Comparative study on the marketing strategies of Pepsi and Coca-Cola on the youth

A Research Project under Research Methodology

INTRODUCTION

This report includes a comparative analysis of the marketing strategies of the

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two rivals Coca-Cola and Pepsi. Analysis of research data will provide an overview of the market, which will be evaluated to provide a conclusion of the two different brands of cola in terms of their marketing strategies.

Coca-cola was invented in 1886 by Dr John S Pemberton. Ownership passed to Asa Candler’s company and remains the producer of coca-cola. (Wikipedia website) Coca-cola was introduced to the UK in 1900. (Coca-cola website) Coca-cola is the most recognised brand in the world, with influence being so great that “the now famous red-suited Santa that is now known and accepted … as the popular image of Santa Claus.” (Coca-Cola website)

Pepsi-cola was invented in 1898 by pharmacist Caleb Bradham. (Wikipedia website) Trademarked in 1903 Pepsi-cola has been in a battle with Coca-cola for dominance of the soft-drink market for over a century, in recent years it has fallen behind coca-cola in regards to market share.

The “Cola-Wars is the term used to describe the campaign of mutually-targeted television advertisements and marketing campaigns in the 1980s and 1990s between Coca-Cola and Pepsi-cola” (Wikipedia website) This report aims to analyse whether the Cola-war still exists and whether the Cola-war continues to consist of Coca-Cola and Pepsi-cola or if other brands, specifically Virgin-cola have been able to gain a foothold in the market.

COCA-COLA VS PEPSI

According to Consumer Reports, in the 1970s, the rivalry continued to heat up the market. Pepsi conducted blind taste tests in stores, in what was called the "Pepsi Challenge". These tests suggested that more consumers preferred the taste of Pepsi (which is believed to have more lemon oil, less orange oil, and uses vanillin rather than vanilla) to Coke. The sales of Pepsi started to climb,

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and Pepsi kicked off the "Challenge" across the nation.In 1985, The Coca-Cola Company, amid much publicity, changed its formula. Some authorities believe that New Coke, as the reformulated drink came to be known, was invented specifically in response to the Pepsi Challenge. However, a consumer backlash led to Coca-Cola quickly introducing a modified version of the original formula (removing the expensive Haitian lime oil and changing the sweetener to corn syrup) as Coke "Classic".Overall, Coca-Cola continues to outsell Pepsi in almost all areas of the world. Saudi Arabia, Pakistan (Pepsi has been a dominant sponsor of the Pakistan cricket team since the 1990s), the Canadian provinces of Quebec and Prince Edward Island and the U.S. states of Michigan and South Carolina are the exceptions. By most accounts, Coca-Cola was India's leading soft drink until 1977 when it left India after a new government ordered The Coca-Cola Company to turn over its secret formula for Coke and dilute its stake in its Indian unit as required by the Foreign Exchange Regulation Act (FERA). In 1988, PepsiCo gained entry to India by creating a joint venture with the Punjab government-owned Punjab Agro Industrial Corporation (PAIC) and Voltas India Limited. This joint venture marketed and sold Lehar Pepsi until 1991 when the use of foreign brands was allowed; PepsiCo bought out its partners and ended the joint venture in 1994. In 1993, The Coca-Cola Company returned in pursuance of India's Liberalization policy. In 2005, The Coca-Cola Company and PepsiCo together held 95% market share of soft-drink sales in India. Coca-Cola India's market share was 60.8%.Pepsi had long been the drink of Canadian Francophones and it continues to hold its dominance by relying on local Québécois celebrities (especially Claude Meunier, of La Petite Vie fame) to sell its product. "Pepsi" eventually became an offensive nickname for Francophones viewed as a lower class by Anglophones in the middle of the 20th century. The term is now used as an historical reference to French-English linguistic animosity (During the partitionist debate surrounding the 1995 referendum, a pundit wrote, "And a wall will be erected along St-Laurent street [the traditional divide between French and English in Montréal] because some people were throwing Coke bottles one way and Pepsi bottles the other way"). Comedian Dave Chappelle starred in ads for both Coca-Cola and Pepsi, an act which drew controversy. When referring to it in his show, Chappelle said, "I can't even taste the difference: all I know is Pepsi's paying more right now, so it tastes better." Coca Cola has become a cultural icon and its global spread has spawned words like "coca colonization", Pepsi Cola and its relation to Russia has also turned it into an icon. In the early 1990s, the term, "Pepsi-stroika", began appearing as a pun on "perestroika", the reform policy of the Soviet Union under Mikhail Gorbachev. Critics viewed the policy as a lot of fizz without substance and as

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an attempt to usher in Western products in deals there with the old elites. Pepsi, as one of the first American products in the Soviet Union, became a symbol of the relationship.

REVIEW OF LITERATURE

The Indian market for soft drinks is increasing. “India is becoming a warmer and drier country. “Chilled drinks are becoming increasingly important.” (Britvic Soft-Drinks Category Report 2006) However “Carbonated soft

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drinks…have felt the negative impact of heightened consumer interest in healthy eating.” “Consumer demand for healthier drinks led to a decline in sales of carbonated drinks” (GMID)

The carbonates market peaked at 2003 with a rise of 10.5% from 2002 but has been in decline since then. This market contains both the brands of Cola analysed within this report.

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INDIA CARBONATED SOFT DRINKS VOLUME 2001 – 2006 ( m LITRES)

Coca-cola is leading in terms of market share over both Pepsi-cola and Virgin-cola. Virgin-cola has failed to gain a substantial share of the market at only 0.3% which is extremely low in comparison to Coca-cola at 7.2%.

Coca-cola currently is marketing the “Coke-side-of-life” campaign. This campaign has been running since 2006. The campaign is a multi-platform project running through various media. These include the re-launching of the coca-cola website with emphasis on the new slogan and a new mass media audiovisual campaign.

Pepsi-cola is focusing on the Pepsi-Max brand of cola . Pepsi-cola continues to use opinion-leaders and portray the brand as an extreme experience. The “Max your life” campaign uses actress Deepika Padukone as an opinion-leader. Pepsi-cola continues to use a multi-medium campaign.

For a thorough and complete analysis of marketing strategy it was necessary to analyse each part of the marketing-communications to show how each brand is utilising each method. The marketing strategies consists of Advertising, Sales-Promotion, Public-Relations, Personal-Selling and Direct-Marketing.

Advertising is “any paid form of non personal media presentation.” To analyse the advertising techniques of each brand a marketing communication tool has been used to compare the advertising aspect of each brand.

Coca-cola uses mediums such as television in order to advertise the latest marketing campaign “the Coke-side-of-life” and tries creating a fantasy world around the brand. This is clear in the television adverts that are broadcast. One of the adverts creates a fantasy around the journey a bottle of Coca-cola takes when it is dispensed through a vending machine. Coca-Cola is raising the awareness of the brand through the advert, interest and

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desire are created by the fantasy that the advert is based around whilst action is suggested by the slogan “The-coke-side-of-life” at the end.To analyse the advert primary research was undertaken in the form of a small focus-group consisting of ten people.

All focus-group members believed; the television advert featuring the journey of a coca-cola in a vending machine was advert was exceptionally or very creative. 80 % also believed that the advert was exceptionally or very entertaining with a 17 year old male commenting;

“This was the most original Coca-cola advert I have seen”.

100% of people questioned within this focus-group believed that the advert lacked information about the product. 40% said that the advertisement was not very persuasive. A male aged 32 commented;

“Not what I have known the brand image of coca-cola to be”

This view was shared by people aged 25+ whereas the age group 16-24 suggested that it was fresh and incorporated what they saw as Coca-cola. An 18 year old female said;

“Very creative and original.”

Pepsi-cola also uses television advertising. Awareness is created by the presentation of the advert whilst interest and desire are created through the use of an opinion-leader and action is created by the slogan “Max your life” at the end of the advert.

The focus-group was requested to complete the same questionnaire as before but in respect of Pepsi-cola.Only 3 members of the focus-group believed that the advert was very creative in comparison to all ten people who believed that Coca-cola’s advert was creative. These responses came from young males. This may be due to the use of an attractive model as an opinion-leader. The Pepsi-cola advert was no different to the Coca-cola one in terms of information; all participants suggested that there was a lack of information about the product. In terms of entertainment this advert fell below the Coca-cola advert in the views of the participant’s. 25 year old female commented;

“Its all the same, they use an attractive woman to tempt males,

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there is nothing unique about it.”

This view was generally shared by the women in the group. Asked how persuasive the advert was a range of responses were received. One response from a 30 year old female;

“As modern-consumers we are more aware of products and advertising does not affect us as much when it comes to Cola drinks. We choose the drink we like the taste of.”

Sales-Promotion “consists of a diverse collection of incentive tools, mostly short term, designed to stimulate quicker and/or greater purchase…consumers.” It is also necessary to consider packaging and other incentives which are offered by the brands in the short term.

The “Coke show” sales-promotion is currently running and part of the “Coke-side-of-life” website has been created for this promotion. This promotion encourages consumers to send in videos of what they see as the essence of Coca-cola to be judged by professional movie producers. Coca-cola has made use of the internet for short promotions such as the World Cup in 2006 and this new campaign the “Coca-cola Show.”

Pepsi-cola have also made use of the internet to aid in sales promotion. The “Max your life” interactive website targets consumers to increase sales by providing incentives to buy a Pepsi. Pepsi-cola in addition teamed up with Microsoft in creating a competition to win a new generation games console. The use of opinion-leaders by Pepsi-cola has also been used as sales-promotion, using model Deepika Padukone as a current figure-head for the Indian market

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Pepsi-cola has been able to attract a male customer base. Pepsi-cola have long been affiliated with the use of opinion-leaders such as David Beckham.

Both the brands of Cola have used packaging to increase short term sales; one example of this was the use of packaging during the recent 2006 world cup.

Both Coca-cola and Pepsi-cola focused on football however both used different methods, Coca-cola using innovative bottle design techniques and the Pepsi-cola using an opinion-leader in footballer David Beckham.

The use of packaging has been a long running theme in the marketing-communications-mix of each brand. Through packaging each brand has been able to communicate with the consumer directly and allow them to send a message to the consumer which may lead to direct feedback from the consumer.

“Public relations involves a variety of programs designed to promote and/or protect…image” PR has become more important than ever, with heightened consumer awareness there has been a need for each of the brands to project a image which incorporates social responsibility as well as remaining committed to their fundamental values.

Coca-cola takes public relations very seriously in that the public relations impact is considered in every aspect of business decision. Although Coca-Cola utilises many methods of PR, one of the dominant methods Coca-Cola has used is to use sponsorship in order to:

To connect with teens in an interesting and fun way

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To create unforgettable teen moments linked to “coca-cola”. To ensure that “Coca-Cola is viewed as making everyday life more

interesting and fun To Communication the dynamic and leading attributes of the brand

Coca-cola maintains a positive relationship with the public by sponsoring global events. As a result of positive PR Coca-Cola is the world’s most valuable brand. Coca-Cola currently sponsors these following events.

2002 and 2006 FIFA World-Cup FIFA Women's World-Cup 1999, 2003 FIFA Confederation-Cup 1999, 2001, 2002, 2005 World Champions vs. FIFA All-Stars 2002, 2006 FIFA World Youth-Championships 1999, 2001, 2003,

2005 FIFA U-17 World-Championships 2001, 2005 FIFA FUTSAL World-Championship 2000, 2004 Blue Stars/FIFA Youth Cup 1999-2006 FIFA/'Coca-Cola' World-Rankings

In order for Coca-cola to portray a responsible yet innovative brand image it has been necessary to connect with the target-market. Through sponsoring events which the target-market attends and adores Coca-cola has created an association with the target-markets.

Sponsorship is also a major part of Pepsi-cola’s PR in India, Pepsi-cola was one of the main sponsors of the Indian Cricket Team. Pepsi-cola continues to maintain a heavy influence in sport and it is clearest seen in the use of opinion-leaders. One example of this is the use of David Beckham as an opinion-leader; the sponsorship deal is £2 million a year.

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Although sponsorship is a major form of PR in the competitive world of the soft drink market, there is also another aspect of PR which both the companies have made use of. The ever-expanding communications tool; the Internet. Both the brands have specifically designed websites in order to provide the consumer with information and entice them to the brand.

Apart from sponsorship , the brands use the media to keep in touch with their stakeholders. Through a mixture of press conferences, releases and other media articles each brand attempts to befriend their stakeholders. Evidence suggests that the brands within this report saturates the market with their brand image and message, it remains the consumer’s prerogative however to which they interpret as the brand for them.

Through research completed for this report it is clear that not all parts of the marketing-communications are utilised by the brands in this report. Both the brands have analysed the most effective way of communicating with their target-market and shareholders and because of this their marketing campaigns have been streamlined. Therefore what is clear from the research is that direct-marketing and personal-selling are two methods not utilised within this industry.

However it is very important to consider that the brands may use the methods of personal-selling and direct-marketing when it comes to b2b (business to business) transactions. Predictably marketing techniques used to promote a brand to consumers differ vastly from b2b promotion.

Word-of-mouth is also very important, although not directly in the marketing-communications. Word-of-mouth can make or break a brand; the brands discussed in this report attempts to convince consumers that they are the best. In this case marketing campaigns may not help a brand image if the reputation is perceived as poor. In order for brands to prosper it is necessary to maintain good public relations which in turn will achieve positive word-of-mouth promotion.

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