Pepsi And Analysis Product Life Cycle

The PLC model is of some degree of usefulness to marketing managers, in that it is based on factual assumptions. Nevertheless, it is difficult for marketing management to gauge accurately where a product is on its PLC graph. A rise in sales per se is not necessarily evidence of growth. A fall in sales per se does not typify decline. Furthermore, some products do not (or to date, at the least, have not) experienced a decline. Coca Cola and Pepsi are examples of two products that have existed for many decades, but are still popular products all over the world. Both modes of cola have been in maturity for some years.

Another factor is that differing products would possess different PLC “shapes”. A fad product would hold a steep sloped growth stage, a short maturity stage, and a steep sloped decline stage. A product such as Coca Cola and Pepsi would experience growth, but also a constant level of sales over a number of decades. It can probably be said that a given product (or products collectively within an industry) may hold a unique PLC shape, and the typical PLC model can only be used as a rough guide for marketing management. This is why its called the product life cycle.

Pepsi-Cola is still second in the carbonated drinks market and remains in the shadow of Coca Cola in terms of market share, perception and image. (Business Week, 2010) However, Pepsi’s insightful marketing techniques (comic strips, television ads etc.) prevented a fall of its position in the beverage industry. The study shall aim to critically analyse the product life cycle of Pepsi and would further extend to assess the consumers’ behaviour and satisfaction towards Pepsi in New Delhi Market (India)

Limitations:

There are some limitations bound with this study, Such as shortage of funds, limited resources and Small sample size (n=100). The random sampling which will be used in this study may not represent the complete population.

1C. WHY IS THIS PARTICULAR TOPIC CHOSEN?

By using diversification techniques and brand management, Pepsi was able to increase its volume of sales and get a stronger market position. Nowadays, Pepsi’s carbonated beverages division clearly remains behind the snack division in terms of profitability and share percentage of operation earnings. Our impression is that the profits of the snack division help create the illusion that the beverage sector is as successful as the management wishes it to be.

The present study aims to analyse in detail the product life cycle of Pepsi in Indian market, the study shall also focus on analysing the consumer’s behaviour towards Pepsi in New Delhi market.

1D. WHAT CONTRIBUTION WOULD THE PROJECT MAKE?

Brand loyalty is a buyers’ preference for the products of Pepsi. Pepsi can create brand loyalty through continuous advertising of brand and company names, patent protection of products, product innovation achieve through its research and development programs and emphasis on high product quality and good after-sales services. It is effective influence in the way in which people perceive the product or the company. By creating feelings of warmth, affection and belonging to a product, a firm is able to relate brand to human personalities.

The study would contribute towards identifying the customer needs and expectation towards Pepsi in New Delhi

1 e. objectives and research questions of the study

Research objectives

To analyse the product life cycle of Pepsi

To determine the customers behaviour and satisfaction level towards products of Pepsi in New Delhi market

To know from the consumers about the specific reasons behind the preference of products of Pepsi over other Cola drinks

Research Questions

Why do consumers prefer Pepsi over other Cola drinks

What attracts/draws consumers towards Pepsi in India?

2.0 METHODOLOGY AND METHODS OF ENQUIRY

RESEARCH METHODOLOGY

Research Methodology defines the purpose of the research, how it proceeds, how to measure progress and what constitute success with respect to the objectives determined for carrying out the research study. (Kothari, 2007) The appropriate research design formulated is detailed below.

RESEARCH DESIGN

The research design is the basic framework, which provides guidelines for the rest of the research process. (Prasad, 2006) The present research can be said to be exploratory. The research design determines the direction of the study throughout and the procedures to be followed. It determines the data collection method, sampling method, the fieldwork and so on.

NATURE OF DATA

PRIMARY DATA: Primary data is basically fresh data collected directly from the target respondents; it could be collected through Questionnaire Surveys, Interviews, Focus Group Discussions Etc.

SECONDARY DATA: Secondary data that is already available and published .it could be internal and external source of data. Internal source: which originates from the specific field or area where research is carried out e.g. publish broachers, official reports etc.

External source: This originates outside the field of study like books, periodicals, journals, newspapers and the Internet.

DATA COLLECTION

Primary data: Primary data will be selected from the sample by a self-administrated questionnaire in presence of the interviewer in New Delhi (India).

SAMPLE SIZE

The survey will be conducted among 100 respondents in New Delhi (India)

Sample Area: New Delhi (India)

Sample unit: It will not be possible for the investigator to survey all the consumers of Pepsi so this study is based on the sampling study that will be done on the sample size of 100 persons residing in Central Delhi (New Delhi-India), this central part of New Delhi is chosen for a simple reason that it is a wonderful mix of people belonging to middle class/upper middle class/higher class

SECONDARY DATA: Secondary data will be collected through Articles, Reports, Journals, Magazines, Newspapers and Internet

SAMPLING TECHNIQUE

Random sampling technique is employed to extract the fruitful results. This includes the overall design, the sampling procedure, the data collection methods, the field methods and the analysis procedures

SAMPLING PROCEDURE ACTUALLY EMPLOYED

The process that will be employed to select the sample in New Delhi (India) is simple random sampling. Simple random sampling refers to that sampling technique in which each and every unit of the population has an equal and same opportunity of being on the sample. In simple random sampling, which item gets selected is just a matter of chance.

ANALYTICAL TOOLS

Simple statistical tools will be used in the present study to analyze and interpret the data collected from the field. The study will use percentiles method and the data will be presented in the form of tables and diagrams.

INITIAL LITERATURE REVIEW

Product life cycle management (or PLCM) is the succession of strategies used by business management as a product goes through its life cycle. The condition in which a product is sold (advertising, saturation) changes over time and must be managed as it moves through its succession of stages.

Like human beings, products also have their own life-cycle. From birth to death human beings pass through various stages e.g. birth, growth, maturity, decline and death. A similar life-cycle is seen in the case of products. The product life cycle goes through multiple phases, involves many professional disciplines, and requires many skills, tools and processes. Product life cycle (PLC) has to do with the life of a product in the market with respect to business/commercial costs and sales measures. To say that a product has a life cycle is to assert four things:

that products have a limited life,

product sales pass through distinct stages, each posing different challenges, opportunities, and problems to the seller,

profits rise and fall at different stages of product life cycle, and

products require different marketing, financial, manufacturing, purchasing, and human resource strategies in each life cycle stage.

There are many stages in a product’s life cycle, some of them are explained below:

Stage

Characteristics

1. Market introduction stage

costs are high

slow sales volumes to start

little or no competition

demand has to be created

customers have to be prompted to try the product

makes no money at this stage

2. Growth stage

costs reduced due to economies of scale

sales volume increases significantly

profitability begins to rise

public awareness increases

competition begins to increase with a few new players in establishing market

increased competition leads to price decreases

3. Maturity stage

costs are lowered as a result of production volumes increasing and experience curve effects

sales volume peaks and market saturation is reached

increase in competitors entering the market

prices tend to drop due to the proliferation of competing products

brand differentiation and feature diversification is emphasized to maintain or increase market share

Industrial profits go down

4. Saturation and decline stage

costs become counter-optimal

sales volume decline or stabilize

prices, profitability diminish

profit becomes more a challenge of production/distribution efficiency than increased sales

It is claimed that every product has a life period, it is launched, it grows, and at some point, may die. A fair comment is that – at least in the short term – not all products or services die. Jeans may die, but clothes probably will not. Legal services or medical services may die, but depending on the social and political climate, probably will not.

Even though its validity is questionable, it can offer a useful ‘model’ for managers to keep at the back of their mind. Indeed, if their products are in the introductory or growth phases, or in that of decline, it perhaps should be at the front of their mind; for the predominant features of these phases may be those revolving around such life and death. Between these two extremes, it is salutary for them to have that vision of mortality in front of them.

However, the most important aspect of product life-cycles is that, even under normal conditions, to all practical intents and purposes they often do not exist (hence, there needs to be more emphasis on model/reality mappings). In most markets the majority of the major brands have held their position for at least two decades. The dominant product life-cycle, that of the brand leaders which almost monopolize many markets, is therefore one of continuity.

Studies shave revealed that the customers are attracted more towards the companies which are innovative in nature and enjoy good brand image in the market. Innovation is now a priority in most firms around the world just as quality was two decades ago. The challenge then was how to transform a quality program and results into a quality image. Today the need is to gain image credit for developing an innovative organization and a flow of innovative products. Having a reputation for creativity not only interjects energy and respect, but adds new product credibility to support a firm’s culture and strategy. Business Week recently ran a story on the 25 most innovative companies (e.g. Apple, Google, 3M, Toyota, Microsoft, G.E., Procter & Gamble, Nokia, Starbucks, IBM and Samsung) as determined by a survey of over 1,000 executives. Among the ideas these firms used to foster innovation was freeing time to experiment, patent sharing, having an innovator-in-chief and developing innovation metrics. While interesting, the story made the unfortunate implication that a reputation for innovativeness was due to the current strategies, processes, culture and product flow of the firm and, further, that such a reputation would result in financial success. The reality is far different.

Perceived innovativeness is driven by many factors, some reaching far into the past. One factor is undoubtedly the heritage of imagination. For over 50 years, 3M has been known for its philosophy of empowering innovators. Apple, the No. 1 firm in the survey, is still drawing on Steve Jobs’ legacy of the first Apple nearly 30 years ago. IBM gets credit for establishing the computer industry some five decades ago. G.E.’s reputation may be influenced more by the legacy of the founder, Thomas Edison, than the Jeff Immelt revolution. (Aaker, 2006)

The effect of brand awareness on buying decisions tends to regard product choice as a very intricate problem-solving process (Foxall, 1992). However, in many low involvement situations, consumers do not have the time, the resources, or the motivation to engage in such EPS processes. They are used to being passive recipients of product information, who need to spend minimal time and effort to determine brand choice (Foxall, 1992). A simple heuristic method, such as “buying well-known brands’ used as a basis for brand choice when consumers undertake commonly repeated product purchases, may explain why firms marketing low involvement products often invest considerable sums of money into advertising, in order to generate and maintain brand awareness. (Hoyer, 1984)

Brand awareness is a dominant factor in both initial (trial) and repeat-purchase decisions, even when the quality of the national brand was inferior to that of a non-national brand. Hoyer and Brown (1990) Similar conclusions were obtained in the replicated study of Macdonald and Sharp (2000), further evidencing the effect of brand awareness on purchase decisions. Familiarity with a brand has an influence on consumer confidence towards a brand, which, in turn, affects the intention to buy that brand (Laroche et al.1996). Familiarity is measured by the experience and information possessed by the consumer for a specific brand hence such information will exert some effects on purchase intentions, thus constructing one of the loyalty dimensions (Bloemer et al., 1999).

If we look at the Pepsi-Cola Company from the outside, there has been a certain amount of repetitiveness in its development. By following the trends and focusing on how to lower the price as much as possible, they managed to create a successful company. By investing in the development of the bottling and distribution sector, Pepsi found their balance in the market. (Nels, 2008)

Then in 1920’s Pepsi-Cola Company failed because they didn’t concentrate enough energy on branding. Within a few years Pepsi was declared bankrupt twice. By the end of the 1930’s the company was reorganized from inside and the marketing policy drastically changed. Major investment was now directed towards making people more familiar with the product. After acquiring Mountain Dew, new sources of financing and revenue opportunities were needed because the acquisition was not an instant success. Therefore, in 1965 Pepsi merged with Frito Lay. In the 1980’s the decreasing sales in the beverage market induced the industry to adjust with more aggressive marketing strategy and new products. In fact, Coke marketed a new cola formula, whereas Pepsi persisted with promotional efforts and improved customer responsiveness to increase sales volume. (Thomas and Alexander, 2005)

Following these cyclical changes in the marketing policy of the firm (every 20 years there is a huge turn over), one could conclude that this is the time for PepsiCo’s to readjust. The circumstances underlying the merger with Quaker Oats are significant. Nowadays, the market is rapidly changing and it’s becoming saturated. The entrance into potential new markets is more complex than ever consequently, the only way for the company to expand is by gaining market share by mergers or strategic alliances. Furthermore, the marketing strategies in foreign markets like China and India are experiencing problems in customer responsiveness. Currently, the beverage sector is following a trend of continuous launch of new products in order to attract new customers. In this sense, the challenge for Pepsi is to be able to sustain such a trend and conversely, to remain a leader in their market.