Final Marketing Project
Submitted to:
Ma’am Remissa
Submitted by:
Muhammad Hassan Ali
Sajawal Waseem
Omer Hameed
Junaid Chaudhry
Contents
 Product itself
 SWOT Analysis
 STP Model
 Target Strategies
 Competition
 PLC
 Product Strategies
 Pricing Strategies
 Distribution
 Promotion Strategies
 Conclusion
 References
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Abstract:
This report provides an analysis and evaluation of the Marketing Strategy for
Pepsi. Methods of analysis include Market Segmentation, Market Targeting, and
Market Positioning of Pepsi. Into this analysis we have tried to show how Pepsi
segment their market basing on different variables. Their target market which they
serve. We also discuss about Pepsi’s internal and external environment.Their
Position in the market and how do they differentiate themselves to make a position
in their customer mind, their strategy of positioning in market we tried to give a
positioning statement of Pepsi and ended the whole report with a conclusion and a
recommendation.
Produt itself
History Of Pespsi
The drink Pepsi was first introduced as "Brad's Drink" in New Bern, North
Carolina, United States, in 1893 by Caleb Bradham, who made it at his drugstore
where the drink was sold. It was renamed Pepsi Cola in 1898, named after the
digestive enzyme pepsin and kola nutsused in the recipe. The original recipe also
included sugar and vanilla. Bradham sought to create a fountain drink that was
appealing and would aid in digestion and boost energy.
1919 newspaper ad for Pepsi-Cola
plaque at 256 Middle Street, New Bern, NC
In 1903, Bradham moved the bottling of Pepsi-Cola from his drugstore to a rented
warehouse. That year, Bradham sold 7,968 gallons of syrup. The next year, Pepsi
was sold in six-ounce bottles, and sales increased to 19,848 gallons. In 1909,
automobile race pioneer Barney Oldfieldwas the first celebrity to endorse PepsiCola, describing it as "A bully drink...refreshing, invigorating, a fine bracer before
a race." The advertising theme "Delicious and Healthful" was then used over the
next two decades.[4] In 1926, Pepsi received its first logo redesign since the
original design of 1905. In 1929, the logo was changed again.
In 1931, at the depth of the Great Depression, the Pepsi-Cola Company entered
bankruptcy – in large part due to financial losses incurred by speculating on the
wildly fluctuating sugar prices as a result of World War I. Assets were sold and
Roy C. Megargel bought the Pepsi trademark.[3]Megargel was unsuccessful, and
soon Pepsi's assets were purchased by Charles Guth, the President of Loft,
Inc. Loft was a candy manufacturer with retail stores that contained soda fountains.
He sought to replace Coca-Cola at his stores' fountains after Coke refused to give
him a discount on syrup. Guth then had Loft's chemists reformulate the Pepsi-Cola
syrup formula.
On three separate occasions between 1922 and 1933, The Coca-Cola Company was
offered the opportunity to purchase the Pepsi-Cola company, and it declined on
each occasion.[5]
Rise:
During the Great Depression, Pepsi gained popularity following the introduction in 1936 of a 12-ounce
bottle. With a radio advertising campaign featuring the jingle "Pepsi-Cola hits the spot / Twelve full
ounces, that's a lot / Twice as much for a nickel, too / Pepsi-Cola is the drink for you", arranged in such a
way that the jingle never ends. Pepsi encouraged price-watching consumers to switch, obliquely referring
to the Coca-Cola standard of 6.5 ounces per bottle for the price of five cents (a nickel), instead of the 12
ounces Pepsi sold at the same price. Coming at a time of economic crisis, the campaign succeeded in
boosting Pepsi's status. From 1936 to 1938, Pepsi-Cola's profits doubled.
Pepsi
Pepsi's success under Guth came while the Loft Candy business was faltering. Since he had initially used
Loft's finances and facilities to establish the new Pepsi success, the near-bankrupt Loft Company sued
Guth for possession of the Pepsi-Cola company. A long legal battle, Guth v. Loft, then ensued, with the
case reaching the Delaware Supreme Court and ultimately ending in a loss for Guth.
Niche marketing
1940s advertisement specifically targeting African Americans, A young Ron Brown is the boy reaching
for a bottle
Walter Mack was named the new President of Pepsi-Cola and guided the company through the 1940s.
Mack, who supported progressive causes, noticed that the company's strategy of using advertising for a
general audience either ignored African Americans or used ethnic stereotypes in portraying blacks. He
realized African Americans were an untapped niche market and that Pepsi stood to gain market shareby
targeting its advertising directly towards them. To this end, he hired Hennan Smith, an advertising
executive "from the Negro newspaper field" to lead an all-black sales team, which had to be cut due to the
onset of World War II.
In 1947, Walter Mack resumed his efforts, hiring Edward F. Boyd to lead a twelve-man team. They came
up with advertising portraying black Americans in a positive light, such as one with a smiling mother
holding a six pack of Pepsi while her son (a young Ron Brown, who grew up to be Secretary of
Commerce)[10] reaches up for one. Another ad campaign, titled "Leaders in Their Fields", profiled
twenty prominent African Americans such as Nobel Peace Prize winner Ralph Bunche and
photographer Gordon Parks.
Boyd also led a sales team composed entirely of blacks around the country to promote Pepsi. Racial
segregation and Jim Crow laws were still in place throughout much of the U.S.; Boyd's team faced a great
deal of discrimination as a result,[9] from insults by Pepsi co-workers to threats by the Ku Klux Klan.
[10] On the other hand, it was able to use racism as a selling point, attacking Coke's reluctance to hire
blacks and support by the chairman of Coke for segregationist Governor of Georgia Herman Talmadge.
[8] As a result, Pepsi's market share as compared to Coke's shot up dramatically. After the sales team
visited Chicago, Pepsi's share in the city overtook that of Coke for the first time.[8]
This focus on the market for black people caused some consternation within the company and among its
affiliates. It did not want to seem focused on black customers for fear white customers would be pushed
away.[8] In a meeting at the Waldorf-Astoria Hotel, Mack tried to assuage the 500 bottlers in attendance
by pandering to them, saying: "We don't want it to become known as a nigger drink."[11] After Mack left
the company in 1950, support for the black sales team faded and it was cut.
History of Pepsi in Pakistan:
In the 1950’s one of the most potent business community of Pakistan, brimming
with the spirit of Independence from the late 1940’s, decided to launch a local
brand of beverages. Pakistan Beverage Limited created the brand Pakola which is
still holding on its unique equity with the Pakistanis within and outside the country.
The Plant was situated in a 1,000 square yard area in the hub of Karachi industrial
area.
With the booming success of their brand and their well known reputation of
enterprising marketing and trade penetration, Pakistan Beverage Limited easily
became the target of many a multinational companies who were interested in
seeding their beverage businesses in this new land of tremendous opportunity
driven by its demographics. In 1979 Pepsi Cola International offered the Pepsi
Franchise to Pakistan Beverage Limited, the then Bottlers of Pakola Brands of
Beverage in different flavors.
Within five years of acquiring the Pepsi Franchise, Pakistan Beverage Limited
succeeded in replicating its previous business successes in the beverage market by
becoming the market leader in Soft Drinks in Karachi and then later in Hyderabad.
The dynamic partnership which was created in 1979 between Pakistan Beverage
Limited and Pepsi Cola International, indeed, is a force to reckon with in the
market which stands true till this day.
This great success gradually trickled down to other cities of Pakistan in the south
and the North, over a period of time, making Pepsi and its brands the most popular
drink in the country.
Today, with almost 60 acres of accumulative area under manufacturing and
warehousing, Pakistan Beverage Limited is one of the most well equipped and well
managed Pepsi Cola Bottling Plant among all Pepsi franchises across the country.
Pakistan Beverage Limited currently consists of 5 manufacturing sites which
includes the Karachi Site, Yasir Fruit Juice, Hyderabad Plant, Quetta Plant and the
Aquafina site.
The Company has made tremendous progress under the dynamic leadership of its
Chief Executive/Managing Director Mr. Yasin Kassam Teli, his younger
brother Mr. Siraj Kassam Teli and his son Mr. Zaid Yasin. Not only did they
make advancements in leaps and bounds with respect to latest equipment
installation, but also got gelled together a blend of diverse group of highly
qualified professionals to run and manage the ever so growing business.
Pakistan Beverage Limited’s Karachi plant has four (4) state of the art bottling
lines and one (1) canning line which are all producing various brands and flavors
of Carbonated Soft Drinks, namely Pepsi, Mirinda, Mountain Dew, Diet Pepsi, 7
Up and 7up Free. The company also has another renowned PepsiCo brand of
drinking bottled water under the brand name of Aquafina which is produced at a
plant located on super highway and is PSQCA certified. Through its subsidiary
company, M/s Yassir juice Limited, it is manufacturing juice under brand name
Slice in PET,GLASS and Tetra packs.
With the vision of becoming the largest branded beverage manufacturing and
selling company, Pakistan Beverage Limited is marching ahead and continues to
provide superior quality beverages to the consumers with a quality backup service
to the customers in the market place.
Pakistan Beverage Limited, through another Group Company, M/s Pakola Products
Limited, also produces plain & flavored milk in Tetra Pack at its plant on Super
Highway. It is market leader in flavored milk with a wide range of different
flavored.
PepsiCo SWOT analysis 2014
Strengths
Weaknesses
Product diversity
Over-dependence on Wal-Mart
Extensive distribution channel
Low pricing
Corporate Social Responsibility (CSR) projects
Questionable practices (using tap water but labeling it as
mountain spring water)
Competency in mergers and acquisitions
22 brands earning more than $1 billion a year
Much weaker brand awareness and market share in the wor
beverage market compared to Coca-Cola
Successful marketing and advertising campaigns
Too low net profit margin
Complementary product sales
Proactive and progressive
Opportunities
Growing beverages and snacks consumption
in emerging markets (especially BRIC)
Increasing demand for healthy food and
beverages
Further expansion through acquisitions
Bottled water consumption growth
Savory snacks consumption growth
Threats
Changes in consumer tastes
Water scarcity
Decreasing gross profit margin
Legal requirements to disclose negative
information on product labels
Strong dollar
Increased competition from Snyder’s
Strengths
1.
Product diversity. PepsiCo has several hundreds of brands, which include:
carbonated and noncarbonated drinks, water, savory and whole grain-based snacks.
Product diversification strengthens PepsiCo because it doesn’t have to rely on few key
products or seasonal sales and isn’t significantly affected by changes in customer tastes.
2.
Extensive distribution channel. PepsiCo products are served to more than 10
million stores per week in more than 200 countries.
3.
CSR. The firm recognizes its role in a society and engages in education,
recycling, water usage reduction, obesity fighting and other projects through PepsiCo
Foundation, thus increasing its brand awareness and customer loyalty.
4.
Competency in mergers and acquisitions. The key to PepsiCo business
growth is its successful mergers and acquisitions of beverage, bottling and snacks
companies. PepsiCo acquired such brands as Gatorade, Tropicana, Doritos, Quaker Oats
and many others.
5.
22 brands earning more than $1 billion a year. The company doesn’t have
to rely on one or two of its product to bring most of the revenues. Instead, Pepsi has 22
brands that contribute significantly to its income, serving different industries and
satisfying various consumer tastes.
6.
Successful marketing and advertising campaigns. More than $2 billion
spent on advertising over 2012 resulted in PepsiCo’s growing market share over its main
competitors, including Coca Cola Company, which spent even more on advertising.
7.
Complementary product sales. In its annual financial report, PepsiCo revealed
one of its studies' results that about 30% of customers who buy its snacks also buy its
beverages. PepsiCo’s decision to diversify its product range is firm’s competitive
advantage too.
8.
Proactive and progressive. According to New York Times food industry writer
Melanie Warner, PepsiCo, by many critics, is considered to be most proactive and
progressive food company.
Weaknesses
1.
Over-dependence on Wal-Mart. More than 13% of PepsiCo business revenues
come from Wal-Mart store chain. Wal-Mart has a significant buyer power and can easily
dictate prices over PepsiCo leaving it with very small margins. In addition, if PepsiCo
would lose Wal-Mart it would lose 13% of its revenue and competitive advantage.
2.
Low pricing. PepsiCo usually prices its products lower than its competitors. Low
price is associated with low quality and PepsiCo products are usually perceived as ones.
3.
Questionable practices. PepsiCo is using and selling tap water but places view
of mountains on its water bottle labels, thus deceiving people that it is mountain spring
water when it is not. PepsiCo has also been criticized for using water in India with higher
than allowed amount of pesticides in it.
4.
Weak brand awareness. The Coca Cola Company has the largest share market
of beverages in the world and much stronger brand awareness than Pepsi, placing it at
competitive disadvantage.
5.
Too low net profit margin. PepsiCo’s net profit margin is 9.7% compared to
Coca Cola’s 18.55% and Nestlé’s 11%.
Opurtunities
1.
Growing beverages and snacks consumption in emerging
markets. PepsiCo has made large investments in BRIC countries to expand its market
share as these countries represent the fastest growing food and beverages markets in the
world. If PepsiCo is successful it will increase its revenues and global market share
significantly. In addition, it will be able to rely less on US market.
2.
Increasing demand for healthy food and beverages. Due to many programs
to fight obesity, demand for healthy food and beverages has increased drastically.
PepsiCo has an opportunity to further expand its product range with beverages and
snacks that have low amount of sugar and calories.
3.
Further expansion through acquisitions. So far, PepsiCo has been successful
in acquiring other companies and adding new growing brands to its portfolio.
4.
Bottled water consumption growth. Consumption of bottled water is expected
to grow both in US (PepsiCo’s largest bottled water market) and the rest of the world.
5.
Savory snacks consumption growth. The same opportunity PepsiCo has in
growing its revenue selling snacks as this market is also expected to grow.
Threats
1.
Changes in consumer tastes. Consumers around the world become more health
conscious and reduce their consumption of carbonated drinks, drinks that have large
amounts of sugar, calories and fat.
2.
Water scarcity. Water is becoming scarcer around the world and increases in
both cost and criticism for PepsiCo over the large amounts of water used for production.
3.
Decreasing gross profit margin. PepsiCo’s gross profit margin was decreasing
over the past few years and may continue to decrease due to higher water and other raw
material costs.
4.
Legal requirements to disclose negative information on product
labels. Some researches show that particular ingredients, consumed in extra large
quantities, in some of PepsiCo products could cause cancer. For this reason, many
governments consider to pass legislation that requires disclosing such information on
product labels. Products containing such information may be perceived negatively and
lose its customers.
5.
Strong dollar. More than 50% of PepsiCo’s income is from outside US. Due to
strong dollar performance against other currencies PepsiCo’s income should fall.
6.
Increased competition from Snyder’s. Snyder’s increase its US savory snacks
market share by 1.6% and almost all of it was taken from PepsiCo.
STP model
STP (segmentation, targeting, positioning) analysis is used to study customers.
Market Segmentation
As we know that PepsiCo provides varieties of beverages such as
carbonatedsoft drinks, sport drinks, dairy-based drinks, energy drinks, fruit flavore
dbeverages, ready-to-drink coffees, ready-to-drink tea, mineral water andfrozen be
verage. These products are marketed under brand as Pepsi,Mountain Dew,
Gatorade, Lipton, Starbucks, Tropicana, and so on. With these
products, PepsiCo aims to attract different groups of
consumers. There aretwo levels in which Pepsi segments its market:
Demographic and Nichemarketing.
•Demographic
In focusing on the Pepsi-Cola beverage product, PepsiCo has retained a
longhistory of concentrating on youth as its main target market –
“GenerationNext!” It has spent billions of dollars in trying to woo the young and
nearlyyoung, implying that Coca-Cola is for the older generation. The reason
whyPepsi-Cola has fiercely targeted this market is because it is the largestamongst
its users. Market segment profiles have shown that the majority of carbonated
beverage drinkers are youth and middle age people. Also, Pepsicontinually targets
the college market in which they spend huge amounts of money to compete with
Coca Cola in acquiring contracts with universities(i.e.: CSUF) to have sold
representation of their product distribution. Pepsi’suse this behaviorist
segmentation has been a key to the company’s success.Place of consumption: coca
cola has segments the market on the basis of the place of consumption of the
beverage. Most of the consumption takes place on premise such as cinemas,
railway stations, restaurants etc., while rest of it takes place in homes.
Product type: Pepsi segments its market on the basis of type of products bought by
customers. The market divided into cola products and non-cola products. Cola products currently
provide majority of the revenues but the portion of non-cola products is increasing.
Positioning.
Positioning is an essential component -- and skill - in good marketing. Perceptual
maps are used to determine the position of a product, firm, person, service or idea.
Positioning maps, or perceptual maps can be simple, yet very effective marketing
tools. One definition of Positioning Theory is: the science of perceptual strategy. It
is based on a theory that strategy can only be planned in the mind of the consumer,
not the marketplace*.
It is important to understand the levels of competition because positioning applies
at all levels of competition. For example:
Product Level (e.g., Pepsi vs. Coke)
Category Level (e.g., Cola vs. Root beer)
Corporate Level (e.g., Pepsi Inc. vs. Coca Cola Company)
Industry Level (e.g., Beverage Industry vs. Snack food Industry)
Targeting.
What is target?. This is the real goal/objective in market that marketer want to
reach.
As a simple questions are :
What percent of the population uses the product at all?
What percent uses your brand?
How does that compare to competing brands?
What is the demographic profile of the product category?
Which media reach the users of this category?
Marketing Strategy:
 Selecting Customers to serve:
Marketing Segmentation: Pepsi segments its market in several ways. Pepsi,
mainly segment their market demographically assuming age, income and family
size. 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
introduces Pepsi diet for the people who are suffering from diabetic and for those
who are likely to avoid sugar and for the aged people specially 40 plus. Pepsi
mainly produces the Pepsi cola the main customer of Pepsi cola is young people
whose age is 10 to 35.
On income basis Pepsi also segment their market by making little pack. They offer
a competitive price range to all class of people. They consider the economic
situation in our country. So they introduce Pepsi in different price for different the
people whose income is different. They think about student, poor people, and
middle class people economic condition for their pricing. Family size basis is also
a base segmentation for Pepsi. In our society, there are many families with
different family size. So Pepsi is served into many size 250ml, 500ml, 1L, 1.5L, 2L
pack. People can easily choose a suitable pack based on their family size.
Target Marketing: The reason why Pepsi-Cola has fiercely targeted this
market is because it is the largest among its users. Market segment profiles have
shown that the majority of carbonated beverage drinkers are youth and middle age
people. Pepsi continually targets the Schools, Colleges, Universities, restaurants,
hotels, and fast food Stores. For this they always spend huge amounts of money to
compete with Coca Cola in acquiring contracts with universities to have sold
representation of their product distribution. Pepsi customers are mostly teenagers
and young adults between the ages of 14 to 29.
 Marketing Management Orientation:
Production concept: Pepsi always follows Production concept. They
always more focus more on quantity but less focus on quality. They
produce a huge amount of product, So that the cost of the production
decreases.
Amount of
product
Hig
her
Low
er
Production
cost
Marketing Concept: Pepsi follows marketing concept. They always
highlight their target markets needs and make sure that the product is
available and highly affordable for them.
Analyzing the Marketing Environment:
Micro environment for Pepsi:
The company: PepsiCo is the company which produces Pepsi.
Suppliers: ABDUL MONEM SUGAR REFINERY LTD, IGLOO BOTTLERS
GRADE SUGAR. Tanvirs’(PEPSI COLA CANS SPEAKER), Partex Plastics
Ltd. (PLASTIC CLOSURES)
Marketing Intermediaries: Akin Enterprise, BANGLADESH. ANSii
Computers, BANGLADESH.
Customers: Pepsi customers are mostly young group between the ages of 14 to
30.
Competitors: Coca Cola, RC Cola, Red Bull etc are the competitors of Pepsi.
Macro environment for Pepsi:
Demographic Environment: In the demographic environment, marketers
must be aware of worldwide population growth; changing mixes of age; ethnic
composition, and educational levels; the rise of nontraditional families; large
geographic shifts in population; and the move to micromarketing and away from
mass marketing. the world population is showing "explosive" growth, totaling 6.1
billion in 2000 and will exceed 7.9 billion by year 2025.A growing population does
not mean growing markets unless these markets have sufficient purchasing power.
Nonetheless, companies that carefully analyze their markets can find major
opportunities. Countries also vary in ethnic and racial makeup. At one extreme is
Japan, where almost everyone is Japanese; at the other is the United States, where
people from come virtually all nations. Each group has certain specific wants and
buying habits. Several food, clothing, and furniture companies have directed their
products and promotions to one or more of these groups. Pepsi is the product
which makes a balance demographic environment.
Economic Environment: Markets require purchasing power as well as people.
The available purchasing power in an economy depends on current income, prices,
savings, debt, and credit availability.
Marketers must pay close attention to major trends in income and consumerspending patterns. Marketers often distinguish countries with five different
income-distribution patterns: (1) very low incomes; (2) mostly low incomes; (3)
very low, very high incomes; (4) low, medium, high incomes; and (5) mostly
medium incomes. Marketers must pay careful attention to major changes in
incomes, cost of living, interest rates, savings, and borrowing patterns because they
have a strong impact on business and PepsiCo is always aware of economic
environment for Pepsi.
Natural Environment: In the natural environment, marketers need to be aware
of raw materials shortages, increased energy costs and pollution levels, and the
changing role of governments in environmental protection. The earth's raw
materials consist of the infinite, the finite renewable, and the finite nonrenewable.
Infinite resources, such as air and water, are becoming a problem such as water
shortages. Finite renewable resources, such as forests and food, must be used
wisely. Forestry companies are required to reforest timberlands in order to protect
the soil and to ensure sufficient wood to meet future demand. Finite nonrenewable
resources - oil, coal, platinum, zinc and silver will pose a serious problem as the
point of depletion approaches. Dramatic rise in oil prices can also create a renewed
search for alternative energy forms. Some industrial activity will inevitably
damage the natural environment. About 42 percent of U.S. consumers are willing
to pay higher prices for "green" products. This creates a large market for pollutioncontrol solutions, such as scrubbers, recycling centers, and landfill systems.
Governments vary in their concern and efforts to promote a clean environment.
Many poor nations are doing little about pollution, largely because they lack the
funds or the political will. Richer nations are able to help the poorer nation’s
control their pollution, but even the richer nations today lack the necessary funds.
For Pepsi-Cola, the packaging of Pepsi is closely related to the natural
environment. So they always try to make the packaging of Pepsi in recycling
format.
Technological Environment: This is one of the most dramatic forces shaping
people's lives. The economy's growth rate is affected by how many major new
technologies are discovered. New technology also creates major long-run
consequences that are not always foreseeable. Therefore, the marketer should
monitor the following trends in technology: the pace of change, the opportunities
for innovation and increased regulation. Many of today's common products were
not available 40 years ago. An increasing number of ideas are being worked on and
the time between the appearance of new ideas and their successful implementation
is all but disappearing. So is the time between introduction and peak
production.90% of all the scientists who ever lived is alive today and technology
feeds upon itself. Scientist today is working on a startling range of new
technologies that will revolutionize products and production processes. Some of
the most exciting work is being done in biotechnology, computers and
telecommunications. Many companies are content to put their money into copying
competitors' products and making minor feature and style improvements. As
products become more complex, the public needs to be assured of their safety.
Consequently, government agencies' powers to investigate and ban potentially
unsafe products have been expanded. However their innovation level is not so high
but PepsiCo always try to make new innovation in Pepsi.
Political-Legal Environment: Marketers must work within the many laws
regulating business practices and with various special-interest groups. Business
legislation has three main purposes: to protect companies from unfair competition,
to protect consumers from unfair business practices and to protect the interests of
society from unbridled business behavior. The laws are not always administered
fairly; regulators and enforcers may be lax or overzealous. Marketers must have a
good working knowledge of the major law protecting competition, consumers and
society. As more business takes place in cyberspace marketers must establish new
parameters for doing electronic business ethically. Many companies have
established public affairs departments to deal with these groups and issues. An
important force affecting business is the consumerist movement - an organized
movement of citizens and government to strengthen the rights and powers of
buyers in relation to sellers. The company monitors the political environment of
the many foreign nations in which Pepsi is sold.
Social-cultural Environment: In the social-cultural arena, marketers must
understand people's views of themselves, others, organizations, society, nature and
the universe. They must market products that correspond to society's core and
secondary values and address the needs of different subcultures within a society.
People living in a particular society hold many core beliefs and values that tend to
persist. Secondary beliefs and values are more open to change. Therefore,
marketers have some chance of changing secondary values but little of changing
core values. Each society contains subcultures. To the extent that sub cultural
groups exhibit different wants and consumption behavior, marketers can choose
particular subcultures as target markets. Although core values are fairly persistent,
cultural swings do take place. Today, young people are influenced by new heroes
and new activities: Tiger Woods, and extreme sports. It must also continue to
monitor the cultural environments of the other countries in which it does business
of Pepsi.
Market Segmentation
As we know that Pepsi is provided among a huge population which is called
market. To distribute it and increasing the revenue the market should be
segmented. Pepsi has segmented their market keeping four major segmentation
variables in their mind which are:
 Geographic
 Demographic
 Psychographic
 Behavioral
Geographic Segmentation:
Geographic segmentation means dividing the market into different geographical
units such as nations, regions, states, countries, cities or even neighborhood. Pepsi
has put little emphasis to segment their market geographically. They are doing
business almost in maximum places around the world.
Demographic Segmentation:
Despite the large customer base in the Soft Drink industry, Pepsi prefers to
segment itself as the beverage choice of the “New Generation”, Generation Next,
or just as the “Pepsi Generation”. These terms adopted in Pepsi’s advertising
campaigns are what marketers refer to as Generation X, which are profiled to be
between the ages of 18 to 29. In addition, Pepsi shifted its focus to the growing
American teenage market in the 1990s by forming exclusive contracts with
American schools and developing advertising campaigns such as “The Next
Generation” and the “Joy of Pepsi”, featuring Britney Spears. Pepsi believes that if
they can get this market to adopt their product, they could establish a loyal
customer in a long run.
Psychographic segmentation:
Psychographic segmentation divides buyers into different groups based on social
class, lifestyle or personality characteristics. People from same demographic group
can have very different psychographic makeups. Pepsi’s segmentation has also
been emphasized psycho graphically. Their beverages are very much focusing
towards lower and upper middle class as they can afford to drink Pepsi. They have
a product like “Mountain Dew” a particular drink which is focused especially who
has adventurous personality. Their campaign of this drink totally focuses to
adventurous young people.
Behavioral segmentation:
Behavioral segmentation divides buyers into groups based on their knowledge,
attitudes, uses or responses to a product. In this segment, Pepsi has been
concentrating carefully. Because they offer in every special occasions, for the
people who seek for benefits off their products, to their loyal customer base.
Occasional cases like religious festivals; special days like mothers’ day, valentine’s
day, friendship day, any individual’s birthday or marriage ceremony or anniversary
in a word in every special occasions there are people to whom buying Pepsi for
celebration is must.
Segmentation
Variables
Geographical
Data
World region
Country
Cities
Density
Climate
Demographic
Asia
Bangladesh
All major cities
Urban
Tropical wet
Age
Gender
Family Size
Family Life Cycle
Psychographic
Social Class
Lifestyle
14-30
Male, Female
1-2, 3-4, 5+
Married, Unmarried
Personality
Behavioral
Occasions
Benefits
User Status
Loyalty Status
Readiness Stage
Middle Class, Upper Class
Actualizes, Believers, Fulfilled,
Achievers, Strivers, Experience makers,
Strugglers
Adventurous
Parties, Birthdays, Sports, Regular
occasions
Quality, Taste
First Time User
Strong
Aware, Interested
Market Targeting:
Market Targeting can be carried out at several different levels. Companies can
target very broadly through “Undifferentiated Marketing”, very narrowly through
“Micromarketing” or somewhere between “Differentiated Marketing” and
“Concentrated or Niche Marketing”. There are four strategies of market targeting.
Pepsi follows the strategy of “Concentrated or Niche Marketing”. In niche
marketing companies goes after a large share of one or a few segments or niches.
Through concentrated marketing, the firm achieves a strong market position
because of its greater knowledge of customer it serves in the niches it serves and
the special reputation in acquires. Pepsi customers are mostly Teenagers and Young
Adults between the ages of 14 to 30. It also targets at Schools, Colleges,
Universities, Homes, Restaurants, Hotels, and Stores They focused on varietal
differentiation since 1990 by introducing a string of niche products. To increase
volume in order to counter flat Coca-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
markets that it currently is not reaching. Pepsi has introduced Code Red and Live
Wire, extensions of Mountain Dew, Pepsi One, and Pepsi Blue. Finally, Pepsi is
countering declining sales of carbonated drinks through the marketing and
distribution of Starbucks ready to drink products, and the acquisition of SOBE and
Gatorade. The success of Pepsi’s Mountain Dew Code Red launched in 2001 was
the most successful soft drink innovation in 20 years and has spurred even more
niche product introductions for PepsiCo as well as other competitors. In some
sense Pepsi also follows the idea of “Micromarketing”. As they are they are
promoting their brands to the local customer groups. They are sponsoring the
signboards for the little or big shopkeepers in town. They are also providing
refrigerator logoed “Pepsi”. All these they are doing to attract their target
customers..
Positioning:
Coca Cola has strategically positioned itself within the world soft drink market. It
faces a vital question: does it have to keep the same positioning or to adapt
according to the 200 countries where the brand sells its products. The brand has
understood this principle while ago: “think global, act local”. Coca is thus willing
to keep the same core product which is coke, but it adapts the offer to local needs.
They use strategic positioning in order to have the same image all around the
world, which is a success because it is perceived today as a part of daily life
everywhere. This perception of the brand by the consumer leads to a high degree of
loyalty and makes the purchasing decision more automatic. Coca Cola has been
successful by using Unique Selling preposition as “Live the coke side of life”,
related to joy and happiness.
Consumers basically associate this brand with these emotions. When the name of
Coke is mentioned, the first thing that comes into mind is fun and entertainment.
Competition:
Coke’s major competitor is “PEPSI” and there is no hesitation to say this because
everyone knows that and all the other cold drinks and water, coffee, tea is the
competitors. They compete in almost all the markets worldwide. Coca Cola has
higher sales worldwide, though Pepsi Co dominates the US market. There are the
other players in various beverages category, but none of them as larger as Coca
Cola or Pepsi Co. the new competition in the industry is to increase the product
portfolio and introduce new variants of carbonated drinks and non-carbonated
drinks.
Major Competitors:
Consumers firstly decide that they are going to have a soft drink. Then they
compete brands with each other. Like they compete Coke with Pepsi and Sprite
with 7up and team .So the major competitor of Coke is Pepsi. When they motivate
to any other brand or on Coke it’s in instinct basically that based on messages
derive certain feelings. But Coca Cola thinks in a different way, they believe that
RC Cola, new coming AMRAT Cola, and all juices, even they take water and tea as
their competitors.
Strategies of Quality:
After Micro and macro analysis Brand “coke” is primarily role
1. Enhance competition moments
2. When people watch cricket
3. through commercialization
4. Fun time though these strategies there could be better understanding and better
connection with the public. These are the “key consumption”.
PLC
Product life cycle management (PLC):
There are five key stages of the product life cycle:
1) Pre-launch – no sales and profit are made because the product is still in
development.
2) Introduction – initial sales are made to innovators, consumers who enjoy trying
new products, but these are insufficient to recuperate development costs
3) Growth – sales being to increase rapidly as the product gains popularity among
the early majority. It is at this stage that profits are first generated.
4) Maturity – this is the longest stage and generates the majority of a product’s
sales and profits from the late majority. To ‘milk’ the product for as much profit as
possible, extension strategies are often implemented to pro-long the maturity stage.
5) Decline – eventually all products stop selling, such as VHS tapes. As expected,
sales begin to decline until the product is no longer profitable.
At each stage, marketers should adapt their marketing strategies to the external
changes in the market place. Let’s take a look at how PepsiCo have used
the product life cycle to successful grow Pepsi into one of the most consumed
drinks in the world.
Product life cycle of Pepsi
Product Life Cycle of Pepsi:
1) Pre-launch – the 1890s
In 1898, pharmacist Caleb Bradham developed ‘Brads Drink’, a formula designed aid digestion. After
strong interest from consumers in his pharmacy, Brad renames the drink ‘Pepsi-Cola’ and purchases the
trademark ‘Pep Cola’ for $100. The origins of Pepsi are very similar to that of Lucozade, which was also
first produced for medicinal purposes.
Although $100 does not appear much, adjusted for inflation that amount of money in the 19th Century is
equivalent to $2516.34 in 2014. This highlights the difficulties companies have in the pre-launch phases
with surviving periods of negative cash-flow, large research costs and development expenditure.
2) Introduction – 1902
Brad began selling Pepsi-Cola and achieved sales of 7,968 gallons of syrup in the first
year.
Objectives: Brad aimed to generate initial awareness and trial of his product, and far
exceeded his targets!
Product: Only a basic product was launched – Pepsi-Cola was initially sold even
without bottles. Instead the product was sold through soda fountains located in Brad’s
pharmacies.
Price: Initially a simple cost-plus pricing strategy was used. It is likely that PepsiCola started with a skimming strategy, to quickly recuperate start-up costs.
Place: A highly selective distribution is initially recommended, and this is evident
with Pepsi-Cola only launching in Brad’s pharmacies.
Advertising: To generate awareness, a celebrity endorsement with race-car driver
Barney Oldfield (above) was utilised.
Sales-promotion: Pepsi-Cola was not launched with any promotions. However, if
promotions are used at this stage they should aim to encourage consumers to trial the
product.
3) Growth – 1930s-1970s
After bankruptcy and then becoming acquired by Loft Inc., Pepsi-Cola’s sales skyrocketed in the great depression. Consumers were attracted by the value-for-money
competitive positioning: 5 cents would buy consumers 12 ounces of Pepsi-Cola, but
only 6 ounces of Coca-Cola.
Objectives: During growth, gaining market share is critical. Hence, Pepsi-Cola was
marketed aggressively against Coca-Cola to encourage consumers to defect.
Product: As the market becomes increasingly competitive it is important to continually improve the
product. Hence, Pepsi-Cola now came in bottles, rather than just soda fountains.
Price: To support the aim of gaining market share, the low price penetration strategy was one of the key
reasons why the brand grew massively in this time period.
Place: An extensive distribution network is needed to support rapid sales growth; therefore exclusivity to
pharmacies ended and the product became a mainstream consumer good.
Advertising: It is vital to capture the early majority stage, requiring that advertising was designed to
effectively reach a mass audience. For example, Radio was selected as a medium because of its low costper reach – click here to listen to an ad from the 1930s! During this time, the name was changed to just
‘Pepsi’ to help differentiate the brand from Coca-Cola. Lastly, the 1975 Pepsi Challenge marketing
campaign was so effective it almost destroyed the Coca-Cola brand!
Sales-promotion: Due to the overwhelming success of the drink, no sales promotion was used given that
the price was already highly competitive and the company struggled to keep-up with demand.
4) Maturity – 1980s – Present day
Since the 1980s Pepsi has been in the maturity stage of the product life cycle, helping the parent company
earn almost $20 billion in annual revenue.
Objectives: At this stage products are most profitable, which is why PepsiCo are likely to consider Pepsi
as a Cash Cow and aim to make as much profit as possible from the brand.
Product: Now that the product is well established, entire ranges can be introduced that act as extension
strategies to prolong the most profitable stage of the product’s life. These include the highly successful
Pepsi Max, to the disastrous Pepsi Raw.
Price: PepsiCo and Coca-Cola clearly do not want to enter price-wars, which is a high risk during this
very competitive stage. As a result, the price rarely fluctuates away from the market average.
Place: The product now has a global distribution to penetrate emerging economies.
Advertising: The main focus of Pepsi’s advertising during maturity to is to differentiate the brand. This
has been mainly achieved through the use of celebrity endorsements – like Beyonce and Michael
Jackson – to position the product as a younger and edgier alternative to Coca-Cola
Sales-promotion: To keep consistent with the brand’s value-for-money positioning, Pepsi frequently
have both value increasing and value adding offers. An example of the former is offering larger bottle
sizes – still to this day – than Coca-Cola; and the latter can be seen in the competitions advertised on
Pepsi’s bottles
.
5) Decline – sometime in the future
Despite growing consumer interest in healthier lifestyles, sales of Pepsi show no signs of slowing down in
the immediate future. Regardless of this, it is recommended that Pepsico have the following strategies
ready to be be implemented in the event of the product entering decline.
Objectives: Cost-reduction is key at this stage to help the brand remain profitable despite generating
fewer sales.
Product: The range should become rationalized, and may be reduced to just Pepsi to leverage economies
of scale and minimize costs.
Price: The price could be reduced further to increase sales among price-sensitive consumers and be an
effective advertising cue for this low involvement product.
Place: The product now returns back to selective distribution to focus efforts on just the few remaining
outlets that generate profits on Pepsi.
Advertising and Sales Promotion: It can be recommended that PepsiCo could go as far as completely
cutting advertising and sales promotion to further reduce overheads.
In summary, the product life cycle of Pepsi is a great business case study that both students and managers
can learn from. They key points to remember are that marketing strategiesneed to be ready for
implementation, before the product enters each phase of the life cycle, otherwise opportunities are missed
and the brand becomes reactive to change.
Product strategies
Pepsi Product strategy
Products of Pepsi-Cola in the carbonated soft drink US market:
Pepsi Natural
Pepsi Next
Pepsi One
Pepsi Throwback
Pepsi Wild Cherry
Caffeine Free Pepsi
Diet Pepsi
Diet Pepsi Lime
Diet Pepsi Vanilla
Diet Pepsi Wild Cherry
Caffeine Free Diet Pepsi
Packaging:
As any oder beverage manufacturer, Pepsi is committed to environmental guidelines, in order to ensure
that packaging has as little impact as possible on the environment
PEPSI INGREDIENTS:
Water
At least 86% of soft drink is purified water. In the case of diet soft drinks water comprises around 96%.
Sweeteners
Such as sugar (sucrose from sugar cane) or non-nutritive sweeteners. The most popular and most widely
non-nutritive sweetener used is Aspartame, being 200 times sweeter than sugar,
is used in very
small quantities. Pepsi Max and Pepsi Light use a dual sweetener system, aspartame and acesulphame
potassium. The latter is 300 times sweeter than sugar, requiring even less to sweeten the soft drink.
Flavors
Pepsi uses flavors to develop characteristic tastes associated with its beverages. These come from a
variety of sources; natural, artificial and nature identical. Examples of flavors used in the manufacture of
soft drinks include natural flavorings from Kola nut, and fruit.
Carbon Dioxide
Effervescence gives soft drinks their special bubbly appeal and is added during production by injecting
C02 into the product on the way to the filler.
Colors
Colors are added to Pepsi Cola products to enhance the esthetic appeal and appearance of products
These may be both natural and artificial
Preservatives
Certain preservatives are used in soft drinks to ensure microbial stability and prevent spoilag
Pricing Strategies:
The amounts of money charged for a product (PEPSI PERFECT). Price of product
should be that which gives maximum benefit to the company and which gives
maximum satisfaction to the customer.
Following factors Pepsi kept in mind while determining the pricing strategy.
 Price should be set according to the product demand of public.
 Price should be that which gives the company maximum revenue.
 Price should not be too low or too high than the price competitor is charging
from their customers otherwise nobody will buy your product.
 Price must be keeping the view of your target market.
Rates:
250 ml-----------------------------------RS. 25.00/500ml------------------------------------RS. 40.00/1000ml----------------------------------RS. 55.00/1500ml----------------------------------RS. 80.00/2250ml----------------------------------RS. 100.00/-
Distribution Channel of Pepsi:
“Marketing channels are sets of interdependent organization involves in the
process of making a product or service available for use or consumption.”By
channel distribution of Pepsi means the intermediaries or the process through
which Pepsi is transferred from the producer to the ultimate users. There are a lot
of intermediaries between Pepsi producers and consumers. Some intermediaries
like wholesalers and retailers buy and resale the product. They are known as
merchant middle men.
Intensive Distribution:
Pepsi Co follows an intensive distribution strategy to distribute Pepsi. To support
their universal feature they want to place their product in as many outlets as
possible.
Distribution Model of Pepsi:
Pepsi uses two types of distribution model to distribute the product among the
consumers. They are
 Direct Distribution System
 Indirect Distribution System
Direct Distribution System:
Pepsi uses its direct distribution system to deliver suppliers. It Supplies the product
directly with
 PIZZA HUT
 KFC
According to the marketing channel Pepsi uses zero level of marketing channels. It
means
Consu
mer
Manufactu
rer
We can see there are no intermediaries between manufacturer and consumer. This
single type of marketing channel is maintained by Pepsi.
Indirect Distribution System:
In this system, there are a lot of intermediaries such as distributors, retailers,
wholesaler etc. To make the product available at the right places at the right time in
the market, the sales department of PepsiCo Company pays major attention on
controlling the channel of distribution. The nature of the channel is as follows:-
PEPSI
DISTRIBUT
ORS
WHOLESA
LER
RETAILER
S
CONSUME
RS
So according to the marketing channel Pepsi uses 2-level marketing channel. It
means
Manufactu
rer
Wholesale
rs
Retailers
Consum
er
Number of Intermediaries:
Pepsi Provides direct and indirect employment of 1, 50, 000 people (including
suppliers and distributors).
Distributors:
Distributors frequently have a business relationship with manufactures that they
represent. The distributors of Pepsi maintain exclusive buying agreements that
limit the number of participants. The distributor becomes the company’s direct
point of contact. Distributors don’t sell the product directly to consumers. At first
PepsiCo supplies Pepsi to the distributors. Then they resale the product to
wholesaler or retailer. According to http://www.exporters.sg/, there are 70
distributors of Pepsi. Some of them are:
OTC GLOBAL LTD, INDIA (Exporting and importing Pepsi in 500 ML pet
Bottles )
SUNRISE FOODSTUFF JSC, VIET NAM (Exporting Famous-Brand Pepsi Soft
Drinks 330ml.)
Wholesalers:
The wholesalers of Pepsi generally buy a large quantity of products directly from
distributors or the company. Then they resale the product to the retailers.
According to http://www.exporters.sg/there are 70 wholesalers of Pepsi. Some of
them are:
FAR WAY GENERAL TRADING LLC (Exporting and importing Pepsi )
Brand Distribution Poland LTD, POLAND (Exporting Pepsi 0,33L 24 cans case)
Retailers:
Retailers consist of small and large for-profit businesses that sell products directly
to consumers. The retailers buy small quantities of an item from a distributor or a
wholesaler. Then resale them to consumers. According to http://www.exporters.sg/
there are 563 retailers of Pepsi. Some of the retailers are
Akin Enterprise, BANGLADESH.
ANSii Computers, BANGLADESH
The channel of distribution is a structure which presents a choice among
alternative channels of distribution of the different marketing situation faced by
retailers, wholesaler and producers within the structure. To bearing maximum
profits of all institutions concerned a channel of distribution should be treated as a
unit of total system of action.
Promotion strategy of PEPSI:
Advertising:
For advertising, it used printed and electronic media. Every newspaper and
magazine carries Pepsi advertisements that make the people interested toward it.
Advertisement of Pepsi are eye catching and attractive. Through advertising it
informs the consumer about new brands and flavors. Pepsi designs their
advertisement campaign focusing on the target markets. They research for the need
of people before make the ads.
Sale promotion: Pepsi has used a variety of sales promotions over the years.
They have used celebrity such as Michal Jackson, Beyoncé’ for endorsements.
This has been shown with the use of BeyoncŽ.
Michal Jackson promoting Pepsi
They have also had essay contest to promotions through schools. They have
giveaways in stores and coupon advertisement in newspapers.
Public relation:
Pepsi is the first product to respond to consumer preference with lightweight,
recyclable, plastic bottles. In addition, different approaches of promotional
campaigns such as press releases have been imposed so as to make the product
more appealing to the target market and to make these product marketable.
Personal selling:
Pepsi use pull strategy for selling the product. In every occasion Pepsi brings
special offers. Like, they reduce the price; give extra quantity of drinks in the same
price.
Publicity:
For publicity Pepsi use social media such as Face Book. Not only that Pepsi use
YouTube to promote its product. It drives public attention toward the product.
Pepsi also use brand ambassador and sponsor cricket team and world cup for
publicity.
Direct Marketing:
Pepsi uses its direct marketing to distribute their product through PIZZA HUT,
KFC etc. More than that, they use ecommerce Such as “Refreshment Services
Pepsi.com” to market the product.
Recommendation:
 Since there are older people and Pepsi has been traditionally a young
people’s drink, Pepsi will have to stimulate consumption by older members
of society
 Pepsi uses Plastic bottles and cans which can be harmful for society. So
Pepsi should be produced more in recyclable bottle
 Need to improve PR activities in urban areas
 In our country, with brand name people prefer Pepsi 23% but without brand
name it is 51%. So need to improve its brand value.
 Should increase promotion strategy to introduce new product line like Pepsi
next, Pepsi zero etc.
Conclusion:
Pepsi has been successful in generating profits in this extremely
rivalries
industry. What the company 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.
References:
 Pepsi
http://www.pepsiproductfacts.com/?or=pusa.1067.
 PepsiCo
http://www.pepsico.com/Company/The-Pepsico-Family.aspx .
 Wikipedia: Pepsi
http://en.wikipedia.org/wiki/Pepsi.
 Wikipedia: PepsiCo
http://en.wikipedia.org/wiki/PepsiCo.
 Market Targeting
http://aboutpepsico.blogspot.com/2010/01/market-targeting-isprocess-of.html.
 http://mpmcgraw.wordpress.com/2011/02/21/productdifferentiation/.
 New York Times
http://topics.nytimes.com/top/news/business/companies/pepsico_in
c/index.html.