Marketing Project for PepsiCO Inc - Business Plan Example

Marketing Plan Project of the of the Collecting Information and Forecasting Demand PepsiCo Inc is a multinational beverage and food corporation located in New York, United States. The company is mainly inclined towards distribution, manufacturing and marketing of beverages, grain based snack foods, etc. PepsiCo Inc encompasses wide range of products, which is distributed across 200 countries. Energy drink from PepsiCo would be truly an innovative product since the company has only dealt in carbonated drinks or fruit juices. The global market demand for various forms of drinks has been elaborated in figure 1. Figure 1: Market share of world drinks (Source; Rupert, 2014) Sports or energy drinks comparatively have lesser market size in relation to carbonated beverages, bottled water, etc. Players like Coca-Cola and PepsiCo currently dominate the drinks market. However there is huge scope for this new product due to increasing percentage of health conscious individuals. On the other hand, carbonated drinks comprises of ingredients that adversely affects human body. This has resulted into a shifting trend towards consumption of energy drinks. The annual sales growth as per forecasted data is expected to rise by 2018. Figure 2: Annual sales growth (Source; Rupert, 2014) On basis of figure 2, it is clearly evident that customers in future years shall be more prone towards consuming energy drinks rather than any form of fruit juices or carbonated beverages. The increasing sales percentage in next few years indicates high market demand of energy drinks. Energy drink consumption is strongly aligned with rapid market growth. Most of the companies have three market segments for energy drinks – 18 to 34 years individuals, young adults and teenagers. Energy drinks help in boosting energy level due to its ingredient base such as vitamins, caffeine, herbal extracts and taurine. Athletes were the primary target group of this product but in current scenario it includes other niche markets too. Analyzing Markets As per highlights on food and beverage industry, the sales volume of energy drinks had reached to €44 billion in the year 2014. The growing sales volume clearly states that there is a high scope for this product in future years. In comparison to 2013, 5% increase has been observed in sales percentage of energy drinks. Energy drinks are usually part of the wide beverage category which includes carbonated drinks, sports drinks, fruit juices, bottled water, vegetable juices, ready-to-drink coffee, etc. It has been observed specifically in this industry, customers purchase more energy drinks in relation to soda drinks. American Beverage Association outlines same amount of soda drinks consumption in the region along with growing trend towards trying new brands of energy drinks. According to market research, in 2017, energy drink growth shall be prominent in United States, Brazil and China. CAGR is expected to increase by 10% of energy drinks market by the end of 2016. These drinks are usually marketed as a healthy substitute in comparison to sugar-saturated or carbonated drinks. This particular market is expected to grow rapidly due to increase in percentage of health conscious customers. Customers are greatly attracted to this product due to its benefit of maintaining physical shape and keeping them active for longer period of time. There are untapped market segments which can be catered by energy drink brands. Organizations dealing in this product category can sustain its market revenue only when they incorporate new formulations. 35% of global market for energy drinks is acquired by North America. Asia Pacific occupies almost 30% of this market. Analysis of different markets has been portrayed in figure 3. Figure 3: Market Share (Source: Foster and Vasavada, 2003) Figure 3 indicates that energy drink consumption is highest in North America, Australia and Europe. Middle East, Asia Pacific and Latin America are certain markets which encompasses future growth of energy drink brands. Identifying Market Segments and Targets Market segmentation for any product is based on four dimensions such as geographic, demographic, psychological and economic. It can be stated that market segmentation and targeting are essential components behind success of any brand. Energy drinks in current scenario dominates many geographical regions. Energy drink industry is a profitable market segment and is forecasted to be successful in coming years. Market segmentation for energy drinks to be launched by PepsiCo will be based on demographic and psychographic segmentation. Demographic segmentation shall encompass three essential factors like age, gender and occupation. Psychographic segmentation for this product will be aligned with lifestyle, benefits, attitude and personality. Targeting for the product will be in line with segmentation criteria. Those individuals will be targeted by the company who belongs to age category of 18-34 years. Both gender groups shall be targeted by the firm. Occupation criteria for energy drinks shall constitute students, athletes, working professionals and sports enthusiasts. On the other hand, psychographic criteria would also play a major role in this particular product category. This criterion includes lifestyle, which will be students or business class individuals who are health conscious. Personality of customers purchasing energy drink shall reflect upon being ambitious or possessing high levels of energy. Quality will be an area of concern for target market. Those customers who are enthusiastic and are searching for sugar-free or carbonated drinks substitutes shall consume this product. Psychology of target group will play a critical role behind success or growth of energy drink launched by PepsiCo Inc. First time users along with regular users would be targeted by the firm. Creating Brand Brand creation is a vital element when it comes to launching a new product in the market place. PepsiCo has already established its brand position in the industry since many years. While entering into a completely new market it is essential that a new brand logo and name should be developed. Energy drink mainly represents a medium through which people can stay healthy and even gain required energy levels. This concept needs to be highlighted through brand name and logo. It is witnessed that brand slogan is solely responsible for dragging attention of customers. A brand name can be developed in the market place only when it is offering something significant which is appealing to customers. “V” by PepsiCo shall be the new brand name for energy drink. This symbol would represent victory. It is always assumed that energy drinks are consumed by individuals either to gain higher levels of energy or to keep them healthy. However victory factor is strongly associated with the concept of gaining additional energy. This slogan would influence target group to purchase the product since it shall portray victory. Brand “V” slogan would be – “It all starts with ‘V’”. The main aim of this brand would be to increase its visibility in smaller and bigger cities. Brand “V” will be associated with teenage group and working professionals. It shall represent an energy drink which not only increases energy level but even ensures victory in life. The brand logo along with its slogan has been outlined in figure 4. Figure 4: Brand Logo & Slogan Brand “V” would be positioned as an easily affordable energy drink for teenager and young adults. Nutrient content and ingredients shall be highlighted in every “V” energy drink can. Competitive Dynamics The competitive dynamics of a product is evaluated through presence of competitors in the industry. Energy drink is a highly competitive market segment in present scenario. This is simply because health conscious individuals are more likely to consume energy drinks in comparison to carbonated drinks. Porter’s five forces model is able to demonstrate competitive dynamics of “V” energy drink. Competitive environment is denoted by five aspects such as bargaining power of buyers and suppliers, threat of new entrants, competitive rivalry and threat of substitute products. The bargaining power of suppliers is low in energy drink industry since there are large number of suppliers who manufacture cans, supply ingredients, etc. Bargaining power of customers in this industry is relatively high because they are likely to switch from one brand to another. Economical reasons tend to decrease brand loyalty percentage of customers. Competitive rivalry occupies central position of competitive dynamics of energy drink. There is wide range of brands present in this industry. Five energy drink brands are present which occupies maximum market share across the globe (Porter, 2008). These brands are Red Bull, Monster, Rockstar, Lucozade and Burn. All of these energy drink brands shall prove to be strong rivals of “V” energy drink. Their respective sales percentage as of last financial year has been highlighted in figure 5. Figure 5: Top 5 energy drink brands (Source: Foster and Vasavada, 2003) Red Bull has acquired maximum market share in energy drink industry. In USA, this brand possesses a sizeable lead but in global context it has established itself as a dominant player. Threat of new entrants is high in this industry due to low levels of investment required for production facilities. There exists local and national market opportunities for new entrants. Substitute products can be considered as a major threat in this market. These substitutes are sports drinks and soft drinks. Sports drinks usually are witnessed to offer similar product benefits and that too at lesser price. Setting Product Strategy Product strategy is all about unique characteristics which differentiate one product brand from another. This kind of strategy is closely knitted with positioning strategy of a product. For instance positioning is totally based on two elements like point of difference and point of parity. Point of difference shall be created by this product through offering lower prices and superior quality to its customer base. Red Bull is the strongest contender in this industry. “V” energy drink can compete with this brand only by being within affordability range of target customers. Point of parity is another important component of product strategy. It is difficult to differentiate between energy drinks because all brands offer similar product features and benefits. “V” energy drink would be differentiated on basis of its competitive nature. This product shall be made available in various flavors. It is easier to locate energy drinks in big retail chains or supermarkets. However this brand shall focus on gaining visibility in smaller cities and small shops. Innovative flavors will be main unique selling proposition of the brand. These flavors shall be aligned with taste and preferences of target customers (Mcfarlin and Sweeney, 2008). For instance, children would have preference towards chocolate or strawberry energy drink, whereas young adults might prefer mint flavor, etc. These differences in taste shall be taken into consideration while manufacturing the product. On the other hand, can sizes would also vary as per need and affordability range of customers. Those customers who are inclined towards bulk purchase will buy bigger cans or bottles of 1.5 liters. There would be smaller cans of 250 ml or 500 ml also available in retail outlets or smaller shops. Designing and Managing Services The services associated with the energy drink would be either customer service support or quality management techniques. Managing services is mainly related to supply chain activities that are undertaken by firms to deliver product to end customers. PepsiCo Inc., over the years has actively indulged into manufacturing, marketing and distribution of products. “V” energy drink is a completely new product category for the firm and hence more precautionary measures needs to be adopted. Firstly service design shall be linked with information transmission from suppliers to retailers to end customers. Customer service support needs to be effective for any new product launch. This is because any customer feedback beneficial for the company in long-run can be incorporated in supply chain process. Customers should be able to communicate easily with respective department. Services also denote the overall effectiveness of a company in terms of achieving balance between supply and demand. “V” energy drink will maintain flexibility in its energy drink production and feedback collection process. This flexibility would enable the firm to incorporate changes as and when required. Quality control techniques shall help the firm to manage its services efficiently. These techniques would encompass evaluating product quality at every possible stage. There will be a particular department who shall undertake function of quality control. A decentralized approach would be adopted by the firm in context of this new brand. This shall be done in order to include region wise taste and preferences in brand functionality. The major portion of supply chain activities like manufacturing, bottling, etc will be controlled by the company. There would be less of third party involvement in service design and management. Developing Pricing Strategies and Programs Pricing strategies is one of the most essential factors in marketing mix. This strategy usually denotes competitive position of a company. There are wide array of pricing techniques implemented by organizations. Energy drink industry is a dominated sector and it offers opportunities for future growth. “V” energy drink will gain significance in the market place only when it is acceptable to customers. Affordability range is a prime area of concern for many companies. To be more precise this brand should firstly evaluate affordability range of its target audience. Pricing shall be based on this form of affordability criteria. There exist different types of pricing strategies like market penetration strategy, cost plus pricing strategy, premium pricing strategy, etc. For this particular product, cost plus pricing strategy would be appropriate. The major goal of this brand is to establish its market position as well as address its overall operational costs. Cost plus pricing strategy comprises of different set of elements that can enable the firm to accomplish its goals. “V” energy drinks being promoted with the support of cost plus pricing strategy shall be more attractive to consumer market segment. Price of the product will vary with product sizes. The smallest pack of this energy drink would cost $5. It would increase with minimal percentage as product size increases. Cost plus pricing technique is usually adopted by all those companies who desire to establish a strong position in the industry. Revenue margins can be effectively acquired only when operational costs are addressed and savings are passed to customers in terms of lower prices. Low priced energy drink brands are less in the market and it would be an opportunity for PepsiCo. For next three years the company shall focus on offering value to customers rather than obtaining high profit margins. Designing and Managing Integrated Marketing channels (Distribution) Marketing channels basically denote distribution mechanism implemented by a firm so as to deliver products on time to end customers. These channels change as per nature or characteristics of products being delivered to customers. It is clearly evident that distribution channels utilized for consumer goods will not be similar to that of industrial goods. Vertical and horizontal marketing integration facilitates easier delivery of products from one end to another. Vertical integration method shall be beneficial for “V” energy drink. This method will ensure tight control over consumer behavior. Conflicts present between channel members can be easily resolved through vertical integration approach. Channels members can contribute effectively in this approach and it eventually increases efficiency of distribution system. Duplication of services is eliminated with the help of vertical integration. Distribution system should be designed in such manner that it guarantees economies of scale. Vertical market integration in this context is advantageous for the brand since it would provide economies of scale. PepsiCo Inc is solely responsible for its distribution system. Market coverage can be increased by the firm only through incorporating third party logistic partners. The second level marketing channel would be ideal for “V” energy drink. There will be four essential components involved in this form of marketing channel like producer, wholesaler, retailer and customer. Manufacturer shall be responsible for delivering products to respective warehouses from where products will be delivered to wholesalers. These wholesalers shall distribute products to retailers of specific regions, which would finally reach to customers. Integration will be achieved by delivering energy drink along with other beverages manufactured by PepsiCo Inc. Economies of scale can be acquired only through such integration functionality. Managing Retailing, Wholesaling, and Logistics Logistics system of energy drink needs to be strong enough so as to ensure there is minimum lead time. Smart transport facilities are an area of concern for manufacturing firms in order to decrease level of carbon dioxide emissions. The medium of transportation for “V” energy drink would be either ship or train. These two transportation medium is cheap and faster. Logistics system should be managed appropriately so that it is aligned with business strategy. Trucks would be utilized by the company only upon emergency. Bulk orders can be efficiently delivered through ships and trucks. Transportation activities will prove to be efficient in this case due to light weight and compact shape of cans in comparison to glass or PET bottles. This energy drink will be transported to regions across the globe. Long distances would be covered by energy drink cans by rail or ship transport system. Priority for PepsiCo is to dispatch maximum products through these transportation medium. Energy drink cans is an ideal way of transportation packaging. 40% of overall truck load is saved due to this form of packaging. Retailers should be managed properly as it is correlated with product visibility and success. In the initial days excessive product quantity will not be delivered to retail outlets. Products shall be dispatched only on placing orders by retailers. For the first year, significant profit margin will be shared with retailers in order to acquire desirable shelf space. On the other hand, bulk amount of products will be delivered to wholesalers, so as to ensure that it will be distributed across smaller cities or shops. Wholesalers and retailers will also be encouraged to provide their feedback. This in turn would enable the company to adopt best practices in future years. Designing and Managing Integrated Marketing Communications Marketing communications is an essential element when it comes to new product launch. There are different techniques included within integrated marketing communications framework. Brand message needs to be consistent while adopting traditional or non-traditional media channels. Integrated marketing communication comprises of wide array of marketing tools such as advertising, sales promotion, experiences or events, public relations, direct marketing, interactive marketing, word-of –mouth marketing and personal selling. The budget of 500, 000 which has been allocated for this new product launch needs to be distributed logically in order to create maximum impact on customer base. “V” energy drinks mainly targets students, athletes and working professionals. It has standardized brand message for all target group members which states – “It all starts with V (VICTORY)”. This message will be integrated in any form of marketing communication channel. Budget would be allocated according to effectiveness of communication channels. Integration will be achieved only when standardized brand message is communicated across wide customer base. Integrated marketing communication can be managed by establishing a link amongst all marketing channels. Advertising would be the prime focus of the company. Innovative advertisement campaigns shall capture customer attention for long term success of “V” energy drinks. It would be followed by events and sale promotion activities. These activities will reflect upon message outlined in advertisement campaigns. There would be separate marketing teams for direct marketing activities, interactive marketing, events, public relations, etc. The entire process of integrated marketing communications shall be managed through five distinct steps (Picton and Broderick, 2009). Firstly the firm would identify customer market segments and then simultaneously evaluate prospects. It would be followed by delivering brand message to prospects. PepsiCo in later phase will indulge into calculating return on investment. This form of calculated data is essential since it would form basis of budget allocation in next year. Management of integrated marketing communications has been highlighted in figure 6. Total Budget 500,000     Percentage of allocation Amount Advertising 18% 90000 Sales Promotion 22% 110000 Events or Experiences 27% 135000 Public Relations 12% 60000 Direct and Interactive Marketing 16% 80000 Personal Selling 5% 25000 Total 100% 500000 Figure 6: Budget Allocation As per figure 6, maximum budget will be allocated to events or experiences, followed by sales promotion activities. This is because energy drinks is largely associated with athletes or sports events. Event sponsorship or hosting real life events would be an effective medium to attract wider base of customers. Managing Mass Communications Mass communications can be considered as a medium to interact with large base of customers. There are innovative ways of communicating with wider customer segment such as advertising, events, public relations and sales promotions. It can be stated that each of these medium possesses their own set of benefits or loopholes. Advertising is an effective way to communicate with target audience. This activity shall be managed by the company through portraying a common brand message across traditional and non-traditional media channels. Advertisement campaigns will be launched by the firm across TV channels, radio, social media, newspapers, health magazines and billboards. Brand message being broadcasted would be similar across all media channels. Sales promotion activities are a common phenomenon for all companies undertaking new product launch. These activities for “V” energy drink shall constitute offering bulk discounts, providing smaller product version, brand endorsement activities, etc. All of these activities will deal with product characteristics or its unique selling proposition. Events are usually organized by PepsiCo for its entire product line. These events highlight benefits being offered by the product. Event sponsorship will be managed in initial days of product launch (Fill, Hughes and Francesco, 2013). Then focus shall be shifted towards hosting any product related event to gain customer attention. Public relations would be managed by recruiting PR personnel, who shall be actively indulged into maintaining brand image in the market place. Brand building activities such as relating the product with any social event would be a part of public relations. Managing Personal Communications Personal communications can be denoted as a medium through which producer can directly communicate with customers. There are many products that are complex by nature. In such cases proper training needs to be provided to customers so that they are aware about product intricacies. Direct and interactive marketing will prove to be beneficial for this energy drink because customers will get to know unique characteristics of this particular drink. There are wide array of energy drinks available in the industry. Hence it becomes essential to highlight unique selling proposition of such product. Direct marketing would take place at retail outlets where “V” energy drink shall be promoted. Personal selling usually gains significance for high value item. However personal selling in energy drinks segment will indeed be an innovative way to reach out to target audience. Personal selling will be exhibited in supermarkets where large percentage of target audience shall be present. The company shall possess a separate team for personal selling activities (Dahlen, 2009). This team’s members will have required skills and product knowledge to approach customers and influence them to buy products. Word of mouth publicity is often regarded as cost effective marketing strategy. This strategy can be implemented only when people are familiar with product or brand name. Word of mouth publicity will motivate other customers to opt for this energy drink. References Dahlen, M. (2009). Marketing communications: a brand narrative approach.UK: Wiley. Fill, C., Hughes, G. and Francesco, S. (2013). Advertising, strategy, creativity and media. USA: Pearson. Foster, T. and Vasavada, P. C. (2003). Beverage quality and safety. USA: CRC Press. Mcfarlin, D. B. and Sweeney, P. D. (2008). International management. New Delhi: Dreamtech Press. Picton, D. and Broderick, A. (2009). Integrated marketing communications, 3rd edition. Harlow: FT- Prentice Hall. Porter, M. E. (2008). Competitive advantage: creating and sustaining superior performance. New York: Simon and Schuster. Rupert, J. (2014). How to start a energy drinks business. New Jersey: MicJames. Read More