Context Need Pricing at Pepsi Company

Context Need Pricing at Pepsi Company

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Context Need Pricing at Pepsi Company

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Executive Summary

The modern business environment is characterized by intensive competition. Business needs to meet the expectations of the target market by continuously delivering new products and services. A new product is identified as Pine is proposed for Pepsi. Co. It will be natural health drinks with its ingredients being extracted from fruits and vegetables.

The target market for Pine is Millennial, which is less sensitive to price in comparison to the quality of products. This market has a growing need for healthy foods and drinks due to health concerns that relate to lifestyles. The following is a context, need, and pricing analysis for Pine.

Context Need Pricing

The company of interest for this assignment is Pepsi. Co. It is a multinational company that operates in the industry of food and beverages. The company has several product lines that include Tropicana, Pepsi-Cola, and Quaker, among others (Kayabas et al. 2017).

Each category has several other products, all amounting to 22 brands. Pepsi is the second leading corporation in the global industry of food and beverages. A proposed new product is Pine, which is an organic nutrient drink.

The target market for this drink is millennials. Studies reveal that each year, an average millennial spends at least $1,672 on food and drinks (Shoup, 2019).

They form about 80 million of the U.S population alone and spend an average of $600 billion a year. Pine will be introduced in the market through price penetration to capture a wide consumer base. The objectives of launching the drink in the market will be tied to the existing brand image of Pepsi.Co.

Context

Pine will be integrated into the healthy beverages of the company. The product will be made from organic products like citrus fruits, turmeric, blueberries, ginger, lemon, and grapes. It will have high energy and vitamins contents to address the health needs of consumers as well as the energy needs of athletes.

Pine will have non-negotiable features as it is expected to be a unique drink in the market because it will be manufactured from purely natural products. The drink will be unique in addressing the increasing health concerns of the consumers. Besides, it will drive the business direction of Pepsi by diversifying is a risk portfolio.

The company is committed to creating positive impacts in society to create financial success. Pepsi is continuously striving to build an image that depicts components of integrity, honesty, and fairness.

This involves positioning itself in a better place for satisfying the needs and desires of consumers. Pine will address this business goal of the company by addressing the health needs of the market and generate additional revenue for the company.

Pepsi has a wide global presence in a hundred and sixty countries. The brand is driven in the international market by diversity and inclusion of the locals, which promotes its acceptability in markets with different cultural values (Kayabas et al. 2017).

It strives to replicate the diversity of consumer base to address their needs effectively. The brand positioning of Pepsi is based on consumer satisfaction, which includes delivering them the value of their products. An example of the defining characteristics of the brand is a niche positioning that focuses on the company’s dominant segment of soft drinks.

Pepsi is defined by its unique marketing strategies that make the brand penetrate the market with ease. The brand has a unique logo that is accompanied by its name that eases advertising efforts.

The result has been the creation of customer loyalty that drives its sales. Today, millions of customers around the world are fond of the flavors of this company, making its products lines to sell globally (Beach, 2014). This is coupled with different pricing and packaging strategies.

The introduction of Pine in the product line of Pepsi will translate to additional efforts in the marketing strategies of the company. This implies promoting the products before being launched to create artificial demand. Pine will have a new marketing campaign that focuses on its nutritional values and health benefits to the target customers.

Pepsi has already been successful in the branding efforts of existing products like caffeine-free diet and zero-calorie cola. The company positions these brands as unique to ensure that they reach the target customers (Pratap, 2019).

This is achieved through transparency and honesty. For example, Pepsi publishes the primary ingredients of its products on its websites to explain the content of what the consumers drink. The company has been making significant strides in incorporating new supplementary features that position the entire brand as a whole new level.

The result is making the products highly recognizable across the globe. The brands are transferable and acceptable in the global market through different cultures and religions. For example, its primary product, diet cola, and Pepsi cola have been accepted in over 200 countries and are distributed in the different portfolio of products to millions of customers (Kayabas et al. 2017).

This evaluation indicates a high likelihood of the new product to be successful in the market. Other similar products have been successful by trading the brand of the company. All the brands of the company cater to the needs of a specific market segment and refrain from cannibalizing each other.

Pine is built on this trend and aims to reach the market needs of athletes and people with health goals such as weight loss and those that seek to boost their immune system.

Need

The target market for Pine is Millennial. Individuals in this group are aged between 21 and 36 years. A majority comprising 57% has never been married and lives in urban centers (Bialik & Fry, 2018). In the U.S alone, this market is estimated to comprise at least 73 million individuals. Their peers easily influence them in comparison to other generations.

They depend on their friends for advice and eventually turn on social media for further guidance before making their purchase decision. This population is defined by a dominant character, with individuals being an enthusiast of technology.

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They tend to adopt new technologies quickly than any other group. A large population is mostly disconnected from traditional media like TVs, radios, and newspapers because their information needs are addressed by social networks (Bialik & Fry, 2018).

Millennials do not consume products or services in silence but like sharing their experiences with others, mostly by posting their pictures and photos on social media. Besides, they are passionate about values and incorporate them in making business decisions.

The marketing of Pine will focus on these characteristics by investing in celebrity endorsement and social media marketing. These strategies can offer the necessary information that the market needs before making their purchase decisions.

Psychographic characters of millennials include the personality of self-expression and uniqueness (Miranda, 2018). They like sharing their ideas and airing their demands whenever an opportunity arises. This brings new ideas and other personalities into the target market, where individuals strive to prove themselves.

They are oriented to online shopping. Besides, individuals in this market are fond of traveling and having fun with their peers. The marketing efforts of Pine will need to be adjusted to give opportunities for customer feedback. It will be in the form of customer reviews, which will be examined to modify the product appropriately to ensure that it accurately meet the expectations of the customers.

The behavioral characteristics of this target population are that individuals are health conscious. The average health index of most millennials is 95.1, which implies majorities have optimal health (Bialik & Fry, 2018). They strive to improve long-term health and wellness and are cautious of lifestyle health conditions like depression, high blood pressure, diabetes, and obesity.

The behavioral characteristics of this market imply that Pine will be readily acceptable in the market because it will satisfy their healthy needs. The drink will address these health conditions by offering a natural alternative to food. Unlike other available drinks that are provided by competitors, the drink will be produced using extracts from the fresh farm produce, making it preferred in addressing health concerns of the target market.

Pines will benefit consumers by improving their immune system. The product will be made of purely natural products from fruits, which boosts the immune system. It will have different flavors like orange, which contain vitamin C, and minerals like potassium and folate that are basic components of strong immunity.

The organic drink contains essential elements that reduce the risks of diseases such as diabetes, heart diseases, and cardiovascular diseases (Grumezescu & Holban, 2019).

Others include liver and stomach cancer and mouth infections, especially the ones that are produced from citrus fruits. Pine also targets to address the need for weight loss in consumers. Orange is among the group of citrus fruits that is commonly used in weight loss programs by avoidance of artificial sweeteners.

Millennial is selected as the target market for Pine because of the health concerns and awareness of this population. More consumers in this market are striving to maintain their health by focusing on their lifestyles and what they eat and drink. The majority of the population continuously prefers organic foods and drinks fresh from farms (Grumezescu & Holban, 2019).

An increasing population of millennials is concerned with weight gain and weight loss and, therefore, consumes foods and drinks that have a low concentration of carbohydrates and high levels of nutrients.

The introduction of Pine in this market will solve this need due to its high level of organic nutrients. The drink is expected to be a building block, especially for the millennials that are underweight loss programs. It will satisfy their hunger without the introduction of carbohydrates and proteins in their bodies.

Strengths and Weaknesses

The strength of customer loyalty drives Pepsi. The company has millions of consumers that make repeated purchases. This loyalty makes its products among the best seller in the international market. It is reinforced by the marketing, pricing, and packaging of the products. This strength results in growth and revenue for the company. Pepsi also focuses on the quality of its products to address the health needs of the customers.

Pepsi has the strength of a wide global presence. The company has its operations in many nations across the world, which reduces the cost of distribution. This location strategy has enabled Pepsi to build a strong supply chain and distribution networks. As a result, most of the products of this company can be found even in the most remote part of the world.

Pepsi has strength of high turnover and outstanding financial stability. For example, its annual average in 2018 and 2019 was $65.7 (Team, 2019). Last year, most of its revenue was from food and snacks that averaged at $33.9 billion, which was 52% of the revenue. These statistics place the company in a better position for acquiring funds from lenders to finance its operations in the global market.

The category of beverages and concentrates yielded $30.7 (Team, 2019). Before the emergence of the coronavirus, the company had projected a growth rate of 12% after the acquisition of Sodastream. The company utilizes its production capacity fully, which contributes to high revenue that challenges Coca-Cola, its main competitor.

A weakness that impacts the achievement of the vision and mission of Pepsi is a low rate of penetration outside the Americas. The company derives three-quarters of its sales from North and South America, which is an indication that the international growth model of Pepsi is not very effective (Muzumdar, 2014). Besides, the company limits its focus on the food and beverage industry. This weakness increases its risks portfolio.

The consumer trend of buying from local will significantly shape the direction of Pepsi. The introduction of Pine in the product lines of the company will require the inclusion of local vegetable and fruit producers in its supply chain. This will translate to participation in corporate social responsibility by promoting the livelihood of the local communities.

It is an indirect marketing strategy that increases customer base by bringing new customers as a reciprocal of buying their products. Consumers will be able to buy Pine from online stores. The product will be incorporated in the existing e-commerce channel for Pepsi. It will also be integrated in the distribution channel to make it available at local stores.

Pepsi has invested $1 billion in the purchase of green bonds that are expected to change the footprint of the company in the environment (Muzumdar, 2014). This project is embedded in technology, research, and development to nurture innovations for promoting the company to promote its environmental sustainability.

The packaging material for the new product, Pine, is proposed to be biodegradable material such as a carton. The containers will also be recyclable to promote the environmental sustainability of the company.

A significant threat that Pepsi faces is the increasing shift of consumers to healthy and organic foods and beverages. The trend is rapidly becoming significant to revenue generation and the sustainability of the company. Some of the products of its products, such as Pepsi Cola, Twister, and Pepsi Next, contain sugar and other inorganic ingredients that customers are avoiding.

However, the introduction of Pine is expected to address this threat. Its success in the market may prompt the company to replace some of the products with natural ingredients. This may be a way of mitigating the risk.

Ethics concerns are instrumental to the brand image of a company. Pepsi is an international corporation and, therefore, it is exposed to different ethical concerns depending on specific markets. This introduces the practice of situational ethics, where international companies adjust to local practices.

Different target populations have different perceptions of ethical behaviors. Ethics and influenced by culture, which vary from one society to another. Consumers detach themselves from a company that violates ethical practices. They can even boycott its products, which result in tremendous losses and even product failure.

The identified factors are critical in the branding operations of the company. They bring together all the departments of the organization in the utilization of strengths and the available opportunities that can further the branding goals of Pepsi. This is an ideal platform that facilitates the conversion of weaknesses and threats into opportunities for the company.

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Core Competencies

Pepsi is driven by the competence of strong marketing and branding capabilities. For example, the company spent $4 billion in 2017 in marketing and $2.4billion in advertisements (Nguyen, 2019). It has wide digital capabilities where it conducts digital campaigns. Pepsi will use this competence to launch Pine in the market through an intensive marketing campaign.

An example is the Bring Home Happiness campaign that had more than 1billion views. Another competence that the company will have after the introduction of Pine is a unique formula for producing a healthy organic drink. This competence is expected to give the company a unique position in the market and widen its customer base.

Pricing

Variable and fixed costs are significant components that will help the company determine the quantity of Pine that will be produced. Their sum will be the total cost, which is necessary for estimating the profitability of the product. Both fixed and variable costs of Pine will be the foundation of Pepsi to achieve its financial goals in the line of beverages.

The target market is willing to pay $1.8 per 300ml of Pine (Nguyen, 2019). A majority of Millennials (80%) are driven by the quality of food or drinks rather than price. They are also driven by transparency in the supply chain and processing of what they eat or drink. Millennials are continuously becoming conscious of what they purchase, especially food.

It is estimated that 69% of the consumers are more likely to purchase a product that aligns with their preferences (Nguyen, 2019). In the U.S, 60% of this market care about food additives and their ingredients.

Pine will be launched in the market using a price penetration strategy. This pricing strategy entails the use of initial lower price to attract more customers from the competitors. The initial price will be low, but it will be increased gradually according to the performance of the product in the market.

Penetration pricing is associated with the risk that new customers may prefer the brand initially but turn to competitors after the increase in price. This risk will be addressed by producing high quality drink and use the strategy as a competitive advantage.

This strategy will help Pepsi to maximize profits through maximum sales and a low-profit margin. Price penetration is an effective strategy for gaining a competitive advantage in the market.

Refinement

The evaluation of the success of Pine will be conducted by gathering customer feedback, sales, and channel partners. Information from these sources will suggest the areas that may need improvement. Early customer success, such as testimonies and positive feedback, will be critical in gaining momentum.

Another metric will be the production and sales data, which will indicate the performance of the product in the market. The evaluation will be done weekly throughout the sales cycle.

Among the business-wide feedback loops and processes that will be implemented in support of the idea is regular communication. The sales team will be required to make weekly reports of the sales activities. The management will, in turn, communicate the required information such as sales targets.

Data will be collected from field reports of the sales teams as well as customer feedback on the e-commerce websites of the company. These are primary sources of data, which implies that the information will be accurate and significant to the company.

The response to a crisis is a critical factor that needs to be considered in the implementation of the new idea. Even with adequate planning, the crisis is inevitable due to unforeseen reasons. However, being prepared to respond to situations is essential than avoid their occurrence. Another significant consideration is intellectual property rights.

This element offers a business an exclusive right to the use of an idea. It raises the need for its full protection. An idea with weak property rights can be copied easily and ceases to be a competitive advantage of a company.

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Conclusion and Summary

Pine has great potentials of success in the market. It is a proposed healthy drink that is expected to be introduced in the product lines of Pepsi. The target market for the drink is millennial because this market is wide and has high levels of health awareness.

Pine will be introduced in the market through price skimming to attract more customers and build customer loyalty. The success of this product in the market will be evaluated by customer feedback as well as sales the data.

References

Beach, J. (2014). Pepsi brand inventory. Retrieved from https://jennambeach.files.wordpress.com/2014/04/jbeach_613_w6.pdf

Bialik, K & Fry, R. (2018). Millennial life: How young adulthood today compares with prior generations. Pew Research Center. Retrieved from https://www.pewsocialtrends.org/essay/millennial-life-how-young-adulthood-today-compares-with-prior-generations/

Grumezescu, M. A & Holban, M.A. (2019). Natural beverages: The science of beverages. Volume Thirteen, Elsevier Inc.

Kayabas, D. T, Boyraz. G & Derdiyok, R. (2017). Examining Coca-Cola and Pepsi brands under the basis of globalization and multinational companies. International Journal of Academic Research in Business and Social Science, 7(12). http://hrmars.com/hrmars_papers/Examining_Coca-Cola_and_Pepsi_Brands_under_the_Basis_of_Globalisation_and_Multinational_Companies.pdf

Miranda, T. (2018). Being a millennial: Age-based or mindset-based? Retrieved from http://broncoscholar.library.cpp.edu/bitstream/handle/10211.3/205854/MirandaTerrina_Project2018.pdf?sequence=4

Muzumdar, P. (2014). A study of business process: Case study approach to PepsiCo. Retrieved from https://www.researchgate.net/publication/272221472_A_Study_of_Business_Process_Case_Study_Approach_to_PepsiCo

Nguyen, H. (2019). Millennials’ food choices are driven by quality and they’re willing to pay more for it. Retrieved from https://today.yougov.com/topics/food/articles-reports/2019/09/09/millennials-food-choices-are-driven-quality

Pratap, A. (2019). Pepsi sources of competitive advantage. Retrieved https://notesmatic.com/2019/01/pepsi-sources-of-competitive-advantage/

Shoup, E. M. (2019). A year in food: Survey reveals millennials’ eating and spending habits. Retrieved from https://www.foodnavigator-usa.com/Article/2019/08/28/A-year-in-food-Survey-reveals-millennials-eating-and-spending-habits

Team, T. (2019). Can Coca-Cola bridge its revenue gap with PepsiCo? Forbes. Retrieved from https://www.forbes.com/sites/greatspeculations/2019/12/18/can-coca-cola-bridge-its-revenue-gap-with-pepsico/#7d52fbac48dc

Context Need Pricing at Pepsi Company

Context Need Pricing at Pepsi Company

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