7/21/2019 Product Life Cycle of Pepsi _ Manifested Marketing Blog

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Manifested Marketing BlogBy Josh Blatchford, Founder and Account Manager of Bitnewt

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Pr oduct Life Cycle of P epsi

This post is a business case study on Pepsi s product life cycle . This is a valuable too l for mar keters to managethe product as it progresses through its life cycle. Managers are encouraged to anticipate industry changes andhave strategies in place for each stage it promotes a proactive planning approach.

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There are five key stages of the product 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 areinsufficient to recuperate development costs

3) Growth sales being to increase rapidly as the product gains popularity among the early majority. It is at thisstage that profits are first generated.

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

5) Decline eventually all products s top selling, such as VHS tapes. As expected, sales begin to decline until theproduct is no longer profitable .

At each stage, marketers should adapt their marketing strategies to the external changes in the market place. Letstake a look at how PepsiCo have used the product life cycle to successful grow Pepsi into one of the mostconsumed drinks in the world.

http://manifestedmarketing.com/2012/12/22/nissan-juke-unique-extension-strategies/http://manifestedmarketing.com/2011/01/19/pepsico-environmental-sustainability/http://manifestedmarketing.com/wp-content/uploads/2014/01/PLC-Template1.pnghttp://manifestedmarketing.com/2012/12/22/nissan-juke-unique-extension-strategies/http://manifestedmarketing.com/2010/09/20/monopoly-revolution-product-development-life-cycle/http://manifestedmarketing.com/2012/03/29/apple-an-introduction-to-marketing-strateg/

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Product Life Cycle of Pepsi:

1) Pre-launch the 1890sIn 1898, pharmacist Caleb Bradham developed Brads Drink, a formula designed aid digestion. After strong interestfrom consumers in his pharmacy, Brad renames the drink Pepsi-Cola and purchases the trademark Pep Cola for $100. The origins of Pepsi are very similar to that of Lucozade , which was also first produced for medicinalpurposes.

Although $100 does not appear much, adjusted for inflation that amount of money in the 19th Century is equivalentto $2516.34 in 2014. This highlights the difficulties companies have in the pre-launch phases with surviving periodsof negative cash-flow, large research costs and development expenditure.

2) Introduction 1902Brad began selling Pepsi-Cola and achieved sales 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 productwas 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 skimmingstrategy, to quickly recuperate start-up costs.

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

http://www.pepsistore.com/history.asphttp://www.pepsistore.com/history.asphttp://manifestedmarketing.com/2010/07/06/lucozade-market-development/http://3.bp.blogspot.com/-O0-6JL5JFtg/TqLooFd9NTI/AAAAAAAACBE/DNefkAhakWI/s1600/Barney+Oldfield.jpg

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ver s ng : o genera e awareness, a ce e r y en orsemen w race -car r ver arney e a ove wasutilised.

Sales-promotion: Pepsi-Cola was not launched with any promotions. However, if promotions are used at this stagethey 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 ouncesof Pepsi-Cola, but only 6 ounces of Coca-Cola.

Objectives: During growth, gaining market share is critical. Hence, Pepsi-Cola was marketed aggressively againstCoca-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 reasonswhy the brand grew massively in this time period.

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

Advertising: It is vital to capture the early majority stage, requiring that advertising was designed to effectivelyreach a mass audience. For example, Radio was selected as a medium because of its low cost-per reach clickhere to listen to an ad from the 1930s ! During this time, the name was changed to just Pepsi to help differentiatethe brand from Coca-Cola. Lastly, the 1975 Pepsi Challenge marketing campaign was so effective it almostdestroyed the Coca-Cola brand!

http://bcreative.al/wp-content/uploads/2011/12/old-pepsi-ads-31.jpghttp://web.archive.org/web/20070615171027/http://www.oldradiofun.com/downloads/Commercials.19xx.xx.xx_Pepsi_Cola.mp3http://www.slate.com/articles/business/rivalries/2013/08/pepsi_paradox_why_people_prefer_coke_even_though_pepsi_wins_in_taste_tests.html

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

4) Maturity 1980s Present day

Since the 1980s Pepsi has been in the maturity stage of the product life cycle, helping the parent company earnalmost $20 billion in annual revenue .

Objectives: At this stage products are most profitable, which is why PepsiCo are likely to consider Pepsi as a CashCow and 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 as extension 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 verycompetitive 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 beenmainly achieved through the use of celebrity endorsements like Beyonce and Michael Jackson to position theproduct as a younger and edgier alternative to Coca-Cola

Sales-promotion: To keep consistent with the brands value-for-money positioning, Pepsi frequently have bothvalue 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.

http://rollingout.com/photos/celebrity-photos-photos/celebrities-who-have-endorsed-pepsi-other-than-beyonce/http://online.wsj.com/news/articles/SB10001424127887323478004578303720031975996http://manifestedmarketing.com/2012/12/22/nissan-juke-unique-extension-strategies/http://manifestedmarketing.com/2010/07/19/audi-the-boston-matrix/http://shard2.1stdibs.us.com/archivesE/art/upload/123/5345/60-PEPSI-web.jpghttp://manifestedmarketing.com/2013/11/09/hp-intel-nissan-corporate-celebrity-endorsements/http://manifestedmarketing.com/2010/09/09/pepsi-raw-new-product-development/

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5) Decline sometime in the future

Despite growing consumer interest in healthier lifestyles, sales of Pepsi show no signs of slowing down in theimmediate future. Regardless of this, it is recommended that Pepsico have the following strategies ready to be beimplemented 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 scaleand minimize costs.

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

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

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

http://shirtoid.com/wp-content/uploads/2010/06/pepsi-fail.jpg

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

Joshua Blatchford, author of Manifested Marketing, 05/01/2014

Related posts:

1. Pepsi Raw New Product Development2. Monopoly Revolution Product Development Life-Cycle

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