Why PepsiCo Should Care about Customer Relationship Management - Term Paper Example

Why PepsiCo should care about relationship management BY YOU YOUR ACADEMIC ORGANISATION HERE YOUR HERE HERE Why PepsiCo should care about customer relationship management Introduction Customer relationship management (CRM) involves a blend of different business tools and strategies which focus on reorienting the entire business to concentrate on customer satisfaction. CRM tools can include software programmes which keep record of customer demographic information or online browsing preferences. In addition, a business can position its entire brand as one which is focused on customer relationships, such as emphasising a company value which is congruent to consumer values. Regardless of the specific model used from organisation to organisation, CRM is all about satisfying the customer as a means to build profitability or achieve organisational performance. Customer relationship management also serves to evaluate the consumer as a means of providing them with the products which would be most suited to their demographic or psychographic profile (Coravue Inc., 2007). Generally this is accomplished by reviewing browsing habits stored in mass databases or reviewing comments left by customers on company websites. In the bricks-and-mortar sales environment, evaluating customer habits can sometimes be as easy as reviewing a credit card statement or sales history over a period of days or weeks. However, who really cares about customer relationship management' PepsiCo should, as there is little evidence that the company maintains a focus on CRM other than through brand-building exercises which appear to give the impression that PepsiCo products are more commodities than tools for building customer satisfaction and loyalty. Evidence suggests that PepsiCo, despite their extended, global reach and wide variety of subsidiaries and brand varieties, requires significant adjustment to existing CRM policies. This paper assesses the overall importance of customer relationship management whilst applying CRM literature to the current marketing environment at PepsiCo. Recommendations for improvements in CRM focus at the firm will also be proposed. CRM as business necessity Technological developments are generally the key to successful CRM programmes, allowing for business communications regarding CRM focus to be distributed as well as maintaining an adequate database of consumer-related information. The Internet, additionally, allows organisations to use real-time customer interaction, through a series of integrated communications messages, to support the brand's image (Turner, 2008). From the technological perspective, customer relationship management is about having the software support necessary to extend the brand/company experience into new areas of streamlined payment systems or interactive, entertaining product websites. PepsiCo is quite competent in its interactive marketing focus, developing a wide variety of contest websites, interactive product design websites (allowing consumers to interact in a virtual design environment), and countless others. For instance, the company utilised a promotional incentive by printing various codes on the tops of its Pepsi brand products, allowing customers to visit the corresponding website to win various prizes (Harwood, 2006). In this particular campaign, PepsiCo received 15 million entries, which suggests that the campaign was a tremendous success. It would be a likely assessment that much of the registration information regarding consumers was stored in a database in the event of requiring information for other promotional offers or incentives. Some might argue that promotional literature and interactive contest websites would not be included in CRM, however in terms of the successes of the Pepsi-Cola brand, these types of promotional activities are creating connection with consumer lifestyle and with the company itself. One need only visit a legitimate PepsiCo product website to witness an enormous volume of custom animations and interactive stories which are attached to many of the company's brands. Getting people excited about the company and its products is part of customer relationship management and this is likely the catalyst for many of PepsiCo's financial successes. PepsiCo deserves credit for investing the financial resources and human expertise necessary to create such a wide variety of virtual, interactive software programmes designed for customer usage. Some of these animations are sophisticated enough to provide multiple entertainment scenarios and outcomes with a simple click of the mouse. However, is PepsiCo actually creating significant value for its customers, other than the outcome of being entertained by various brand-building campaigns' Quaker Oats and Frito Lay, two brands under the PepsiCo name, account for the largest majority of the firm's profit (Strategic Direction, 2007). PepsiCo also supports brands such as Aquafina and Gatorade, two powerful-selling products in their drink product lines. With such an extension of brands and the necessity to market them in a multinational business environment, the majority of the company's CRM campaigns are to boost profitability. Is this transparent, however, to the public and are they simply entertained by the extensive (and likely costly) animations in the virtual environment but finding no real connection with PepsiCo brands' Murphy (2007) offers that Pepsi-Cola and Coca-Cola continue to battle for market share, with Coca-Cola taking an apparent lead over their rival. This was likely due to the recent Olympics focus which benefitted Coca-Cola. The author offers that Coca-Cola has "pulled up its socks" in regards to communication strategy (Murphy, 2007: 1). This suggests that Coca-Cola is finding more success than their competitor in terms of appealing to their desired target audiences. This might be an aspect of providing the type of quality entertainment that consumers desire from large-scale cola manufacturers. Coca-Cola does not appear to take the same approach to the interactive, virtual environment as their competitor, which might suggest that PepsiCo's approach to online brand-related entertainment is less-sophisticated than that of Coca-Cola. By any measure, a company must fully understand the lifestyle preferences and expectations of their desired target audience if they are to provide intense volumes of animated literature as a means toward profitability. Hein (2007) supports this assessment by suggesting that the cola Pepsi will always be considered the more youthful brand over their main rival, Coca-Cola. Brand Strategy (2007) offers the importance of flexibility in the CRM business model, suggesting that PepsiCo's view of flexibility includes the appearance of the brand, television, radio, web content, and various print advertising. There is no evidence, however, that the business utilises their exhaustive marketing campaigns to remain focused on the customer as the primary goal. All of these changes are designed to create a connection with a youth culture, with Pepsi changing billions of packages to reflect a more contemporary demographic. However, other than the experience of drinking a quality cola product, what real value does the product provide in terms of creating a long-term relationship with the customer' There does not appear to be the consistency necessary for sending the same promotional messages in a method that would satisfy the customer they are trying to appeal toward. If packaging creates consumer connection, however when they visit the website they are inundated with unsophisticated animation, would this not defeat the purpose of the CRM campaign and focus for long-term profitability' The point is not to harshly criticise PepsiCo and suggest that the firm does not have significant strengths of leadership in many strategic and competitive areas, however even the firm's annual report makes no mention of customer relationship management even in the most recent edition. Precision Marketing (2007) suggest that global CRM spending is expected to grow by 10.5 percent each year, a significant investment in the customer relationship management strategy. If PepsiCo's competitors are investing heavily into CRM projects, they might be able to seize competitive advantage if their strategies are superior. Consider what the firm's 2007 Annual Report discusses regarding the consumer: "Any damage to our reputation could have an adverse affect on our business" (PepsiCo Annual Report, 2007: 35). Though this is a priority focus for many companies, when the consumer is discussed in their official reports, they are often referred to in relation to their individual impact on the business rather than as important components of total business strategy. This is especially unusual considering the nature of their product variety: Food and drink, which is so largely affected by fluctuating consumer behaviours (PepsiCo Annual Report). The Economist (2007) provides an interesting fact in relation to their cola products. Cola, much like coffee, can actually be classified as a commodity being sold at a premium price. In today's difficult economic environment all across the globe, when consumers are looking for value at a quality price, might realise that they should be paying commodity prices for the cola rather than the existing retail price. Though this is only a hypothetical scenario, it does tend to reinforce why maintaining a solid customer relationship is vital to profitability. Reputational damage is one issue but sales decline due to changing consumer perceptions about the nature of the product calls for a CRM-focused organisation. This is something which PepsiCo appears to lack and views the consumer and its promotional literature as merely a tool for profitability and increased market share. Should this ever become transparent to the consumer there would likely be a variety of negative outcomes on the business. From a more technological perspective, Szwarc (2005) offers a type of CRM business activity involving credit card companies. Large, transactional databases store volumes of customer information in the event of witnessing whether changes to the normal account patterns generally exist. This would indicate a potential theft of the card even before the customer realises it, thus delighting the customer through CRM technologies. For the business-to-business aspect of PepsiCo, which is a large part of their daily operations, these types of CRM programmes would be beneficial to the company. When the business is a customer, similar databases identifying trends in high volume purchases which make the client eligible for a discount as a sudden promotional brand-building activity would serve Pepsi well. Gagnon (2008) provides that CRM in the business-to-business sales environment is beneficial in streamlining the sales and marketing staff to allow them to link marketing functions with specific customer-related marketing activities. This creates a more efficient business leadership team and provides superior benefit for the company. Having such a system in place at PepsiCo would allow them to provide a more efficient system of billing and acknowledgement to create long-standing relationships with retailers or other vendors in the business and marketing environments. Some might take a radically different viewpoint of PepsiCo and suggests that the company is both consistent in its brand messages and delivers quality entertainment as part of the firm's marketing focus. However, Tullo (2008) offers that businesses should no longer be thinking of CRM in its traditional sense but should consider it as CVM, or customer value management. There is little evidence that the various projects provided by PepsiCo create any short-term or long-term value other than periodic entertainment and, perhaps, brand association and recognition. Keeping customers the whole point of the CRM process using methods which extend outside of merely brand-building exercises. It is showing genuine concern for the needs of the consumer and business customer and providing both quality solutions and quality products, combined with effective marketing literature, to satisfy the psychological and tangible need of the buying public. According to Peppers and Rogers (2000) having a solid customer relationship business model requires remembering customers from situation to situation across multiple areas of the business. Consumers want to be acknowledged and treated with respect and the small gains achieved by presenting appropriate mailers which are linked to habitual buying behaviours is one step which PepsiCo might consider to enhance the company image and increase consumer loyalty. It is likely that customers, especially the business-to-business environment, value being recognised and would appreciate spontaneous offers from the manufacturer. This is all part of maintaining quality customer focus. On a different note, Peters, Thomas and Tolson (2007) offer the consumer phenomenon of demanding socially responsible and ethical practices from businesses. It is further provided that if consumers perceive the company poorly in this area, they will change their purchasing behaviours in a fashion which will bring negative value to the company. This makes it especially important for companies like PepsiCo to establish an appropriate image of service in which the consumer views themselves at the top of the business strategy hierarchy. DHL, a worldwide shipping entity, utilises the phrase Customer service is back in shipping as a means to forge solid customer relationships and then works to deliver on that commitment (Boone & Kurtz, 2007). Even though this is a delivery service, it is still a multinational business which must remain consistent in promotional literature and in company focus on service/product quality delivery to provide the message consistent for relationship-building. Perhaps it is a disadvantage of PepsiCo that the business maintains such a wide variety of brands that it must market to mass audiences in order to sell high volumes of product internationally. Mass market philosophies would, in respect of PepsiCo, somewhat limit the availability to allocate funds and human resources necessary to create specific, niche marketing messages to a multitude of target segments. For instance, if PepsiCo considers the majority of its soft drink consumers to be in the 18-24 age bracket, the business would seem to require print literature, customised web development services, lifestyle packaging efforts and many other marketing activities to create a connection with just this group; a costly pursuit for a business. Perhaps this simply suggests that large, multinational companies such as PepsiCo can only develop a workable and financially-feasible CRM policy when appealing to mass markets of individuals. The difficulty, also, is that CRM focus requires certain functions in the business to be handled automatically, such as the transfer of information between various databases or efficient online payment systems. The containment of countless volumes of consumer behaviour and browsing patterns between a wide variety of virtual brand-related websites would represent a significant data storage and capacity issue with a company like PepsiCo. This would likely require labour cost increases for additions to information technology support teams and require the human expertise to regulate the content and integrity of the data being stored. From a cost perspective, PepsiCo would also likely have to add significant costs to the operating budget for these efforts which may speak to why the firm relies more on traditional brand-building exercises than developing individual relationships with millions upon millions of consumers in multinational environments. The proverbial cola wars between Coca-Cola and Pepsi has been one pop culture aspect of lifestyle which both firms have been able to capitalise on decade after decade. In the pursuit of increasing market share over their competitor, perhaps Pepsico has become so competitor focused that it has lost track of understanding its consumer. Slywotzsky and Hoban (2007) call it competing the firm to death. There are merits to the PEST Analysis model and Porter's Five Forces Model which indicate the importance of scrutinising the external business environment to understand what drives marketing successes both domestic and foreign. However, could analysis of PepsiCo's main competitors and their activities be distracting from creating a quality CRM business focus' With so much emphasis on brand-building exercises and the concern over corporate profitability and lost market share, perhaps evaluating the consumer as a needs consumer could allow the company to create a valuable connection with the buying public. By positioning the company as a socially-responsible advocate for serving the human condition both mental and physical, the company can move away from competitor analysis to create a more in-depth analysis of the consumer public. Due to the fact that customer relationship management is largely about satisfying the customer as a total business practice, there is also a missing element to this in terms of distribution at the company. There is no direct-selling to the consumer, requiring consumers to buy PepsiCo products from the retail or vending environment (PepsiCo Annual Report). In a period where consumers are shifting some of their purchasing habits to the online environment, it would stand to reason that the firm could capitalise on a new bulk purchasing system which provides consumers with considerable discounts direct from the manufacturer. The ease and convenience of a well-constructed company website with easy-to-navigate pages and product listings would provide consumers with a totally new image of a modernised PepsiCo. This could make the business a leader in direct-selling and, perhaps, outperform competition in the process when people are lured to the ease and convenience of one-click ordering and multiple package discounts. This type of CRM changes would only require a small support staff and the software necessary to handle the transactions and store needed information. From a profitability standpoint, it would likely serve the business well and lure a new type of customer, the bulk-minded and value-minded, to the 21st Century PepsiCo and transform the business as a leader in CRM philosophy and value orientation. Consumer Values PepsiCo could also benefit from an organised group of company representatives, dispatched in their multinational business environments which maintain potential for profit growth and increase in consumer incomes. These individuals could be responsible for physically interacting with various cultures who purchase their products across the globe in order to understand what drives buying behaviour. Perhaps minor social unrest has caused a change in the public mindset, which provides the opportunity for PepsiCo to receive real-time data from on-site, foreign representatives to assist in developing a new print literature campaign in the region. For a large, highly profitable, multinational business, this would not represent a considerable expense and would be a considerable return on investment if any of the campaigns hit their target intention. As a company which can provide real-time marketing language in a method which is accessible to the indigenous consumer it would show that the brand is aware of community issues. This could be a valuable addition to the existing CRM model (however small) at PepsiCo today to fully create connection with mass market audiences and not represent massive labour expenses or the need for complicated software package implementation. The winner in this scenario would be both the consumer and PepsiCo. PepsiCo appears to have another tremendous strength in terms of recognising that consumer behaviours and attitudes can change, making them difficult to predict (PepsiCo Annual Report). This represents a business which does understand the need for consumer research to stay apprised of various trends and the flexibility of organisational design to improve on any existing customer-focused programmes. From a leadership perspective, flexibility which allows for CRM improvements will likely lead to a more efficient company where all members of staff are focused on the customers' needs and service/product delivery. As it is relatively common knowledge in the business world that junior staff members model the behaviours of senior management leadership, sending the consistent internal message that the customer is a priority element to sustaining the business' future is part of the CRM focus and it appears to exist at PepsiCo. It would be virtually impossible to determine whether PepsiCo maintained an internal organisational culture which was focused on CRM as a total business philosophy without performing a research survey or interview with various staff members at the company. However, based on the notion that quality customer relationship management relies on staff which are all unified and focused on the consumer needs, it is likely that this would be necessary to make PepsiCo find success and add value to the consumer agenda. Conclusion PepsiCo maintains a somewhat mixed-focus of what constitutes quality customer relationship management. The firm's positive aspects include the creation of a wide variety of brand-related, virtual literature designed to entertain and inform the consumer. These should not be underlooked as positive contributors to PepsiCo success in the food markets. PepsiCo also recognises the importance of understanding the consumer and views the buying audience as a major force in total business success. This is, at least, the foundation of quality CRM policies and practices. The more complicated aspects of CRM, such as creating quality relationship messages and creating targeted connections with different market segments appears to be lacking at PepsiCo. The company's mass market realities likely limit the firm from creating specialised, niche relationships with different demographics and being effective at it, which may be why the company does not focus so strongly on this element of customer relationship management. The cost investment would likely outweigh the long-term or competitive advantages to the firm and would require a significant labour reorganisation to accomplish the creation of multitudes of positioning strategies for each product brand or consumer demographic. It is clear that the company is trying to make positive consumer connections, therefore this should be identified and acknowledged as a success at PepsiCo. Though the company needs improvements, their CRM model is at least adequate in terms of technology, focus and effort. Bibliography Annual Report. (2007). "Performance with Purpose". PepsiCo. Accessed 30 Nov 2008 http://www.pepsico.com/AnnualReports/07/pdf/277660_PEPSICo-10m.pdf Boone, L. and Kurtz, D. (2007). Contemporary Marketing, 13th ed. United Kingdom, Thomson South-Western. Brand Strategy. (2007). "Case Study - PepsiCo: Cola gets a pep talk", London, 16 Apr: 20. Coravue, Inc. (2007). "CRM: Taking One-to-One Marketing to the Next Level", An Executive White Paper. Accessed 30 Nov 2008 www.coravue.com/documents/Coravue_CRM_White_Paper.pdf Gagnon, Eric. (2008). "Six Steps to Developing the Measurability Mindset: Building Strong, Measurable B2B Marketing Programs Using CRM Systems (Part 1)", Business Marketing Institute. 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