Sustainable Marketing

Every organisation today is looking at ways to use their resources effectively so that it does not result in wastage, eventually causing harm to the environment. Marketing has always been so much about consumption that somewhere the basic elements about preservation of the environment seems to be going amiss. This is where sustainable marketing steps in a balance between not only churning profits for the company or brand but also look at innovate ways of production.

PepsiCo has been a doer when it comes to practicing the sustainable way of production as well as performance. They moved into this practice at the start of 2000 to ensure that they deliver a valuable and sustainable system which looks at constantly improving their waste reduction and conservation of water & energy. According to PepsiCo’s 2013 Sustainability report, the organisation has kept an objective to see optimum use of water especially in water drained areas. Better packaging to not harm the environment is also an aspect they repetitively work on.

Sustainability in the human factor is also an aspect PepsiCo practices where they look at expanding their product range which are healthy, this assures higher stakeholder trust. They wish to achieve this by mitigating usage of added sugar or saturated fats. In order to do this, they have a Research & development segment in place to ensure innovation, performance and balance.

Sales Management

The objective of any product based organization is maximizing sales by achieving targets. Pepsi with its growth in sales wishes to maintain maximum market share in the soft drink industry. 

Pepsi has a network of distributors and dealers who the sales professional has to interact on a day to day basis to achieve the assigned targets. Handling this network is also one of the many objectives of sales. 

According to the sales funnel, awareness is an aspect one concentrates on to reach people who are not aware of the product and cannot be reached personally. Communication strategies helps here. When the funnel starts narrowing , there are people who drop away or are enticed by competitor products. These can be reasons why the sales of a company may not be always similar even if the communication of the product is effective. Managing promotion campaigns is one of the other goals that Sales Management has.

Since Pepsi is not a serviced based product, therefore there may not be many customer complaints that the company receives. They could definitely get suggestions from loyal customers for a new product. Complaints could come from a distributor if the stock delivered is not on time.

Pepsi holds a substantial market share in the industry and is a strong player as compared to Coca-Cola, who has been its consistent competitor in the category.

Analyzing Business Markets

Pepsi is a part of the soft drink industry, which, according to EuroMonitor International,  continues to witness growth in the year 2014. The launch of a plethora of flavours is one of the reasons to the growth.

Pepsi caters to both the business as well as consumer market.

Business to Business (B2B)
Hoteliers and fast food chains such as McDonalds & Dominoes, large scale event organizers (IPL), functions such as invoices, tracking, telephone, fax, bottles as well as chemicals for producing the drink.

Business to consumer (B2C)
Wholesalers and retailers fall actually under B2B2C as they have a primary business transaction with Pepsi to get the stock.

B2B leg is highly rationally oriented when compared to B2C which is more of an emotional driven decision making process as it basically targets the wants and needs of the customer. Business with the consumer is also driven by the choices in the various categories the consumer has.

A very interesting move in the world of B2B is the use of social media. More and more buyers by the hour are using this tool to search for vendors there. Though it may not create the same kind of connect for their B2B products,  it is still on the up rise and is being well accepted in the segment.

Analyzing Consumer Markets - Consumer Behavior

To understand consumer behavior, the first step is the stimulus response model. These in turn lead to a consumer's decision process. 

Marketing Stimuli

• Product - Pepsi
• Price - Rs. 8 (inclusive of all taxes, 200ml), Rs. 25 (600ml)
• Distribution - wholesalers, retailers, groceries
• Communications - Advertising targeting the youth

Other Stimuli

• Economic - affordable, low cost soft drink

Consumer Psychology

• Motivation - Pepsi is consumed to quench thirst (physiological needs)
• Perception - The brand perception is created by the awareness that is built by the communication strategies, the brand is perceived as a youth brand.
• Memory - Pepsi as a brand has been built over decades. An advertisement of the past which drew a lot of appeal could be a factor that gravitates one towards the brand.

Consumer Characteristics

• Cultural - We want to have a drink while we eat, a drink which is sweet and has a fizz satiates the spice in food, also cheesy products make you more thirsty
• Social - Youth
• Personal - Refreshing, sweet

 Buying Decision Process. which is the next step in the stimulus response model is explained in the earlier posts. 

To summarize, the finale purchase decision depends on the choice of the product as well as the brand which plays a role in making the decision, this is backed by the price and the time taken to purchase the product.

Branding

Pepsi as a brand has a huge value as well as a market share. A brand and a product are not the same . Pepsi is not only picked in a grocery shop, or had with a meal in a restaurant because it has a good taste. That highlights only one aspect of Pepsi as the drink. Whereas there are certain intangible benefits that the drink has such as the values of the company, the loyalty that one has towards their most liked brand, which cannot be measured. This is how Pepsi gets differentiated from other cola drinks. This differences only come about through the product characteristics. From 1960s, as seen in the picture above, the logo of Pepsi has been tweaked but the loyalty continues to remain the same. This speaks about the brand recognition factor of Pepsi, which has culminated over the years.

Brands today wish to encapsulate the customer through heartfelt experiences. This creates a competitive edge but here the understanding of non-product related characteristics is taken into account. They understand consumers better and depict that in imagery, an area where Pepsi has triumphed time and again. From an organization's point of view, in order to ensure longevity of the brand, the product line is innovated repetitively, an aspect which PepsiCo pioneers. Such a change is usually seen in the maturity phase of a product/ organization.

Brand recall for Pepsi is a reminder advertising consisting of the various advertisement campaigns, IPL Sponshorship, brand ambassadors such as Ranbir Kapoor who have been associated with the brand. All these strategies are done over the course of time so that a brand is remembered time and again by the consumer. 

A brand equity is not built over night but over a long term period of time. Pepsi's logo is world wide recognized because that is how long it has existed in this category. Their timely changing communication strategies, as well as the change in signage or logo, with the same appeal is a form of reminder advertising so as to keep the consumer aware of the existence of the brand.

According to Interbrand, Pepsi was one of the Best Global brands 2013. 

Segmenting, Targeting and Positioning

There is a need to target the consumers more intricately. An interpretation of the consumer behavior is what determines how the various market segments are made. Market segments are basically the segregation of customers according to aligned needs or wants.

The segmenting takes place according to parameters such as demographics, geographic, psychographic and behavioral. From a marketer's point of view, the lifestyle of your consumer is what needs to be taken into account. The demographic variable comes into picture after the  and behavioral aspects are clearly demarcated. Here, behavioral means the buying behavior of the customer.

In case of Pepsi, the segmenting could be as follows :

Behavioral 

Occasions - Dinners, Parties, Family functions

Benefits - Taste, Refreshing

Psychographic

Social class - Upper, Lower middle(the smallest bottle is for Rs. 10), Middle

Lifestyle - Enthusiastic, Go-getters, ambitious

 Demographic 

Age - All age groups drink Pepsi, but 14 - 35 should be a range they look at

Geographic
Pepsi reach is very refined because of their distribution system. Hence, it moves beyond the urban contours

For targeting, we see that most of Pepsi's advertisements are primarily targeted to the youth. Since the product gives a refreshing feeling on a hot summer afternoon, a cold drink is what appeals to the most. Hence, the youth or the age group specified may not be the only ones who consume the drink.

Sizes of the bottle also determine the buying behavior that satisfy a particular requirement. For example, the 2L bottle will be bought by somebody who is probably arranging a weekend get together at home.

The brand Pepsi has always been very enthusiastic in its appeal as it is a refreshing drink. Hence its association with the youth is always been there. We see that in promotional strategies, events, advertisements etc. Also their taglines, the recent one being 'Oh Yes Abhi' and 'Live For Now' resonates the same message. So the way they position themselves comes from value the product provides to its target group.

Promotions

Pepsi's advertisements in 1960 portrays couples, drinking Pepsi and the background score says "pick the smarter and light one, now its Pepsi for those who think young". Clearly, Pepsi here is defining an audience that is young and smart and would buy the product. It brings a sense of rejuvenation & leisure, that the brand stood for at that time.

Through the course of time, Pepsi has maintained the freshness quotient with a constant appeal to the youth. Later after a few years, Pepsi took a chance with a new tagline and created a generation - You're in the Pepsi generation. It was an extension of the earlier campaign.

Today in 2014, Pepsi's youth appeal is maintained. The zeal and enthusiasm that the young bring comes across in this advertisement which has Ranbir Kapoor in it.

Apart from print and TV, Cinema is a very effective tool to bring the product in the limelight. Yeh Jawaani hai Deewani (featuring Ranbir Kapoor) saw the advertisement of Pepsi

Pepsi follows mostly reminder advertising where the audience has to be reminded of the product for repeat purchase.

IPL is an event where a relevant audience for Pepsi is met. Also, the experience is engaging and the event is filled with a lot of energy which resonates with a brand like Pepsi.

Interactive marketing

In an endeavor to increase interactivity, Pepsi Next innovated in a fresh campaign with a Wheel. Everytime the wheel was spinned, an actor or a skit of that category was performed. The site garnered more than a million views.

 (Source : http://www.cukerinteractive.com/blog/2013/07/29/five-best-brands-using-social-media-2013/)

The above piece shows how Pepsi is effectively using digital to create better interactivity and engagement with the target audience.

Recently Pepsi Max used augmented reality on a London bus stop by bringing a surprise element to the dull time spent waiting for a bus at the bus stop. 

Designing and Managing Integrated Marketing Channels

Various types of Channel for Pepsi

Wholesalers, retailers, transportation companies, ad agencies

Push and Pull strategy : Pepsi uses both push and pull strategy effectively

Channel Decision

Value

Target group should be decided to determine demand. This further helps in determining the supply chain.

A company lies at the center of a value network. In case of Pepsi, the value network includes distributors, suppliers, and customers.

Also, Pepsi is bought at Malls, supermarkets and mom and pop stores. Hence the channels are different for different customer needs. It could depend if it is to be bought in bulk or small quantities.

Distribution Systems

(For Pepsi)

DSD - one of the oldest methods of distribution by PepsiCo employees, they take direct orders and deliver them. This is usually done to launch new products in pretty quick time. A response to the market can be determined easily.

Broker Warehouse Distribution - for perishable products. Third party distributors are hired. It is an economical process

Vending & Food Service Systems - Products made available in schools, college, canteens

Pricing

Setting the price objective :

Pepsi, because of its huge demand and competition factor, has low unit costs in order to increase sales volumes. Hence, Pepsi wants maximum market share

Pepsi market share : 28.1 % , dropped by 0.4 % this year

(http://seekingalpha.com/article/1986901-coke-vs-pepsi-where-the-real-difference-lies)

Determining demand :

Pepsi and Coca-Cola are perfect substitutes products.

Hence the fall in price of one affects the other and vice-versa.

It has been seen that Pepsi has slashed the price of the product , anticipating demand. For ex. In 2003, the price of 300 ml was dropped from Rs. 8 to Rs. 6. Thus, it has a negative sloping demand curve

(The dotted line is for Coca-Cola which at that time had a lower price than Pepsi and hence better demand. This led to Pepsi changing it's pricing strategy to increase the demand (yellow line) )

Price elasticity of demand for Pepsi : -1.28

 (http://www.freeeconhelp.com/2012/06/is-it-elastic-or-inelastic.html)

Perceived Value pricing

Customer Perceived value for Pepsi is very high. The cost of the product is low. Hence, the customer benefit is high.

Also, a brand like Pepsi has an image benefit as it is associated with a brand like PepsiCo.

Product Mix Pricing 

From a marketer and company point of view, pricing drives demand and competition for a product. Pepsi follows Product Line Pricing primarily and has different costs for its various sizes i.e 1 litre, 600 ml, 500 ml and 200 ml. Companies are looking for the right prices that justify the product so as to maximize profits.

Product Strategy

There are five product levels : Core benefit, Basic product, Expected product, Augmented product, Potential product

Core Benefit : It is the service or benefit the product is offering. In a soft drink, a consumer is buying the product to quench the thirst while dining at a restaurant, hotel or on a hot day.

Basic product : The core benefit triggers the basic product. For a soft drink, the basic requirements are soda fizz & sweetened.

Expected product : These are attributes expected by the consumer from the product. In case of Pepsi, it must be served chilled to get the real taste of the drink.

Augmented product : It is a differentiated product that is made to exceed a consumer's expectations. Pepsi offers Diet Pepsi which is a non-sweetened soft drink for the ones who are health conscious but are not ready to give up their loyalty for Pepsi while choosing a drink.

Potential product : This is where the company looks for innovate ways to satiate the consumer. It comes for a new to the category/ sub-category and also hence forms a new life cycle. 

The above 5 levels unite with the 3C model and hence we get a better understanding of where each of them lie in the model 

Customer : The core benefit lies with the customer. It is a realization that the customer has. When he/she is thirsty while having a meal at Dominos or McDonalds, only then a product like Pepsi comes into play to satisfy the requirement and quench the thirst. Also, a customer has minimum expectations from a product. In this case, it expects the drink to have fizz and be served cold. This is what is an expected product.

Company : The basic product lies with the company, which, in this case is a carbonated soft drink that is sweet in taste.

In the growth stage of a product's life cycle, the company looks of ways to innovate by coming out with new products to satisfy customers. In the case of Pepsi, Mountain Dew was a new to the category product launched and it was a flavored soft drink. This is a potential product introduced in the market, with a new offering to the customer.

Competitor : Basic , augmented and potential product all three get elements from a competitor's point of view. In a basic product, a competitor like Coca-Cola is also serving the same requirements that Pepsi is. It is only slightly less sweet in taste. 

In augmented product, when the company does a differentiation to the product, its oncoming in the market is a potential threat to competitors. Diet Pepsi provides a sugar free carbonated drink which is a different version of the Pepsi, catering to those who feel like having Pepsi but fear about the calories.

Lastly, a potential product is that with a new life cycle and is an innovation that the company seeks for probably in a new to a category/ sub-category product. It does create competition as a new entrant in the category with a different customer value that is offered. Eg. Sprite

For Pepsi, the product hierarchy is as follows :

To draw a link with 3C model ,

Marketing Mix

A product, in terms of acceptability to the buyer is imperative. Pepsi, being one of the well accepted soft drinks in the market, generates a huge margin of PepsiCo’s revenue in terms of sales. Also, to speak of its brand, it needs no introduction. The brand PepsiCo is a food beverage company, which has many food products such as Kurkure, Lay’s, Chittos, Quaker foods, to name a few.

Price of the product is a proxy for quality and at the same time determines the affordability for the user. In a competitive market such as the soft drinks industry, with two huge players i.e Pepsi and Coke, competitive prices are indispensable. Also, lower cost per unit would increase sales and that in turn, is a huge boost for the reach of the product as well.

Promotion for a brand is done for creating awareness for the seeker. This can be in the form of sales promotion, advertising, direct marketing, etc. Also, this is where competition for the product comes into play.

For eg. In 2013, Pepsi dressed up as Coca-Cola and the ad was a viral hit.

Lastly, place or distribution is what determines the accessibility for the payer. Pepsi is easily available -- from small grocery stores in rural areas to super markets, malls, restaurants in the urban market. The reach for the product through the various channels is high.

Life Cycle

Product Life Cycle

1)   Pre- launch or Development:  In the early days, Caleb Bradham, a pharmacist, made ‘Brads Drink’ which was basically a formula made digestive drink later named ‘Pepsi-Cola’. The trademark ‘Pep Cola’ was bought for 100 dollars.

2)   Introduction: The initial aim was to create awareness. The trial of the product was a success. Also, Pepsi-Cola was not sold in bottles but through soda fountains. The distribution of the product was very selective and started from Caleb’s pharmacies.

As awareness was there key aim, a celebrity endorsed the product.

3)   Growth: Even during the recession of 1929 and post that, sales of Pepsi-Cola were only rising. Value for money is what brought people to the drink. With the increase in competition, Pepsi-Cola was now bottled and sold. With a low price and huge volumes of sales, Pepsi-Cola got a huge boost in terms of reach and availability to the consumers.

4)   Maturity: To the present day, Pepsi has been in the maturity phase. Using the establishment of the product, range of products was then launched to increase the profit making stage in the curve. The brand is constantly aiming to differentiate itself as a brand for the young. Pop stars have been associated with Pepsi for the same reason.

5)   Decline: Though the brand is very strong and may not show a downfall, it constantly needs to reinvent the brand itself to not enter the decline phase.

Industry Life Cycle

The industry, per se, is in the maturity stage, which includes Coke, Pepsi, Sprite, Thums Up, Mountain Dew, Limca, 7up, Miranda.

80 % of the sales in drinks come from carbonated drinks.

However, according to a report in 2000, the per capita consumption as compared to the US is very small – 5 bottles annually versus 800 bottles annually.

Industry profitability will continue until new products are introduced to keep the market competitive and also reduce cost per unit.

A new product in the market of soft drinks faces a challenge of product differentiation and distribution (reach) of the product, that too, in an already established soft drink industry.

Though with studies proving that soft drinks are one of the main reasons for increase in obesity in children, drinks such as fruit punch, iced tea, lemonade (non carbonated beverages) are also growing in consumption.

Brand Life Cycle

Though PepsiCo is widely known because of Pepsi, but its other products, which consist of 63 % foods and 37 % beverages, are huge revenue generators too. Also, PepsiCo caters to different demography with their required tastes. Eg., Kurkure for the Indian regional market.

The brand has evolved since the 1800’s and as of now, they are the second largest food and beverage business in the world. Their merger in 1965 with Frito-Lay let to the expansion from Pepsi to a range of products that they have today.

Competition

Market leaders in the beverage industry: Coca – Cola, Snapple, Kraft foods

Market leaders in the Indian beverage industry: Coca- Cola, Maaza, Appy Fizz

Speaking of carbonated drinks in India, Coca – Cola and Pepsi hold a huge ground. But are completely different in their spaces. While one considers itself to be a youth player, the other brings facets such as happiness to its value.

Coca-Cola has always had an evolving message, from “Thanda Matlab Coca-Cola” to “Open Happiness”. Whereas Pepsi has a constant youthful, enthusiastic message that is sent out with a very clear focus on a particular TG.

Though it is interesting to note that the likelihood of spending on beverage drinks may not be a sought after choice in the future. According to an article in WP, since Coca-Cola is an only beverage company, it saw decline in growth this year as it was effected by the health campaign against sweetened beverages. Whereas, PepsiCo stayed unaffected as food accounts for more than half the sales of the company. 

Buying Decision Process - Understanding Consumers & Consumption

Pepsi , a carbonated soft drink, which was first manufactured in 1890, has been in the front running in the beverage market ever since.

The buying decision process for Pepsi has been explained in detail

1.              1. Who buys the item/ product ? 

This is consumed unanimously with fast food, also hard drinks or as a refreshing drink. College going students, frequent restaurant visitors form the major chunk of buyers. The product has a young TG, as elders are a lot more health conscious. Hence, the brand is aware of the youth connect it has. Also, one can see that Pepsi has youth oriented Brand Ambassadors – Unmukt Chand , under 19 Indian cricket team captain. In this way, Pepsi also targets mega sports events as sponsors like IPL, where again maximum viewership are youngsters.

2. What problem will this product solve?

It solves a problem - what to supplement a meal with. Eatery items such as burgers and pizza are dry to consume by itself. A cola drink which is sweet and has a fizz to it goes very well with savouries (fast food) , quenches the thirst fast and also is a quick filler to the stomach. Also, it works as a refreshing drink – a quick fix on a hot afternoon after college hours. Because it is cheap and available, the reach is more.

3. Which attributes are important and why?

In terms of taste, its sweet, less fizzy taste complements spicy fast food. In terms of the brand, its target on the youth makes it popular. Most importantly, the cost factor is well kept in limits and has a good value for money.

4. If this decision is the first time, how will it go? If it is a repeat, how will it go?

Someone looking for a cheap refreshing drink to go with a meal and also to fill them up, Pepsi shall be an appropriate choice. The sweetness of the drink being is an add on to it. The first choice happens because of the awareness and reach the brand has. Also it has been successful in associating the brand with celebrities like Ranbir Kapoor who are an instant connect with the TG they have in mind – the youth. So the excitement or urge to try it will be very high.

For a repeat, the person will come back for the value for money and taste that the product has to offer.

 
5. How was the deliberation (thinking) in your head? 

Keeping in mind the customer perceived value Pepsi has, the cost of the product, and the quality or taste of the product and the availability, was some key focuses kept in mind while understanding the consumers and consumption of Pepsi.

Customer Value

Customer value forms the heart of any product and is highly worked on to distinguish products.  With more choices at their disposable, it is very easy for a consumer to shift from Product A to Product B. So in times like these, when the customer is spoilt for choice, what appeals a particular product to the customer is what requirements are to be understood very clearly. Their final call is made on whichever product delivers the most perceived value.

Customer perceived value is defined is the difference between the prospective customer’s evaluation of all the benefits and all the costs of an offering and the perceived alternatives.

Total Customer Benefit

Product benefit: It is a drink best served with fast food, hard drinks. Easily available. Has a sweet taste, less fizzy.

Service benefit: Pepsi is available, affordable.

Image benefit: it appeals to the youth, thus adding a cool factor to it. Also, Pepsi’s brand name attracts customers to buy the product. Any celebrity associated with a brand like Pepsi further adds to how influencing the brand is on him/her

Total Customer Cost

Monetary cost: Pepsi’s 200 ml bottle – Rs. 8, affordable

Time Cost: Due to its easy availability, minimal time is spent on getting the product from either a store or a restaurant

Energy cost: Due to its easy availability, minimal energy is spent on getting the product from a store or a restaurant

Psychological cost: Pepsi has the cool factor attached to it. It is very youthful in its appeal. Also, as a brand, Pepsi has evolved over the years. Any celebrity, sports star associated with Pepsi entices consumers, especially the young audience, more towards it.

Product Description

Pepsi which is a highly consumed carbonated soft drink is produced and manufactured by PepsiCo. The beverage was created in 1893 and got introduced as Brad's Drink.

In the Indian market, Pepsi faces competition majorly from Coca-Cola, but apart from that there are now many players in the cold drink market. Also, fruit juice products are soon coming up and hence the industry is in the growth phase of its industry life cycle.

Introduction

Friends, Readers, Marketers … We are here to uncover the various layers of marketing as a subject through a product, in this case Pepsi. This is a marketing diary for our coursework at Symbiosis Institute of Media & Communication, Pune.

What is marketing?

Marketing, to many, only signifies ‘Sales’, a myth which has existed and been carried on for ages. But the evolution of the marketing definition speaks another story of what it was perceived as in each era of time.

In 1935, the first formal AMA definition was developed in 1935. It has been periodically reviewed since then and was modified again 1985 and 2004. The three definitions are:

·         Marketing is the performance of business activities that direct the flow of goods and services  from producers to consumers (1935)

·         Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives (1985)

·         Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing relationships in ways that benefit the organization and its stakeholders (2004)

From the above, we understand the various molds in time which finally lead to the organizational structure where marketing is a function of the organization. But on the crux, it ignores a key role played in marketing i.e. understanding the consumer that lies at the center.