Business Model Used by PepsiCo - Research Paper Example

Marketing plan on Pepsi Contents Introduction 3 Background Information 3 Smart Selling concentrating on what PepsiCo brings to the table. PepsiCo’s fiscal developments are completely underpinned by the brands that they offer. PepsiCo’s most current activity is making and growing the "macro nibble portfolio". With the times changing PepsiCo and other soda pop organizations understood that when individuals go to have a nibble they search for a beverage too, and with buyers searching for the sound choice pop organizations similar to PepsiCo were losing clients. PepsiCo presented the "Force of One" in which PepsiCo acquired the two biggest packaging gatherings, New York based Somers Pepsi Bottling Group (PBG) and Minneapolis based Pepsi-Americas. This consolidation gave PepsiCo immediate control in excess of 80% of its packaging system. Presently the organization can consolidate sound snacks with their solid beverages and procure the profits (Ryder, 2013). 6 Pepsi has and global Market vicinity, generating and viable Diversification Analysis. The following step is to be mindful of the budgetary changes that face shoppers, which put weight on our organization when attempting to offer our items. With this being an element in our marketing and offering we will keep on putting resources into creating and developing markets, universally. PepsiCo has stretched the organization into offering its items universally and now offers its items in excess of 200 nations. 6 Furthermore Lastly PepsiCo concentrates on making keeping client connections by giving the individuals what they need. PepsiCo’s prosperity relies on upon the way the organization responds to purchaser pattern. With the pattern of customers arriving at for healthier choices, PepsiCo keeps on growing their Good-For-You portfolio. Concentrating on Consumer patterns, giving the individuals what they are searching for (Ryder, 2013). 6 Analysis of Target Market 7 Analysis of Competitive Environment 16 Marketing Mix 24 Product Mix 25 Price Mix 29 Place Mix 31 Promotion Mix 33 Application Marketing 35 Conclusion 35 References 36 Introduction PepsiCo offers the world’s largest portfolio of food and beverage brands. PepsiCo has eighteen different products and they are operating in different countries across the world. PepsiCo serves their customers with a range of products starting from cold beverages to tasty treats which can deliver enjoyment as well as nutrition at an affordable price. For this reason, in recent times, they have incorporated organic products in their products which do not contain artificial additives and preservatives. The marketing plan of PepsiCo is analyzed from the background analysis of the company, where the background serves as a basis for analyzing the internal and external environment of the company. Background Information PepsiCo, the American multinational food and beverages giant is a New York based corporation engaged in manufacturing and marketing of snacks foods and beverages. Formed in the year 1965, merging with the Pepsi-Cola Company and Frito- Lay Inc, PepsiCo has become a premium brand over the century and now it has expanded its business to broader range of food and beverages offerings. It was found that PepsiCo’s product lines generated $ 1 Billion sales, as of 2012. The company is, at present, operating in almost 200 countries and is the second largest foods and beverages organization in the world. The company’s expansion strategy was through acquisition with different businesses across the perimeter of the country. The company went for divestment operations as well, because of cutting off the unprofitable brands and acquired Tropicana, the global multinational famous for its fruit related beverages. The divestment operation stopped during 1997, and the company went for multiple large scale acquisitions. This strategy was focused to target the broader segment of customers who were already familiar with the brand name of PepsiCo. Although PepsiCo is a market leader, it is still hard for them to retain the market share in this competitive environment. So they need to shift their focus on image building so that it can result in increasing brand loyal customers. PepsiCo has always been a leading company in beverages advertising and promotions. PepsiCo has a distinct set of resources through which they have achieved long term sustainable competitive advantage. PepsiCo believed that proper utilization of organizational resources, combined with capabilities inherited by a company, are the essential ingredient of achieving core competencies. Analysis of external environment is important, and it cannot be denied that a careful analysis of the external factors affecting the organization must be taken into account to judge the competence level of the firm. But PepsiCo determined that resource based strategies must be implemented in order to succeed in the long run. The main basis of the business model used by PepsiCo is: Providing Value to Customers and Consumers Exceptional go-to market capability Research and Development activities for further innovation in product offerings Value can be delivered to the customers only if the resources used by the company are used in a proper and convenient manner, with a focus on the customer needs. The model is called then resource based model (VRIN framework) where it is imagined that in order to get sustainable competitive advantage, a firm must engage in value creation activities utilizing the resources which are valuable, rate, inimitable and non-substitutable. The model is shown below: Figure: Resource based business model used by PepsiCo Pepsi Co. Global Marketing Strategy PepsiCo is a global nourishment and drink organization that is positioned at Number 2 on the planet behind Coca-Cola. Its marketing strategy is essentially to work inside the organization, "Execution with a Purpose" Strategy. Bring Customers in by pushing an item that advertises a hypothesis of bringing about a noticeable improvement Smart Selling and concentrating on Business Portfolio Analysis, where to offer their item International Markets, making items that fit in clients life style-Customer Relationships (Ryder, 2013). Smart Selling concentrating on what PepsiCo brings to the table. PepsiCo’s fiscal developments are completely underpinned by the brands that they offer. PepsiCo’s most current activity is making and growing the "macro nibble portfolio". With the times changing PepsiCo and other soda pop organizations understood that when individuals go to have a nibble they search for a beverage too, and with buyers searching for the sound choice pop organizations similar to PepsiCo were losing clients. PepsiCo presented the "Force of One" in which PepsiCo acquired the two biggest packaging gatherings, New York based Somers Pepsi Bottling Group (PBG) and Minneapolis based Pepsi-Americas. This consolidation gave PepsiCo immediate control in excess of 80% of its packaging system. Presently the organization can consolidate sound snacks with their solid beverages and procure the profits (Ryder, 2013). Pepsi has and global Market vicinity, generating and viable Diversification Analysis. The following step is to be mindful of the budgetary changes that face shoppers, which put weight on our organization when attempting to offer our items. With this being an element in our marketing and offering we will keep on putting resources into creating and developing markets, universally. PepsiCo has stretched the organization into offering its items universally and now offers its items in excess of 200 nations. Furthermore Lastly PepsiCo concentrates on making keeping client connections by giving the individuals what they need. PepsiCo’s prosperity relies on upon the way the organization responds to purchaser pattern. With the pattern of customers arriving at for healthier choices, PepsiCo keeps on growing their Good-For-You portfolio. Concentrating on Consumer patterns, giving the individuals what they are searching for (Ryder, 2013). Objectives of the report The research objectives of this report is to establish the marketing plan of PepsiCo to - Analyze the internal and external environment of the business in terms of the SWOT analysis of Pepsi. Know about customer perceived value of Pepsi and comparison between the customer perceived value and customer received value. Brand positioning in the mindset of the customers and consumer’s perception about the product offerings. Know whether the customers are satisfied with the product offerings or not. Understand the impact of marketing and promotion strategies on the target customers. Analysis of Target Market Target Customers of PepsiCo Historically, PepsiCo has targeted a young segment of target consumers. The age group of target audience was 18-35. Their advertising campaigns were targeted to the teenagers and younger groups by introducing fun, sports and music in their advertisements. Recently, due to increase in public health consciousness, PepsiCo has shifted its focus partially on the children and started manufacturing and marketing of healthy products with its responsible marketing campaigns. The target market of PepsiCo can be explained below: Product offerings Target market Juices, water, and soda People who are looking for a convenient drink Coffee and energy drinks Workers and Young college students Sports drinks like Gatorade Athletes Convenient foods Offices, hospitals, schools Ready-to-eat meals/cereal Single parents, busy families, and college students Customer needs and wants Analysis of customer needs and wants is the primary thing of proceeding with the target market. Customer needs are the primary things that the marketers need to detect. Consumer needs and wants form the demands. In this case the consumer needs and wants are – Bottled water and drinks are required by the consumers who simply want to quench their thirst and for this, they need a convenient drink. Young college students and teens want some foods and beverages which not only can fulfill their nutrition aspects but also provide them substantial enjoyment and fun during consumption. The fun factor behind these product offerings was the key business strategy of PepsiCo over the years. Athletes and workers want some drinks which can energize them properly. The drinks should not be targeted to fulfill the conventional needs. Thus, this consumer segment will discriminate the brands in terms of the health and energy benefits they are receiving from the brand. Offices, schools and hospitals need products which are of high convenience. The products should be more value added to fulfill the basic needs of these institutions. In this context of busy and fast world, every people living in busy families or as a college student do not have proper time to cook and eat proper foods. They need something which can fulfill their basic needs without investing significantly in food preparation. They want some ready to eat snacks or cereals which won’t take much time to consume. Segmentation Approaches The target market of PepsiCo is segmented according to the behavioral and psychographic aspects of them. Although it is true that PepsiCo works in different countries which have different geographic and demographic factors, the basis of segmentation is mostly done in two first two ways. Demographic segmentation is done according to the age group of the target audience. The segmentation approaches formulated by PepsiCo is shown below: Targeting Strategies PepsiCo believes in targeting the segments by their standardized way of marketing used across the world. Widely known as the geocentric approach of internationalization, this approach believes in covering the total market segment by standard offerings. In case of Pepsi, the soft drinks offered by PepsiCo, they have followed the total market coverage strategy quite successfully over the years. But in case of other products like chips, snacks and energy drinks, they have focused the particular segment and have implemented a marketing strategy to approach them in a distinct way. The targeting strategies of PepsiCo are shown below: In case of Pepsi, the cash cow flagship product of PepsiCo, the targeting strategy is total market coverage. In case of snacks and bottled water, the targeting strategy is product focused. This is shown below: In case of the question mark products, like Gatorade and Tropicana, PepsiCo opts for the multi segment targeting strategies. Differentiation strategies Differentiation is the degree of variations in the product/service offerings as proposed by an organization while targeting its particular target segment. In case of branded and renowned product, differentiation strategies do not make sense, thus, it is advised to promote undifferentiated standardized products. But in case of newly launched products or some products with some specific benefits, different set of marketing mix should be used to approach the segments particularly. For example, in case of energy drinks like Gatorade, PepsiCo must concentrate their marketing strategies in a differentiated way targeting the particular segment only, thereby providing different marketing mix for the segment. Figure: Undifferentiated marketing of Pepsi drink The differentiated marketing strategy opted by PepsiCo in dealing with the snacks and energy drinks products directed to some particular segments is shown below: Figure: Differentiated marketing of foods and energy drinks Positioning Strategies PepsiCo’s positioning is focused on delivering product to the whole society and it is directed for the purpose of refreshment. The advertising campaigns used by PepsiCo have always been targeted to the refreshment aspects of the offerings. The products campaigns are always associated with some particular taglines which signify this entertainment aspect. PepsiCo’s positioning strategies tried to capture the leading consumers rather than tried to cope up with the trends. The positioning strategy is directed towards building dynamic trend setting, design and creating social communities. The positioning strategies of PepsiCo are explained below: New vision in positioning PepsiCo has changed its marketing strategies to a more online domain keeping a vision of approaching the changing business and develop a procedure of approach the next scenario. New media vehicle PepsiCo has started working in involving a broad ranging brief to produce a complete communication toolkit that includes all types of print and broadcast media, corporate advertisers and incidental marketing approaches that can capture the new vision of PepsiCo. Redefining visual advertising PepsiCo has created extensive image library for promoting visual advertising. They have collaborated with different advertising agencies which are engaged in visual advertising and created a successful network of promoting their products through these advertisements. Online Marketing The corporate strategy of PepsiCo has focused to the web based marketing strategies by promotion of product offerings in the websites. The company has recognized that in order to capture the mindset of the target customers, the marketing strategy must be directed to the changing trends. The customer segments, mostly young in nature, are tech savvy and are quite familiar with the online domains. Thus, online promotions can a suitable way to capture the mindset of the target consumers. The company aims in delivering products with high degree of differentiation starting from snacks, chips to soft drinks and bottled water with a cost effective way. The price ranges of these products are in the affordable range, this results them becoming a global player. Figure: Positioning strategies with respect to differentiation and cost efficiency PepsiCo’s products fall in the first quadrant of the above matrix, which results in becoming a global player (PepsiCo, 2009). Analysis of Competitive Environment Competitive environment of an organization can be analyzed from two different aspects. First one is known as the direct marketing environment analysis and the second one is known as external environment analysis which is the PESTEL Analysis of the firm. Direct Marketing Environment Analysis The direct competitor of PepsiCo is Coca-Cola which is also engaged in beverages business in the same segment as of PepsiCo. These two companies share a 112 years old competitive rivalry among themselves. To understand the direct marketing environment, the strengths and weaknesses of the competitor as well as its core competencies need to be evaluated. To analyze the direct competitor’s market scenario, a look into the present company’s Strength, weakness, Opportunities and Threats needs be considered. The SWOT analysis (Internal and External Analysis) of PepsiCo is shown below: SWOT Analysis of PepsiCo Strengths: Product diversity. Efficient and large distribution channel. CSR initiatives. Competency in M & A. Large product offerings. Successful marketing and promotional activities. Weaknesses: Overdependence on large retail chains. Low pricing of products. Controversial business practices. Weaker brand awareness and market share when compared to Coca-Cola. Opportunities: Growing consumption rate of bottled water. Increasing demand for healthy food and beverages. Growing beverages consumption. Growth opportunities through acquisitions. Threats: Changing consumer tastes and preferences. Water scarcity Decreasing profit margin of the business. Increased competition (Source: Friesner, 2014) Opportunities and threats of the direct competitor (Coca-Cola) are almost same as that of PepsiCo, as both of them are dealing with the same types of products in beverages segment with little added differences. Thus, an analysis of only Strengths and Weakness of the competitor can describe the competitive position of it. Strengths and Weakness of Coca-Cola Strengths: The most valued global brand in the marketplace Largest market share in beverages segment. Marketing and advertising efficiency. Extensive distribution channel. Loyal customer base. Strong bargaining power over suppliers. Corporate Social responsibility Weaknesses: Focus is limited to carbonated drinks only. Undiversified product portfolio High acquisition debt. Negative public image. Failure of many brands. From the SWOT analysis of Coca-Cola, it is found that the although the company is operating in the marketplace as a market leader based on their extensive promotion and distribution strategies, they have ample possibilities of lagging behind PepsiCo in the long run because of limitation in product offerings. To cope up with the competition exerted by PepsiCo, Coca-Cola has also invaded the market with their bottled water. The business practices of both the companies are often criticized for their lack of focus on the health aspects of the consumers. Thus PepsiCo can become the market leader by leveraging Coca-Cola’s weaknesses. The respective market share of both the companies (as of 2013) is shown below: (Source: Bhasin, 2013) From the figures above it is found that both the companies have certain advantages as well as drawbacks. In case of PepsiCo, as their annual revenue is higher than Coca-Cola, they can work on this as a potential advantage. The higher annual revenue of PepsiCo signifies that the company has more variations in their product offerings and can counter the competition using their sound financial resources. Global market share of different brand offerings from Coca-Cola and PepsiCo are explained below: Soft Drink Market Share (%) Coke 26 Diet Coke 15 Pepsi 15 Mountain Dew 10 Dr. Pepper 9 Diet Pepsi 8 Sprite 8 Diet Mountain Dew 3 Diet Dr. Pepper 3 Fanta 3 Total 100 Based on the abovementioned table, the market share of different brands is shown: (Source: AccuVal Associates, 2014) (Source: Euromonitor International, 2013) Marketing Mix Marketing mix of a company consists of the four P’s, product, price, place and promotion. Together these four elements give an insight of the marketing strategy a company needs to implement. PepsiCo’s marketing mix is explained below: Product Mix Product/Brand – Features &/or Needs satisfying benefits offered to customers The main product of Pepsi Cola Company is Pepsi and its sub brands are Dew, Miranda, 7up, Pepsi Max. It additionally broadened into Lays. Furnishing their buyers with simple to-utilize, advantageous and imaginative holders are one of their top necessities. Bundle presentations they have made through the years incorporate the business initial 1 ½ liter container; Regular, Disposable; Can. Pepsi Co. was the first organization to react to shopper inclination with lightweight, recyclable, plastic flasks. These flasks are made of polyethylene terephthalate or "PET plastic," which is a manifestation of polyester used to make solid, lightweight, break safe containers. The products provided by PepsiCo are diversified in nature. They are manufacturer and marketer of soft drinks, beverages, energy drinks and snacks foods in the marketplace. Product attributes are focused on the nutrition aspects as well as the entertainment factors associated with it while consumption. Energy drinks are primarily focused on athletes and they contain the necessary ingredients that can energize the target consumers. Bottled water and snacks are targeted to the general population to fulfill the basic needs of the target audience. Product Differentiation & Competitive Advantage The product offerings of PepsiCo are widely differentiated in nature. The differentiated product offerings are: The product offerings offered by PepsiCo served as a source of competitive advantage in the Diversified product offering to wide customer segment results in increasing the customer base and reputation of the brand. Different types of product offerings with affordable sizes make it easy for the consumers to identify their desired products. Product Classification and strategy implications Products are classified according to their characteristics and usage rate of consumers. Most of the products are focused on the youth target audience. The broadly classified products are served to the consumers based on the requirements. The strategies for these two broad categories are that the Food products are served to particular customer segments with a multi segment targeting strategy because of their diversified nature and different customer segments. Most of the beverage products are served with standard product packaging and they are served with an undifferentiated way. Branding strategies The branding strategies of PepsiCo can be explained from the famous Kapferer’s prism for brand identity. The whole branding strategy undertaken by PepsiCo can be explained as follows: Figure: Kapferer’s Prism for Brand Identity Physique: This is the physical aspects of the brand. PepsiCo’s products are well packaged and always in well condition. Personality: Each of the brands carries the youthful charms of PepsiCo’s promotional campaign. Relationship: The entertainment focused brands directed towards the young customer segment has been successful in creating a relationship with the target audience. Culture: Fun drinks culture with easy to consume foods matches the culture of the youth target segment. Reflection: The brand itself reflects the company’s well managed positioned in the market place. Also the recycling instructions associated with the offerings are enough to reflect the socially responsible activities of the company. Self-image: This is the brand personality. The usual brand logo, designs, and detailed ingredients on the package exhibit the dominant self image of PepsiCo. Packaging strategies Separate graphic designs on their flagship product rather than the usual linear usual package designs. The packaging of PepsiCo is the last point of promotion of their brands. Package designs are focused to the young and energetic segments. The visual image on the package designs of PepsiCo conveys more information about the brand. Product Management issues & stage of PLC The product management issues of PepsiCo are mostly concerned with the products residing in the introduction and decline stage of the product life cycle. PepsiCo’s flagship product, Pepsi drinks is, at present, at the maturity stage, hence there must be some counter strategies to hold the market share of this product. Critical Success Factors for Product decisions They have diversified products with different packaging. Graphic designs on the packages represent the brand image of the company. Distinct marketing strategies are used for each consumer segment. Price Mix Pepsi prices its products like those of Coca-Cola so as to keep benefits high. Rivalry is built for the most part in light of marketing aptitude as opposed to price to help dodge expensive price wars and keep benefits stable. Since none, of these of the significant makers might win a price war, it is unwritten decide that the organizations will take after the valuing structure of the business sector pioneer. While this adds up to price settling, there has not been any real government activity to shorten the practice so it ought to proceed later on. Pepsicos present retail prices reach relying upon the comfort of the area in which they are placed and relying upon the span of the soda pop compartment. Pricing Objectives The pricing objectives of PepsiCo are to earn adequate return on investment. Maximize their profit, Increase product sales and Increase market share of growing brands. Pricing strategies over PLC Bottled drinks: The growing brand in the marketplace with strong potential to gain market share. The pricing is based on current advertisements. Foods: These are priced as per as the size and requirements of the consumers. Flagship products: Pepsi drinks, priced keeping competitor’s price in mind. Pricing comparisons The price of foods and newly introduced drinks are priced according to the consumers, therefore they are irrespective of the competitor’s price. The cash cow product, Pepsi is priced according to the price range of the leading competitor, Coca-Cola and these two companies fight with each other to gain cost leadership position. Pricing Policies Discounts: Provide quality products at an affordable price have always been PepsiCo’s objective of offering their product offerings, especially drinks and snacks. Geographical pricing: Although PepsiCo used standardized pricing strategy, some of their product prices are set according to the economic condition of the target market. Critical Success Factors in pricing decisions Their Pricing is set according to the affordability levels of the customers. Cash cows are priced according to the competitor’s price level and pricing is decided mostly from the current advertisements. Place Mix Distribution is a very important aspect in the refreshment business. Since the cola organizations need to concentrate on making syrup and marketing, they have to have solid, faithful bottlers. This is particularly the case in remote markets where the cola organizations savagely fight for great bottlers. The building of bottlers through joint ventures and the expanded upkeep of current bottler relationship ought to be the primary center of Pepsis global marketing. The wholesaler conveys it to the basic need retailers, distributing organizations, restaurants, and warehouse/club stores. Place decisions made Indirect channels of distribution using intermediaries. Channel Systems Figure: indirect distribution channel of PepsiCo. Distribution strategy Intensive by providing provide saturation coverage of the market by using all available outlets. The product is sold through many retail outlets. International markets While going global, the international marketing strategy used by PepsiCo is licensing through organizations based on the foreign domain. Being a licensor, PepsiCo has full control over the licensees, but in the long run, the licensees can emerge as potential competitors. Critical Success Factors for Place decisions The place of products is set according to convenience of the customers. The products are distributed through retail chains to increase market coverage. Wholesalers and retailers are accountable to the company for selling products; this has increased their commitment in selling the products on their own interest. Promotion Mix Pepsi advertises its products in a numerous ways, however centers essentially on getting products connected with diversion symbols that engage youth. The main significant utilization of this procedure was the marking of Pakistan cricket group as superstars. Two different territories of excitement that have been utilized by Pepsi to push its brands are games and films. Games are a famous wellspring of stimulation all around the globe and is utilizing it to push the brand is a fundamental center of Pepsi. Since brandishing occasions are seen ordinarily by fans, it gives a great open door to expand brand differentiation. Motion picture stars are additionally mainstream all around the globe and are incredibly respected by individuals, so utilizing them as a part of promoting has a positive impact on brand picture. Promotion objectives Their promotional objectives are to generate awareness about the brand through advertising campaigns. Convey the product offerings with the promotional activities. They also plan to keep up with the pace of the consumer’s changing response to the promotions. Promotion Methods used Advertising TV commercials, products appear on TV shows and movies, newspaper and magazine advertisements, and coupons. Sales Promotions They provide discounts on the offerings and premium packs. Public Relations PepsiCo is engaged in public relations activities through sponsoring events, concerts etc. Use of social media marketing Dynamic Consumer Engagement Pepsi’s new digital dashboard is the most recent iteration of an online strategy that included last years debut of Pepsi Pulse and Sound Off. User-generated content Social media marketing has become highly dependent on user-generated content, meaning reviews, comment, or any other input from customers. Peer influence has substantial impact on consumer purchase decision. Critical Success Factors in Promotion Decisions They have a Geo local reach of the promotional activities. Their focus is on consumer oriented promotional activities. They also use many integrated marketing communication channels. Application Marketing The use of application marketing can also be an effective way in the promotion of the company. Now almost everyone has a Smartphone, so downloading a free application should not be a problem. If Pepsi comes up with an application that can entertain the consumers at the same time offer them good deals with their products, then it can further help Pepsi in pushing its sales. Conclusion PepsiCo has wide range of products in their foods and beverages segment which are sold with different marketing plans in mind. In modern day scenario, as per as the interest of the consumers, PepsiCo has taken measures to meet the varying demands of customers. They have understood the requirements of both health and nutritional aspects of their product offerings. The different elements of marketing mix used by the company are in accordance with the consumer needs and wants and this has been a source of their sustainable competitive advantage. References Bhasin, K. (2013). COKE VS. PEPSI: The Story Behind The Neverending Cola Wars. Retrieved from: http://www.businessinsider.com/coca-cola-vs-pepsi-timeline-2013-1?IR=T. PepsiCo. (2013). Brands. Retrieved from: http://www.pepsico.com/Brands.html. PepsiCo. (2009). Annual Report 2009. Retrieved from: www.pepsico.com/Download/PEPSICO_AR.html. AccuVal Associates. (2014). Carbonated Soft Drinks: Is Demand Fizzing Out? Retrieved from: http://www.accuval.net/insights/industryinsights/detail.php?ID=193. Friesner, T. (2014). SWOT Analysis PepsiCo. Retrieved from: http://www.marketingteacher.com/swot/pepsi-swot.html. Euromonitor International. (2013). COCA-COLA CO THE, SWOT ANALYSIS, IN SOFT DRINKS (WORLD). Retrieved from: http://www.euromonitor.com/medialibrary/PDF/Coca-Cola-Co_SWOT_Analysis.pdf. Ryder, P. (2013). PepsiCo Marketing Strategy (By Paige Ryder). Isenberg Marketing. Retrieved from http://isenbergmarketing.wordpress.com/2013/10/29/pepsico-marketing-strategy-by-paige-ryder/ Read More

 

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