Pepsi drops to #3 in the cola wars. What can we learn from this?

by Tony Fannin, President, BE Branded

The recent cola wars between Coca-Cola and PepsiCo is an interesting micro look at two different marketing philosophies. As of this writing, Pepsi is now the #3 soda in the U.S. It fell behind Diet Coke. Now, Coca-Cola owns the top two slots ahead of #3 Pepsi and #4 Diet Pepsi. So, how did Diet Coke over take Pepsi? It may be more of what they didn’t do and what Pepsi did do based on differing marketing approaches.

Coca-Cola has spent the last few years driving home the basics and taking the long-view of marketing. Coke stayed the course in brand building, knowing it’s a long-term play, protected it’s brand, invested in it, reminded people why they love Coke, and invested in their people. They built on their heritage of a great drink that is refreshing and part of your fun.

Pepsi took a different route. They focused more on the “marketing flavor of the week” in their attempt to be “cutting edge”, bold, and appeal to the younger generation. They focused on a social platform with their Refresh Project. They pulled out of the 2010 Super Bowl. They changed their logo. These are just a few of their “non-traditional” marketing moves. Flavor of the week strategy. Most of Pepsi’s approaches was applauded by critics and the public as “and example of progressive marketing”, “refreshing innovation”, and bold courage (to forgo the Super Bowl). I believe their hope was that their strategy would set Pepsi as a company who got social media and who thumbed their noses at the traditional tenants of marketing (Super Bowl spots are soooo old school).

Though Pepsi got plenty of PR coverage for their moves, especially the Refresh Project and the no-show at the Super Bowl, it didn’t translate into the core of what businesses are measured by, sales and profits. Pepsi has been in a tail spin over the last 3 years, allowing Diet Coke to dominate Pepsi’s flagship brand. The Refresh Project probably has done some social good, but it hasn’t paid off at the cash register. It seems charities took the money and ran without the public rewarding Pepsi by buying it at the supermarket. The news about Pepsi pulling out of the Super Bowl got great press, but was press worth trading for actual sales?

What can we learn from this micro case study?
• Don’t forget the basics – What Pepsi did was fine, but it depended on scattered marketing and jumping on the social bandwagon to drive it’s brands. That doesn’t work by itself. It takes sticking to the basics of building and protecting your brand and reminding customers how you can make their lives a little better and more refreshing. Keep the core foundation of strong marketing to build your specialty promotions on top of.

• Market your core strengths – Cola is what Pepsi is known for. Both Pepsi and Coca-Cola have other non-cola brands and they battle over many different segments. What Pepsi forgot was they, like Coke, have their true brand equity tied to cola. It is both economic and symbolic. If either one got completely crushed in the cola category, it would be like a “run on the bank”. By itself, it wouldn’t economically kill either company, but it would alarm investors, the public, and other stakeholders to begin doubting it’s viability as a major player. Don’t forget what your brand stands for, even when you reach out to other categories for growth.

• Out of sight, out of mind – There’s a reason why mega brands like Coke and McDonald’s still advertise. They know it only takes a very short time before you forget they are around and begin a new habit of picking up a different brand in the grocery isles or go to a different drive through to pick up lunch (remember Hardee’s? Me either.). Pepsi forgot a basic marketing guideline, when you stop, your momentum stops. The silver rule to this is just because you stop, doesn’t mean your competitors stop too. It just accelerates falling behind even more.

Pepsi has vowed to return to brand marketing and pump up their budget investment over the next couple of years. It will be a long, and expensive road. In the long run, it’s cheaper to get ahead and stay ahead than it is to rest or diverge and try to catch up again.


About Be Branded

Tony Fannin is of President of BE Branded, an integrated marketing firm who helps clients BE Somebody to their customers. If you aren't somebody, then you are commodity.

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