To you, the difference in utility is large, hence to you they are not substitutes.They are to some people because if one is not available they will take the other without much decrease insatisfaction.Substitutes are two goods that consumers (you and me) can purchase, and substitute with one anothershould something happen to one. Coke and Pepsi are substitutes because they basically are the sameproduct (not including someone's preference) if you go somewhere and they don't have Coke you usuallywill just take Pepsi. 7-Up and Sprite are also substitutes because if one place doesn't carry one you will just have the other. Also, if the price of Coke goes up by $5, most likely people will stop purchasing Cokeand buy Pepsi instead, which is at a much lower priceThey are very similar products that most people will take either if only one is available. Availability andprice is the main decision factor in selecting substitute products.
The two main competitors for our introduction of Fei Fei Cola in the cola market are Coca-ColaCompany and PepsiCo Inc. Both are very successful and dominate the cola as well as other softdrink markets. For the product category cola, Coca-Cola and Pepsi are perfect substitutes withoutnoticeable taste difference;however, the two products are not substitutes for most of the people.Cola as a drink is a low involvement product, but marketers for both Coca-Cola and Pepsi have triedto increase consumers' involvements throughout various advertisement campaigns and sponsoringvarious events.
Taking a good look at their marketing actions and the consumer reactions to it willprovide important information regarding our new product.
ARTICLE : - Pepsi cuts price, Coke yet to follow suit April 15, 2003 15:03 IST
Heralding the cut-throat summer competition in soft drinks, Pepsi said on Tuesdaythat it has slashed prices of its 300 ml returnable glass bottles to Rs 6 in the capitaland this price cut may be extended to other markets to make its brands moreaffordable. However, Coca-Cola appears to have been caught on the wrong foot,with its 300 ml pack still priced at Rs 8. When contacted, Sunil Gupta vice-president(external), of Coca-Cola India, told PTI, "We're making no fresh comments on ourpricing strategy. Right now, our 300 ml pack continues to be priced at Rs 8." Thefresh price war, triggered by Pepsi, follows an earlier onslaught when both thecompanies reduced prices by about 20 per cent across the board just before theUnion Budget for 2003-04, which provided them excise duty relief. A Pepsi
spokesperson said, "In a high-consumption market like Delhi, aggressive pricepoints devolving from the 300-ml segment will work much better. Our price strategyfor this market, therefore, works off this thinking. As a consequence, 200-ml bottlesare priced at Rs 5. The new price points are 300 ml at Rs 6, and 200 ml at Rs 5."According to industry sources, this sector is heavily dependent on returnable glassbottles and Pepsi's latest price reduction strategy is critical to drive volumes.Sources said earlier this year, Coca-Cola had taken the price war head on byintroducing 600-ml PET bottles priced at Rs 12 each, beginning with Maharashtra,one of Pepsi's key markets. Pepsi, which was selling 500-ml PET bottles priced atRs 15 each, was caught on the backfoot and was forced to react, beginning with