Product Life Cycle of Pepsi

This post is a business case study onPepsisproduct life cycle. This is a valuable tool for marketers to manage the product as it progresses through its life cycle. Managers are encouraged to anticipate industry changes and have strategies in place for each stage it promotes a proactive planning approach.

There are five key stages of theproduct life cycle:

1) Pre-launch no sales and profit are made because the product is still in development.2) Introduction initial sales are made to innovators, consumers who enjoy trying new products, but these are insufficient to recuperate development costs3) Growth sales being to increase rapidly as the product gains popularity among the early majority. It is at this stage that profits are first generated.

4) Maturity this is the longest stage and generates the majority of a products sales and profits from the late majority. To milk the product for as much profit as possible,extension strategiesare often implemented to pro-long the maturity stage.

5) Decline eventually all products stop selling, such as VHS tapes. As expected, sales begin to decline until the product is no longer profitable.At each stage, marketers should adapt theirmarketing strategiesto the external changes in the market place. Lets take a look at howPepsiCohave used theproduct life cycleto successful grow Pepsi into one of the most consumed drinks in the world.

Product Life Cycle of Pepsi:1) Pre-launch the 1890sIn 1898, pharmacist Caleb Brad ham developedBrads Drink, a formula designed aid digestion. After strong interest from consumers in his pharmacy, Brad renames the drink Pepsi-Cola and purchases the trademark Pep Cola for $100. The origins of Pepsi arevery similar to that of Lucozade, which was also first produced for medicinal purposes.Although $100 does not appear much, adjusted for inflation that amount of money in the 19th Century is equivalent to $2516.34 in 2014. This highlights the difficulties companies have in the pre-launch phases with surviving periods of negative cash-flow, large research costs and development expenditure.2) Introduction 1902

Brad began selling Pepsi-Cola and achievedsales of 7,968 gallons of syrup in the first year.Objectives:Brad aimed to generate initial awareness and trial of his product, and far exceeded his targets!

Product:Only a basic product was launched Pepsi-Cola was initially sold even without bottles. Instead the product was sold through soda fountains located in Brads pharmacies.

Price:Initially a simple cost-plus pricing strategy was used. It is likely that Pepsi-Cola started with a skimming strategy, to quickly recuperate start-up costs.

Place:A highly selective distribution is initially recommended, and this is evident with Pepsi-Cola only launching in Brads pharmacies.

Advertising:To generate awareness, a celebrity endorsement with race-car driver Barney Oldfield (above) was utilized.

Sales-promotion:Pepsi-Cola was not launched with any promotions. However, if promotions are used at this stage they should aim to encourage consumers to trial the product.3) Growth 1930s-1970s

After bankruptcy and then becoming acquired by Loft Inc. Pepsi-Colas sales sky-rocketed in the great depression. Consumers were attracted by the value-for-money competitive positioning: 5 cents would buy consumers 12 ounces of Pepsi-Cola, but only 6 ounces of Coca-Cola.Objectives:During growth, gaining market share is critical. Hence, Pepsi-Cola was marketed aggressively against Coca-Cola to encourage consumers to defect.

Product:As the market becomes increasingly competitive it is important to continually improve the product. Hence, Pepsi-Cola now came in bottles, rather than just soda fountains.

Price:To support the aim of gaining market share, the low price penetration strategy was one of the key reasons why the brand grew massively in this time period.

Place:An extensive distribution network is needed to support rapid sales growth; therefore exclusivity to pharmacies ended and the product became a mainstream consumer good.

Advertising:It is vital to capture the early majority stage, requiring that advertising was designed to effectively reach a mass audience. For example, Radio was selected as a medium because of its low cost-per reach click here to listen to an ad from the 1930s! During this time, the name was changed to just Pepsi to help differentiate the brand from Coca-Cola. Lastly, the1975 Pepsi Challenge marketing campaignwas so effective it almost destroyed the Coca-Cola brand!

Sales-promotion:Due to the overwhelming success of the drink, no sales promotion was used given that the price was already highly competitive and the company struggled to keep-up with demand.

4) Maturity 1980s Present daySince the 1980s Pepsi has been in the maturity stage of the product life cycle, helping the parent company earn almost$20 billion in annual revenue.Objectives:At this stage products are most profitable, which is why PepsiCo are likely to consider Pepsi as aCash Cowand aim to make as much profit as possible from the brand.

Product:Now that the product is well established, entire ranges can be introduced that act asextension strategiesto prolong the most profitable stage of the products life. These include the highly successful Pepsi Max, to thedisastrous Pepsi Raw.

Price:PepsiCo and Coca-Cola clearly do not want to enter price-wars, which is a high risk during this very competitive stage. As a result, the price rarely fluctuates away from the market average.

Place:The product now has a global distribution to penetrate emerging economies.

Advertising:The main focus of Pepsis advertising during maturity to is to differentiate the brand. This has been mainly achieved through the use ofcelebrity endorsementslike Beyonce and Michael Jackson to position the product as a younger and edgier alternative to Coca-Cola

Sales-promotion:To keep consistent with the brands value-for-money positioning, Pepsi frequently have both value increasing and value adding offers. An example of the former is offering larger bottle sizes still to this day than Coca-Cola; and the latter can be seen in the competitions advertised on Pepsis bottles.

5) Decline sometime in the future

Despite growing consumer interest in healthier lifestyles, sales of Pepsi show no signs of slowing down in the immediate future. Regardless of this, it is recommended that PepsiCo have the following strategies ready to be be implemented in the event of the product entering decline.Objectives:Cost-reduction is key at this stage to help the brand remain profitable despite generating fewer sales.Product:The range should become rationalized, and may be reduced to just Pepsi to leverage economies of scale and minimize costs.

Price:The price could be reduced further to increase sales among price-sensitive consumers and be an effective advertising cue for this low involvement product.

Place:The product now returns back to selective distribution to focus efforts on just the few remaining outlets that generate profits on Pepsi.

Advertising and Sales Promotion:It can be recommended that PepsiCo could go as far as completely cutting advertising and sales promotion to further reduce overheads.

In summary, the product life cycle of Pepsi is a great business case study that both students and managers can learn from. They key points to remember are thatmarketing strategies need to be ready for implementation, before the product enters each phase of the life cycle, otherwise opportunities are missed and the brand becomes reactive to change.

The 44 Ps of MarketingThe four Ps of marketing is a common starting place for planning marketing. But marketing is much more than your advertisement. Everything you do is a part of your marketing.The 44 Ps of marketing is a more comprehensive list of things to consider when you market anything.1. PackagingPackaging is one of the four Ps of marketing. If no one notices your product, no one will buy it. And if no one wants to buy your product after seeing it, no on will buy it. Manycompanies spend millions in packaging design. And for some huge brands thats a sound investment.Whatever you sell, you need to think about the packaging. If you sell a service, the packaging means the way you and your employees look, your website, and everything else your customers see of you before the purchase.2. PainDo your potential customers have fears associated to your product?In most cases they do, even if they dont know it.For example people who buy a car fear accidents, high maintenance costs, pollution, and what the car does to their status. If you dont know what they fear, you may easily induce fear instead of using it to your advantage.3. PandemicIs there a reason why people would spread your advertisement or story? You cannot create an advertisement, which would certainly go viral. But you should try.Create something highly valuable or entertaining and people will gladly spread it. Content marketing is in part so effective because of this.A wonderful example is ToyotasSwagger Wagon. Toyota created a rap music video for a car (Sienna SE), which went viral. At the time of this writing over a million people had seen it. It wasnt certain that so many people would see the ad, but it was likely. Its really entertaining, so why wouldnt you tell your friends about it?4. PartThis is one of the core aspects of marketing. Whats the part your product will play in the customers life? If its an important part, people spend more time thinking about their options; you cant hard sell a house through advertising. Your marketing has to fit your product into the part it plays in the minds of your customers.5. PartyIs there a group of users that form a tribe that customers can join when they make the purchase? Users discussion forums, private meetings, or special content?People want to belong to groups. These groups are often the best marketing tools you have. They help other members with problems, and intensify the feeling that you provide something meaningful.6. Pass-along valueWill the product hold its value? You can of course market and sell successfully products that are meant for one time use only. But you need to take this into account.Resell value is most important in expensive purchases. Im surprised car manufacturers dont use this to their advantage. Our cars hold their value better than any other cars. That would make a difference to me. Would you listen? Unless youre a Rockefeller, youd probably pay attention.7. PeersAre there others using your product? Social proof is maybe the most effective way to gain trust. Social proof is relatively easy to deliver. Quotes, pictures, videos, recordings Use an image of the person who refers the product. It makes the recommendation more effective.When you provide social proof, youlend the credibilityof that personto your product. So, a well-known person providing the recommendation is always better than a nobody. But a nobody is much better than no social proof at all. It works because people want the certainty that a decision will pay off. If someone has already took the risk, and proved it to be worth it, theres more certainty.8. PerceptivenessIntuitive products, especially technological products, are a pleasure to use. Theres nothing more frustrating than to know you can do something with a product, but you just dont know how.Apples computers and iPhones are so popular because of this. They work, as youd guess them to work, if youd never touched a computer before.Theres probablyno better example of this than a poor one. After 9/11 a company decided to create a parachute for such situations. They were invited to demonstrate the use of the product in a TV-show. What happened, was that they couldnt figure out how to put on the parachute. And youre supposed to do it in seconds when you see a plane coming your way As far as I know, the product was never released.9. PersonasThis is one of the core ideas of marketing. Marketing should always be directed to a specific group of people. Specific doesnt necessarily mean asmallgroup, but a clearly defined group. Unless you understand who buy from you, you cant target them with your marketing.Create buyer personas for each different buyer type. You can then target your marketing straight to them. Understanding your buyer personas is detailed in the guide toPremeditated Marketing.10. PictureA picture says more than a 1000 words. People notice pictures more easily than words. Especially close-up pictures of peoples faces capture our attention. This is why womens magazines nearly always have a close-up picture of a face on their cover.To understand a phrase, you need to read it.To understand a picture, on an intuitive level,you only need to glance at it. Reading takes time, glancing doesnt. Dont expect people to take the time to read.Theres a great rule of thumb for moviemakers, 70% of information should be conveyed through pictures (the rest with sound). Use the force of pictures to tell your story whenever possible.11. PilotPeople want certainty and theres no better way to get certain about a purchase, than to test the product first. You wouldnt buy a car without test-driving it first, would you?The larger the purchase the more important this is, but even the smallestpurchases are easier when you can put your mind at ease. If, for any reason, you cannot offer a free trial, at least offer a nearly free trial and a money back guarantee.AWeber, the email list company, does just that. They charge $1 for the first month of service. With this they discourage people to sign up for the service if theyre not serious about the purchase. But with a 30-day money back guarantee they make the investment irrelevant.12. PlaceboA placebo is a fake medicine, given to some patients (without their knowledge) to test the effects of a real drug. If theres no difference between results, the real drug doesnt actually work.You cannot sell a placebo. You might be able to sell it for a while, but sooner or later youd be caught. And this doesnt apply to medicines only. Whatever you sell has to be authentic. Your product has to meet the expectations people give to it.13. PlanningThe most important part of marketing is the research for it. Understanding your story, your customers, and the general situation takes time. And most people dont spend enough time planning.You can spot a poorly planned marketing message instantlyif you know what youre looking for. Its not clear on what its selling, its not directed to anybody in particular, it doesnt catch your attention, and so on. Do your planning well, and youre halfway ready for marketing (check out 25. Premeditation for the next half).14. PlantingIts said, you believe what you hear/see 10 times. This is whyunnoticed marketing can work. Exposure to a product, brand, idea, or whatever else, creates familiarity. And when in doubt, people choose the most familiar option.To plant an idea into your prospects mind, you need to reach them through different channels. Whenever you consider using multiple channels for marketing, consider your buyer personas carefully;you need to reach the same prospects with all channels.15. PlayfulnessYoure marketing message doesnt have to be playful. But you do need to consider the mood of it. An advertisement without emotion will never work. Using emotion is a necessity.But which emotion should you use?People walk towards, and run away.People will generally work harder and more rapidly if theyre avoiding something bad, than if theyre working to gain something. But if you associate negative emotions to your product, no one wants it.You can use all emotions and moods in marketing. You just need to understand how your prospects will understand and associate the emotions.16. PleasureHow will your product make the users life happier? People strive for happiness and they make decisions based on that. Unless they believe your product will make them happier in some, way for some reason, they wont buy it.Sometimes the message is as simple as, Our new pizza tastes good! Good food and happiness are closely related in our minds. But in some cases the connection isnt as clear, The new content management system makes handling projects more efficient. But stillthe promise is the same, Buy this product and youll be happier.(see 21. Positivity).17. PlotThis is the most important P of marketing.Ive even created mymarketing guidearound this concept. In a sense all other Ps of marketing are a part of this.Marketing is storytelling.Nothing more, nothing less. You dont (and you cant) market a product, service, person, or anything but a story. Its the story of your product that youre marketing.The story tells what the product is, what it does, how it feels, is it good, what kind of a person uses it, and so on. Its much more then the facts.You tell your story with your marketing. If people dont believe your story, they wont buy your product.18. PoliticsA charismatic figure is a good marketing trick. Steve Jobs with his presentations sold more Macs than the Apple marketing department. People want to be lead. A trustworthy leader is more than social proof. People intuitively believe a leader to have a positive vision for the future. And they want to follow the leader to that vision.19. PornPeople and all other animals survive only as long as they reproduce. The need for feeling attractive is embedded into us.We avoid anything that makes us less attractive, and we go to great lengths to look gorgeous.Pretty much anything and everything can be marketed with sex. And pretty much everythingismarketed with it. The few advertisements that use less-than-perfect-looking models stick out because of that. But even those ads often sell the feeling of being attractive.Consider if users will feel more attractive because of your product. If thats possible, consider using that in your marketing message. But you still need to be remarkable enough to be noticed (see 41. Purple Cow); there are already too many shampoo advertisements that look alike.20. PositioningPositioning is one of the basic four Ps of marketing. It has a couple of angles to it. First: you must notice a marketing message, to be affected by it. Second: positioning changes your message.You wouldnt pay for ad space under a bridge.Theres no one there to see your message. So, no matter how little you pay for it, its a waste of your money. At the same time you probably know (at least you should know) the best places for you marketing. Places where your potential customers will notice it. And remember that not all of your customers use the same medias.Where your message is, affects the message itself. A trusted place like a newspaper will lend a part of its credibility to your message. This also works the other way around. Low-trust placement will take away your messages trustworthiness.21. PositivityLeave a feeling of control and positive determination. Even if you use fear as a motivator, people should feel positive because they know what to do next (buy your product that will help them).22. PraisesReviews work as positive reinforcement for the action the customer should make. Reviews by trusted sources provide proof for your story. They take away the feeling of risk thats always present when you buy something.23. PredictionThis includes many of the other Ps of marketing.What do you predict will happenif you buy a productis the most important questionyou ask yourself when you decide whether or not to buy something. Even if youre only thinking about the next 5 minutes, the prediction determines your decision.24. PreferenceIf your potential customers use a competitors product, you need to convince them to take a risk. People feel safe with a product theyve used. Theyre unlikely to switch to your product without a very convincing reason.You can compare your product to the other one, toillustrate the differences as well as the similarities. The similarities can turn your product from unnecessary risk to worth checking out.You can also go for a more aggressive approach. Break your competitors product. Obviously Im not suggesting vandalism. Break the competitive product, like email is breaking fax. Either make a product so superior that people will voluntarily make the switch, or if youre a cell phone operator you could get the iPhone exclusively. That would break AT&T for many people.25. PremeditationNo body can ever guarantee the success of a marketing campaign. But premeditation will make the success much more likely.Before you ever launch your campaign you should become the devils advocate. Look closely at all the aspects of your campaign. If theres anything you havent considered, do so before you start to market your product.26. PressSocial media is the press of the 21stcentury. If you want your marketing to work, you need consider how to tie it to social media. Competitions, giveaways, etc. are all great ways to engage people through social media.27. PressureCreate a sense of urgency. People are reluctant to act, and the longer they wait the less likely the action becomes. Time-sensitive offers are just one way to create urgency.Another effective way to create pressure is to appeal to peoples sense of status. Be the first, Your friends already do it, If youre smart, youll You can use this egoistic side of people, to create pressure.28. PreviewThe purpose of marketing is to have your potential customers imagining themselves using your product. If they create this preview in their heads, youre a lot closer to getting a lead.This is another reason why you should use pictures in marketing. Its easier to create a mental picture based on pictures, than words. This is also a very powerful sales technique:have the prospect imagine using the product, and have them describe how it feels. In both cases, they get the good feeling of having your product.Deciding not to buy after that experience, feels like they lose something.29. PricingPricing is one of the basic four Ps of marketing. Understanding what people are willing to pay for your product is essential. Even if you nail every other P of marketing, the pricing can screw up the whole thing.A low price lessens the products perceived value. It can even lower the perceived value below what youd expect from a free gift.But if your product is too expensive for your customers, they wont buy it. When a customer is choosing between two products with near identical qualities, pricing becomes very important. And the cheaper one usually leaves the shelf.30. PriestNothing has ever been marketed as well as religions. The reason religions have succeeded so well, is the understanding of their audiences worldview. Priests, prophets, cult leaders, and all spiritual leaders fit their words into the beliefs their listeners hold.Changing the worldviews of your audience is extremely difficult. It takes too much time and resources for most companies. Instead of changing the beliefs,shape your message to fit the beliefs your audience holds. This is one of the concepts discussed in myfree marketing guide.31. PrinceLike the small girls who dream of a prince who comes to pick them up, all people dream about something.A product that answers a common dream will succeed.You might dream about status: a BMW can answer that dream. It could be about your family: a travel agency can fulfill that one with a family holiday. Or maybe you dream of the perfect music experience: many hi-fi sound companies attempt to turn that dream into reality. You need to know the dream youre fulfilling.32. PrinciplesPeople have their own principles. And they generally hold on to them tightly. Your marketing message cannot oppose these principles. Instead you can use the principles to your advantage.You like your principles and you like others who share the same ones. This applies to products as well as people.You like products that reinforce your principlesor at least work in accordance with them.33. ProductThe product is yet another one of the basic four Ps of marketing. A great product is much easier to market for several reasons. There are more good things to market. It will create word of mouth marketing. It will exceed customers expectations. And so on.34. ProductionEthical and ecological factors are becoming more and more important. If your product has any positive ecological or ethical ideologies, production methods, or aspirations, you should mention it. These things arent important to everybody, but a growing number of people make their decisions based on these factors.35. ProminenceMarketing needs observers, people to be affected. If your marketing message isnt displayed prominently enough, it will fail. Youre most likely to notice something when you want to notice it. Features in newspapers, blogs, radio, TV, and other medias are therefor much more effective than paid advertising placements.People have learnt to avoid paying attention to advertising. Content marketing is becoming more important because of that. Provide useful content as your marketing material, and people will not only pay attention to your marketing but even search for it.36. PromisesA purchase is always a risk. You as the marketer should do whatever you can to make purchasing your product seem less risky. A specific and simple to understand promise creates the most certainty for the customer. Say something like, It will last at least 5 years, no matter how you use it. Not even 5 year guarantee creates the same certainty, even if it means the same thing.37. ProofThe reason many advertisements for medicines present doctors, is the authority and trust they create. People trust doctors when it comes to medicines. Use a trusted expert or a scientific study to demonstrate your products features, and hardly anyone will question the trustworthiness.38. PropertiesSome product properties are always necessary for a customer. If any of these properties is missing, you cant make the sale. Identify what are the most important properties for your target audience. Then make sure that these properties, or at least the ones that arent absolutely obvious, are presented in your marketing.39. ProsperousnessPeople are very aware of their perceived status. Theyll go to great lengths to defend their status. Marketing should make an implied promise of a status increase. With some products (cars, clothing, jewelry), the status aspect is obvious. But all products affect the feeling of status in some way.40. ProtectionAnother way to make the risk of a purchase seem less intimidating is to promise help. For example you could effectively market a computer with the promise of customer service. Convey the idea that if anything goes wrong, someone will be there to help.41. Purple CowSeth Godins bookPurple Cowis about being remarkable. If youve seen a thousand cows, you think theyre boring. But if you then see a purple cow, its interesting.You need to get people interested, otherwise no one will buy your product. There are always many ways you can be remarkable. Your specialty can be something about your product or your marketing, as long as it gets you noticed.42. PurposeWhy do people do charity work? They do it because of the purpose the work gives them.They feel theyre a part of something biggerthan themselves. But giving purpose isnt reserved for charities. You can easily market an ecological product with the feeling of purpose, This book is printed on recycled paper that saves natural resources. You could just as easily use ethical or political reasons.43. PushYour marketing should always push people into taking action. You can successfully create the desire, but still fail at creating action. Ideally you create enough push with the other Ps of marketing. But some things create push more than anything else. You could for example show people buying the product (also social proof), or provide a map to the nearest store that sells your product.