Branding is a way to differentiate a company, product or service from its competitors, and establish a personality that is both unique and appealing to potential customers. It is a multifaceted, multilayered process and discipline that aims at establishing long and profitable relationships with stakeholders. It begins with a branding strategy and is implemented throughout an organization and communicated to significant company stakeholders over time.
It springs from a company's core - its vision and mission - and develops the corporate "story" in ways that relate and resonate with target market members. Branding builds stronger, longer relationships with customers. For those embracing the concept of "customer life value", branding is integral. A powerful, well-established brand also removes the product from the "commodity" category and often allows the company to operate witho...
ut the need to participate in competitive price wars.
Branding has taken on a greater significance in the past decade as companies begin to see their brands as assets - as valuable and as tangible as their systems and patents. So brands have become more than marketing slogans and icons today: they are now closely monitored by the CEO and CFO, and assessed by industry analysts and pundits. Today's accounting practices can actually value the brand as an asset on its balance sheet. Yet many businesses, particularly business-to-business marketers and service providers, have yet to accept, or even appreciate, the value of branding.
The truth is every business, even a commodity supplier, is building a brand through their actions and their presence even if that brand is not being intentionally created and nurtured. They acquire a "position" in the minds of customers and prospects, a position or identity
based solely on exposure and experience with the provider. With focus and action, these companies can enhance their brand and increase its value (Jelsema,M. , 2007). Marketing tells people about products, and awareness is far preferable to non-awareness.
Sales promotions work, and digital marketing campaigns can be lots of fun. Creative ads get headlines and even win awards at Cannes. Tomorrow's real branding magic is going to come from conceptualizing all business activities as branding: ingredients, mixtures, containers, manufacturing, distribution, display, replenishment, and support all commingled to provide uniqueness, competitive advantage, and behavioral prompts for purchase. The following paper attempts to analyze the branding strategy of Pepsi both in global and Bangladesh context.
The Carbonated Soft Drink (CSD) industry is a tight oligopoly with Pepsi and its chief competitor, Coca Cola, comprising 70% of the total market. In particular, the paper will examine how current actions by PepsiCo regarding differentiation, pricing, cooperation, and complements have affected their profitability in the CSD industry. Furthermore, the paper will give specific recommendations, with an emphasis on cooperation tactics and complements.
The American Marketing Association describes a brand as a “name, term, sign, symbol, or design, or a combination of them, intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competition. ” Technically speaking, then, whenever a marketer creates a new name, logo, or symbol for a new product, he or she has created a brand. It should be recognized that many practicing managers, however, refer to a brand as more than that – defining a brand in terms of having actually created a certain amount of awareness, reputation,
prominence, and so on in the marketplace.
Branding involves creating mental structures and helping consumers organize their knowledge about products and services in a way that clarifies their decision making and, in the process, provides value to the firm. The key to branding is that consumers perceive differences among brands in a product category. Leadership is part of the core identity for many brands, especially corporate brands, and with good reason. It can inspire employees and partners by setting a high brand aspiration level; the goal of being out in front makes the brand-building task exciting and worthwhile.
For many customers, a leadership brand provides reassurance, while for others it implies quality and/or innovation that translates into solid functional benefits. Buying and using a true leadership brand also delivers self-expressive benefits – a feeling of importance and the satisfaction of having good judgment. Brand equity is the commercial value of all associations and expectations (positive and negative) that people have of an organization and its product and services due to all experiences of, communications with, and the perceptions of the brand over time.
This value can be measured in several ways: as the economic value of the brand asset itself, as the price premium (to the end consumer or the trade) that the brand commands, as the long term consumer loyalty the brand evokes, or as the market share gains it results in, among many others. From an economist’s perspective, brand equity is the power of the brand to shift the consumer demand curve of a product or service (to achieve a price premium or a market share gain). The CBBE model approaches brand equity from the perspectives
of the consumer-whether it be an individual or an organization.
Understanding the needs and wants of consumers and devising products and programs to satisfy them are at the heart of successful marketing. In particular, two fundamentally important questions faced by marketers are: what do different brands mean to consumers? And how does the brand knowledge of consumers affect their response to marketing activity? Customer-based brand equity is formally defined as the differential effect that brand knowledge has on consumer response to the marketing of that brand. (Bourbab and Boukili, 2008)
PepsiCo is one of the largest food and beverage companies in the world. It manufactures and sells eighteen brands of beverages and snack foods and generates over $98 billion revenue in retail sales. PepsiCo encompasses the Pepsi Cola, Frito-Lay, Tropicana, Quaker, and Gatorade brands and offers products in over 200 countries. It currently holds 36 percent of the total snack food market share in the U. S. and 25 percent of the market share of the refreshment beverage industry. The company’s headquarters are in New York and employs over 200,000 people.
In 2007 Indra K. Nooyi became the CEO of PepsiCo. PepsiCo has received many awards and recognitions over the years, including being ranked in the top 25 of the best global brands, ranking number four overall by Diversity Inc, and earning the Green Award by the Environmental Protection Agency. PepsiCo Guiding Principles: “We must always strive to: 1. Care for our customers, our consumers and the world we live in. 2. Sell only products we can be proud of. 3. Speak with truth and candor. 4. Balance short term and long term. 5. Win with diversity
and inclusion. . Respect others and succeed together. (“PepsiCo Values ; Philosophy. ” PepsiCo. Available at-http://www. pepsico. com/Company/PepsiCo-Values-and-Philosophy. html) The Pepsi recipe was developed by pharmacist Caleb Bradham in the 1890s. Originally marketed under the unassuming name “Brad’s Drink,” Bradham’s creation was renamed Pepsi-Cola in 1898 due to the pepsin and kola nut ingredients used. Awareness of Bradham’s new creation spread quickly, and in 1902 he decided to create the Pepsi-Cola Company so people everywhere could enjoy the drink.
In 1903 the patent became official, and by 1910 Pepsi-Cola had franchises in 24 states and sold over 100,000 gallons of the syrup annually. However, the Pepsi brand would encounter several rocky situations before becoming the success that it is today. World War I proved to be an especially turbulent time for Pepsi-Cola. Severe fluctuations in sugar prices caused the company to lose money, and in 1923 Bradham sold the trademark to Craven’s Holding Corp. , who shortly after sold it to a New York stockbroker named Roy C.
Megargel. Megargel fought to revitalize the company but failed. In 1931 the Pepsi-Cola Company underwent its second bankruptcy. Candy manufacturer Charles Guth, president of Loft Inc. , saw Pepsi-Cola as a great investment and decided to purchase the company. Within two years the company was earning over a million dollars and was on its way to making history.
Building a Brand
Guth had many challenges to overcome in order to save the struggling brand.
Through the Great Depression, Pepsi carefully positioned itself as a low cost leader and made advertising history when it released the nation’s first jingle “nickel, nickel,” which was heard across the nation. With financially-strapped customers reluctant to pay
a nickel for a drink, Guth began offering twice the amount of Pepsi for the same price, a tactic which met with resounding success. World War II continued to test Pepsi-Cola’s strength with introduced sugar rationing, but Pepsi’s marketing campaigns and brand design helped Pepsi make it through the difficult period.
For instance, Pepsi changed the colors on the label to be red, white, and blue to show patriotism and declared that patriotic people drink Pepsi. Pepsi’s success allowed it to begin marketing internationally in 1945. As more people began earning more disposable income, Pepsi-Cola recognized that the marketplace was changing. To maintain a strong brand, its marketing campaigns had to change too. Pepsi therefore said goodbye to the long-running “nickel, nickel” slogan and introduced a more lively “More Bounce to the Ounce” slogan to the after-war population.
During the 1950s, Pepsi evolved from the low cost price leader to a more lifestyle drink approach. For example, as Americans became more health conscious, Pepsi introduced slogans such as “The Light Refreshment” and “Refreshing Without Filling. ” Other new advertising campaigns included slogans such as “Be Sociable, Have a Pepsi” and “Now Its Pepsi, For Those Who Think Young” to concentrate on a younger market. It was this younger target market and the post-war baby boom generation that set the stage for Pepsi’s long-lasting brand image.
It all started with Pepsi advertiser Alan Pottasch, who recognized the different nature of the newest generation of consumers. Whereas consumers before the war were more cautious and price-conscious, the post-war baby boomer generation was carefree and hopeful. Pepsi once again capitalized on the changing environment, and under Pottasch launched the “Pepsi Generation”
campaign in 1963. The campaign was an advertising breakthrough as it helped to set a new standard for advertising in America. The ads portrayed happy Americans living the American dream—with their Pepsis, of course.
By associating its brand with youth and excitement, Pepsi-Cola became the forerunner of lifestyle marketing. Future campaigns continued to promote this brand image, with slogans such as “You’ve Got a Lot to Live. Pepsi’s Got a Lot to Give,” “Catch that Pepsi Spirit! ,” “Pepsi Now! ,” and “Come Alive. You’re in the Pepsi Generation! ” Pepsi successfully adapted its practices and product positioning with the times through its marketing campaigns. The company also pursued a major acquisition strategy as well as an expansion of its product line. Burch, Montoya and Sawayda, “Pepsico’s journey towards an ethical and more responsible culture”, Available at- www. 2dix. com)
The industry for carbonated soft drinks is characterized by the following five forces: Threat of New Entrants – Currently, the biggest threat of entry faced by the majors is from private label manufacturers. The challenge to both Coke and Pepsi is to further build brand loyalty in their core cola products so that consumers will not be swayed by the cheaper, private label imitations products.
More importantly, retailers, finding far more attractive margins with private labels, may choose to push these products instead of the majors. Given that access to distribution channels is currently one of the largest barriers to entry, Coke and Pepsi must maintain favorable relations with the large retailers so that this barrier remains strong. For both companies the end product is, despite extensive advertising campaigns that promote the contrary, almost identical. The product
differentiation comes from established marketing campaigns that have created brand identification and loyalties.
For a new entrant to compete effectively, they would have to be willing to expend the time and resources necessary to first convince the consumer to try the new product, and after trial, switch their loyalties. The threat of new entrants is partially increased by the low switching costs for consumers. Thus, the overall threat of new entrants is considered moderate with a special note made of the increasing presence of private labels. Bargaining Power of Buyers – The level of bargaining power differs among groups of buyers.
The bottlers, distributors and retailers have significantly greater bargaining power than the end consumer does. The bargaining power of retailers is lessened by the end-consumer brand loyalty. A retailer could risk losing groups of customers if they simply refuse to stock a certain brand. The bargaining power of the end consumers is low. They are a fragmented group and no one individual’s purchases account for a significant portion of the manufacturer’s profits. Although the presence of substitutes does serve to increase buyer power for the consumers, the high degree of brand loyalty mitigates this power.
The overall bargaining power of buyers is considered medium. Bargaining Power of Suppliers – There are few suppliers for the carbonated soft drink industry. The end product is comprised of few ingredients, which are largely commodities. Also, it is safe to assume that Pepsi and Coke sales account for a large percentage of the suppliers’ total revenues. Thus, the importance of the CSD industry to the suppliers serves to contain whatever bargaining power they may have. The overall bargaining power of the
suppliers is considered to below.
Substitutes – There are many substitutes to carbonated beverages. However, each company has a significant presence in substitute markets so that a decrease in cola consumption can conceivably be made up in increased consumption of bottled water, juices, teas and energy drinks. The challenge lies in increasing brand loyalty within these substitute markets. Because the substitute products are, for the most part, contained with each manufacturer’s product portfolio, the threat of substitutes is considered low. Rivalry – There is intense rivalry between Pepsi and Coke.
This rivalry leads to downward pressure on prices and significant investments in advertising in an attempt to build and maintain brand loyalty. A 2000 article from the Competitive Media Reporting group reported that soft drink advertising expenditures in 1999 were $649. 8 million. In a maturing market such as domestic carbonated sodas, the only way to gain market share is to steal from one’s rivals. Thus, Pepsi and Coke fight heatedly over prices, suppliers, spokespeople, retail space and most importantly, the taste buds of consumers. Pricing:
Given the mature nature of the market, both Pepsi and Coca-Cola have resorted to pricing discrimination strategies to maximize the value of consumer demand. Direct Price Discrimination – the simplest form of extracting customer surplus is charging customers with different prices based on their location and purchasing power. This is evident in the international operations of both Pepsi and Coca Cola. Cola prices in Mexico, Brazil and Eastern Europe are lower than prices in the U. S., even though the cost of the concentrate is practically the same.
Domestically, direct price discrimination is based on distribution channel segmentation. Restaurant fountain drinks, single drinks
at gas stations and take-home packs at supermarkets have all different prices on a per-unit basis even though their costs adjusted for packaging and distribution would not warrant such a discrepancy. Obviously, such segmentation helps situational-based pricing differences. Indirect Price Discrimination – Quantity discounts along with price coupons used in supermarkets are obvious indirect price discrimination tools Pepsi can use.
However, the most effective indirect price discrimination tool Pepsi has is in fact its brand name. The Pepsi brand equity actually allows the company to maintain its pricing power. Its product image translates into perception for higher quality vis-a-vis private labels and other substitute drinks. Differentiation: Pepsi has attempted to differentiate its products from Coke’s, but with little success. In an attempt to differentiate its products from Coke’s, Pepsi shifted its focus to the growing American teenage market in the 1990s, while Coke continued to target baby boomers.
Pepsi targeted the teen market by forming exclusive contracts with American schools and developing advertising campaigns such as “The Next Generation” and “Joy of Pepsi”, featuring Britney Spears. Both Coke and Pepsi have “moved to the middle” in recent years, however, as evidenced by the most recent Pepsi campaign, “For Those Who Think Young”, to attract an older consumer, and by Coke’s moves to modernize its packaging, in order to appeal more to younger consumers. Pepsi focused on varietal differentiation since 1999 by introducing a string of niche products, although product innovation has been quickly copied by Coke.
To increase volume in order to counter flat cola sales, Pepsi introduced Sierra Mist in 2002-2003 to take the place of 7-Up and go head-to-head with Sprite. Pepsi has also tried to
boost volume by introducing products that appeal to specific target market segments that it currently is not reaching. Pepsi has introduced Code Red and Live Wire, extensions of Mountain Dew, Pepsi One, and Pepsi Blue. Coke has followed with the introductions of Vanilla Coke, Sprite Remix. Unfortunately, analysts argue that line extensions often cost a lot while doing very little for actual sales.
According to Tom Birko, president of Bevmark LLC, an industry consulting firm, “There’s a littered landscape of [carbonated beverage] product extensions in the market. ” Since product extensions generate considerable uncertainty with modest results and high cost, both firms could jointly de-escalate the introduction of new products in favor of focusing on core brands, with some emphasis on product innovation. Pepsi could signal this intent by announcing its strategy publicly, hopefully encouraging Coke to follow suit.
Branding Strategy of Pepsi
This paper attempts to explore the branding strategy of Pepsi along its 5 key dimensions:
- Web presence
- Customer-centric approach and
A brief exploration of each has been presented below: Packaging: Pepsi uses its package as a meaningful and appealing communications tool with its customers. Under a new branding strategy, Pepsi is introducing new can and bottle designs every few weeks, planning to sell 20 or more different ones annually in every market.
For a mainstream consumer brand to vary its packaging so often is a striking departure from marketing convention, which says that brands should strive for consistency. Brands were developed to reassure consumers that they were getting the same product every time they bought it. Why tinker with that formula? Health-conscious consumers are cutting back on purchases of sugary, fizzy beverages, particularly in
developed markets. Even in strong markets, consumer attitudes are changing, said Peter Arnell, founder of the Arnell Group, a product design company in New York that worked with Pepsi on the new approach.
Attention spans are getting shorter and consumers are faced with a proliferation of media and brands, all competing for their time. "The future of branding is about recognizing cultural movements, not just creating marks," Arnell said. Though he acknowledged that the idea of changing the packaging so often might be seen as sacrilege by consistency-minded marketing traditionalists, he said it would allow Pepsi to use its cans and bottles as advertising vehicles, not just containers for its drinks. It's the biggest single medium they have," he said. The new packages depict themes like international travel, music and digital technology, with graphic images in light blue on Pepsi's traditional dark blue background. Some of the packages will direct consumers to Web sites and online video games, giving the campaign an interactive element. In some markets the designs use local images, with a lunar New Year theme in China, for example. The theme of consumer choice is reinforced with new television advertising.
These new approaches are big departures for Pepsi, whose advertising used to center on glitzy, celebrity-focused extravaganzas, including a Roman gladiator- themed spot featuring the singer Britney Spears. The new ads and packaging make use of celebrities like Ronaldinho and Lampard in a much more subtle way, reinforcing Pepsi's "consumer-centric" approach, said Ron Coughlin, chief marketing officer at PepsiCo International. "This is much bigger thing than just a change in packaging," he said. (Eric Pfanner, “Pepsi’s counterintuitive branding strategy”, Available at-www. ytimes. com) So
bottling isn't after or outside Pepsi’s brand, but rather is the brand. Or at least a core part of it. Bringing it into the company’s fold isn’t some exercise in cost-reduction, but rather a brilliant, strategic branding move. New packages and formulations, available at new and different locations, priced and supported in novel ways vs. some archaic top-down application that sees it only as image and words. It's these actions, and real investments, that will build sustainable, long-term brand growth. (Baskin, J. S. “Pepsi’s brilliant Branding”, Available at-www. futurelab. net) Brand Website: The economic model of a Brand website is similar to mass media advertising. While the Internet is still a developing medium, the basic principles of brand marketing remain. The goal of the branding site is to use the opportunity to strengthen the brand identity, to build upon the intangible emotional connection in the mind of the loyal consumer. The goal for the brand manager is to push the consumer along the typical brand stages of awareness, consideration, preference and hopefully, loyalty.
Even more, the interactive nature of the Web should not just build the brand experience, it should integrate the brand so deeply into the visitors mind that it becomes part of who they are, something that doesn’t require thought. When sitting at a restaurant and asked what they want with their burger and fries, “Pepsi” should come out of their mouths before their mind has even registered the question. An excellent example for a branding site, Pepsi. com has hit the key components:
- A clear brand identity—the site’s colors, use of logos and complete look and feel integrate well into the overall brand
image. Fully integrated online and offline marketing-- with offline promotions driving traffic to the site, and online promotions gathering more information from visitors for offline marketing efforts
And they will all walk through the same front door—the URL, “www. Pepsi. com. ” The best sites are designed with the visitor needs first, and this holds true for a brand site as well. How should a consumer product brand company like PepsiCo prioritize the visitors—and therefore the design—of Pepsi. com? While all company sites receive visitors looking for investment information, business contacts, jobs and media press releases, a consumer product site has to prioritize the consumer. Pepsi is such a well-known brand that consumers will type in www. Pepsi. om directly. Obviously, if consumers landed on a page lauding the latest stock increases for investors; it would be a terrible brand experience. Pepsi has only one chance, only one front door with the www. Pepsi. com URL. They have rightly chosen to design the site with the consumer’s needs put first. Global navigation can bring the other stakeholders to the sites created for their needs, such as PepsiCo. com or Pepsijobs. com. Not all branding sites are alike, nor should they be. As in all good website design, the business strategy dictates the site contents.
Who will visit the site, what does
the firm want from them and what do they want from the firm. Providing the visitor with what they want is the only way to fulfill business goals. PepsiCo. , a huge company with many brands, has chosen a URL strategy and a target audience for their Pepsi. com site. They chose a target audience- teens and young adult consumers, found out what they want- entertainment, music and sports, determined their own business goals- build the brand, traffic and awareness, and designed a smash hit of a site. www. mequoda. com) Celebrity Endorsements: In more recent years, Pepsi has used celebrity branding to build upon the Pepsi brand. The 1980s brought in celebrity endorsers like Tina Turner, Michael J. Fox, Gloria Estefan, and David Bowie. By far its biggest celebrity endorser in this time period was Michael Jackson. The singer and PepsiCo struck a $5 million partnership that linked the two together for the rest of the 1980s. With Jackson as its prime celebrity endorser, PepsiCo was able to set itself up as the hip, trendy drink for the new generation.
Pepsi’s celebrity partnerships enabled the company to gain market share even as Coca- Cola’s market share was dropping. Another notable achievement in marketing history was the inroads Pepsi made into the Soviet market. Perhaps the biggest (indirect) Soviet endorser of the product was the Soviet Premier Nikita Kruschev, who was caught on camera drinking a Pepsi at the 1959 American National Exhibition in Moscow. A favorable relationship developed between the Soviet Union and the company, leading to a trade agreement in 1972 where Pepsi became the first foreign consumer product sold in the Soviet Union.
1988, Pepsi also became the first advertiser to buy time on Soviet television. A Pepsi advertisement that was aired later that year incorporated Soviet teenage actors to appeal to the younger generation. PepsiCo has continued to use celebrity marketing throughout the 1990s and early 2000s, including celebrities such as Ray Charles, Cindy Crawford, and Britney Spears. To appeal to sports fans, PepsiCo also tapped into the celebrity status of Shaquille O’Neal and racecar driver Jeff Gordon.
Customer-centric Approach: When the "You're in the Pepsi Generation" advertising campaign launched in 1963, it may have been the first time a brand was marketed primarily with an association to its consumers' aspirational attitudes. A decidedly youth-oriented strategy, the campaign hoped to attract young Baby Boomers while they were still young. In 1984 Pepsi launched another long-running campaign, "The Choice of a New Generation," and in 1997 they debuted the "GeneratioNext" concept.
PepsiCo worked closely with Peter Arnell and Arnell Group, based in New York City, to devise a comprehensive new strategy that would connect with Pepsi's core consumers. Arnell reinvented the Pepsi package as a meaningful and appealing communications tool for the latest generation of youth that are not overwhelmed by media, music, or digital distractions. "Product innovation today must be driven by deep consumer meaning and connectivity," says Arnell. "It is less about unmet needs and more about giving people what they haven't asked for but are dying to have.
Using design to turn packaging into personal consumer-powered media helps create the ultimate supportive and inspiring relationship between Pepsi and its youth audience. " PepsiCo and Arnell Group traveled extensively to emerging markets to find key consumer product drivers for
youth cultures and to learn how the Pepsi brand was perceived in different countries. They also found many consistencies in youth cultures around the world in how today's youth is preoccupied with newness, discovery, and personalization of their possessions.
Pepsi actually asked their loyal consumers what brand elements would have to remain so that they would be intuitively reassured that their favorite drinks were not changing and the brand they trusted was still essentially the same. Their answer was direct and consistent. Pepsi-lovers needed to see three elements for sure—the Pepsi "globe," the iconic Pepsi blue, and the familiar tilted Pepsi capital letters. They also discoverd today's youth as demanding authenticity from the products they come into contact with in their day-to-day experiences.
The new Pepsi design strategy is versatile because it can be authentic and stay current, and it could also make introducing special seasonal or regional designs more intriguing and less disruptive. "This is a new way of using packaging as media," explains Miller. "The consumer is looking for more variety and expecting more from their brands. They want to have a dialogue with their favorite brands. " (Romanic, 2007) Innovation: While the beverage wars of past decades were decided by taste, victory in the current beverage environment will be predicted on innovation with purpose and developing groundbreaking design.
In 2006 PepsiCo got a new CEO, Indra Nooyi, who began reorganizing PepsiCo to focus on several different initiatives. 4Es Marketing Model: Pepsi,s new step of branding, ‘Refresh Project’, is based on the concept of the ‘four Es marketing model’, consisting of emotions, experiences, engagement and exclusivity. The Refresh Project embraces the four Es marketing model and
represents a shift away from traditional marketing to marketing with a higher purpose. While Dove’s Campaign For Real Beauty is more emotional in its approach, Pepsi’s Refresh Project has an engaging point of departure.
Intel’s Creators Project is approaching the four Es first and foremost by offering the audience experiences through exhibitions and videos. But in general, the three very different but all very successful brands bring emotions, experiences, engagement and exclusivity in to play in their overall communication and marketing strategies. They are all doing ‘good’ as well, with regards to the campaigns highlighted. Pepsi launched the second year of its Pepsi Refresh Project, calling on people from across the US to submit ideas that have the power to move communities forward.
The categories are Education, Communities and Arts & Music, but in addition to these three, Pepsi will announce a new Pepsi Challenge each month. This month, Pepsi is challenging fans to channel their love of music to drive social change by asking, “How would you rock the house for a good cause? ” Pepsi is enabling innovative ideas through the Pepsi Refresh Project, a platform for inspiration, learning and taking action. By awarding more than $1. 2 million each month to ideas that receive the most votes at www. RefreshEverything. om, Pepsi aims to encourage ideas that capture the youthful optimism in all of us. It seems that, Pepsi truly believe that every individual can refresh the world! Pepsi’s Refresh Project has generated tens of millions of votes and countless tweets and Facebook posts in 2010. This year, PepsiCo will take it global. [pic] (Available at-www. soundslikebranding. com)
Branding Strategy Wars: Coke vs. Pepsi: Leader vs.
Coca Cola and Pepsi Cola have been archenemies for over a hundred years. But although their main product is very similar in both taste and color, their branding strategies couldn’t be any further apart. Coca-Cola has long been the steady brand that triumphs over Pepsi as the latter attempts to gain ground with brand gimmicks and changes. The two cola giant companies struggle in the battle to dominate total market share, famously known as the `cola wars era` which took place in the USA, having a far reaching impact around the world in different countries all across the globe including the UK on consumer buyer behavior and brand loyalty.
These wars have been primarily fought through the main media particularly through television advertisements and the way in which the brands want to be perceived and positioned. Marketing strategies have been intensified to such an extent that only a few consumers are unaware of their heavily branded images and strategies. The historical marketing strategies and even marketing decisions that both leading cola giants make today underpin theoretical concepts of guerrilla marketing competitor strategy theory similar to military warfare like principles.
An analysis through several factors has been presented below: Logo: While Coca Cola has only been modifying their initial logo in a very subtle way (there’s been very little, but consistent changes, which only become apparent really when comparing the first one to the latest version), Pepsi instead kept reinventing their logo every bunch of years and have by now a pretty impressive number of “old” logos that would be enough material for almost a year of branding studies.
Let’s have a closer insight at the pros and cons
of each strategy. When Dr. John Stith Pemberton started selling his brand new beverage (Coca Cola) in 1886, it was his bookkeeper who came up with the idea for the now so famous logo and name, by combining the two Cs with his own unique handwriting. In 1898, Caleb Bradham gave birth to his own creation of similar ingredients (and therefore similar taste and color), initially named it Brad’s drink, but soon renamed it to Pepsi Cola to reflect the actual main ingredients.
Interestingly enough, the first 4 generations of logo for the Pepsi beverage have a remarkable resemblance with the one from Coca Cola. This is where the similarities end. From here on, Coca Cola has been continuously trying to keep up with the changes of time by including interesting slogans, modernizing their can/bottle design in a subtle way and by generally tweaking their brand, without ever trying to reinvent it and/or revolutionize their corporate design.
Pepsi Cola, on the other end, has gone through so many different logos, that the initial concept has absolutely nothing in common anymore with the current one, other than the word “Pepsi”. Even the second part of the name (Cola), that initially was part of the brand, has now disappeared. [pic] Coca Cola seems to have been doing their homework much more accurately than Pepsi. By not changing their logo more than necessary, Coca Cola has achieved to be very consistent in consumers’ memory, no matter whether old or young.
People can remember the red can (or the unforgettable cult bottle), the logo, the distinct taste of it, and it’ll all feel like Coca Cola hasn’t aged a bit. It is
still the same feeling it was back then. Pepsi, on the other hand, is (memory-wise) nothing like it used to be. Although the beverage in itself hasn’t really changed, the logo and the base colors have, in fact the base color has never been the same throughout the world (some countries have always had Pepsi with different base colors).
While some will remember it as the ‘famous’ blue-red ball (similar to the ying-yang symbol), new generations won’t get this benefit as the logo has changed so much that basically nothing of that blue-red ball is left (somehow it’s still there, but it looks very different). (www. brandinfection. com) Pepsi is trying so hard to give the impression they’ve changed, one is actually lead to think the taste has changed as well, thus making their customers wonder if their good old beloved beverage still exists.
Of course, that doubt can be quickly put to side by buying one of the new cans and trying out whether this has happened or not, but as we all know, the mind has a big impact on how we feel about something we taste, and we might be left with the impression that the modern beverage contained in those new shiny modern cans with that fancy new logo is, indeed, a newly tasting Pepsi Cola (even though it really isn’t), and with a bit of bad luck, consumers might not like that self-suggested new taste. On another note, this shows on a very basic level how the logo itself is not the reason a product is immensely successful.
It may emphasize the quality and/or speak to a specific audience they are trying to
reach, it may additionally improve the way customers remember a product, it may even make the difference between buying for the first time or rather not doing so, but it will never, under any circumstances, replace the good quality product itself. What the logo does, is that it makes consumers connect the memory and the values they have come to know from a product with that portrayed brand. By changing the logo a lot of times, customers are forced to associate new values and new memories with that new logo over and over again.
Possibly the reason why Pepsi has still its good old shady place hidden behind the much bigger (and more consistent) image of it’s ever so long rival, and winner of the Cola Wars : Coca Cola Websites: Pepsi is targeting teens and young adults—a natural audience for the online channel. With 30 percent of households with broadband at home, Web video is getting ready for the big time. Some studies have shown that the young audience spends more time in front of the computer screen than the TV screen. Pepsi has made the most of the opportunity. A brief look of the some of the highlights from the last few years:
It’s worth noting that Coke has followed the same strategy on their consumer site MyCoke. com, building a consumer-oriented website chock full of brand-building downloads, promotions and sticky interactive features. Much like the actual beverages themselves, the similarities outweigh the differences. Both Coca-Cola. com and Pepsi. com use almost all of the following tactics to build their brand in the visitors mind: Historical events in the Strategy War: Below is a historical
review of the most significant competitor strategies adopted between Coca Cola and Pepsi Cola in last decade.
This was only just the start with more competitive rivalry to emerge. Cola Wars 80`s Era Coca Cola – Market Leader challenged by Pepsi Cola the Market Challenger. endorsements, gaining sports Olympics sponsorship, communicating key messages to different audiences via television commercials to various target audiences for example families, office employees, builders, sales promotion, outdoor advertising and digital advertising. It is pertinent that both colas retain their market share they hold today to tackle and attack entry competitors like Virgin Cola, RC Cola, Uro Cola etc. Current movement of the colas today
In UK, Coca-Cola has repositioned itself after spending millions, on the fabulous “Open Happiness” campaign. The marketing communications strategy behind this positive idea is an integrated one incorporating all elements of the mix. Its platform positioning and pitch captures and displays a very positive, optimistic and inspirational meaning in deeper essence for the consumer to be excited about and more than happy to purchase Coke. Pepsi has teamed up with leading pop R `n` B artists Akon and Keri Hilson and celebrity footballers Fernando Torres and Didier Drogba to launch an awesome music track called `Oh, Africa`.
It features in the latest Pepsi Max commercial as a national anthem. Proceeds are donated to a charity helping underprivileged African youth. (Akon’s Konfidence Foundation) As a result of Pepsis new music track, Rival leader, Coca Cola competitively defends itself and clearly attacks this strategy by teaming up with iconic African hip-hop artist K’naan. To develop a music track for the global marketing campaign, for the Coca-Cola sponsorship of the FIFA World
Future of the Cola Brands
Pepsi Refresh has launched a massive $20 million social media campaign asking consumers to come with up with a digital pro-social idea for the exciting Pepsi Refresh project. Both brands are shifting more focus towards digital marketing communications techniques rather than traditional campaign sites. They will be appearing more on social media networks like Facebook, YouTube, myspace or twitter with official pages. The future of the cola brands stands promising and both brands have reached their own particular league within the industry.
This position that they currently own in the marketplace will be extremely hard to replace by any other competitor. They are challenged to retain what they have today to make a continued success for tomorrow. The challenging pressure is constantly on to move with each other as competitive rivals, consumers and trends in this ever changing, volatile economy. (Harminder Bhamra, 2010, The Wall Street Journal: `Coke Follows the Pepsi Challenge article`, Available at- http://theacademyofbusinessstrategy-mbc. com/2010/04/13/03/)
Pepsi and Transcom: PepsiCo is a world leader in convenient snacks, food and beverages with revenues of more than $39 billion and over 2,00,000 employees worldwide in 2010. PepsiCo has attained a challenger position as being next to the leader, Coca Cola. Their business profit is increasing rapidly due to a high standard of performance, marketing strategies, competitiveness, determination, commitment, and the personal and professional integrity of their people, products and business practices.
Pepsi is one of the oldest soft drink beverage brands in Bangladesh since 1976 and came with the cola-flavored Pepsi, the lemon-flavored 7up, the orange-flavored Mirinda and later introduced the mango-flavored Slice and citrus-flavored carbonated soft drink Mountain Dew. Pepsi is manufactured by
Transcom Beverage limited in Bangladesh. The company is the exclusive PepsiCo Franchisee for Bangladesh. Transcom Beverage Limited is committed to delivering sustained growth in Bangladesh and moving towards being the dominant beverage company, delighting & nourishing every Bangladeshi; by est meeting their everyday beverages needs; through talented people and successful marketing strategies. Marketing mix of Pepsi in Bangladesh: Pepsi is continuously improving their marketing mix to catch a greater share of Bangladesh soft drink's market. These marketing mixes are listed as below:
- Product: Pepsi has two different cola flavors in Bangladesh. One is the classic Pepsi and another is, Diet Pepsi. Another variation, the ‘Pepsi Blue’ was launched, which was not a successful brand. It was available in BD market for only a short period of time.
- Price: Transcom Beverage Limited always tries to keep a standard price of Pepsi bottles. It also includes the discounts, allowances, credit terms and payment period for the Retail and Convenience stores and Restaurants. Pepsi enhances its price competition capability through creating bundle and free offers to the restaurants and convenience stores.
- Place: Transcom Beverage Limited has a strong distribution channel to distribute Pepsi. They make Pepsi easy to get and available to the customer everywhere through their expert distributors. Their transport facilities, channels of distribution, coverage area, etc. are maintained very securely.
- Promotion: Transcom frequently advertises its products through mass media. Every day in TV and newspaper, we see different advertisements of its products with many types of slogans such as 'Pepsi khao game change kore Dao' (change the game) etc. They also advertise its products in social networks. Segmentation of BD consumers by Pepsi: For the purpose
of branding Pepsi in Bangladesh, consumers have been divided into different segments along different dimensions.
The principal attempt is to segment according to consumer demographics such as, age, income and family size etc. Pepsi’s behavioral segmentation has been a key to the company’s success. Age is one of the most significant parts of the segmentation of Pepsi. Pepsi diet has been aimed at diabetic patients, 40 plus age group and health-conscious consumers who are likely to avoid sugar. And the main target customer of Pepsi cola is young people in the age band of 14-30. Different sizes of bottles, from small to large, have been offered to provide value for consumers from different income groups.
Competitive prices have been set for these different sizes. Considering the economic situation and purchasing power of Bangladeshi customers, Pepsi is available from 200ml to 500ml, 1L, 1. 5L, 2L bottles. Consumers can choose easily among them based on the consumptions situation, place, spending intention, purchasing power, family size etc. Target marketing of Pepsi The reason why Pepsi has fiercely targeted the young consumers’ market is because it is the largest among its users. Market segment profiles have shown that the majority of carbonated beverage drinkers of Bangladesh are youth and middle aged people.
Pepsi continually targets the Bangladeshi schools, colleges, universities, restaurants, hotels, and fast food shops. For this, they always spend huge amounts of money to compete with Coca Cola in acquiring contracts with universities to have sole representation of their product distribution. For example, Coke is not available in the Dhaka University campus. But, Pepsi, Mirinda and Mountain Dew are the most available and common brands here. Pepsi customers are
mostly teenagers and young adults between the ages of 14 to 30. Positioning of Pepsi
Pepsi’s main slogan is – “Generation Next! ” It spends billions of dollars in trying to impress the young generation consumers with vibrant lifestyles. This is also true for the BD market. Pepsi has been branded by fierce advertisement spending, sponsorship of cultural events, fashion shows, concerts etc. But, perhaps the most important positioning strategy of Pepsi has been its convenience and availability.
Strengths in the branding strategy of Pepsi. Even from the very beginning, when Pepsi was just starting in the early 1900’s, the government had passed the Pure Food and Drug Act that prohibited the use of certain drugs such as arsenic, uranium, barium and plenty of others in drinks and foods. At this time, Coke and other existing soft drink brands had to change their formulas, but Pepsi did not. It proudly boasted that it has already met all federal requirements. While other brands were changing formulas to suit government standards, Pepsi was cutting into their market share.
Pepsi was one of the first markets to use automobiles to improve their distribution system, and what the younger company lacked in prestige when compared with Coke, it made up for in ambitious advertising. This constant competition has been dubbed as the Cola Wars. Pepsi has gained a reputation for catering to the teenagers, those in their twenties and even the young at heart. This is a customer base that other soft drink brands have previously overlooked in favor of the mature consumers. Pepsi also has the distinctive style of portraying the times in their campaigns.
Their Generation Next campaign suggested that Pepsi
is not just a drink for the next generation; its drinkers are also a generation ahead of their counterparts. Pepsi has cultivated an image for itself as the drink for the modern times. It has discovered that the buying power of the youth and the marketing power of celebrities were compatible. They have earned generously out of this formula. Pepsi continued to try and improve its image from being considered as a bargain brand and attracted the young, fashionable consumers with their theme, Be Sociable, Have a Pepsi.
Pepsi targeted the younger audience and those who are young at heart. During the baby boomer generation, Pepsi positioned itself as the drink for the new generation with a series of themes designed to appeal to the youth. These youths were said to belong to the Pepsi Generation in the early 1960’s. Diet Pepsi and Mountain Dew were then added to the list of products (Muris, et al, 1993). Pepsi-Cola concentrated on markets where it could prosper alongside Coca-Cola, rather than trying to defeat it.
Pepsi branding: Confusion or Strategy? While it has always played second fiddle to Coca-Cola, both cultural and via sales, there is no denying it is an iconic American brand. But what Coke has done well is maintain brand consistency. That script font, contour bottle and dynamic ribbon are as famous as the secret formula. Ask most people what Pepsi’s most famous tagline is (and most likely the one they still remember) and they’ll say, “The choice of a new generation. ” That was a great tagline and represented the highpoint of Pepsi’s marketing when they were taking to Coke with their taste tests.
But is the
idea to have so many Pepsi logos out there is an effective branding tool in long run? Are they slicing and dicing consumer segments? It is evident that, the best brands, Nike, Apple, McDonalds and yes, Coca-Cola, remain remarkably consistent. It’s tempting to change logo, but PepsiCo need to remember it’s likely that they are getting bored with it a lot quicker than their consumers are. (Rick Liebling, 2009) Some recent logo and packaging changes have caused up roared criticisms as they don’t have any clear meaning or project any particular feeling.
The freshness and excitement of the Pepsi branding ads are missing from the package (www. brandingeye. com). A visual example has been given below: [pic] Pepsi is trying so hard to give the impression they’ve changed, one is actually lead to think the taste has changed as well, thus making their customers wonder if their good old beloved beverage still exists. PepsiCo’s success has not come without major challenges or ethical dilemmas. One of the biggest difficulties for any multinational organization is how to successfully enter into other countries, particularly when laws vary from country to country.
Although PepsiCo takes great care in researching potential markets, the company has encountered several problems that have caused tensions with different cultures, in both the U. S. and abroad. Additionally, PepsiCo still faces heavy criticism for products that are viewed as largely unhealthy and whose packaging contributes to a large amount of waste. Finally, though PepsiCo has proved to be successful in continually updating its advertising campaigns, a recent iPhone app developed to target the AMP Energy Drink market unleashed a stream of controversy for its potentially offensive content.
Beverage Limited has to do more advertisement, give more promotional offer, and invent more convenient and creative packages for the Bangladeshi consumers. If Pepsi bundles snacks with soft drinks as part of its pricing strategy aimed at fast food restaurants and convenience stores, it may be able to increase sales and obtain better shelf space from retailers. This may prove a very important tactic in trying to re-claim share in the fountain drink segment, a large part of which was lost after Pepsi’s exit from the restaurant business in 1997.
Currently, Coca Cola holds approximately 67% share of the total fountain cola sales. What the brand should do now is employ a strategy that now only addresses its own deficiencies in an effort to grow market share, but one that will increase the overall size of the pie. This strategy, in the end, will allow Pepsi to grow and sustain above-average returns. Another component of the new competitive strategies of Pepsi-Cola is their increasingly complex and sophisticated advertising and promotions--a major tactic in the so-called Cola Wars.
But the ultimate success of these campaigns often depends on the cooperation of the bottlers to implement the campaign in their territories. Bottlers must cooperate by arranging spot coverage and by implementing coordinated promotion and pricing policies that build on the theme of the national advertising campaign (Muris, et al, 1993). An additional opportunity for cooperation is for each company to reduce the number of niche products that serve only to drive up costs while adding little to the top line.
By focusing on their core colas (including diet) and introducing a limited number of niche products to generate excitement and
build on the core product line, both players should be able to continue to effectively compete against the private labels. Thus, by continuing to build loyalty in the core products and decreasing niche products, Pepsi can achieve greater profitability.
Given the extreme competitive nature of the Carbonated Soft Drinks industry, the slow growing market size and the shrinking margins, a firm that is going to be successful and generate above average returns must have a sound and coherent strategy. In order for Pepsi to protect its position, marketers must be wary of private label infiltration. Pepsi should also focus on gaining a pricing advantage. One way this can be done by offering ‘reverse’ quantity discounts on new packaging (actually reducing the size of the offering and increasing the effective per-unit price).
Another strategy would be to offer bundled products to convenience stores and restaurants. From a channel perspective, Coke is dominating Pepsi in fountain stations. This is a concern that Pepsi must address, and soon. Coke has achieved better distribution in venues with fountain stations, through exclusive contracts. For Pepsi, turning the tide in this channel is critical to long-term success. Finally, Pepsi should assume the leadership position in de-escalating the “cola wars” that are occurring in developing markets.
Both Coke and Pepsi would benefit from cooperation that helps to expand the market more rapidly and to more areas than currently exist. Pepsi has been successful in generating profits in this extremely rivalrous industry. What the company should do now is employ a strategy that not only addresses its own deficiencies in an effort to grow market share, but one that will increase the overall size of
the pie. This strategy, in the end, will allow Pepsi to grow and sustain above-average return. The Pepsi-Cola drink was invented in 1898 and grew basically by following the Coca- Cola marketing, product, and distribution strategies.
Like Coca-Cola it advertised as heavily as finances permitted, and was distributed through soda fountains and franchised bottlers. Assessing Pepsi’s marketing strategies; it is clear that Pepsi has made several right choices. With the existence of Coke, Pepsi can never lay claim to true originality. It is not that unique. So, Pepsi took advantage of their late entry into the market by lowering their prices. Before it entered the international market, it first familiarized its customers with its product thoroughly in its home base.
By the time Pepsi was ready to enter the international market, it had a good grasp of what its target audience really is. In conclusion, Pepsi’s marketing strategies, from past to present included: enhancing their distribution system, knowing the environment of the foreign market and finding the things their target buyers had in common, adding new innovations and products while improving the old products, imaginative advertising, use of advanced technology, assertive promotions, trendy, socially-aware campaigns, alliances with major corporations and expansion into other industries such as restaurants.
Even Pepsi’s rival, Coca-Cola, had a hand in Pepsi’s success. When Coke makes a marketing move, even their buyers can’t help but hold their breath, waiting for Pepsi’s response. So, in effect, Coca-Cola’s massive fame has also rubbed off on its rival. It even isolated these two beverage companies from other soft drink brands. The worldwide success of PepsiCo reflects the company’s dynamic and adaptable strategy throughout the company’s history, leading
to its current revenues of over $43 billion.
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