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MARKETING STRATEGY

 
Tahir Masood 072424
Moeed Butt 053431
Omer Rafiq 072431
 

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

Internal Analysis \

External Analysis

/\

/\
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's
success 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

Experienced, broad base of Large size may lead to conflicting


Management
interests and knowledge interests

New one calorie products have no


Unique, tastes good, competitive existing customer base, generic
Product Line
price, and convenient brands can make similar drinks -
cheaper

May lose focus, may not be


Marketing Diverse, and global awareness
segmented enough

Possible conflicts due to so many


Personnel International, diverse positions people, possible trouble staying
focused

High expenses, may have trouble


High sales revenue, high sale
Finance balancing cash-flows of such a
growth, large capital base
large operation

Low costs and liabilities due to Lose control and quality


Manufacturing
outsourcing of bottling standards

May concentrate too much on


Research & Continuous efforts to research existing products,
Development trends an reinforce creativity intrapreneuralship may not be
welcomed

External Factors Opportunities Threats

More expensive products than


Huge market in the healthy
Coke, such a high price may limit
Consumer/Social products and growing market for
lower income families from
specialized foods
buying a Pepsi product
Distinctive name, product and
Not entirely patentable, constant
Competitive packaging in with regards to its
replicability by competitors
markets

Internet promotion such as Computer breakdowns, viruses


banner ads and keywords can and hackers can reduce
increase their sales, and more efficiency, and must constantly
Technological
computerized manufacturing and update products or other
ordering processes can increase competitors will be more
their efficiency advanced

Consumer income is high, more Very elastic demand, almost pure


Economic
tend to eat out competition

High Food & Drug


Legal/Regulatory 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. Target
Market.

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 Mountain Dew 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 are the 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 finally
they 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 of
CSD’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 appeal
fairly 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.

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

Market Prices

Price to
Raw consumer/
case Price to Consumer Retail Retail Price to Consumer 250ml
size Retailer Price margin mgn % Retailer Price serving

per per per


CSD case per case case 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
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 much
more 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 message
the 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, not
all 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 they
deliver. 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. Television
2. Radio
3. PrintPublications
4. Internet
5. DirectMail
6. Signage
7. ProductPlacement
8. MobileDevices
9. Sponsorships
10.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 of
Cannibalization.