CB 2601 Marketing Final Report

City University of Hong Kong

2017-2018 Semester A
CB 2601 - Marketing
Lecturer: Mr. Alex Tham
Submission Date: 5 th December, 2017

Course Session: C01

Group Number: 3
Product: Pepsi Cola

Group Members:
No. Student ID Student Name Program / Major Year
1. 55073591 Chan Kwan To, Nereus BBA / Finance 2
2. 55224601 Tang Man Chung Tommy BBA / Economics and Finance 1
3. 55017986 Pang Tat Kwan, Gary BBA / Finance 2
4. 55054957 Cheung Ho Ying, Cathy BA / MDCM 3
5. 55129763 Leung Ka Kit, Jerry BBA / Finance 2
6. 55089496 Chung Cheuk Wang, Roy BBA / Finance 2
7. 55218631 Lau Pak Ho BBA / BDIS 1
8. 55235295 Ng Sin Tung, Sindy BBA / Economics and Finance 1

Contact Person and phone number: Chan Kwan To, Nereus 96832397
Contact email: [email protected]
 CB 2601 Marketing Final Report

Content
Company Background
Description of current corporate strategy and Organizational culture
Part A: Situation Analysis
A1) Company Review
A1.1 - Implications from Company Review
A2) Competitor Review
A2.1 - 4P Strategies adopted by the competitors
A2.2 - Implications from Competitor Review
A3) Environment Scanning
A4) Consumer Review
A4.1 - Purchase decision process
A4.2 - Major psychological influences
A4.3 - Socio-cultural influences
A5) SWOT Analysis – A summary of above

Section B: Recommendations
B1) Target Market and Positioning Strategies
B2) Marketing Objectives
B3) Marketing Mix Programs
B3.1 - Product
B3.2 - Price
B3.3 - Place
B3.4 - Promotion
B3.4.1 Advertising, Sales Promotion and Public Relations
B3.4.2 Social Media and Mobile Marketing
B3.4.3 Personal Selling
B3.4.4 Interactive Marketing
B3.4.5 Multichannel Marketing
B4) Marketing Calendar

Appendix

Reference
 CB 2601 Marketing Final Report

Company Background

PepsiCo, a leading company in the food and beverage industry, operates in almost all over the world. It
provides a lot of choices to the customers by having a complementary food and beverage brands. It manages
22 brands including Pepsi-Cola, Mountain Dew, Walkers, Gatorade, Quaker, Ruffles, and Tropicana. PepsiCo
sells diverse products, for example, snacks, soft drinks and sports nutrition. PepsiCo is expanding its business
by selling products and serving customers in more than 200 countries around the world.

PepsiCo’s vision is to have a top-notch financial performance in the long term by developing a sustainable
business strategy and bringing positive effects to the society and environment. PepsiCo’s mission is “to
provide consumers around the world with delicious, affordable, convenient and complementary foods and
beverages from wholesome breakfasts to healthy and fun daytime snacks and beverages to evening treats”
(Pepsico, 2017).

Organizational culture is important for a company. PepsiCo’s culture is more than just focusing on the
products, but creating a healthy workplace for the employees to encourage them to be creative and mindful,
thus achieving sustainable growth.

PepsiCo operates the business under six guiding principles. First, PepsiCo believes that caring for the
customers and the world is equally important as making profits. Second, PepsiCo is proud to have its product
ingredients, and it only sells products that it has confidence in. Third, to encourage innovation and develop
new opportunities, PepsiCo embraces diversity and engagement. Fourth, PepsiCo commits to be honest, true,
and accurate in every communication with the customers. Fifth, PepsiCo thinks respecting others and
succeeding together is very important when working as a team. Sixth, PepsiCo strives for a balance between
short-term and long-term objective to maintain a continuous growth of the company (Pepcico, 2017)

Description of current corporate strategy and Organizational culture

As Pepsi cola has a relatively high market share, but low market growth rate, we can assume that Pepsi cola
is the cash cow of the PepsiCo, based on the BCG Matrix. As a cash cow, Pepsi cola can generate stable
income without investing enormous amount of money on it. Therefore, Pepsi can make use of the money to
invest on a new product or to promote the star product. The strategy which the company has adopted is to
remain a considerable amount of money for the promotion of Pepsi Cola to ensure that the company has
sufficient money to develop new products, such as Pepsi True and Pepsi White.
In addition, the market-product strategies which Pepsi Co. is using for expanding sales revenues are: Market
penetration, by advertising Pepsi Cola on their current market; Product development, selling new products to
the existing market, such as Pepsi Diet and Diet Pepsi Lemon.
Organizational culture is important for a company. PepsiCo’s culture is more than just focusing on the
products, but creating a healthy workplace for the employees to encourage them to be creative and mindful,
thus achieving sustainable growth.
PepsiCo operates the business under six guiding principles. First, PepsiCo believes that caring for the
customers and the world is equally important as making profits. Second, PepsiCo is proud to have its product
ingredients, and it only sells products that it has confidence in. Third, to encourage innovation and develop
new opportunities, PepsiCo embraces diversity and engagement. Fourth, PepsiCo commits to be honest, true,
and accurate in every communication with the customers. Fifth, PepsiCo thinks respecting others and
succeeding together is very important when working as a team. Sixth, PepsiCo strives for a balance between
short-term and long-term objective to maintain a continuous growth of the company (Pepsi Co., 2017)
Section 1: Situation Analysis
A1) Company Review
Existing 4P’s
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Product:
Carbonated soft drinks are the main products of PepsiCo. Among various PepsiCo’s carbonated soft drinks,
for example, Diet Pepsi and Pepsi Zero Sugar, Pepsi is the leading and most popular product. Pepsi is “the
bold, refreshing, robust cola” (PepsiCo, n.d.), which is stated on the PepsiCo’s website. From the nutrition
facts label, it is noted that Pepsi contains different ingredients such as carbonated water, high fructose corn
syrup, sugar, caffeine and natural flavor. Besides, Pepsi has different package size, ranging from 330ml to
2.5L, which can satisfy the different needs and preferences of the customers. However, the design of the
package may not attractive and effective enough to meet the taste of its target customers.

Price:
Although Pepsi is using market-oriented pricing strategy to attract the customers, the current pricing strategy
is not competitive enough to compete with its strong competitor, Coca Cola. In Taste, a chain supermarket in
Hong Kong, a can of 330ml Coca Cola is sold at $6, while a can of 330ml Pepsi is sold at $7, which is higher
than Coca Cola. Moreover, for Coca Cola, there is a promotional discount that two packs of Coca Cola are
sold at $46.9, while for Pepsi, buying two packs of Pepsi can have a pack of Supreme Oolong Tea or Supreme
Meta Tea. For most customers, direct price discount is most attractive to them. Therefore, the pricing strategy
of Pepsi is not effective.

Promotion:
PepsiCo promotes its product through advertising, sales promotion and public relations. For advertising, it
primarily relies on media to promote its product. Celebrity endorsement, for example, Aaron Kwok and Louis
Koo, is popularly used in different media such as television, print media, YouTube, and Facebook. As for
sales promotion, it sporadically applies discounts, coupons, contests, and sweepstakes. In 2017, Pepsi and
issue worked together for a random draw to encourage the customers to make a purchase. Regarding public
relations, it attempts to increase exposure through events and sponsorships. Pepsi has sponsored events like
NBA games and world cups of football. In 2015, Pepsi rolled out the Pepsi x Liter of Light “Ignite the Light”
Tour, which aimed at bringing public attention to those who live without electricity and light. It is not effective
at all because the promotion does not have enough exposure to its target customers.

Place:
PepsiCo’s distribution network is divided into three categories, which are direct-store-delivery(DSD),
customers warehouse, and distributor networks. Direct-store-delivery enables the products to be shifted
directly from the merchandiser to the retail store, which works well to products that always require restocking.
Customer warehouse operates more or less the same that only the receivers of the products change to the
customers. Compared to the former, distributor networks are more extensively used. It has strong distributor
networks such as supermarkets, restaurants, retailers, schools and grocery stores. It is effective because the
extensive distribution network makes the product accessible to the customers.
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Current selling points and target market(s)

The target market of Pepsi is the younger generation, which is segmented by demographic and behavioral
segmentation. As Pepsi belongs to fast-moving consumer goods and the price of Pepsi is not high, it targets
the low-income consumers. In short, the demographic segmentation is based on age and income level.
Behavioral segmentation means that the market is divided based on different variables, for example, the degree
of loyalty, benefits sought, user status and purchase occasion. Pepsi has targeted the benefit sought by the
customers. PepsiCo states that Pepsi is “the bold, refreshing, robust cola” on its website (PepsiCo, n.d.). It
shows that the product is targeting the customers who seek refreshment from Pepsi. Also, Being one of the
global brands in the foods and beverages industry that targeting the younger generation is the current selling
point of Pepsi.
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A1.1 Implications from Company Review

Pepsi is one the most iconic and well-known brand in the world. It is highly recognized, not only for the
diverse products produced but also its contribution to the society, by the customers. Pepsi achieves high retail
sales, which accounted for more than $1 billion (Global Brands, n.d.). Besides, PepsiCo Hong Kong office
has been identified as a “Caring Company”, which honors the company who contributes a lot to the society,
by The Hong Kong Council of Social Service (“PepsiCo Hong Kong”, 2012). Pepsi’s goodwill and high brand
value can be regarded as its internal strength. By utilizing such intangible assets, PepsiCo can sell products
under the brand name instead of the products’ features.

On the other hand, PepsiCo’s soft drinks are perceived as unhealthy by the customers, which is one of the
internal weaknesses of PepsiCo. The marketing strategy may be limited because it cannot target on health-
conscious consumers. By resolving the problem, PepsiCo can have value addition on its promotion, which the
company is not doing well now. Besides, overreliance on the franchise businesses is another internal weakness
of PepsiCo (PepsiCo, 2016). The franchising system may limit PepsiCo's ability to control certain aspects of
its businesses. Sometimes, the franchise businesses may oppose the marketing strategy of PepsiCo. Thus, the
company is lack of autonomy in designing the marketing strategy.

A2) Competitor Review

Name of Swire Coca- Lotte Chilsung AS Watson PepsiCo.

major Cola Milkis Group Pepsi Cola
Competitors Coca-Cola Sarsi
Strengths - Longest - Traditional - A healthier - Long history
history in the beverage in ‘Cha beverage that
market who Chaan Teng’ contains no - Significant
have very good since the 1960s caffeine partners with the
reputation worldwide
- Relatively new events
- Significant products in the
partners with market (In BCG - Already had
the worldwide matrix, it belongs various ‘on
events to ‘Stars’) trade’ partners

- Already had
various ‘on
trade’ partners

- Developed
several series
Weaknesses - Coke Zero - Customers are - Extreme taste - Contains too
Series has raised able to make it, that not every- much sugar that
many negatives not necessary to one enjoys it may create
responses buy the products. health problem
- No other
- Many harmful - Lower volume, series has - Few gimmick
substances only 250mL / can developed on its products
and promotion
Competitive Market leader Relatively new General market Second market
Position market competitor leader
competitor
Main Selling - They often use - Collective - The original - Serve as
Point group activities memory and idea is ‘refreshment’
 CB 2601 Marketing Final Report

in the novel beverages developed to be

advertisement to Generation X served as
and Millennials Antipyretic.
- So much fizz respectively
in their
carbonate
products
Target Mainly All layer of Adults and Millennials
market Generation Y people elderly. (Young
and Millennials generation)
(Ages up to 40)

A2.1 4P Strategies adopted by the competitors

Products Price Place Promotion

Swire Coca- - Five types of - On average $6- ‘On-trade’: - TV programme

Cola Coca- flavor. They are / a can Various chain and Internet are
Cola ‘Original’, restaurants such the key channels.
‘Lemon flavor’, - Adopted Odd - as ‘McDonald’, Eric Kot and Jan
‘Original Light’, even pricing, ‘Fairwood’, and Lamb are the
‘Lemon flavor i.e. a pack of the local opinion leader in
light’ and ‘Coca- Coca-Cola is restaurant, etc the current
Cola Zero Sugar’ $29.90 instead advertising
of $30 - ‘Off-trade’:
- ‘Original’ and Distributors - Outdoor, i.e.
‘Lemon flavor: - Customers can such as bus stop and
42-43 kcal have redeemed, ‘Wellcome’, MTR stations
energy, 10.6g they can have 2 ‘Parknshop’,
carbohydrate, bottles of Green ‘Seven Eleven’, -‘Sweepstakers’,
10.6g sugar and 4 Tea Beverage ‘CIrcle K’, etc i.e. ‘LE
mg sodium / by paying $9.90 CREUSET’
‘Coca-Cola - Vending Cooking
Light’: 7 mg machines in equipment
sodium / For public place
‘Coca-Cola Zero - Outdoor
Sugar’: 12 mg - Online activities, i.e.
sodium supermarket mini concert
 CB 2601 Marketing Final Report

Products Price Place Promotion

Lotte Chilsung - Two types of - On average $4 - Only ‘off-trade’ - Internet,

Milkis flavor. They are / a can of Milkis Distributors such newspaper and
‘Original’ and as ‘Wellcome’, magazine
‘peach flavor’ - Discount is ‘Parknshop’, advertising
provided ‘Seven Eleven’,
- 50 kcal energy, frequently ‘CIrcle K’, etc - Heavily rely
12g sugar, 12g on customers’
carbohydrate, 10 - Customers - Online references
mg sodium may redeem supermarket groups and
various choices family influ-
of snack by - Korean ence to sustain
paying $6.90 - beverage outlets customers’
$12.90 awareness.

Products Price Place Promotion

AS Watson - On average - ‘Off-trade’ - Rare adverts-

Group $3.20 - $5.50 / only, mainly ing on the
Sarsi can in Parknshop media. (Last
and Wellcome advertising was
- Adopted Odd- supermarket, 2013 in Hong
even pricing convenient Kong)
i.e. 25.90 per pack store some-
instead of $26 times stored - Rely on
stock, and customers’
traditional references
store. groups and it’s
history to
sustain the
awareness
 CB 2601 Marketing Final Report

Products Price Place Promotion

PepsiCo. - Mainly ‘Origi- - On average $7 / - ‘On trade’: - Online adver-

Pepsi Cola nal’ and ‘Light’ can Various chain tising. Aaron
flavor flowing in restaurants Kwok and Louis
the market - Adopted Odd- such as ‘KFC’, Koo are the key
even pricing, i.e. and ‘Pizza opinions
- Various volume 25.90 per pack Hut’.
i.e. from 330mL instead of $26 - Cooperate with
to 2.5L - ‘Off-trade’: Marvel and use
- Discounts will Distributors ‘Spiderman’
- ‘Original’: be held fre- such as figure to
45 kcal energy, quently ‘Wellcome’, stimulate sales
11g sugar and ‘Parknshop’,
carbohydrates ‘Seven - ‘Loyalty
and 12 mg Eleven’, programme’, i.e.
sodium ‘CIrcle K’, etc customers regis-
‘Light’: ter the receipts
18mg sodium online to win
the prizes

A2.2 Implications from Competitor Review

The major competitive strategies in the coming months should be the amendment and develop the healthier
drinks. Since Coca-Cola has developed the first zero sugar cola in 2006, health consciousness towards soft
drinks is becoming critical. Though Coca-Cola practice health cola first, they have received plenty of negative
comments especially the taste. So, even though they promote another kind of zero sugar cola in the mid of
2017, it is a chance for PepsiCo. to attack their new products as some of the potential customers are not
confident to buy their product. If PepsiCo. can develop their own zero sugar cola with the taste that is sweet
enough, it is possible to seize the customers of Coca-Cola.

PepsiCo should also attack Milkis which produced by Lotte Chilsung. This is because Milkis is a relatively
new soft drink in the market, and the original idea of Milkis is the mix of cream soda and fresh milk. That is,
it is easy for the customers to make it, it is not necessary for them to buy the Milkis. As there are several
comments on Milkis that the taste is not as good as the one in traditional Cha Chaan Teng, it cannot satisfy
some of the customers. Together with the its new position, it is easy for PepsiCo to attack Milkis. The
significant task that PepsiCo needs to overcome is, they should have a promotion with the great impression to
the customers, which should be compatible to the classic advertising that produced by Milkis in the film ‘A
Better Tomorrow’ with Mr. Chow Yun Fat.

PepsiCo should better avoid Sarsi which produced by AS Watson Group. This is because the target customers
of Sarsi are adults and elders such as the Generation X, that is different from Pepsi Cola. In addition, Sarsi has
very rare promotions on the market, but the price is nearly the same with Pepsi Cola. With less awareness of
the customers, Sarsi should not gain great profit. Also, the taste of Sarsi is totally different from the general
soft drinks, the sweetness is not their selling point. Customers who have already developed loyalty to Sarsi,
probably they are already the ‘diehard’ customers to Sarsi. In short, it is unworthy for PepsiCo. to invest
enormous resources to compete with Sarsi since it is difficult to seize their customers and it will only bring
limited benefits to PepsiCo.

For the target customers, young generation would still be the main target customers of Pepsi Cola. As
mentioned before, the Generation Y and Millennials are the main target customers of soft drinks, PepsiCo
should find out the way to expand this market. Moreover, as the awareness towards healthy soft drink is
becoming mature, if Generation Y and Millennials are the focus on such principal, by the reference group and
 CB 2601 Marketing Final Report

family influence, it is possible that the Generation X and elders would be another potential market. Yet, it all
depends on whether PepsiCo is able to develop the brand new healthy soft drinks.

Among 4P, ‘Promotion’ would be the sharpest weapon in competing with the competitors. Although PepsiCo.
do not have a very good market performance in the recent years, their reputation is still enormous, it is easy
for them to create various methods in the promotion. As seen in the promotion methods of Coca-Cola such as
advertising on TV and Internet or finding the opinion leaders, though they have adopted various ways to do
promotion, most of the promotion methods are general, that PepsiCo is easy to follow. More than that, other
than the general promotions, other promotion methods such as ‘deals’, ‘contests’ and ‘sweepstakes’ should be
adopted. In the recent years, PepsiCo is seldom proposing such ways to promote cola, it is also possible to
have a try at it. Promotion is the only way that PepsiCo. could enlarge products information to the customers.
Because of its reputation, it is not the difficult tasks to design an impressive promotion to the customers.
Therefore, it is strongly suggested that they should apply for promotion to a larger extent.

A3) Environment Scanning

1.Social forces
According to Bailey (2014), the target generation cohorts of soft drinks are Generation Y and Millennials that
is the same of the target customers of Pepsi Cola. As stated in the Hong Kong Population Projections, the
number of people who aged between 15-40 is around 2.4 million, which has a slight increase compared to
2017. This can be a potential market for Pepsi Cola. Yet, from the cultural aspect, “Soft Drinks in Hong Kong,
China” stated that the local consumers tend to develop a trend to have beverages that contain low sugar and
artificial ingredients. This atmosphere may reduce the number of customers.

2. Economic forces
According to Fung (2017), the inflation rate in Hong Kong is approximately 1.8% that have an increasing
trend until 2018. Furthermore, according to 2016 census, the average wages earning was $25,000. Although
the averages will gradually increase, it still fails to compete with the inflation rate. Therefore, as the
consumption ability decrease, customers may be less willing to consume Pepsi Cola.
 CB 2601 Marketing Final Report

3. Technological forces
According to the study held by Hong Kong Consumer Council in 2015, the trend of online retail is becoming
more mature all over the world. Under such atmosphere, Hong Kong is a potential venue for developing the
online retail platform. The most outstanding online platform for local to consume is HKTV mall. PepsiCo.
may develop their own online platform to promote and sell cola. They may expand the applications of internet
technology to complete the whole process of selling, such as promotion, receiving the orders, receiving
payments, and gathering postpurchase feedbacks.

4. Competitive forces
PepsiCo mainly has two ways to sell their products to the customers, which are called ‘off-trade’ and ‘on-
trade’ respectively. ‘Off trade’ refers to the way that PepsiCo will sell the products to the customers through
the distributors in terms of retailers, and ‘on trade’ refers to the distributors in terms of restaurant, bar, hotel,
etc.

According to the official statistics of Euromonitor International, the soft drinks market (in terms of ‘off-trade’)
structure in Hong Kong is Oligopoly, which Swire Coca-Cola Hong Kong Ltd. PepsiCo., AS Watson Group
and Telford International Co Ltd., etc, have taken up great market share. As a result, as there are few major
competitors, it is easier for each of the brand, including PepsiCo. to stabilize the price and secure the profit.

5. Regulatory forces
Patent Ordinance in 2016 (With amendment)
The significant amendment is the definition of novelty. After the amendment, if the inventors develop the
products by using the same substances of the existing goods, but they use different technologies to produce
that products, it still does not violate the right to apply for the patent. That is, the new competitors may arise
as they may find the different ways to produce the same product of Pepsi Cola and compete with PepsiCo.

Trademark Ordinance in 2017 (With amendment)

The significant amendment is about the interpretation of the words in the trademarks. If the trademarks have
a significant words or icons that may present some of the misleading messages to the customers, yet the detail
of substances is mentioned on the label, it is not violated the trademark ordinance. Therefore, it would be a
grey zone for PepsiCo. to do promotion, it would also reduce the possibility of complaints and lawsuits as
well.

A4) Consumer Review

A4.1. Purchase decision process
The decision making process is the stages which a consumer passes through when they are making buying
decision. (Roger, Steven, & William). It involves 5 different stages: (1) problem recognition, (2) information
search, (3) alternative evaluation, (4) purchase decision, and (5) postpurchase behavior. As the customers have
low involvement in making purchase decision on soft drinks, such as Pepsi, due to the lower price and lower
impact on one’s social image, routine problem solving is adopted and some of the stages will be minimized.

In the first stage, our consumers realises a need of our products when they are thirsty or want something for
refreshment. In addition, they may arise a need of our product if their consumer’s decision process are
activated by our advertisements.

After recognizing their needs, the consumers will move on to the second stage, information search. Since soft
drinks are a frequently purchased products, the time they are willing to spend on searching is minimal. The
 CB 2601 Marketing Final Report

buyers will only search for internal information, which is their previous experiences, rather than external
resources such as friends or product rating organisations.

The alternative evaluation stage will be shortened as the consumers have low involvement on soft drinks. They
will evaluate one type of product attribute and compare our product with a few of sellers only. The product
attribute which the consumer will be considered on soft drinks is taste and they will compare us with Swire
Coca Cola, as they produce soft drinks as well. The consumers will based on their own preferences to choose
which items for purchase.

The fourth stage is purchase decision, the decision on deciding from whom to buy and when to buy. For the
whom problem, they will buy the products base on the convenience of the store location, the past purchase
experience and the return policy. Since drinks cannot be return, they will emphasis on the store location and
past experience with the seller. For the when question, consumers usually prefer to buy a item when they are
on sale or when a coupon is offered, however, soft drinks are cheap and affordable for almost everyone.
Therefore, consumers normally will not wait for a promotion of the product and will decide to buy immediate
whenever they want to buy it.

At the final stage, the postpurchase behavior, customers will compares their expectations to satisfaction. They
may feel satisfy and spread their opinions to their relatives or friends. Conversely, they may feel dissatisfy and
share their experience to people around them. Some of the dissatisfied customers may complain on our website
as well, extensive staff training is required to handle their complaints and solve the problems. Pepsi should
maintain a positive postpurchase communications among the consumers to strengthen the relationship between
us, as customers who are willing to buy soft drinks based on their past experience to select the sellers.

A4.2. Major psychological influences

Motivation:
According to the Maslow’s hierarchy of needs, people have five stages of needs. A person will seek for a
higher level of needs when they are satisfy with the previous level. The Physiological needs are the basic needs
for survival. Whenever the person feel that they are thirsty, they will want something to drink, which means
that they may consider Pepsi cola as a solution. Furthermore, people may want to drink Pepsi cola if they want
to blend in with the crowd, usually people who they want to be friend with. The reason behind this is because
people have social needs, which are friendship, belonging and love. If the people surrounding them like to
drink coke, they will follow as they need to be friends with them.

Lifestyle:
Lifestyle may have impact on customer behavior as it reflects how customers spend their time and resources
on different activities, and what they are interested in. According to the VALS Program, which developed by
SPI International, there are eight style of adult lifestyles based on a person’s self-orientation and resources. A
person ,who is a experiencers, usually is a youngster and enjoys social activities. As they are young, life values
and behaviors patterns are still formulating, they will attend to advertising and spend most of their disposable
income on social activities.Thus, they will be motivated by the advertisement easily and may buy Pepsi during
their social activities. However, a person who is maker will prefer to buy something basic, such as water, and
will put their attention on practical matters, instead of social.

Consumer Perception:
Consumer perception is process of how a person select, organises, and interprets information to create their
own view to the world. If a person is a As the world is flooded by information, our brains will help us to
 CB 2601 Marketing Final Report

organise and interprets the information. This process called selective perception. A person seeks for a healthy
life, will ignore information about Pepsi coke as they believe that coke is unhealthy.

Learning:
Customers’ behavior can be learned as well. Behavioral learning means that a person learns and builds up
automatic responses to specific situation by experience it frequently. People who want some refreshment will
keep on buying Pepsi coke, if they have good consumer experiences on it.
Cognitive learning means a customer learn without direct experience or by observing someone’s outcome.
Customer may want to buy Pepsi coke when they are thirsty if they received advertisement repeatedly with
message such as “ Pepsi coke can eliminate thirtyness”.
After repeated purchase on Pepsi coke, customers will build up brand loyalty to our product and will have a
favorable attitude to purchase Pepsi coke again. The reasons are: risk is reduced since the past experience can
be use for reference; time is saved for purchasing.

Values, Beliefs and Attitudes:

Attitudes is the consistent response to a certain object or class of objects, and the response can be positive or
negative, which based on personal values and beliefs. Personal values will affect attitudes by influencing the
consumers to focus on which aspect of the product. For example, if someone emphasize on the freshness of
the drinks, they may focus on the freshness date of Pepsi cola.
Beliefs are the perception on the product's or brand's performance on different attribute and are based on
personal experiences, advertisement and information from another. People may believe that Pepsi can quench
their thirst, as they received the message from the advertisement of Pepsi.
If their attitudes toward Pepsi is positive, they will be more willing to purchase Pepsi’s products.

A4.3. Socio-cultural influences

Personal Influence:
Purchase of the consumers may be influenced by opinions, ideas or behaviors of the others, especially the
people who the consumers trust, such as the opinion leaders and friends. People may want to buy Pepsi cola
when they see one of the movie actors is promoting it, as they believe that the actor enjoys Pepsi cola as well.
In addition, people may trust the word of mouth, which is the information provided by friends or other people.
The rumors of the company can be positive or negative and they may not be based on fact. The rumors of the
company may also have tremendous effect on the purchase decision due to the internet and social media. For
instance, people will buy less Pepsi cola when they received negative word of mouth of Pepsi, such as rumor
of using illegal material to produce the product.

Culture and subculture:

Culture is the set of values, beliefs and attitudes which are shared by a large group of people. They will be
attended to advertisement which are consistent with their values. For example, A Chinese may pay attention
to Pepsi’s Mid-autumn Festival advertisement because it is a traditional festival in China, however, an
American will ignore the promotion since he or she does not share the same value with the Chinese.

Subcultures are the subgroups, which have unique values, ideas and attitudes, within a large culture. For
instance, Hong Kong people who enjoy discussing on or watching discussion from an online forum, such as
the Hong Kong Golden Forum, can be classified as a subgroup, since they share some similar ideas and values,
like using Hong Kong internet slang. A company can tailor-made an advertisement to grab their attention since
their thoughts or views may not be accepted by the public yet. For example, Pepsi can make advertisement
which make use of internet slang to catch people attention.
 CB 2601 Marketing Final Report

A5) SWOT Analysis – A summary of above

Strengths Weaknesses
● Contains too much sugar that may create
health problem
● Long history
●
● Significant partners with the worldwide
● Few gimmick on its products and
events
promotion
● Already had various ‘on trade’ partners
● Overreliance on the franchise businesses

Opportunities Threats
● The population of people within 15-40 is
increasing. ● The trend of healthy lifestyle, customer
● The market structure is oligopoly as it is will aware of the sugar contained in the
dominated by Pepsi and Coca-cola, price drinks.
competition will rarely appear as it will ● The new patent law may lead to more
harm the profit of both company. competitors, which will reduce the market
● The trend of online shopping. share of our company.
● The amendment of Trademark Ordinance
may raise the effectiveness of promotion
and reduce the opportunities of facing a
lawsuit.
 CB 2601 Marketing Final Report

Section 2: Recommendations

A) Target Market and Positioning Strategies

A change in target market is needed

The current market for Pepsi cola is the younger generation and low-income consumer. It is suggested that
Pepsi needs to change its target market to health-conscious consumers, as Pepsi is currently weak in terms of
its competitiveness in the field of refreshment cola to teenagers.

In Hong Kong, the Swire Coca-cola owns a significant market share in the cola market and its customer is
quite loyal to the brand. The customers perceive Coca Cola is better than the taste of Pepsi. Consumers view
Pepsi cola as unappetizing. Unlike in other countries, such as South Korea, PepsiCo cannot take the leading
role in the cola market in Hong Kong. (As mentioned, Coca-cola takes 28.4% of total market share on soft
drinks industry) Pepsi is actually declining all over the world. On Facebook, the followers of Coca-cola are
over 100 million, while Pepsi’s are under 40 million. In order to take back its market share in the soft drinks
industry, change in the target market is needed. Pepsi cola should focus on promoting Pepsi to the health-
conscious customers.

Psychographic description
The target market can be differentiated by lifestyles, value. The personality of the target customers can be
ambitious. Customers nowadays are more focused on maintaining a good health. They may want a taste of
carbonated soft drinks, without causing negative effects to their body. Promotion of Zero Sugar is, therefore,
needed. It will be even more successful if PepsiCo is able to create a better formula for a healthier Pepsi. The
need of health-conscious customers is a high-quality, healthy, but refreshing drinks with a reasonable price.
The new drink may need a slightly higher price to create its brand image as a moderately affordable drink.
This value should be added to prevent a cheap image of the drink, which avoids target customers to think that
the drink is not healthy at all.

Demographic description
The target market can also be divided by factors such as ages, gender, income and education. The age of target
customers should remain under 40~50 years-old since older generation generally do not enjoy soft drinks.
Both men and women should be targeted. The target customers should also be able to purchase Pepsi cola at
a reasonable and affordable price. With the increasing awareness of personal health, PepsiCo can focus
promoting on customers with these characteristics.

Repositioning
The existing positioning adopted by Pepsi soft drink is a multi-segment type, meaning that Pepsi focuses on
more than one customer segment simultaneously. (Dudovskiy, 2016) A change is needed for PepsiCo since
focusing on one specific market can be more effective to the promotion of Pepsi cola, as to combat the
declining market share of PepsiCo. It can be repositioned by product differentiation. Differentiation
positioning will benefit PepsiCo by avoiding direct competition with Swire Coca-Cola, on focusing the market
of health-conscious customers.

First, Pepsi may modify its physical feature, keep the blue colour and add other colours, for instance, adding
a green colour to represent a healthy lifestyle. While the size of the soft drink can remain unchanged since the
current 350mL is a suitable amount to all customers. As mentioned, Pepsico can try to build its non-physical
feature to a better image or perception by Hong Kong customers, due to the unimpressive image perceived by
citizens nowadays, compared with Coca-Cola. The price of Pepsi cola may remain unchanged as to capture
 CB 2601 Marketing Final Report

the market of low-income customers. Pepsi may, therefore, create new customer loyalty to the health-
conscious customer and the low-income customers. It may even reposition from low-nutrition drinks to high-
nutrition drinks if a new formula is produced. Reposition of quality will exist, as a result.

Another change could be the applications. Most of the citizens prefer traditional carbonated soft drinks or beer
during social events, such as a party. In fact, Pepsi can reposition Pepsi cola to all kinds of daily-life social
events. With advertisement promoting the healthy style by Pepsi cola, Pepsi may create a new trend to
customers consuming healthier soft drinks. As a result, product user will also shift to health-conscious
customers.

Pepsi cola positioning statement

To Generation Y to millennials who are concerned about their health

Pepsi cola is the soft drink that enables you to enjoy refreshness with health care

You will feel refreshing, enjoyable of a special taste

You dislike about possible unhealthiness, obesity that will bring by having soft drinks

We are Pepsi Cola which are

1. created with new special formula that cause nearly harmless effect on
human body
2. tested and approved by food safety professionals

Reason why the new position is better

As stated, it is important for Pepsi cola to attract a new market rather than focusing on the same market, due
to its low competitiveness of soft drinks market in Hong Kong. With a good promotion on the new target
market, It is believed that the new market will bring a significant increase in market share of Pepsi cola. Diet
cola could even be a possible trend for customers in the future, bringing more sales to PepsiCo.

B) Marketing Objectives
In 6 months’ time the awareness is to be increased by 10 % (absolute measure - % of population/ target market)

Justifications:
It is suggested to raise its awareness by 10% in order to start gaining a significant market share for PepsiCo’s
healthy image. The market for these health-conscious customers is growing nowadays. Pepsico may try to
provide some promotional discount, for instance, creating a seasonal edition of Pepsi cola. With more
promotion, the customers will be aware on the change and thus recommend the soft drink to their friends if
the quality of the edition is high. So, it is expected to raise the awareness by 10% in six months.

In 6 months’ time the sales is to be increased by 5 % (absolute measure - % of population/ target market)
Justifications:
The sales is expected to have a 5% increase of the target market. With a persistent promotion to increase the
awareness of the citizens, some of them may want to have a try. The attractive design can be a gimmick to the
 CB 2601 Marketing Final Report

customers. However, the flavour of Pepsi is not generally preferred by the Hong Kong citizens. It is not
expected to have a same increase in sales with the increase in the awareness, as a result.

In 6 months’ time the market share is to be increased by 4 % (absolute measure - % of population/ target
market)

Justifications:
By rebuilding its brand image, reputation of Pepsico can be reinforced into the mind of customers. It is
impossible for Pepsi cola to combat with the Coca-cola, the market leader of soft drinks in Hong Kong. Yet,
with the increase in sales, it is believed that the market share of Pepsi cola can increase 4%. If the promotion
to the new target customer is successful and effective, more investment will go to Pepsico. Therefore, Pepsi
may attempt to have a further expansion of its market share in the future.

C) Marketing Mix Programs

B3.1 - Product
For product strategies, develop the brand of Pepsi among Hong Kong people can help to identify the brand
itself, providing legal protection, as well as help segment the market, such as divide into different income or
different age groups. We consider Pepsi as a consumer product as people consume the drink for their personal
consumption. The marketing considerations for this consumer product will be convenience, which means
people purchase frequently with little planning and little comparison. The customer involvement is relatively
low. Product quality and product features could also be promoted, such as the enjoyment of consuming the
drink, and the joy of sharing with friends. So customer value and satisfaction would be created and promoted.
For packages, seasonal packaging could be used, for example during Christmas, the can of drink will use the
icon of red ribbons and snowflakes as the wrapper. This can enhance the satisfaction of customers. Customers
will have more enjoyment seeing the packages on the can of soft drinks, thus attracting them to consume the
drink more often.

B3.2 - Price
For pricing strategies, cost-based pricing would be used to maintain profit as cost is easier to be measured.
Prices are set based on the production cost. This strategy is used as sellers is more certain about costs than
demand. Competition-based pricing could also be used to maintain competitiveness among other competitors.
To improve the current pricing strategies, product bundle pricing could be used, by for example, buying 6 cans
of coke as a pack would be cheaper than buying 6 individual can of coke, as direct discount would be more
attractive for customers. Also, we can take reference from other competitors, that buying two packs or more
would have a discount. More volume would be generated and necessary profit could be gained.
The objectives of the above pricing strategies are to prevent price competition among competitors, stabilize
the market effectively, profitably retain existing customers, as well as attracting new customers.

B3.3 - Place
Distributor network has been using by the PepsiCo. , and most people recognize the brand through such way
as many local restaurants and supermarkets can find the type of drinks. To increase the intensity of distribution,
we suggested non-store retailing could be used more often, as it has been growing faster than store-retailing
in recent years, since the popularity of technology and Internet has been increasing. Examples are using
vending machines in sports centre and school campus, as well as developing online distribution.
 CB 2601 Marketing Final Report

Another suggestion is that we can cooperate with the instant food company, such as EatEast, to install
lunchbox-Pepsi vending machines in offices areas, like Central and Kwun Tong. People are busy for work and
they can just easily buy a lunchbox at the lobby of their office building. Whenever people buy a lunchbox, a
discount price would be offered for a can of drink, as people usually want something refreshing to drink during
their meal. This way, non-store retailing is used and convenience could be brought to different kinds of
customers.

PepsiCo. could develop with the online shopping website in Hong Kong, such as HKTV mall and HK
webmart, to increase the distribution network. In this case, the distribution would not be limited in physical
and store-retailing, but also customers can buy the drinks anywhere and anytime, by simply just using their
smart devices. Price that are cheaper than buying in a supermarket could be offered to customers using online
shopping through these sites, such as extra 2% off, to encourage more people consume online, so our cost in
shelf-fee in supermarkets could be decreased, as less drinks would be available in supermarkets, and more
drinks would be in storage to cope with the expected popularity of online shopping.

B3.4 - Promotion
B3.4.1 Advertising, Sales Promotion and Public Relations
From our marketing target group, it is suggested that Pepsi needs to change its target market to health-
conscious consumers from younger generation and low-income consumer.For advertising, reminder
advertising is needed because Pepsi can use it to reinforce the image of it and induce the positive feeling of
the customers. With this in mind, using little amount of fear appeal can include in the advertisement because
Pepsi can remind the low-nutrition ingredients in their drinks in the past to provoke the customer to change
their drinking habit. This can attract the attention of the loyal customers and also engage the wants of the
potential buyers. It is suggested that mix of media alternatives can be used, for example, magazines,TV, radio
and newspapers. Also, the package of the Pepci can have different design with the season change such as a
Christmas or World Cup version. That can keep refresh consumer mind and image that they may enjoy Pepsi
in all season and festival.

For this traditional media bundle, it is believed that the cost can be minimized and the exposure can be
maximized because Pepsi spread the healthy lifestyle concept to the general public. We can also analysis
several data from the advertisement,like, the reach, the rate and the cost in order to determine which
advertisement is effective for further adjustment. For the sales promotion, it is recommended that samples can
be launched. For examples, Pepsi should provide their new drinks to the general public for free in order to get
the feedback and response form the customers instantly, therefore the customers can be more easier to accept
the new product.

For public relations, Pepsi should send their new drinks to the primary school in Hong Kong as a free gift and
teach them to maintain healthy lifestyle with an aim to care about the healthy problem of local students. It can
have several benefits, one is that Pepsi can take the social responsibility to the society by contributing some
resource to the society, another benefit is that it can promote its brand and product to the public though the
students to their family. Therefore,Pepsi can maintain a good public relations with the society. It is reasonable
that the advertising, sales promotion and public relations strategies are in line with our marketing objective
and the acceptance of the customers.

B3.4.2 Social Media and Mobile Marketing

For social media marketing, the problem of Pepsi is that its followers is much less than its competitors.
Therefore, there are several ways for Pepsi to improve in social media. First, it should try to use social media
bundle which means that using different social media to maximize the exposure to the customers. If customers
can find fan page if Pepsi in many social media ,like, facebook, twitter and instagram.This can increase the
awareness of the customer to Pepsi and follow Pepsi to get further information. Second, Pepsi should pay for
social media ads. Though using digital marketing, it is much easier to measure the performance of the ads
,adjust it frequently and have low cost. Then, it is easy to predict the purchasing habit of the customers by
 CB 2601 Marketing Final Report

using retargeting. Pepsi can apply social customer relationship management(CRM) to monitor the data
retrieved from the social media ads and interact with the customers to strengthen their relationship and boost
sales growth.

For mobile marketing, the problem of Pepsi is that not enough loyal customers. If Pepsi want to attract the
customers. They should update the function of their app frequently. For example, they can design virtual points
function to induce the frequency of buying Pepsi by purchasing Pepsi and save points. Another function is the
interaction platform, customer should express their view instantly in the app, then Pepsi should solve it and
correct the mistakes. It helps Pepsi to understand more about their customers view towards their product and
show that they are caring about the need of the customers.

B3.4.3 Personal Selling

For personal selling, Pepsi can hire some famous star like movie star or sports players to become the
spokesperson to promote the product through social media and advertisement. This is because the Celebrity
effect of famous people is an important factor to gain consumer interest and preference. The most successful
case is the Aaron Kwok Fu Shing. He has much contribution of Pepsi to develop promotion plan starting from
1997.
Furthermore, the Pepsi can regularly send out salesman to monitor the sales and position of product to make
comparison with competitor brand and place. Also, it can ensure that all the pepsi product will not have conflict
in the process of distribution. This can be effective on develop goodwill in the selling works.

B3.4.4 Interactive Marketing

To create interaction between Pepsi and consumers, one of the effective method is to design a game app that
can connect to facebook and their smartphones all together. It opens for all consumers to play and Pepsi may
also gain permission of consumers through smartphone and Facebook. For instance, the PepsiMan, a hot
Playstation Game in 90s, can be redesigned as a online game app and open in Android, IOS and Facebook.
The concept is to engage consumers to play this game to collect points to redeem code for lucky draw, discount
of purchase in retailer store and website. For the game design, the style and wearing of the pepsiman can
created by player’s their own, also the game effects and environment should related to the features of Pepsi
product, so players can choose their favourite Pepsi and play the game with their own creation. As a result,
Pepsi can generate the consumer needs and preference and organise follow up event like lucky draw in order
to develop customer .

B3.4.5 Multichannel Marketing

For the transactional websites, Pepsi can spread out message all updates through various media such as Twitter,
Youtube , Facebook and retailer website including the HKTVmall and the HK webmark. It mainly reply on
operation with retailer in order to reach as much as possible consumers. For example, the website of
HKTVmall can insert the advertisement of discount of Pepsi or the game of Pepsiman to encourage consumers
of their website to play the games to get the redeem code and purchase Pepsi with discount.
For promotional website, Pepsi would provide all the details about the events such as instruction of playing
Pepsiman with regular update in website and channels. It helps to promote the game of Pepsiman and engage
consumers to play the game. In this way, consumers who have participated in the event can get the redeem
code for lucky draw and discount in retailer’s store. Once the consumer are interested in the rewards of the
event, they would participate in this and cultivate the customer relationship and let them to become advocates
of Pepsi.

D) Marketing Calendar
 CB 2601 Marketing Final Report

Month Activities Reasons

Jan-Feb ➢ Create a Fan page for Pepsi cola, start ❏ When the new Pepsi Cola is launched, the
making advertisement on the page company should pay more effort on
➢ Pay for social media advertisement to introducing the new product to the
promote Pepsi Cola market.
➢ Start making advertisement on magazines/ ❏ More advertisement should be made
TV/radio
➢ Start preparing for the launch of the game
➢ Preparation of the new app

Mar-Apr ➢ Offer free Pepsi Cola to the public for ❏ Offering free Cola can attract most of the
promotion people as taking the drink costs them
➢ Offer free Pepsi Cola to students in nothing.
primary school for promotion ❏ Pepsi can collect comments about the its
Cola from consumers and do evaluation
Regular activity in each month
(Starting from March)
➢ Keep updating the fan page

May-Jun ➢ Launch the new app ❏ Over the past few months, people already
➢ Launch the new game have enough understanding on the cola, it
➢ Review the comments/ feedbacks made by is a suitable time for Pepsi to launch the
consumers in the promotion new app.
Regular activity in the month ❏ More people/ customers are willing to
(Starting from May) download the app
➢ Send salesman to monitor the sales and ❏ The new game can be treated as another
position of product to make comparison promotion of cola in the middle of the
with competitor brand and place year.
Jul-Aug ➢ Pay for social media advertisement to ❏ Introduce the game to more people after
promote the new game the game is launched
❏ More people will join the game
❏ Earn rewards and redeem Pepsi cola

Sept-Oct ➢ Make advertisement with some famous ❏ Advertisements are made in the
stars to promote Pepsi Cola beginning, middle and end of the year to
➢ Review all the activities/ promotion promote the cola frequently.
campaign held within the year
➢
Nov-Dec ➢ Make evaluation of the activities or ❏ The company can make possible changes
promotion campaign held within the year on the marketing plan of the next year
➢ Prepare for the upcoming promotion work
in the next year
 CB 2601 Marketing Final Report

Appendix

2016 Pepsi Co. Annual Report - 2016 Financial Highlights

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 CB 2601 Marketing Final Report

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