Marketing Strategy for PepsiCo Incorporated - Case Study Example

 Marketing Introduction The essay is based on designing a zero-based marketing channel for PepsiCo. Inc. Marketing channel of any organisation can be described as a set of different activities which are essential for the smooth flow of product transferring procedure from the producer to the end-users. The marketing channel of any organisation can also be termed as the distribution channel (Coughlan, 2010). The zero-based marketing channel will assist the organisation to meet the demand of their targeted market in terms of service output. This design of marketing channel will enable the organisation to incur minimum cost for the desired service output. According to the zero-based channel design, all the channel members need to utilize minimum costs to serve the targeted market of the channel manager (Rosenbloom, 2011). The discussion will explain all the necessary elements for meeting the demands for service output. It will also emphasise on the essential elements to fulfil the requirements of the supply side of the channel. The essay will address the potential channel gaps that can hamper the channel performance and therefore, it will offer necessary solutions to it. It will also elaborate the possible conflicts within the channel elements. Therefore, it will suggest the essential strategies to eliminate these conflict issues. Company overview PepsiCo Inc. is a multinational food and beverage company which deals in carbonated soft drinks, packaged drinking water, beverages and snacks foods. The organisation was established in 1986 by Donald Kendall and Herman Lay. The organisation is headquartered in New York, USA. The organisation distributes a range of products across over 200 countries. Their product line includes Diet Pepsi, Mirinda, Aquafina, Mountain Dew, Tropicana, 7 Up, Gatorade, Frito-lay and Fritos. The company has recorded revenue of $66 billion by the end of 2013 (Marketline, 2014). The organisation has segmented their market according to the geographical locations. The areas with higher summer temperature are the major targets of the organisation. They have also divided the market according to the age and lifestyle of the consumers. Though the organisation focuses almost all the section of the market, they prefer to provide more attention towards the middle class population aged between 16-35years (Marketline, 2014). The organisation mainly follows a three-channel distribution network to supply their products within their targeted market. The three major distribution channels of the organisation are direct store delivery, third party distribution network and customer warehouse. The direct store delivery procedure of the organisation focuses in direct supply of their end-products to the retailers. Customer warehousing procedure can be considered as the less expensive alternative. The organisation utilizes this channel for less sensitive products. In this distribution system, the organisation stores their products to the broker’s distribution warehouse. The organisation also uses the third party distribution network to supply their products to different restaurants, stadiums, businesses and colleges. They prefer to involve vending distributors and other operators in the supply procedure of these products (PepsiCo, 2013). The major competitor of the organisation is the Coca-Cola Company which possesses almost 40% of the market share. On the other hand, PepsiCo Inc. holds over 55% of the market share. The organisation has very limited threats from the new entrants in the market. It has already accrued a strong position in the global food and beverages industry. The multi segmentation strategy and strong brand reputation is the main reason behind the competitive advantages of the organisation. The cost effective distribution channel and market promotional method also play a vital role in their market positioning (PepsiCo, 2013). Service output demand of target market Service output can be defined as the value-added services that are generated by the marketing channel members to increase the demand of the consumers to purchase the product. During the designing of marketing channel, the marketer needs to analyze the desired output level by the consumers. The different elements of service output can be described as bulk-breaking, delivery time, assortment and variety, spatial convenience, customer service and information provision (Baghalian, Rezapour and Farahani, 2013). Bulk breaking, assortment and variety, spatial convenience, delivery time and customer service will be the important elements to be considered to meet the service output demand of targeted market of PepsiCo Inc. (Baghalian, Rezapour and Farahani, 2013). Bulk breaking service output describes the lot size or number of product units that the marketing channel permits a customer to purchase in a specific occasion. Generally, bulk breaking refers to the delivery of single or specific units of product from the warehouse to the retailers rather than multiple bundles of products. This delivery is mostly influenced by the demand of the consumers. This system provides the ability to the consumers to buy their desired number of products (Baghalian, Rezapour and Farahani, 2013). Spatial convenience described the degree to which the marketing channel members make the purchasing procedure easier for the end-users. Increase in spatial convenience will assist the distribution channel of PepsiCo Inc. to enhance the satisfaction of consumers by reducing the cost for product search and transportation (Bustinza, Parry and Vendrell-Herrero, 2013). Assortment and variety of service output defines breadth of product categories and product line. It also defines the number of brands any marketing channel offers within a specific category. Generally consumers prefer to have greater assortment within a specific market channel as it increases the chances to find their required product (Bustinza, Parry and Vendrell-Herrero, 2013). The customer service procedure of service output covers all aspects of easing the purchasing procedure of the consumers. It includes various add-on services such as easy credit availability and fast delivery system. Therefore, this element will help the organisation to increase the customer loyalty (Qiang, Ke, Anderson and Dong, 2013). Waiting or delivery time can be explained as the total required time to deliver a product to the end-user after placing the order. If the product is available in the distribution channel of the organisation then the waiting time for the consumer is very low. Lower delivery time assists the organisation to reduce the cost of consumer loss. It also enables them to sale the product in a lower price margin (Qiang, Ke, Anderson and Dong, 2013). Service output for Supply side of the channel design Bulk breaking service output will not be a suitable preference for the supply side of the distribution channel. This service output will not only increase the cost of distribution for the organisation but also increase the price per unit. Therefore, it can reduce the market demand of the product (Baghalian, Rezapour and Farahani, 2013). Assortment and variety in marketing channel will also hamper the profitability of the organisation. Increase in assortment and variety heightens the cost of the product distribution. Therefore, it also increases the price of the product. The increased price of the products of PepsiCo Inc. can certainly hamper their competitive advantages (Baghalian, Rezapour and Farahani, 2013). The marketing department of PepsiCo Inc. needs to focus on the Spatial convenience, delivery time and information provision. These elements will assist the organisation to meet the demand for service output while incurring a nominal amount of cost. Therefore, it will be beneficial for the supply side of the distribution channel (Bustinza, Parry and Vendrell-Herrero, 2013). Spatial convenience channel output will enable the organisation to avail a wide range of product for their potential consumers. It will help the organisation to strengthen their market presence. This system will enable the suppliers to attract a wide range of consumers. It will also generate very minimum cost to serve the consumers. Therefore, this element will assist the organisation to design the zero-based marketing channel by serving a large number of consumers with minimum amount of distribution cost (Bustinza, Parry and Vendrell-Herrero, 2013). Minimizing the delivery time may generate some additional cost to the organisation. On the other hand, it will allow the management to enhance the overall profit by improving consumer loyalty. This procedure will provide a long-term benefit to the marketing channel of PepsiCo Inc. (Bustinza, Parry and Vendrell-Herrero, 2013). Information provision system of service output concentrates on educating the consumers about the attributes and usage of the product. This procedure of the marketing channel helps the organisation to eliminate the requirement of customer services. Therefore, it assists the marker to reduce the cost of marketing channel while increasing the market demand for the product (Qiang, Ke, Anderson and Dong, 2013). Information provision reduces the chances of product pile-up in the warehouses. This element enables the organisation to increase the demand within the consumers. It will allow the channel partners to easily clear the stored products. Therefore, it increases the supply of the product to the consumers with very minimum cost of distribution services (Qiang, Ke, Anderson and Dong, 2013). Channel gap analysis It can be considered that the marketing channel has some gap if the supply side of the distribution network fails to meet the service output demands. The gap increases the operating cost of the distribution channel. It also hinders the necessary flow of the channels. The two major sources of this gap in the distribution channel of PepsiCo Inc. are environmental bounds and managerial bounds. The economical slowdown in the developed countries is creating a gap within the marketing channel of the organisation. The retail outlets of various regions are avoiding bulk purchases due to their fluctuating economical condition. The organisation is also facing different legal issues due to the breach of health parameter in their offered products. This law suits are hampering their market demand. Therefore, it is creating a gap between market demand and supply. Managerial bound within the distribution channel of the organisation can constraint the smooth supply procedure of product. Inadequate knowledge of different channel partners is also restricting the proper market channel flow of the organisation. The marketing channel of the organisation is facing demand side gap. The service output supplied by the organisation is failing to meet the service output demanded (SOS Read More