Pepsi: Sales & Marketing Strategy - Case Study Example

Pepsi - Sales & Marketing Strategy Order No. 162212 PepsiCo is a world leader in convenient snacks, foods, and beverages. The companys revenues exceed $35 billion and it employees over 168,000 employees. Some of the worlds most popular brands like Pepsi-Cola, Diet Pepsi, Mountain Dew, Lays, Tropicana, Gatorade, and Quaker belong to PepsiCo. PepsiCo was founded in 1965 through the merger of Pepsi-Cola and Frito-Lay. It acquired Tropicana in 1998 and in 2001 PepsiCo merged with The Quaker Oats Company and Gatorade. The company presently has six divisions: Frito-Lay North America, Frito-Lay International, Pepsi-Cola North America, Gatorade/Tropicana North America, PepsiCo Beverages and Quaker Foods North America. It operates in around 200 countries and its World Headquarters is located in Purchase, New York. The success of PepsiCo’s with Ms Indra K. Nooyi as Chief Executive Officer is the result of “superior products, high standards of performance, distinctive competitive strategies and the high integrity” of PepsiCo’s people (PepsiCo.com). Presently its shares are priced at $ 63.39, which is higher than last years price of $58. The shares are traded at NYSE. For developing and managing sales of a product, a company has to have an effective sales and marketing cycle .The company has to conduct market research and understand the market and its customer base, price the product and then devise a promotional campaign based on the results of the market research and finally assess the success of the campaign so that further sales strategies can be improved. As Robert Michael Fried says, One important strategy of developing sales is to target appropriate people. Every product has a Target Audience that may include the entire population or a particular segment like gender, age, income, or education. Every companys research should identify the most lucrative segment and the primary target audiences should be those customers who make up the bulk of its business. It should use traditional demographics and psychographics to construct an authentic profile of a target audience" (Fried R ( 2005 ) A Marketing Plan for Life , Chapter 3.) A company cannot aim to serve and satisfy all the customers. The market is too large and diverse in buying behaviour to do that. Wikipedia quotes Without knowing your target audience advertising and the selling of a particular product can become difficult and very expensive. (Wikipedia) Identifying and narrowing your buyers helps you bring focus to your marketing and advertising activities and subsequently helps you serve your customers better. This is a challenge for a fast moving consumer goods company such as Pepsi. Pepsi belongs to the soft drinks category, which comes under the mass - market segment. This means, the company is involved in mass production, mass sales & distribution and mass advertising & promotion of its product for all buyers in the market. Many companies especially in the FMCG category used to prefer this route as it creates the largest potential market. This also leads to economies of scale in terms of production, distribution and marketing which in turn leads to higher sales and margins. Today, however, such a method would fail to work. The market is increasingly fragmented and customers have many options. In fact renowned marketing expert, Philip Kotler says "The proliferation of advertising media and distribution channels is making it increasingly difficult and expensive to reach a mass audience" (Kotler P, Marketing Management, p 279,). Focus Strategies are applied when strategies are niche with specializations such as Product specialization, Geographic specialization and Customer specialization (Porter M. E. 1980). Pepsi employs this differentiation strategy quite successfully. It constantly introduces new products that are different from its competitors and offers additional benefits, which meets specific consumer preferences. For example Pepsi introduced Pepsi Max, which was low in sugar, yet not having a diet taste or image. This caters to customers who are calorie conscious but do not like the taste of a diet cola. The first step is to identify the market segment and then target the customers in that segment through relevant advertising and promotion. Kotler says, "A market segment consists of a group of customers who share a similar set of wants" (Kotler P, Marketing Management,p 279). This offers several benefits over mass marketing. A company can customise its product, pricing and distribution, which are appropriate for its target audience. Pepsi has identified the youth (age group: 15-28) around the world as its target audience. Through appropriate advertising and marketing strategies, it always aimed at identifying with the youth of the country. It positions itself as a fun and trendy beverage and youngsters can consider themselves cool when holding a Pepsi in their hand. In fact, Pepsi positions itself as the "Choice of the New Generation" Unlike its competitors Pepsi relies heavily on celebrity endorsers to connect with their target audience. Pepsis spokespersons are carefully chosen based on their popularity and perceived image among the youth. Celebrities such as pop stars Mariah Carey, Britney Spears, Jennifer Lopez, Christiana Aguilara and footballer David Bekham are extremely popular with the youth around the world and hence Pepsi has used them as ambassadors for its brand in order to capture the pulse of the audience. Almost all off Pepsis marketing activities revolve around its target audience. In fact Pepsi not only aims at reaching out to its audience but also interacting with them. A good example is the Chinese New Year campaign not too long ago, which featured the popular Chinese pop star, Jolin Tsai. Pepsi tied up with Madhouse, to reach its young, very mobile media savvy audience. Chinese youngsters today spend most of their time on the Internet and their mobile phones and Pepsi sought to capitalise on that. Along with Madhouse, Pepsi built the "Pepsi CNY WAP" campaign site, which hosted some real cool downloadable content such as many behind-the-scenes videos of Jolin Tsai and also Chinese New Year TV commercials. Madhouse also automatically tailored the content for thousands of mobile phones across China. The campaign was a huge success with over 8,00,000 total impressions. This is just one example of how Pepsi connects and interacts so closely with its target audience. SWOT Analysis Strengths: One of the biggest strengths of Pepsi is its vast experience and its wide range of products. Due to its enormous size, Pepsi can afford to put aside a sizeable amount for its advertising and marketing activities. This results in Pepsi emphasizing its product line through reminder promotions and advertising. Also, with its huge budget, Pepsi can afford to aggressively launch products and communicate the same to its audience in a big way. Weaknesses: A strange irony with Pepsi and in fact with many global conglomerates is that its strengths can also translate into weaknesses. The large size of Pepsi results in conflicting interests around the world. What may work in one country may not exactly work in another and responding to such cultural conflicts is a huge task by itself. Also with so many brands in its portfolio it is difficult for Pepsi to stay focused in its marketing and promotion activities. The franchisee and distribution system that is such a good advantage for Pepsi can also be seen as one of its biggest weaknesses. Many distributors over the years have become strong and refuse to be dictated by Pepsi. Some have even gone to the extent of producing their own product line that conflict directly with Pepsis products. Opportunities: The soft drink customer base is one of the widest bases in the world. The customer base is around 95% of the regular users in the United States (Beverage Digest) and this is a huge opportunity for a company like Pepsi. Also, Pepsi with its huge product portfolio caters to many segments with each presenting a sizeable opportunity in terms of sales and revenue. One area where Pepsi has a clear advantage is the health foods and juices segment. Pepsi is present with its Tropicana brand and with Americans clearly becoming increasingly health conscious this presents a huge opportunity for growth. Threats: The biggest threat to Pepsi is its competitor, Coca Cola. Pepsi and Coke have been fighting it out in the market for over 80 years and this has spanned across many countries around the world. Also there are many imitation brands across the world that cater specifically to local tastes and are quite popular. Another threat to Pepsi is the presence of alternates to cola, such as lemonade, juices and even drinking water. The increasingly health conscious youth of today are slowly turning to these alternates. Pepsis advertising strategy is top rated with many of their campaigns going on to becoming case studies for future learning. This is because, Pepsi is in tune to its audiences needs and desires and knows exactly how to connect with them. Pepsi relies on aggressive but vivid advertising. Most of its commercials feature top rated celebrities and are replete with a lot glamour and splendour. This makes for some very enjoyable viewing. Over the years, Pepsi has become synonymous with celebrity advertising. Pepsi is known for making use of the popular pop stars and sportspersons in their advertising to project the desired cool and trendy image. In fact the use of pop stars in their commercials has become the core of Pepsis advertising. This is one of the ways Pepsi uses to differentiate from its biggest competitors. One of the key marketing strategies of Pepsi is to lap up the hottest names in sports and entertainment the minute they hit big time and centre all their advertising and sales promotions on them. These celebrities are all over the news and they are fresh in the minds of the audience. For example pop star Britney Spears appeared in her first commercial during the 2001 Academy Awards when she was at the height of success with no.1 singles across the globe. Latin singing sensation, Shakira, appeared in a new set of commercials just as her debut English album was hitting music stores around the world. In conclusion, one can say Pepsi has made a success of its sales strategy by defining its target audience, by knowing its customers who make up the bulk of its business and by learning the preferences and habits of its core customers. References 1. Fried Robert, (2005), A Marketing Plan for Life, Chapter 3 2. Kotler P, (2003), Marketing Management, Third Indian Reprint p 279 3. Kotler P, (2003), Marketing Management, Third Indian Reprint p 279 4. Porter M. E. 1980) Competitive Strategy, The Free Press, New York 5. Wikipedia (Retrieved from the site en.wikipedia.org/wiki/Target_audience on April 7 2007) 6. Www.pepsico.com (Retrieved on April 6,2007) Links to sites - Pepsi Ads 1. http://i-wisdom.typepad.com/iwisdom/2007/02/amazing_pepsi_a.html 2. http://www.fanpop.com/spots/legendary-ads/videos/7684 3. http://www.usatoday.com/money/advertising/adtrack/2003-11-16-pepsi_x.htm 4. http://www.ifilm.com/video/2771640?loomia_si=1 5. http://www.usatoday.com/money/advertising/2003-11-20-pepsi_x.htm 6. http://www.youtube.com/watch?v=3sU7EmHj0QE&eurl= 7. http://www.youtube.com/watch?v=ZU7FpnNLLn8 8. http://www.frederiksamuel.com/blog/2006/05/pepsi-2.html Read More