasive yet objective view of the conditions in the business environment in which PepsiCo operate\s and help in identifying the key factors that would later guide in the full fledge research. These factors thus will form the basis for the hypothesis construction and research aims and objectives. Thus, the researcher has not focussed on detailed questionnaire formulation but a brief caricature of what is about to come.
One will also notice that the questions have been designed with the view to wield subjective answers to have a better opinionated outcome from the survey analysis. As this research is consumer behaviour oriented and how PepsiCo's strategy is affected by consumer behaviour, giving the participants plenty of space to respond to the questionnaire would allow them to answer fully, and provide comprehensive subjective opinion of their choices, preferences and reasons why for purchasing certain brands under certain conditions. For example questions like Do you think brands have any effect on your life? is an open ended question which allows its responder to explore different campaigns, interactions, effects and influences in their purchasing decisions. Consequently these responses would help to better facilitate the research outcome.
Questionnaire
To begin with the researcher has decided to take a sampling of 20 people to investigate the consumer response to PepsiCo's marketing strategy and its effectiveness. Since the company focuses on a target audience between the ages of 18 and 24 years old, it is only prudent that the researcher chooses younger individuals of college or university going students for this research. For the convenience of this initial research proposal and to conserve time, the researcher has chosen to conduct a random survey within the university itself (See appendix).
The above five questions are expected to reveal subjective responses from the interviewers about Pepsi, Coca-Cola and its rivals. But more importantly, it has helped in generating opinions from consumers such what are the inherent elements that consumers seek when they have to make the choice of a brand and being loyal to it. The questions have been designed to reflect real life opinions from consumers who interact with soft drink brands and whether these have any effects on their lives due to promotions or campaigns; and whether any change in the brands would make a difference in their choices.
Results
The 20 participant's responses have been compiled and summarized as follows:
12 out of 20 individuals consider the latest PepsiCo promo (Munarriz 2005) which gives out Xbox as gifts to be most exciting. While 8 consider the Coke give away promo to be more (Pefok 2005) to be more lucrative as it has variety of prizes. Though both type of consumers think the promos by Coke and PepsiCo are reflective of the company's sensitivity to the young consumer choice however, they think the promos will not make them brand loyal any more or less. Instead the majority 16 respondents think a brand should be dynamic, flexible, cater to all moods and occasions, customer service oriented, and trendy. Though these factors do not make them brand loyal nevertheless these qualities would make them inclined to become one. For this reason there is a disparity between the 11 individuals who are Pepsi loyal while the other 9 are Coke loyal. These individuals are not particularly loyal to PepsiCo or Coke when it comes to diversified products and services such as snacks, quick service restaurants or types of soft drinks other than cola drinks. They are willing to remain loyal to the particular brands but they may not be partial to these brands if they have alternatives fulfilling the above qualities.
Analysis of findings
Through the above brief survey, the researcher finds disparity in the consensus opinions about brands, products and loyalty. Despite efforts made by PepsiCo to retain its customers through extensive marketing strategies and consumer loyalty programs, consumers are not loyal. Given the chance they are willing to switch to new products provided the products offer features that they consider should be inherent in a brand. This opinion is consistent with the success of PepsiCo new brands which it introduces frequently to engage consumers in loyalty strategies. Similarly, consumers are not particularly loyal to soft drinks but to the ideology and the association they have with these brands. If drinking make them feel trendy and belonging to the in-crowd they would continue to support and buy it.
CHAPTER 4: DISCUSSION OF FINDINGS AND EVALUATION
The initial discussion started with PepsiCo and its position in the beverage industry. How PepsiCo fares among its competitors greatly depend on how it carries out its marketing strategy given the dynamic aspects of consumers preferences. PepsiCo statistically indicate it has sustained its second position in the soft drink industry for decades, only second to Coca-Cola. Experts have speculated this position and analyze why PepsiCo has never attained the number one position despite its creative approach to marketing strategy.
The literature review indicates that consumers tend to associate with brands and they make their purchasing decisions based on their experience, age, events and emotional associations. Sensitivity to these aspects helps the company to devise better marketing strategies. Some marketing strategies fail because of the same reason not because the marketers do not respond to the sensitive and emotional consumer needs but top management are not willing to take the risk of launching new products or extension of existing ones based on consumer fickle preferences. Consequently they lose out in the competition. The brief survey indicates how this view can definitely compromise the position of the company if the top management do not learn to take risks in responding to consumer dynamic needs and preferences. Consumers according got the survey need constant change and for this they seek in brands they consume the ability to transform through time and expect brands to be flexible to change with them in terms of fashion, trends or accepted behaviours. Perhaps this is the reason why PepsiCo has been more successful in launching its Dew and Aquifina products as these brands respond to the changing health consciousness trend among consumers.
The literature review indelicate that consumers of today are created with the view to associate themselves with brands they consume. To gain their loyalty companies must create brands that consumers can relate in every day life as well as in their perception. This emotional association not only make them brand loyal but also attract them towards new product and services offerings. In the case of PepsiCo, the company has successfully achieved this aspect of brand association by creating extensive promotional strategies featuring hip and young celebrities that consumers vouch for and associate with. Britney Spears and Beyonce Knowles for example have been the famous celebrities in the last few years making them the prime candidates for endorsing Pepsi brands.
The problem however, is inherent in PepsiCo's diversification strategies. Over the years PepsiCo has been able to transform with the trend and the crowd by acquiring diversified business categories and consequently diversify its brand offering. These have been clever strategies for diversifying its cola based core products to other categories making it feasible for the company to move on to other related industry and compete differently from its arch rival Coca-Cola. Along with these moves, PepsiCo has also launched new products as it respond to the consumer preferences and trends. However, with each new brand, it is also bring in great risks to the company exposing its investment to consumers as well as environmental risks. These features not only do not sit well with top management but will also make them vulnerable to competition wherever its products and brands expand such as competition among bottled water, snacks, quick service restaurants etc.
CHAPTER 5: CONCLUSION AND RECOMMENDATIONS
Given the above discussion and evaluation, it can be concluded that even though PepsiCo has sustained its position in the beverage industry, the nature and diversity in its product and brand ranges have exposed to multitude business risks which require it to take re-consider its marketing strategy. Promotional strategies and future marketing plans should be based on industry based analysis and evaluation. Considering the fickle nature of consumers who are willing to switch to new products whenever it comes out and reflect their preferences (which are usually indefinable) it is critical that PepsiCo consider its product offering within the realm of its business instead of continuously produce new ones to cater to a segment of the market. Coca-Cola has not diversified considerably but retained its number one position through market extension and diversification. Diversification through products is not only expensive but also costly in the long term for the company as well as for the investors.
Consequently, alternatives should be evaluated in terms of the loopholes inherent in existing marketing strategy. The researcher also aims to hopefully shed light on alternatives and options which would allow PepsiCo to better facilitate its future marketing strategies.
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Sicher, JD March 4, 2005, Beverage Digest/Maxwell Ranks US Soft Drink Industry for 2004. March 4, 2005, Beverage Digest. Press Release
Pefok, J. D. May 13, 2005, Douala University Student Wins Car In Coca-Cola Promotion. Post Newsline. Accessed on 13-9-2005 from: http://www.postnewsline.com/2005/05/strongdouala_un_1.html
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APPENDICES
Questionnaires
Full Name:
Age:
Sex:
Ethnicity:
Occupation:
Survey Questions
a. Do you like the latest Pepsi promo? Which one and why? (Specific ad will be chosen)
b. Do you like the latest Coca-Cola promo? Which one and why? (Specific ad will be chosen)
c. What are the five qualities that you like in a brand?
d. Do you consider yourself brand loyal?
e. What would make you switch brands?
f. How frequently do you purchase soft drinks? Which brand do you choose and why?
g. Do you think brands have any effect on your life?
h. Do you think you think PepsiCo as a brand has any effect on your life? Why?
