Pepsico Inc Marketing Strategy

Introduction

PepsiCo Inc. is a USA based beverages and snacks company with a worldwide reach. The company had a humble beginning way back in 1898 at the back office of a pharmacy. Today it and has diversified into other drinks like Mountain Dew and Tropicana and foods items like Quaker Oats and Lays potato chips. The company has more than 285,000 people employees working in its offices and factories around the world.

Recommended Marketing Plan for PepsiCo Inc.

PepsiCo Inc is a global giant and as such its marketing strategy needs to be multinational. Hence the marketing strategy it needs to adopt is one that has international standards with local flavours. In short a multinational strategy. An important point when it comes to international marketing is that there need to re-evaluation of the plans from time to time to make changes as per the changing international scene (Lascu, 2003). A multinational strategy can be called an evolved international strategy. The company involved needs to be ready to adjust not only its products but also its practices irrespective of the high cost to suit the conditions of the markets in different nations (Kotabe and Helsen, 2009). However a point of note is that the differences that existed among nations in their preferences of products are quickly fading away. A company now days cannot get away with introducing a product in a developing country a year after it was already introduced in developed countries (Kotabe and Helsen, 2009). Due to this very reason PepsiCo need to stick to a pattern where a product when introduced in the US is also introduced in Europe and Asia. However, its advertising strategy should be adjusted in accordance with the beliefs and practices of different countries. There can be a common underlying message, however the words used and the scenes used need to be altered to suit the country. Something that works in the USA may turn out to be offensive in an Asian country due to the vast cultural paradoxes.

To be successful, it is essential to have a well drawn marketing plan as well. The plan should begin at the market level, so that there is a complete understanding of the customer preferences and then gradually progress to the corporate level (McDonald and Wilson, 2011). This gives a worldwide plan that takes into consideration the customer preferences. Such a plan will enable PepsiCo to bring out a market program that would be structures such that changes can be made as per the requirement of the very volatile market. PepsiCo will thus be able to come out with new or modified products that are liked by the customers. It will also be able to come out with a promotional campaign (that is key to its success) that will be acceptable to people of different countries. A campaign that caters to the sentiments of the people is likely to succeed in most countries of the world. To increase its reach, it is also essential to sponsor more entertainment and sporting events both in the international as well as local levels. Sponsoring TV shows or movies that cater to the “generation next” image that Pepsi is trying to create would also go a long way in improving its market. It would also improve its prospects of beating its arch rival in the “Cola wars”.

Pepsi Co’s Marketing Strategy

The current marketing strategy adopted by PepsiCo Inc. is definitely one that caters to its global standing. Since Pepsi came out at a time when Coke or Coca Cola already had a head start in the market, its market strategy and business plan began with differentiation – an attempt to establish its product as one that is unique in taste and quality. This approach was successful to a great extend and Pepsi was able to establish itself in the US markets. Later the plan shifted to comparative marketing and later to diversification.

PepsiCo Promotional Campaigns

Pepsi’s promotional campaigns had a lot to do with its success. Pepsi’s market environment always presented it with a challenge in the form of Coke which had already created a niche for itself.

In the 1940s to create a niche among the African American, Pepsi created a scholarship program that awarded 17 African American high school seniors full time scholarships (Capparell, 2007). During the same time the ad campaigns of Pepsi featured top people from the African American community and they called it “Leader in their field” campaign. This campaign was quite a breakthrough and really made an impact. It opened up a whole new market segment for the company.

In the 1960s, Pepsi’s campaign was aimed at teenagers and young adults – beach bursting of youngsters having fun and drinking Pepsi was quite a common theme and popular too. It showed that Pepsi was the drink for partying and hanging out with friends, something the American youth could easily identify with. The “Pepsi Generation” theme became highly popular and the drink started creating a niche for itself among the young of the country. At first it was called “think young” campaign. This later evolved into “come alive” in the year 1965. This is when the term “Pepsi generation” was first introduced to the people (Rutherford, 1994).

In the 1970s Pepsi came out something called the “Pepsi Challenge”. This campaign was aimed at proving Pepsi as a better tasting drink than its rival Coke and involved blind tasting of the two products to choose the better one (Shimp, 2010). Even though this helped improve the market share of PepsiCo, Coke still led the market.

Pop icons like Michael Jackson and Lionel Ritchie and youth sensation like Michael J Fox became part of the Pepsi campaigns in the 1980s where by Pepsi began to beat Coke and come out the winner (Rutherford, 1994). They had a huge fan following and when they were seen endorsing the brand, the impact was instantaneous. Pepsi also exploited famous movies of the time like Star Wars to improve their brand image and create interest among the people. However, Pepsi chose to replace the “Pepsi Generation” campaign with “Gotta Have It” in the beginning of the 1990s. This turned out to be an erroneous move and Coke again started to gain market share.

The Beverages Marketing Company did a research on the leading beverages in the US in 2009-2010 and came up with the following result which clearly shows Coca-Cola leading the show. However Pepsi is 2nd in line and the company’s other products are doing quite well.

Source: Beverages Marketing Corporation – News Release

Pepsi and the Cola Wars

The cola wars began somewhere in the mid 1950s. The main players in the war were Pepsi and Coca Cola. The two companies had been in rivalry ever since Pepsi came out with its first cola. But the rivalry reached its zenith in the 1980s and 1990s. The main point was neither company had a cost advantage. Hence promotion was the main way of competing. In the 80s Pepsi started coming out with campaigns that undermined Coke. For example, a Pepsi ad came out which showed a group of retirement home people dancing to rock ‘n roll when they get the wrong delivery of a Pepsi crate instead of Coca Cola (Rutherford, 1994). It also used celebrity advertising vigorously. This gave Pepsi a lead in the market, though short lived. In the 1990s Coca Cola was beating Pepsi by huge margins again. The war was quite cut throat with Coca Cola doing everything possible to outrun Pepsi. This included stealing Pepsi’s bottlers, hoarding of Pepsi bottles and creating ads that hinted at ridiculing the Pepsi brand. In many countries Coca Cola were forcing retailers and bottlers to boycott the Pepsi brand. Upon learning about this Pepsi filed several anticompetitive cases out if which they won around 70 (Gillespie et al, 2011). Yet, at one stage of the war Pepsi’s market value fell to less than half of Coca Cola’s market value (Ferrell and Hartline, 2008). Coca Cola was and is still leading in when it comes to market share of its cola brand. The only way Pepsi could fight back was through diversification. It started spreading its wings to include sports beverages, varied versions of the Pepsi drink and non-carbonated beverages in its portfolio. It started considering itself as a “complete” beverage company. The diversification further happened to include snacks and food items like potato chips and oats. Diversification really helped Pepsi to improve its falling stand in the market not only in the local markets of America and Europe, but also in its international markets where Coke is leading the show.

Now Pepsi and Coke have to face the “New Cola Wars”. Many new companies are coming out with cola drinks of their own. For example in the Middle East there is the Mecca Cola and the Zam Zam Cola, in India there is Thumps Up and in Latin America there is the Kola Real. These brands were able to capture a part of the market share in their respective territories where by Pepsi and Coke started to lose market despite the ardent promotions.

Pepsi Goes International – Its Global Marketing Plans

In the 1940’s itself PepsiCo started branching out into the international arena. At first it was into Latin America, the Middle East and the Philippines. Here too Coke had the early bird advantage. Yet the product soon gained popularity. With the Arab countries boycotting Coke, Pepsi enjoyed a monopoly for many years in the Middle East. In the 1950’s Pepsi went to Europe and this included Russia, with whom there existed a Cold War by USA. Though there were initial difficulties, getting into Russia was a major breakthrough which the company exploited. The company posted pictures of the then leaders of the United States and Russia sipping the drink (The Pepsi Cola Story, 2005). Its arch rival, Coca Cola, was able to enter the Russian markets only after more than 25 years after Pepsi’s entry.

In many of the countries that Pepsi ventured into comparative advertising was prohibited and in many countries it was not an accepted concept. For example, Pepsi tried its “Pepsi challenge” promotional gimmick in Japan. However, the country and its people were not aware of comparative advertising and as such the campaign did more harm than good (Gillespie et al, 2011). Hence in Japan they had to break their tradition of running with the global campaign and come up with a campaign that the Japanese would identify with and was more Japanese. The “Pepsiman” was a superhero like figure that was devised by a Japanese person for the Japanese market (Keegan, 2002). The commercial was an instant hit and helped improve Pepsi’s share in the Japanese market by as much as 14%. From Japan Pepsi learned a valuable lesson – the same ad will not have the same effect everywhere. When it comes to cross national advertising, there is always the inherent risk of alienating the people.

With the Indian markets, Pepsi had the first mover advantage over Coke. It had coined its own special slogan for the Indian market too that became quite popular with the crowd. Yet Coke re-entry into India was a great threat to the company. Coke signing on youth icon and Indian star Hrithik Roshan to do their campaign was an even bigger threat. However, Pepsi reverted to the old ploy of showing down the competition. They featured the king of Indian movies, Shah Rukh Khan and a Hrithik look alike (White, 2002). This comparative ad was effective and brought Pepsi back into the spot light.

In the USA and European markets Pepsi still uses promotional campaigns that aim to break the colour barriers with stars like Britney Spears, Beyonce and Haley Berry appearing in its ads. The brand and its products are highly popular in these areas. In the international arena, Pepsi has been able to create a niche through its vigorous advertisement and event sponsorship. In fact more than 45% of the total revenue of the company comes from its market outside the USA (PepsiCo Annual Report, 2010). However the company has experience many setbacks due to its many blunders have cost it valuable market share.

Marketing Blunders

One of the major blunders that Pepsi did in its marketing runs is the literal translations of some of its slogans into other languages. For example PepsiCo’s slogan “Come Alive with the Pepsi Generation” when translated into Taiwanese meant “Pepsi will bring your ancestors back from the dead” and caused great damage for its image (Ahlstrom and Bruton, 2010). It was the perfect example of the wrong market message. Similarly, the goodwill of the company suffered a heavy blow when its bottle cap campaign (number inside the cap and a few winning numbers win fabulous prizes) in Chile ended in wreckage of the company. This was caused by a wrong fax being sent and the wrong number being announced on TV (Gillespie et al, 2011). Almost a similar incident repeated in the Philippines as well a few months later when, due to a computer glitch, instead of one winner several winners were announced for the bottle cap sweepstakes. Instead of learning from a blunder in one country, it was repeated in another, causing further harm to its brand image.

A more recent marketing blunder happened in the United States of America itself. In 2010, Pepsi decided not to spend big bucks for sponsoring the Super Bowl. The Super Bowl is a sporting event in the States that is watched by almost all Americans and hence its wide reach is indisputable. Instead, it decided to do social marketing through its internet based “Refresh” campaign (Forbes, 2nd September, 2010). Though the effort was commendable it was a major blunder. Instead of using the Super Bowl to further give lime light to the Refresh campaign, it completely missed the opportunity paving way for others to make use of the spot.

PepsiCo – What the Future Holds

The future of the global market place is quite volatile. It can be said that the market place will be in a constant phase of flux. The market is in a state of turbulence where there are sudden leaps and sudden falls. These leaps and falls could be due to the economic conditions, political conditions or even climatic conditions. Then there are the market shocks in that are caused due to sudden surges in technology. The starting of Amazon, the first full scale online market and the introduction of the iPhone, a technological marvel in the mobile phone world, can be considered as true examples of these surges (Kotler and Caslione, 2009). With new technologies being invented almost daily, the phase of marketing is also changing daily. The radio brought our radio jingles and sponsoring of radio shows by companies and brands. Similarly the invention of TV saw TV shorts and commercials becoming popular. The internet saw the coming of online marketing and now with mobile phones there is mobile phone marketing. PepsiCo too changed its marketing tactics in step with these technological changes. Mobile phones, androids and palm tops are now ruling the market. Pepsi needs to come out with applications for these devices that can be downloaded and installed. Applications could include games, screen savers, wall papers and mp4s.

In the hope of luring in the young, Pepsi had taken to calling in on designers to come out with cool designs for its cans back in 2007. In 2010 it has started to be more socially active, giving in to the call for corporate social responsibility, by bringing out the Refresh campaign that is aimed at charity work and social causes. However the real challenge of the company lies in moving beyond the cola and promoting its other products. Its challenge also lies in being able to cope with the changing market situations and come up with promotional gimmicks and products that would continue to hold the interest of those already into the product and that would attract the newer generation who are ready to experiment. It needs to come with a marketing strategy that would not only help increase its market share in the world market but also lure in more loyal customers. This would ensure sustainability and stability for the company and its products.

Appendix

Company Background

Pepsi was created by chemist named Caleb Bradham. He was inspired to experiment with various products and ingredients to create a suitable summer drink that became highly sought after way back in the summer of 1898 (The Pepsi Cola Story, 2005). It was this summer inspiration that later evolved into what we now know as Pepsi Cola. The company was launched officially in the year 1902. The beginning of Pepsi Cola was in the back room of his pharmacy, but recognizing its potential, Caleb soon started bottling the product so that people all over can enjoy it. As the years passed, Caleb started franchising the bottling of the drink to different people in different locations. Soon Pepsi Cola was being sold in 24 states across the United States. When World War I broke out, the company went bankrupt and Caleb had to sell the trademark to a stock broker from North Carolina. But he too could not revive the business. It was the candy manufacturer, Charles G. Guth, who bought it from the previous owner and revived it into the global brand it is today. Its marketing plan started even when the company was in the hands of Caleb and grew with the company. It was during World War II that the company adopted the red white and blue emblem to depict patriotic America. The colour code still exists today though the emblem has evolved many times.

It was after 65 years after the sale of its first cola that PepsiCo started its diversification into other foods and beverages. Now the company not only sells Pepsi, its main brand, but also other items like Quaker Oats, Aquafina, Tropicana, Mountain Dew and Lays. It also had alliance with companies like Starbucks and Lipton to come out with special coffee and tea.