MARKETING STRATEGY

Marketing strategy

Introduction:

Company Description

PepsiCo, Inc. is among the most successful consumer products companies in the world, with 1999 revenues of over $20 billion and 116,000 employees. The company consists of: Frito-Lay Company, the largest manufacturer and distributor of snack chips; Pepsi-Cola Company, the second largest soft drink business and Tropicana Products, the largest marketer and producer of branded juice. PepsiCo brands are among the best known and most respected in the world and are available in about 190 countries and territories. Some of PepsiCo's brand names are 100 years old, but the corporation is relatively young. PepsiCo, Inc. was founded in 1965 through the merger of Pepsi-Cola and Frito-Lay. Tropicana was acquired in 1998.

PepsiCo's success is the result of superior products, high standards of performance, distinctive competitive strategies and the high integrity of their people. Their overriding objective is to increase the value of their shareholders' investment through integrated operating, investing and financing activities. Their strategy is to concentrate their resources on growing their businesses, both through internal growth and carefully selected acquisitions. Their strategy is continually fine-tuned to address the opportunities and risks of the global marketplace. The corporation's success reflects their continuing commitment to growth and a focus on those businesses where they can drive their own growth and create opportunities.

Strategic Focus and Plan

Mission/Vision

PepsiCo's overall mission is to increase the value of their shareholders' investment. They do this through sales growth, cost controls and wise investment of resources. They believe their commercial success depends upon offering quality and value to their consumers and customers; providing products that are safe, wholesome, economically efficient and environmentally sound; and providing a fair return to their investors while adhering to the highest standards of integrity.

Goals

Nonfinancial Goals

Sharply focus their financial and management resources on their core businesses: restaurant management on restaurants, packaged goods management on beverages and snacks.

Ruthlessly prioritize to be sure they employ their greatest sustaining efforts on the biggest opportunities within their core businesses. In beverages, for example, the lions share of their investment dollars and management attention will go to high-potential markets where no company dominates like China, India and Russia and to markets where they lead or are a strong number two.

Build their success upon their key functional strengths:

1. day-to-day management of operationally intensive businesses;

2. manufacturing, selling and distribution infrastructure development; and

marketing and new product R&D.

Core Competency and Sustainable Competitive Advantage

In terms of core competency, PepsiCo seeks to achieve a unique ability to:

(1) Provide a distinctive, high-quality one-calorie soft drink and to provide a high-quality citrus soft drink using Pepsi Company’s distinct ingredients to appeal and to excite contemporary tastes for these products and

(2) Deliver these soft drinks to the customer using effective manufacturing and distribution systems that maintain PepsiCo’s quality standards.

To translate these core competencies into a sustainable competitive advantage, Pepsi Co. works closely with key suppliers and distributors to build the relationships and alliances necessary to satisfy the high taste standards of our customers.

Mountain Dew

Mountain Dew is a drink distributed and manufactured by PepsiCo. The main formula was invented in Knoxville, Tennessee, named and first marketed in Knoxville and Johnson City, TN in the 40s, then by the Minge family in Fayetteville, North Carolina and across the United States in 1964.When removed from its characteristic green bottle, Mountain Dew is bright yellow-green and semi-opaque.

As of 2007, Mountain Dew was the fourth-best-selling carbonated soft drink in the United States, behind only Coca-Cola Classic, Pepsi-Cola, and Diet Coke. Diet Mountain Dew ranked ninth in sales in the same year. In October 2008, it was announced that Pepsi would be redesigning their logo and re-branding many of their products.

Ingredients

Mountain Dew lists its ingredients as:

Carbonated water

Sugar

Citric acid

Sodium benzoate (preserves freshness)

Caffeine (55 mg per 12 oz. [approx 330ml])

Sodium citrate

Emulsifiers

Natural Flavors

Ascorbic Acid

Color (Tartrazine)

Marketing efforts, 2002–2007

Today’s target demographic is radically different. The drink is mainly marketed to people in the 16-18 year old demographic group, creating a connection to activities like extreme sports and to the video game culture. The name Mountain Dew was first trademarked by two brothers, Barney and Ally Hartman, who ran a bottling plant in Knoxville, Tennessee.

Market Analysis

Whether you are starting a new business or launching a new product, conducting a marketing analysis is the first step in determining if there is a need or audience for your idea. Knowing the market's needs and how it is currently serviced provides you with key information that is essential in developing your product/service and marketing plan. Too often, businesses spend thousands of dollars launching a "new" idea with a limited market because of competition. The owner is forced to reevaluate his strategy and determine if there is room for another player.

Conducting a market analysis will help you:

1. Prepare to enter a new market

2. Launch a new product/service

3. Start a new business

When Mountain Dew launched in Pakistan, primarily they analyzed the existing CSD market by creating awareness of their product to the market. Since, the physical attributes like color, taste etc were totally different as compared to ordinary Cola’s, hence it helped them a lot in order to create awareness of their product to their target market.

Secondly, they conducted the product test to get the response of their target market. They conducted this test by comparing Mountain Dew with all the other existing CSD’s in the market. This test is called Concept Fulfillment Test and it consists of two stages. In the first stage of this test, the response of the respondents was checked by just showing the physical attributes of the product, e.g. color. By just showing the green color, respondents were able to easily identify the Mountain Dew.

In the second stage, the BLIND TESTING (Paired) was conducted to get the responses of the respondents and to create awareness among them. They used to give the respondents the unlabelled cans of all the existing CSD’s in the market, and the respondents were asked to taste the drinks and to identify the new taste and differences.

After completing the product test, Bases Test was conducted in which they compared the results of the product test with the International database by using software, to bench mark their product to get the volume based on consumer strategy.

Situational Analysis

This situation analysis starts with a snapshot of the current environment in which Mountain Dew finds itself by providing a brief SWOT (strengths, weaknesses, opportunities, and threats) analysis. After this overview, the analysis goes into greater detail with regards to industry, competitors, company, and consumers.

SWOT Analysis

SWOT analysis is a simple framework for generating strategic alternatives from a situation analysis. It is applicable to either the corporate level or the business unit level and frequently appears in marketing plans. The following diagram shows how a SWOT analysis fits into a strategic situation analysis.

Situation Analysis

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Internal Analysis \

External Analysis

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Strengths Weaknesses

Opportunities Threats

SWOT Profile

The internal and external situation analysis can produce a large amount of information, much of which may not be highly relevant. The SWOT analysis can serve as an interpretative filter to reduce the information to a manageable quantity of key issues. The SWOT analysis classifies the internal aspects of the company as strengths or weaknesses and the external situational factors as opportunities or threats. Strengths can serve as a foundation for building a competitive advantage, and weaknesses may hinder it. By understanding these four aspects of its situation, a firm can better leverage its strengths, correct its weaknesses, capitalize on golden opportunities, and deter potentially devastating threats.

Internal Analysis

The internal analysis is a comprehensive evaluation of the internal environment's potential strengths and weaknesses. Factors should be evaluated across the organization in areas such as:

Company culture

Company image

Organizational structure

Key staff

Access to natural resources

Brand awareness

Market share

Financial resources

Exclusive contracts

Patents and trade secrets

The SWOT analysis summarizes the internal factors of the firm as a list of strengths and weakness.

External Analysis

An opportunity is the chance to introduce a new product or service that can generate superior returns. Opportunities can arise when changes occur in the external environment. Many of these changes can be perceived as threats to the market position of existing products and may necessitate a change in product

specifications or the development of new products in order for the firm to remain competitive. Changes in the external environment may be related to:

Customers

Competitors

Market trends

Suppliers

Partners

Social changes New

technology Economic

environment

Political and regulatory environment

The SWOT analysis summarizes the external environmental factors as a list of opportunities and threats.

Strengths

The primary and key strength of Mountain Dew is that it is the brand of one of the strongest and globally recognized company that is PepsiCo. Since, the mother brand is so strong, it helped Mountain Dew a lot in creating its name in the beverage industry. It also increases the credibility of the Mountain Dew.

Opportunities

One of the best opportunity for mountain dew is that the people are now fed up of ordinary cola’s and other existing CSD’s, hence strongly moving their interest towards the citrus segment like mountain dew, sprite 3G etc. Another opportunity is that the income of consumers is high enabling them to be less price sensitive, and convenience is becoming important to many countries around the world.

Weaknesses

The increasing inflation rate in Pakistan may result in an upcoming weakness for Mountain Dew. Secondly, fragmentation in the beverage industry of Pakistan is another weakness. Thirdly, and most importantly, Mountain Dew’s fame can hurt the credibility of the mother brand, Pepsi.

Threats

The biggest threat for mountain dew is the competition threat from Sprite 3G and other energy drinks like red bull, energy etc. Before Sprite 3G, Mountain Dew enjoyed the monopoly in the citrus segment of CSD’s industry. Now, the competition is very high between the two brands. Secondly, from the Pepsi’s perspective, Mountain Dew can be a threat for the mother brand.

Industry Analysis

Trends in Healthy Soft Drinks

Within the soft drink industry, a major trend to capitalize on is healthier soft drinks. The market for healthy soft drinks is huge and growing. Along with a large market, many opportunities have arisen due to recent technological advances. Also technology on the Internet has revolutionized the promotional process. By using banner ads and keyword ads, Mountain Dew can reach a higher number of audiences and yet and the same time have more specific and targeted segments. A final factor that is providing an ideal situation to introduce a new product is that consumers are tending to eat out more often due to the fact that economically, income is high. This will help to increase our sales of fountain beverages to restaurants. All of these positive industry factors combined create an exemplary context in which to launch new healthy soft drink products.

Company Analysis

Currently PepsiCo competes in the soft drink segment of the global beverage market. While PepsiCo's soft drinks can obviously compete as a stand-alone product, it can also complement any snack or meal.

At present PepsiCo, Inc. operates with over 116,000 talented and innovative employees. The steadily increasing business with minority and women-owned firms has improved their company's supplier base. It has also helped to strengthen the suppliers' firms as well as the minority community infrastructure with regard to such benefits as employment, training, role modeling, buying from other minority and women-owned businesses, and supporting community organizations. PepsiCo's culture is informal and entrepreneurial. Their people are empowered to make the decisions necessary to grow the business. They seek to achieve outstanding results through innovation, long tern partnerships, and an open work environment that respects the individual and promotes personal and professional growth.

PepsiCo's strategy is to concentrate on resources to grow businesses, both through internal growth and carefully selected acquisitions. The strategy is continually fine-tuned to address the opportunities and risks of the global marketplace. The corporation'ssuccess reflects their continuing commitment to growth and a focus on those businesses where they can drive their own growth and create opportunities.

PepsiCo’s SWOT Analysis

The following table shows the internal and external factors affecting the market opportunities for PepsiCo.

Internal Factors Strengths Weaknesses

ManagementExperienced, broad base of interests and knowledge

Large size may lead to conflicting interests

Product LineUnique, tastes good, competitive price, and convenient

New one calorie products have no existing customer base, generic brands can make similar drinks - cheaper

Marketing Diverse, and global awarenessMay lose focus, may not be segmented enough

Personnel International, diverse positionsPossible conflicts due to so many people, possible trouble staying focused

FinanceHigh sales revenue, high sale growth, large capital base

High expenses, may have trouble balancing cash-flows of such a large operation

ManufacturingLow costs and liabilities due to outsourcing of bottling

Lose control and quality standards

Research & Development

Continuous efforts to research trends an reinforce creativity

May concentrate too much on existing products, intrapreneuralship may not be welcomed

ExternalFactors

Opportunities Threats

Consumer/SocialHuge market in the healthy products and growing market for specialized foods

More expensive products thanCoke, such a high price maylimit lower income families from buying a Pepsi product

CompetitiveDistinctive name, product and packaging in with regards to its markets

Not entirely patentable, constant replicability by competitors

Technological

Internet promotion such as banner ads and keywords can increase their sales, and more computerized manufacturing and ordering processes can increase their efficiency

Computer breakdowns, viruses and hackers can reduce efficiency, and must constantly update products or other competitors will be more advanced

EconomicConsumer income is high, more tend to eat out

Very elastic demand, almost pure competition

Legal/RegulatoryHigh Food & Drug Administration standards eliminate overnight competitors

Competitor Analysis

The CSD industry in Pakistan fall into four main segments: Colas, Citrus segment, Lemon-lime segment & Orange segment. Please refer to the following table:

Segment PepsiCo Products Competing Products

Cola Pepsi Coca Cola

Citrus Mountain Dew Sprite 3G

Lemon Line 7up Sprite

Orange Mirinda Fanta

The major disadvantages regarding the competitive structure of the market lies in the fact that there are so many other competitors and options such as water, coffee and juice to compete for the same consumer.

Customer Analysis

Pepsi, the mother brand of Mountain Dew has an extremely large customer base due to the wide spread popularity of soft drink, that really helped Mountain Dew in creating its name in the beverage industry of Pakistan. It is therefore necessary to segment the market and look at particular trends in the soft drink market. There are two key trends in the soft drink market, which are the growing demand for healthier soft drinks and secondly the mostly targeting groups with specific products regarding their interest i.e. TargetMarket.

Target Market

For mountain dew every individual with a middle class status can be considered a potential consumer. Though, in order to target specific markets, mountain dew divides the target market into the following market segments:

Mountain Dew’s Target Market

Mountain Dew targets male consumers within the age range of 16-18 years of age. This is when mountain dew is marketing to teenagers, which they call as Bull’s Eye Target Audience. These potential customers still live at home with parents. They rely heavily on parents to purchase the product for them. These are the key consumers for mountain dew because they are ready to embrace excitement, adventure, fun, energy and enthusiasm. In this segment, mountain dew is trying to capture brand awareness.

Communication target

The communication target is broad in nature as compared to the target market. Here, mountain dew targets the people within the age range of 16-24 or even 16-35. Communication target defines the target audience for which the company is going to advertise, people who will watch the ads.

Consumption target

Consumption target will be as broad as possible, because it involves all the people who will actually consume the product. Here, no age limit is defined because whoever is consuming the product is their target in this section. It could be teenagers, families, etc.

DISTINCTIVE CAPABILITIES

1. Brand of PepsiCo.

2. No existing product in the market (colored bottle, green color, high caffeine)

3. Packaging in the unique beer bottle design.

Market Demographics

Mountain Dew divides the market demographics in 2 main areas:

1. Demographic

2. Behavioral

1. Demographic:

Mountain Dew is targeting the people within the age range of 16-18, mostly the teenagers. Hence, they are not concerned about their income level, because their target audience can easily buy the product as they are charging the standard price, country-wide. Secondly,the usage of carbonated soft drink has now become a lifestyle of people in Pakistan, which again becomes an opportunity for Mountain Dew.

2. Behavioral:

The strength of Mountain Dew’s strategy is to target their audience on the basis of behavior. Since, their actual target market are the teenagers hence they target daring, excited, adventurous, fun-loving, confident, energetic, enthusiastic and aggressive behaviors. All these mentioned behaviors are part of the teenager’s life; therefore, the same message is also being delivered through their ads.

Market Needs

Mountain Dew captured its market by smartly meeting their needs, like:

1. Quality Product

Mountain Dew is providing the quality citrus soft drink. They are strictly meeting the updated ISO standards, hence meeting the quality needs properly. Apart from this, they have hired specially trained quality employees who are always involved in the quality checking of the product through out the manufacturing process.

2. Product Attributes

Secondly, the product attributes like shape of the bottle, color of the drink, labeling and packing are uniquely designed which actually shows the quality of Mountain Dew. The product attributes were so attractive that it really helped Mountain Dew strongly entering into the existing CSD market of Pakistan.

Market Trends and Growth

Globalization, technological advancements and innovation changed people personalities, perceptions and preferences for different products. As a result, people are more aware of

the Fast Moving Consumer Goods now. Similarly, market trend of CSD in Pakistan started shifting away from ordinary Cola’s to flavored and colored soft drinks. This was the actual need at the time when Mountain Dew was launched. People were fed up of the ordinary cola’s and they were looking for some alternatives. Hence, the above mentioned situation provided the opportunity of growth to Mountain Dew. Mountain Dew rightly took the advantage of the available opportunities and satisfied the need of the time and later on, the same concept and theme was copied by others as well.

Competition Analysis

In this section, we’ll deeply analyze the direct and indirect competition of MountainDew with other drinks.

The direct competitor of Mountain Dew is Sprite 3G. Both the brands are great threat to each other. Sprite 3G is also coming up as energy drink now and they are following the same theme as that of Mountain Dew. Sprite 3G’s target market is almost same of Mountain Dew. They are targeting the young blood, enthusiastic teenagers, aggressive and fun-loving males.

The indirect competitor of Mountain Dew consists of all the other CSD’s including the flavored and colored drinks like Pepsi, Coke, 7-up, Sprite, Fanta, and Miranda etc. However, the different energy drinks may also be considered as competitors of Mountain Dew.

Positioning Strategy:

The positioning strategy is the heart of the brand strategy. Positioning statement typically identify the set of associations (benefits, quality, user imagery) that the brand should own, the support for claiming these associations, and perhaps the tone or personality by which the brand should speak to its prospects about these concepts. Positioning statements arethe arguments for the brand relative to the other brands in the category and are based on abstracted associations. For example, the positioning statement of Mountain Dew used by PepsiCo is as follows:

“To 16-18 year old males, who embrace excitement, adventure and fun, Mountain Dew is the great tasting carbonated soft drink that exhilarates like no other because it is energizing, thirst quenching, and has a one of a kind citrus flavor.”

This statement defines the target in terms of age and psychographics and then directs the creative to communicate a laundry list of benefits: its exhilarating and energizing effects, its thirst quenching ability and its distinctive citrus flavor.

Positioning Against Competitor

Who’s the biggest game in town? We can learn a lot about ourselves, the market, and our market share by analyzing our competition. A lot can be achieved by asking some probing questions.

- Who is doing what we’re doing?

- Who are their customers?

- Are they the same people we’re trying to attract?

- How does our product or service compare in terms of price and quality?

... and so forth.

By properly answering the above mentioned questions, we can better understand our competition and can formulate better positioning strategy against our key competitors. In the current scenario, Mountain Dew has positioned itself against its key competitors on the basis of product attributes. For example, they introduced the unique beer bottle design, then the usage of colored bottle and drink, and finallythey have strongly positioned them based on the amount of caffeine used. Since, caffeine gives energy, hence their positioning strategy strongly focuses the words like, males, who embrace excitement, adventure and fun, great tasting carbonated soft drink that exhilarates like no other because it is energizing.

“A 12 ounce can of Mountain Dew contain 55 milligrams of caffeine. What surprises many people is the level of caffeine in Mountain Dew - at 55mg it is significantly higher than any other existing CSD.”

The strength of Mountain Dew’s positioning strategy is that they very smartly and aggressively deliver the positioning strategy in their ads as well. The ads are very much attractive for the target audience as they are able to see what they are actually willing to see. The ads are full of excitement, adventure, fun, energy and enthusiasm.

Positioning by price & Quality:

For Mountain Dew, positioning by price does not matter a lot because the prices ofCSD’s in Pakistan are standard:

250 ml : 12/-Rs

1.5 Litre: 50/-Rs

2.5 Litre: 60/-Rs

However, Mountain Dew strongly focuses on positioning by quality. They have efficiently positioned their product on the basis of product attributes. For example,

Mountain Dew’s unique beer bottle design, green colored bottle and drink, labeling, packaging and an overall unique and new CSD that was not existing in the beverage industry of Pakistan, before.

Marketing Mix Strategy

A) Pricing Strategy:

One of the four major elements of the marketing mix is price. Pricing is an important strategic issue because it is related to product positioning. Furthermore, pricing affects other marketing mix elements such as product features, channel decisions, and promotion.

While there is no single recipe to determine pricing, the following is a general sequence of steps that might be followed for developing the pricing of a new product:

1. Develop marketing strategy - perform marketing analysis, segmentation, targeting, and positioning.

2. Make marketing mix decisions - define the product, distribution, and promotional tactics.

3. Estimate the demand curve - understand how quantity demanded varies with price.

4. Calculate cost - include fixed and variable costs associated with the product.

5. Understand environmental factors - evaluate likely competitor actions, understand legal constraints, etc.

6. Set pricing objectives - for example, profit maximization, revenue maximization, or price stabilization (status quo).

7. Determine pricing - using information collected in the above steps, select a pricing method, develop the pricing structure, and define discounts.

These steps are interrelated and are not necessarily performed in the above order. Nonetheless, the above list serves to present a starting framework.

Marketing Strategy and the Marketing Mix

Before the product is developed, the marketing strategy is formulated, including target market selection and product positioning. There usually is a tradeoff between product quality and price, so price is an important variable in positioning. Because of inherent tradeoffs between marketing mix elements, pricing will depend on other product, distribution, and promotion decisions.

Estimate the Demand Curve

Because there is a relationship between price and quantity demanded, it is important to understand the impact of pricing on sales by estimating the demand curve for the product.

For existing products, experiments can be performed at prices above and below the current price in order to determine the price elasticity of demand. Inelastic demand indicates that price increases might be feasible.

Calculate Costs

If the firm has decided to launch the product, there likely is at least a basic understanding of the costs involved, otherwise, there might be no profit to be made. The unit cost of the product sets the lower limit of what the firm might charge, and determines the profit margin at higher prices.

The total unit cost of a producing a product is composed of the variable cost of producing each additional unit and fixed costs that are incurred regardless of the quantity produced. The pricing policy should consider both types of costs.

Environmental Factors

Pricing must take into account the competitive and legal environment in which the company operates. From a competitive standpoint, the firm must consider the implications of its pricing on the pricing decisions of competitors. For example, setting the price too low may risk a price war that may not be in the best interest of either side. Setting the price too high may attract a large number of competitors who want to share in the profits.

From a legal standpoint, a firm is not free to price its products at any level it chooses. For example, there may be price controls that prohibit pricing a product too high. Pricing it too low may be considered predatory pricing or "dumping" in the case of international trade. Offering a different price for different consumers may violate laws against price discrimination. Finally, collusion with competitors to fix prices at an agreed level is illegal in many countries.

Pricing Objectives

The firm's pricing objectives must be identified in order to determine the optimal pricing. For new products, the pricing objective often is either to maximize profit margin or to

maximize quantity (market share). To meet these objectives, skim pricing and penetration pricing strategies often are employed.

Skim pricing attempts to "skim the cream" off the top of the market by setting a high price and selling to those customers who are less price sensitive. Skimming is a strategy used to pursue the objective of profit margin maximization.

Skimming is most appropriate when:

Demand is expected to be relatively inelastic; that is, the customers are not highly price sensitive.

Large cost savings are not expected at high volumes, or it is difficult to predict the cost savings that would be achieved at high volume.

The company does not have the resources to finance the large capital expenditures necessary for high volume production with initially low profit margins.

Penetration pricing pursues the objective of quantity maximization by means of a low price. It is most appropriate when:

Demand is expected to be highly elastic; that is, customers are price sensitive and the quantity demanded will increase significantly as price declines.

Large decreases in cost are expected as cumulative volume increases.

The product is of the nature of something that can gain mass appealfairly quickly.

There is a threat of impending competition.

As the product lifecycle progresses, there likely will be changes in the demand curve and costs. As such, the pricing policy should be reevaluated over time.

The pricing objective depends on many factors including production cost, existence of economies of scale, barriers to entry, product differentiation, rate of product diffusion, the firm's resources, and the product's anticipated price elasticity of demand.

Pricing Methods

To set the specific price level that achieves their pricing objectives, managers may make use of several pricing methods. These methods include:

Cost-plus pricing - set the price at the production cost plus a certain profit margin.

Target return pricing - set the price to achieve a target return-on- investment.

Value-based pricing - base the price on the effective value to the customer relative to alternative products.

Psychological pricing - base the price on factors such as signals of product quality, popular price points, and what the consumer perceives to be fair.

In addition to setting the price level, managers have the opportunity to design innovative pricing models that better meet the needs of both the firm and its customers.

Price Discounts

The normally quoted price to end users is known as the list price. This price usually is discounted for distribution channel members and some end users. There are several types of discounts, as outlined below.

Quantity discount - offered to customers who purchase in large quantities.

Cumulative quantity discount - a discount that increases as the cumulative quantity increases. Cumulative discounts may be offered to resellers who purchase large quantities over time but who do not wish to place large individual orders.

Seasonal discount - based on the time that the purchase is made and designed to reduce seasonal variation in sales. Cash discount - extended to customers who pay their bill before a specified date.

Trade discount - a functional discount offered to channel members for performing their roles. For example, a trade discount may be offered to a small retailer who may not purchase in quantity but nonetheless performs the important retail function.

Promotional discount - a short-term discounted price offered to stimulate sales.

Market Prices

Raw case size

Price toRetailer

ConsumerPrice

Retail margin

Retail mgn %

Price toRetailer

ConsumerPrice

Price to consumer/

250ml serving

CSDper

case per caseper

caseper

bottle per bottle

SSRB 24 258 288 30 10% 10.8 12 12.0

MSRB 12 328 360 32 9% 27.3 30 7.5

1.5MSPET 6 286 300 14 5% 47.7 50 8.3

SSNR 12 198 216 18 8% 16.5 18 18.0

500SSPET 12 285 300 15 5% 23.8 25 12.5

1.0MSPET 6 195 210 15 7% 32.5 35 8.8

The prices of PepsiCo CSD’s is as follows along with different sizes and offereings:

2.25MSPET 4 225 240 15 6% 56.3 60 6.7

CANs 12 240 264 24 9% 20.0 22 16.7

WATER

1.5MSPET 6 124 144 20 14% 20.7 24 4.0

500SSPET 12 134 156 22 14% 11.2 13 6.5

Market Entry Penetration

Market penetration

Market penetration is the name given to a growth strategy where the business focuses on selling existing products into existing markets. Market penetration seeks to achieve following objectives:

• Maintain or increase the market share of current products – this can be achieved by a combination of competitive pricing strategies, advertising, sales promotion and perhaps more resources dedicated to personal selling

• Secure dominance of growth markets

• Restructure a mature market by driving out competitors; this would require a muchmore aggressive promotional campaign, supported by a pricing strategy designed to make the market unattractive for competitors

“Mountain Dew was introduced in the existing CSD market with a new product category, that is Citrus segment. Hence, they had to adopt the Market Penetration strategy to prove its capabilities.”

Geographic Strategy

Mountain Dew is following the point of production strategy in which buyer pays all freight charges and seller set the prices.

B) Distribution Strategy:

We must also select the distribution method(s) that we will use to get the offering into the hands of the customer. These include:

On-premise Sales involves the sale of our offering using a field sales organization that visits the prospect's facilities to make the sale.

Direct Sales involves the sale of our offering using a direct, in-house sales organization that does all selling through the Internet, telephone or mail order contact.

Wholesale Sales involves the sale of our offering using intermediaries or"middle-men" to distribute your product or service to the retailers.

Self-service Retail Sales involves the sale of our offering using self service retail methods of distribution.

Full-service Retail Sales involves the sale of our offering through a full service retail distribution channel.

Of course, making a decision about pricing, promotion and distribution is heavily influenced by some key factors in the industry and marketplace. These factors should be analyzed initially to create the strategy and then regularly monitored for changes. If any of them change substantially the strategy should be reevaluated.

Mountain Dew is using two distribution channels:

1. Direct Distribution.

2. Third Party Distribution.

1. Direct Distribution

In direct distribution channel, there are no middle-men or intermediaries. The sequence of direct distribution channel is as follows:

Producer – Retailer – Consumer (P-R-C)

This Distribution channel is applied in Lahore.

2. Third Party Distribution

Third party distribution channel involves the sale of offering using intermediaries or "middle-men" to distribute our product or service to the retailers. The sequence of direct distribution channel is as follows:

Producer-Distributor-Retailer-Consumer (P-D-R-C)

This Distribution channel is applied in Islamabad.

Intensity of Distribution

There are three broad options - intensive, selective and exclusive distribution:

Intensive distribution aims to provide saturation coverage of the market by using all available outlets. For many products, total sales are directly linked to the number of outlets used (e.g. cigarettes, beer). Intensive distribution is usually required where customers have a range of acceptable brands to choose from. In other words, if one brand is not available, a customer will simply choose another.

Selective distribution involves a producer using a limited number of outlets in a geographical area to sell products. An advantage of this approach is that the producer can choose the most appropriate or best-performing outlets and focus effort (e.g. training) on them. Selective distribution works best when consumers are prepared to "shop around" - in other words - they have a preference for a particular brand or price and will search out the outlets that supply.

Exclusive distribution is an extreme form of selective distribution in which only one wholesaler, retailer or distributor is used in a specific geographical area.

“Mountain Dew has adopted the intensive distribution strategy to provide saturation coverage of the market by using all available outlets. For example, Mountain Dew is available at all the small and large retails stores, supermarkets, departmental stores and medical stores as well.”

C) Product Strategy:

Product Offerings: Mountain Dew’s product offerings are as follows:

• 250 ml : 12/-Rs

• 330ml(Tin): 25/-RS

• 1.5 Litre: 50/-Rs

• 2.25 Litre: 65/-Rs

Fast Moving Consumer Goods (FMCG), also known as Consumer Packaged Goods (CPG), are products that have a quick turnover and relatively low cost. Though the absolute profit made on FMCG products is relatively small, they generally sell in large numbers and so the cumulative profit on such products can be large.

Examples of FMCG generally include a wide range of frequently purchased consumer products such as drinks, toiletries, soap, cosmetics, teeth cleaning products, shaving products and detergents, as well as other non-durables such as glassware, bulbs, batteries, paper products and plastic goods. FMCG may also include pharmaceuticals, consumer electronics, packaged food products and drinks, although these are often categorized separately.

“Mountain Dew falls under the category of FMCG (Fast Moving Consumer Good). However, if we further sub-categorize it, then it is a convenience good as well because the consumers are not supposed to prepare it after the purchase. It is an RTD (Ready To Drink) CSD. Just purchase it and consume it.”

Convenience goods are those that the customer purchases frequently, immediately, and with minimum effort. Tobacco products, soft drinks, soaps, and newspapers are all considered convenience goods, as are common staples like ketchup or pasta. Convenience-goods purchasing is usually based on habitual behaviour, where the consumer will routinely purchase a particular product.

Product Mix

The product mix of a company, which is generally defined as the total composite of products offered by a particular organization, consists of both product lines and individual products. A product line is a group of products within the product mix that are closely related, either because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges. A product is a distinct unit within the product line that is distinguishable by size, price, appearance, or some other attribute. For example, all the products PepsiCo offers constitute its product mix; products in the Cola segment constitute a product line; and the basic Cola product is a product item. Product decisions at these three levels are generally of two types: those that involve width (variety) and depth (assortment) of the product line and those that involve changes in the product mix occur over time.

PepsiCo divides its CSD’s into 4 main segments:

1) Cola’s : Pepsi

2) Citrus : Mountain Dew

3) Lemon-lime : 7-up

4) Orange : Miranda

Mountain Dew falls into the citrus segment of PepsiCo’s CSD product mix. Its major competitor is Sprite 3G.

Product Life Cycle

Product Life Cycle Management is the succession of strategies used by management as a product goes through its product life cycle. The conditions in which a product is sold changes over time and must be managed as it moves through its succession of stages.

A product's life cycle (PLC) can be divided into several stages characterized by the revenue generated by the product. The life cycle concept may apply to a brand or to a category of product. Its duration may be as short as a few months for a fad item or a century or more for product categories such as the gasoline-powered automobile.

Introduction Stage

Is the product is the result of NPD or copy competitors? Which pricing strategy to adopt—penetration or skimming? Spending a lot on advertising and sales promotion to induce trial purchase, sales promotion. Build channels of distribution, selective distribution. Any USP, stress on it. Educate the market about the product benefits and features. The product for the time being is a loss maker.

Growth Stage

Sales rises if the new product gain acceptance, production rises, unit costs fall. Here, the product starts to yield profits and competitors are attracted. Firms must put more emphasis on the brand name of the product since consumers are now aware of the product’s benefits. Distribution should become more intensive—enter new distribution channels. Pricing may be reviewed if a skimming pricing strategy was adopted. Companies should lower the prices to attract the next layer of price sensitive buyers and finally a firm must attempt to maximize market share.

Maturity Stage

This is the stage of fierce competition. Sales growth slow down. Most products spend most of their time in the maturity stage of the PLC. Profits are good. Improve product quality and add new product features and improved styling. Add new models and flanker products (i.e. provide products of different sizes, flavours and so forth that protect the

main product). Enter new market segments and defend market share. Win competitor’s customers—For example, Pepsi Cola is constantly tempting Coca-Cola users to switch to Pepsi Cola, throwing out one challenge after another. Secure more support and display in the exiting outlets. Re-positioning of the product in the mind of customers may be a valid alternative as well.

Decline Stage

In the declining stage, sales may fall rapidly. Firms should maintain the sales of the product so far it is contributing to profits or enhances the effectiveness of the product mix. Re-positioning may be conducted to extend life cycle. Marketing mix must be adjusted accordingly. Harvesting—gradually reducing a product or business cost while trying to maintain sales—reduce sales force size, R&D costs, plant and investment costs,advertising expenditures and slowly pulling out of the business. Rejuvenate a product by adding value to the original declining product—Yamaha Pianos.

“Mountain Dew falls in between the introductory & growth stage of the Product Life Cycle. Since, Mountain Dew is a New Product Category, hence it is moving toward the growth stage. If it gains acceptance, the sales will increase more which will results in the increasing production process and finally the unit cost will be decreased. This thing may lead to the threat of more competitors in the future. They may emphasize largely on the brand name because the consumers will be aware of the product’s benefit and they may need to focus more intensive distribution.”

D) Advertising & Promotion Strategy

Advertising campaign

1. Budget:

A famous comment:

“I know that half of my advertising budget is wasted, but I’m not sure which half”

It is difficult to measure the effect of advertising on a business’ sales. Advertising is just one of the variables that might affect sales in a particular period. As a percentage of sales, advertising expenditure varies enormously from business to business, from market to market.

Setting an advertising objective is easy, but achieving the objective requires a well- thought out strategy. One key factor affecting the strategy used to achieve advertising objectives is how much money an organization has to spend. The funds designated for advertising make up the advertising budget and it reflects the amount an organization is willing (i.e., approved by high-level management) to commit to achieve its advertising

objectives. Organizations use several methods for determining advertising budgets including:

Percentage of Sales – Under this approach advertising spending is set based on either a percentage of previous sales or a percentage of forecasted sales.

What is Affordable – Many smaller companies find spending of any kind to be constraining. In this situation, advertising may be just one of several tightly allocated spending areas and, thus, the level spent on advertising may vary over time. For these companies, advertising may only occur when extra funds are available.

Best Guess – Companies entering new markets often lack knowledge of how much advertising is needed to achieve their objectives. In cases where the market is not well understood, marketers may rely on their best judgment (i.e., executive’s experience) of what the advertising budget should be.

“PepsiCo’s main product and major CSD is Pepsi, hence they are spending additional 25% budget on Pepsi advertisement, and 75 % of Pepsi’s advertising budget is being spent on Mountain Dew advertising.”

2. Selecting Media:

Selecting Media Outlets

With an objective and a budget in place, the advertising campaign will next need to focus on developing the message. However, before effort is placed in developing a messagethe marketer must first determine which media outlets will be used to deliver their message since the choice of media outlets guides the type of message that can be created and how frequently the message will be delivered.

An advertising message can be delivered via a large number of media outlets. These range from traditional outlets, such as print publications, radio and television, to newly emerging outlets, such as the Internet and mobile devices.

Creative Options

An advertisement has the potential to appeal to four senses – sight, sound, smell and touch. It should be noted that promotion can also appeal to the sense of taste but generally these efforts generally fall under the category of sales promotion However, notall advertising media have the ability to deliver multi-sensory messages. Traditional radio, for example, is limited to delivering audio messages while roadside billboards offer only visual appeal. Additionally, some media may place limits on when particular options can be used. For instance, some search engines or websites may only accept graphical-style

ads, such as images, if these conform to certain large dimensions and limit small advertising to text-only ads.

Creative Cost

The media type chosen to deliver a marketer’s message also impacts the cost of creating the message. For media outlets that deliver a multi-sensory experience (e.g., television and Internet for sight and sound; print publications for sight, touch and smell) creative cost can be significantly higher than for media targeting a single sensory experience. But creative costs are also affected by the expectation of quality for the media that delivers the message. In fact, media outlets may set minimal production standards for advertisements and reject ads that do not meet these standards. Television networks, for example, may set high production quality levels for advertisements theydeliver. Achieving these standards requires expensive equipment and high cost labor, which may not be feasible for small businesses. Conversely, creating a simple text only Internet advertisement requires very little cost that almost anyone is capable of creating.

Type of Media Outlets

While just a few years ago marketers needed to be aware of only a few media outlets, today’s marketers must be well-versed in a wide range of media options. The reason for the growing number of media outlets lies with advances in communication technology, in particular, the Internet.

The leading media outlets are:

1. Television2. Radio3. PrintPublications4. Internet5. DirectMail6. Signage7. ProductPlacement8. MobileDevices9. Sponsorships10.Others

“Mountain Dew covers almost all the media outlets to reach its target market.”

3. Evaluation of Advertising Campaign:

Evaluating Campaign Results

The final step in an advertising campaign is to measure the results of carrying out the campaign. In most cases the results measured relate directly to the objectives the marketer is seeking to achieve with the campaign. Consequently, whether a campaign is judged successful is not always tied to whether product sales have increased since the beginning of the campaign. In some cases, such as when the objective is to build awareness, a successful campaign may be measured in terms of how many people are now aware of the product.

In order to evaluate an advertising campaign it is necessary for two measures to take place. First, there must be a pre-campaign or pre-test measure that evaluates conditions prior to campaign implementation. For instance, prior to an advertising campaign for Mountain Dew, a random survey may be undertaken of customers within a target market to see what percentage are aware of the Product. Once the campaign has run, a second, post-campaign or post-test measure is undertaken to see if there is an increase in awareness. Such pre and post testing can be done no matter what the objective including measuring the campaign’s impact on total product sales.

Sales promotions

In a time when customers are exposed daily to a nearly infinite amount of promotional messages, many marketers are discovering that advertising alone is not enough to move members of a target market to take action, such as getting them to try a new product. Instead, marketers have learned that to meet their goals they must use additional promotional methods in conjunction with advertising.

Other marketers have found that certain characteristics of their target market (e.g., small but geographically dispersed) or characteristics of their product (e.g., highly complex) make advertising a less attractive option. For these marketers better results may be obtained using other promotional approaches and may lead to directing all their promotional spending to non-advertising promotions. Finally, the high cost of advertising may drive many to seek alternative, lower cost promotional techniques to meet their promotion goals.

Samples and Free Trials

Enticing members of a target market to try a product is often easy when the trial comes at little or no cost to the customer. The use of samples and free trials may be the oldest of all sales promotion techniques dating back to when society advanced from a culture of self- subsistence to a culture of trade.

Sampling and free trials give customers the opportunity to experience products, often in small quantities or for a short duration, without purchasing the product. Today, these methods are used in almost all industries and are especially useful for getting customers to try a product for the first time.

Free Product

Some promotional methods offer free products but with the condition that a purchase be made. The free product may be in the form of additional quantities of the same purchased product (e.g., buy one, get one free) or specialty packages (e.g., value pack) that offer more quantity for the same price as regular packaging.

Premiums

Another form of sales promotion involving free merchandise is premium or “give-away” items. Premiums differ from samples and free product in that these often do not consist of the actual product, though there is often some connection.

“Mountain Dew conducted massive sampling at the time of launching. As per their rough estimate, they reached approx 2 Million consumers in Pakistan with their different samples of green bags, green T-shirts, key chains & caps etc. As per their statement, people still remember their massive sampling technique to set up their roots strongly in the CSD market of Pakistan.”

Sponsorship and event marketing

Sponsorships

Companies and brands use sponsorships to help build goodwill and brand recognition by associating with an event or group. Marketers can examine sponsorship opportunities to find those that reach target groups, fit within a specified budget and provide sponsorship benefits that suit the marketer’s objectives. There are numerous local, regional, national and international sponsorship opportunities ranging from a local art center or theatre to the Olympics. Most organizations seeking company sponsors provide information on the variety of sponsorship levels which include data on event audience, exposure opportunities, which can include signage, T-shirts, public announcements and numerous other opportunities, receptions and much more. Marketers can use this information to help match sponsorship opportunities with the company’s objectives.

Mountain Dew is strongly involved in the sponsorship of the programs that exactly match the theme and concept of their product, and their target market loves to watch. For example, Mountain Dew sponsoring “Living On The Edge”on THE MUSIK channel featuring VJ Waqar, who is an icon for teenagers and himself an aggressive and enthusiastic entertainer. Previously they were sponsoring the “Survivor Series”.

Both these programs are purely for the young blood, the target market of Mountain Dew. One can view some extreme stunts, daring actions, adventure and aggressiveness in these programs which is the concept and message that Mountain Dew delivers to its target audience. These programs are typically for the daring, enthusiastic and aggressive youngsters.

Special Events

Special events can be designed to reach a specific narrow target audience. These special events capture the attention of an audience in the immediate area, but also attract the attention of mass media such as TV news and major newspapers, which provide broad reach. As with all PR programs, special event planners must work hard to ensure the program planned conveys the correct message and image to the target audience.

“Mountain Dew also sponsors special events and conduct event marketing as well. They sponsor the events that match the message that Mountain Dew delivers to its target audience. For example, they conduct special events like Rock concerts, in which teenagers participate with full energy, passion and enjoy with their full potential.”

Recommendations

Mountain Dew should undergo brand extension of their product.

Mountain Dew must strongly focus on intensive distribution

Mountain Dew must work hard for the brand image.

Must formulate a strategy to eliminate the threat ofCannibalization.