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Introduction

This assignment sample discusses the concept of Marketing Mix and the various theories associated with it. It also provides an in-depth analysis of the marketing mix strategy of PepsiCo, one of the leading American multinational food and beverage Corporation.

PepsiCo is the second largest consumer product company in the world. It has its prominent presence in almost all the countries around the globe. Apart from the popular beverages, it enjoys a leading market share in various snack foods. Here, we will be discussing the dynamic process of the marketing mix for PepsiCo.

Marketing Mix Analysis

Definition:

Marketing refers to the set of strategies and action that are used to promote and sell a product or a service by the respective producer or organization. Marketing Mix is an important segment under the comprehensive marketing strategy which is used by all marketing experts to determine the feasibility and effectiveness of a product for its potential consumers.

History of Marketing Mix

The term ‘Marketing Mix’ was coined by Neil Borden in the famous paper ‘The Concept of Marketing Mix’ which he presented before the American Marketing Association. Borden made a comprehensive study in his paper where he identified the role of a marketing manager and the various ingredients that ensure the success of the product. He considered the following ingredients:

After he conceptualized the theory of Marketing Mix, various explanations were made on the topic by different eminent researchers and marketing experts.

In the year 1960, E. Jerome McCarthy made a significant contribution to this Marketing Mix concept when he grouped all the ingredients suggested by Borden and introduced the four controllable categories. He identified Product, Price, Promotion and Place (Distribution) as four indispensable aspects for a successful marketing mix. He commented that an accurate and planned mix of these four Ps would ensure success and generate optimum income for the organization. Since then it came to be known as the ‘4Ps of Marketing Mix’.

This 4P classification is used by every marketer throughout the world. With the advent of the digital age, the marketing strategies have further been improvised and modified. Today, most of the researchers include the fifth ‘P’ in the model which is referred as ‘People’.

All these 5Ps of marketing mix influence each other. These five parameters, subject to internal and external constraints help to reach the anticipated goal of the organization.

The 4P's/5P's of Marketing Mix

As noted, a development over the McCarthy’s model, the service marketing mix comprises of 4P's/5P's. They are as follows:

Let’s learn these five components in detail.

• Product

A product refers to an item that is conceived and developed by the company in order to satisfy the consumer demands. The term product includes tangible items as well as services provided by the company. Examples of tangible items are mobile phones and a bottle of deodorant whereas a service refers to software prepared for a computer operating system.

• Price

Price refers to the amount paid by the customer to buy the product. Determining the price is very important which affects the demand of the product. It also decides the final profit derived from the product. Setting up the price should be based on the affordability and the perceived value of the product. The marketing experts need to decide the optimum price, which should neither be too high to make the customers disinterested nor too low which can affect the survival of the product.

• Place

Also referred to as distribution, the placement of the product is an important part of the marketing mix. It confirms the availability of the product to all the potential customers. The marketing experts need to exploit the distribution channels and effectively position the product in all the feasible places from which the buyers can procure it conveniently.

• Promotion

Promotion refers to all the methods of communication through which the producer develops an interest among the potential customers about the product. Advertising, public relations and word of mouth are various promotion strategies that the marketing experts employ to increase product awareness, recognition and sales.

• People

Every company depends on it employees and its people who work relentlessly to make the launch of a product successful. Having the right people who are competent to execute the responsibility given to them is equally important. It not only includes the efficiency of the employees but also the skill and resources that they need to have to accomplish the task. Some experts also include the customers and the processes that the employees use to produce the product in this People component. They define that it is important to realize the requirements of the customers when they are introducing a new product.

Importance of Marketing Mix Anlysis

The importance of marketing mix lies in the ability to help a business strive for success. The marketing experts need a lot of understanding, knowledge and expertise to conduct and administer the whole procedure, from determining the quality to the promotional procedures. The marketing mix provides the comprehensive tool through which they can control the whole procedure.

Marketing mix provides inclusive and holistic marketing directions and features different ways to communicate with the customers, and also helps in value creation.

Analysis of Marketing Mix of PepsiCo

PepsiCo profile:

Marketing Mix is a dynamic process here which alters with the changing environment. PepsiCo was formed in the year 1965 when the Pepsi Cola Company acquired Frito-Lay Inc. Since then PepsiCo has expanded rapidly and has now over $22 billion worth brands worldwide. Today, PepsiCo is the second largest food and beverage producer in the world which generate around $67 billion revenue in the year 2013.

The main acquisitions of PepsiCo brand, apart from Frito-Lay Inc in the year 1965, are Tropicana (in 1998) and Quaker Oats Company in the year 2001. Now PepsiCo has segregated its business into two sections – one which provides beverages and mineral water and the other which deals with snacks and food items.

Internationally, PepsiCo shares a rivalry with another popular brand Coca-Cola Company. In some markets like North America, PepsiCo is the largest beverage company in net revenue while internationally Coca-Cola Company enjoys supremacy over it. The intense business rivalry between these two Cola giants gets resonated through the different marketing campaigns and strategies of these two companies. The RC Cola of Dr Pepper Snapple Group is the third largest soft drink manufacturer which is also considered to be a potential competitor for PepsiCo.

PepsiCo - 5Ps of Marketing Mix

PRODUCT:

According to the worldwide net revenue of the year 2012, PepsiCo’s product mix consists of 63% foods and 37% beverages. With its international expansion, it has introduced several products which have received enormous popularity throughout the globe. It started with producing cold beverages and now its product width encompasses snacks, health drinks, breakfast cereal and packaged purified water.

PepsiCo offers its various popular products in over 200 countries. At least 22 brands of PepsiCo have annual sales of above $1 billion, a rare distinction in the whole world.

Main Products of PepsiCo

In Beverages

PepsiCo with the accomplished expansion in the food and snacks section has been successful in reducing its dependence on beverages. However, on the other hand, Coca-Cola Company did not take any such initiative.

PRICE

In the beverage and snacks industry comes under the Oligopoly industry which has few sellers but numerous buyers. This industry is dominated by two giants PepsiCo and Coca-Cola Company. Accordingly, the pricing of any one product will influence the other. But the price war is more or less absent in the industry as both of them maintain a clear pricing policy.

PepsiCo pricing is based on the customer’s perception of value. It is more concerned to give the customers a refreshing experience on every bottle rather than being just a thirst quencher. A company is said to use a mature pricing strategy only when it helps to reach the desired profit level and also meet the customer’s needs. Therefore, PepsiCo employs price discrimination strategy to maintain its growth. It can be reviewed under two categories:

• Direct Price Discrimination Strategy

For the same quantity, PepsiCo charges different prices on its products in different countries. As the cost of manufacturing, licensing, remuneration of employees and transportation varies in every country, it is compelled to charge different prices to sustain their profit margins. The fluctuating currency value of the respective country with regard to international financial condition also contributes to this direct price discrimination.

• Indirect Price Discrimination Strategy

PepsiCo is also known to provide promotional discounts to the customers from time to time especially during the festivals. It can also be noted in this regard that a 250 ml pack will be relatively higher priced compared to the 2 liter bottle of any soft drink brand of PepsiCo. One of the main strategies of indirect price discrimination strategy is that it provides significant discounts on bulk sales. The top retailers like Walmart of USA and Big Bazaar in India are bulk buyers which purchase products of PepsiCo in large quantities and receive a substantial discount overall. The same holds truth for KFC which is also a bulk buyer of PepsiCo beverages.

In the recent years, PepsiCo has started the usage of inexpensive and recyclable bottles which will reduce the manufacturing cost and subsequently increase the profit margin.

PLACE

PepsiCo has one of the largest distribution channels in the world which ensures that its every product is available in every locality where their potential customers reside. As, PepsiCo focuses in more than 200 countries, the distribution chain is competent uses a variety of transportation methods to reach the customers. PepsiCo follows two distribution channels to reach their buyers. They are as follows:

All the products produced by PepsiCo follow the same distribution channel. According to the distribution chain it follows, the first distribution channel falls under the category of Direct Store Delivery (DSD). In DSD, PepsiCo takes the responsibility to deliver the products directly to the retail stores. It ensures maximum visibility but also involves a higher cost to the company. PepsiCo also uses Third Party Distributor Networks to increase their prominence and sales. It distributes its snacks, beverages to various restaurants, schools, universities and stadiums.

Since 1965, it has taken vast steps to expand in every part of the company. So, the company planned initiatives to build up their base in Brazil, United Kingdom, Australia, China and India, all the markets with millions of prospective customers and to decrease their dependence on the sole US markets where they face consistent challenges from Coca-Cola Company.

PROMOTION

Without proper promotions, no product can sustain in the competitive industry. One of the strongest reasons why Pepsi enjoys such a comfortable position in the global markets is the use of vigorous promotional strategies. Apart from the extensive marketing of all its products and various promotional strategies, PepsiCo also gets into product alliance and partnerships with other companies to increase its sales and prominence. Accordingly, PepsiCo brands all its products into three different promotional categories:

• Fun for You

It includes all the popular brands like Lays, Mountain Dew, Pepsi, Cheetos, Mirinda, etc which can be enjoyed anytime with family, friends and also when alone.

• Good for You

The category includes nutritious and healthy products which include Tropicana, Aquafina, Quaker oatmeal, etc.

• Better for You

This category includes snacks and breakfast meals with low fat content and includes a variety of nutrients. Some products which fall under it are Walker, Baked Lays, Pepsi Next, Alvalle and some flavors of Quaker.

PepsiCo has identified its targeted customers as teenagers and young adults between the ages of 12 to 35. Their promotional strategies are formulated accordingly. Some of the strategies used by them are:

• Advertising

PepsiCo uses both the electronic and print media for its advertising purposes. Through this advertising, it informs the customers about the introduction of new brands and to increase the sales of the existing brands. These days, PepsiCo also uses the digital world for marketing its products. It has its prominent presence in YouTube, Facebook and Twitter. Each of the advertising uses a specific international slogan. It is also complemented with national slogans to make it more appealing for the customers of different countries.

In the year 2013, PepsiCo launched its new international global slogan, “LIVE FOR NOW!”

Apart from these slogans, it also does marketing in different international sporting competitions to promote is products.

The following illustration explains the advertising expenditure of PepsiCo in USA in the year 2013.

• Celebrity Endorsements

Various famous personalities from the entertainment and sports sector have promoted different products produced by PepsiCo. As these personalities are idolized by the young generation, it has a profound effect on the sales of PepsiCo products. From Michael Jackson in the 1980s to Beyoncé Knowles in this 21st century, the most famous global personalities have endorsed Pepsi and its other products.

Celebrities who have been paid to advertise for Pepsi products are:

• Public Relations

PepsiCo also uses different promotional campaigns from time to time where the organization releases press releases about their products to increase their marketability. Through these press releases, they inform about the reduction in prices, an extra quantity of drinks, the introduction of new flavors and many more. It also publishes an annual report and organizes different seminars to maintain a regular interaction with the customer, consumers, shareholders and people associated with it.

• Direct Marketing

PepsiCo also uses the direct marketing strategy according to their alliance with the leading fast food centers like KFC, the famous pizza chain Pizza Hut and many more. They also have exclusive tie-ups with some leading e-commerce giants through which they sell their products.

With each year, PepsiCo increases its spending on its promotions and advertising. Focused on brand building, PepsiCo spent $3.9 or around 6% of the total revenue on advertising and marketing in the year 2013.

PEOPLE

The structure of PepsiCo global operations has changed multiple times with its international expansion and introduction of new products. Now, the operations of PepsiCo are segregated into four main divisions. They are:

• PepsiCo Americas Foods
• PepsiCo Americas Beverages
• PepsiCo Europe
• PepsiCo Asia, Middle East and Africa

Overall in these four divisions about 285,000 people are employed worldwide (figures of 2010). The headquarters of PepsiCo is located in the town of Harrison, New York. The current leadership of PepsiCo is:

• Indra K. Nooyi, Chairman and Chief Executive Officer
• Hugh F. Johnston, Chief Financial Officer and Vice Chairman
• John Banner, Executive Vice President, Communications
• Sanjeev Chadha, CEO, PepsiCo Asia, Middle East and Africa
• Albert P. Carey, CEO, North America Beverages
• Dr Mehmood Khan, Chief Scientific Officer

The website of PepsiCo provides a wealth of information about the company, its rich history, leadership, brands, goals and values. It is one of the very few companies which have experienced an increase in the worldwide revenue. In the year 2014, the annual revenue surpassed $66 billion.

It has received accolades and recognition of its performance throughout the world. The most recent honors that PepsiCo received are as follows:

• Named among the world’s most admired companies (2015) by Fortune’s World
• Ranked 43rd in the Fortune 500 List (2014)
• Ranked 22nd in Best Global Brands (2013) by Interbrand
• Ranked 33rd in the world’s most respected companies list (2014) by Barron’s World
• Awarded the best governance risk and compliance program (2014) by New York Stock Exchange
• Included in the North America sustainability index for 9th consecutive year and the World Index for 8th consecutive year (2014) by Dow Jones
• Named among the top global companies in Green Rankings (2014) by Newsweek

Customer Service - It also maintains a customer care service where they get to know about the opinion and suggestions from the customers. It is available through phone and email services which is managed by a separate customer care executive team. PepsiCo maintains a distinct customer service in every country so that they can cater better service to the customers.

Apart from the usual business, PepsiCo also engages in different philanthropic activities around the world. It has taken various initiatives in the last two decades for protecting the environment and its resources. Now, the packing facilities of PepsiCo use recyclable plastic which do not damage the environment.

Graphical Analysis of PepsiCo Marketing Mix

CONCLUSION

PepsiCo is one of the most reputed brands which are famous and popular throughout the world. By ensuring the quality of all its individual products, perceiving the need of the customers, introducing new products and through its innovative promotional strategy it has been successful to enthrall its consumers. It maintains a strong reputation which helps it compete with another giant of this FMCG industry, Coca-Cola. In this assignment, we learned about the marketing mix of PepsiCo which is effective and efficient which helps to reach the objectives set by the management of this esteemed company.

References

• http://economictimes.indiatimes.com/definition/marketing-mix
• http://marketingmix.co.uk/
• http://www.netmba.com/marketing/mix/
• https://en.wikipedia.org/wiki/Marketing_mix
• http://www.pepsico.com/
• http://www.statista.com/topics/1503/pepsico/
• http://www.marketing91.com/marketing-mix-of-pepsi/
• http://www.professionalacademy.com/blogs-and-advice/marketing-theories---the-marketing-mix---from-4-p-s-to-7-p-s
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• http://www.slideshare.net/FatemaTuzZzohora/a-marketing-plan-for-pepsi-assaignment