Market segmentation of softdrink industry:-

The following major segments of the softdrink drinkers have been identified:

1.  Fashionable brand conscious consumers:

This segment of people are generally in their twenties, who are uni students or make up the
working class, drive fast cars(or would like to ) they socialize with friends and go to parties and
dance clubs. They are carefree and are freestyle. When they buy this product, they buy the
image, they buy the fashionable drink that exudes coolness.

2.  Average consumers:

These people are usually prone to purchase product out of mindless habit. This segment of
consumers have successfully been “brainwashed” to some extent by advertising campaigns and
heavy promotions conducted by these companies. Again the age bracket is in the twenties,
although teenagers tend to fall under this category.

3.  Peer pressured consumers:

This segment of the majority teenagers who purchase this product “because their friends do it,”
or they do not want to appear daggy purchasing a local drink. They are less likely to request any
ordinary drink while purchasing.

4.  Soft drink addicts:

This segment usually follows any particular brand that will have nothing other than there
preferred brand, no substitute’s, no imitations. They are accustomed to the taste, and believe it is
the distinct flavour that keeps them buying coke consistently. On the other side, these consumers
are addicted to the prizes and competitions offered by these companies, resulting in the purchase
of that product

PEPSI SEGMENTING TARGETTING AND POSITIONING

Executive Summary

This report provides an analysis and evaluation of the Marketing Strategy of PepsiCo. Methods
of analysis include Market Segmentation, Market Targeting, Market Positioning, as well as the
Marketing Mix of PepsiCo.

The research draws attention to the Market Segmentation of PepsiCo. While the soft drink
industry has probably the widest and deepest customer base in the world, Pepsi did not use the
majority fallacy to market their product. Instead, Pepsi prefers to segment itself as the beverage
choice of the “New Generation”, Generation Next, or just as the “Pepsi Generation”. These terms
adopted in Pepsi’s advertising campaigns are what marketers refer to as Generation X, which are
profiled to be between the ages of 18 to 29. In addition, PepsiCo also focus on another market,
which includes Teenagers that are between the 12 to 18 years old. Pepsi believes that if they can
get this market to adopt their product, they could establish a loyal customer in a long run.

Despite being a strong #2 against Coca Cola, Pepsi has become the largest selling soft drink in
the world and is liked by people of all ages. A recent survey has shown that about 90% of the
world population prefers Pepsi when asked the question of which soft drinks do they prefer. The
reason for their linking is because Pepsi is able to give them a higher quality of taste and a large
variety of flavors.

INTRODUCTION:

PepsiCo is a world leader in convenient snacks, food and beverages with revenues of more than
$39 billion and over 185,000 employees. The company consists of PepsiCo Americas Foods
(PAF), PepsiCo Americas Beverages (PAB) and PepsiCo International (PI). Besides the Pepsi-
Cola brands, the company owns the brands Quaker Oats, Gatorade, Frito-Lay, SoBe, Naked,
Tropicana, Copella, Mountain Dew, Mirinda and 7up (outside the USA).
PepsiCo’s products are recognized and are most respected all around the globe. Currently,
PepsiCo has divisions which operates in three major US and international businesses: beverages,
snack foods, and restaurants. In each of these

businesses, PepsiCo has attained a leadership position as being the world leader in soft drink
bottling, the world largest snack chip producer, and the world largest franchised and company
operated restaurant system. The cooperation’s increasing success has been based on high
standards of performance, marketing strategies, competitiveness, determination, commitment,
and the personal and professional integrity of their people, products and business practices.

PepsiCo’s overall mission is to increase the value of our shareholders’ investments through sales
growth, investments and financial activities. PepsiCo believes their success depends upon the
quality and value of their products by providing a safe, whole some, economically efficient and a
healthy environment for their customers; and by providing a fair return to their investors while
maintaining the highest standards of integrity.

Market Segmentation

As we know that PepsiCo provides varieties of beverages such as carbonated soft drinks, sport
drinks, dairy-based drinks, energy drinks, fruit flavored beverages, ready-to-drink coffees, ready-
to-drink tea, mineral water and frozen beverage. These products are marketed under brand as
Pepsi, Mountain Dew, Gatorade, Lipton, Starbucks, Tropicana, and so on. With these products,
PepsiCo aims to attract different groups of consumers.

There are two levels in which Pepsi segments its market:

Despite the large customer base in the Soft Drink industry, Pepsi prefers to segment itself as the
beverage choice of the “New Generation”, Generation Next, or just as the “Pepsi Generation”.
These terms adopted in Pepsi’s advertising campaigns are what marketers refer to as Generation
X, which are profiled to be between the ages of 18 to 29. In addition, Pepsi shifted its focus to
the growing American teenage market in the 1990s by forming exclusive contracts with
American schools and developing advertising campaigns such as “The Next Generation” and the
“Joy of Pepsi”, featuring Britney Spears. Pepsi believes that if they can get this market to adopt
their product, they could establish a loyal customer in a long run.

Niche Marketing

Pepsi focused on varietal differentiation since 1990 by introducing a string of niche products. To
increase volume in order to counter flat coca sales, Pepsi introduced Sierra Mist in 2002-2003 to
take the place of 7-up and go head-to-head with Sprite. Pepsi has also tried to boost volume by
introducing products that appeal to specific target markets that it currently is not reaching. Pepsi
has introduced Code Red and Live Wire, extensions of Mountain Dew, Pepsi One, and Pepsi
Blue. Finally, Pepsi is countering declining sales of carbonated drinks through the marketing and
distribution of Starbucks ready to drink products, and the acquisition of SOBE and Gatorade.
The success of Pepsi’s Mountain Dew Code Red launched in 2001 was the most successful soft
drink innovation in 20 years and has spurred even more niche product introductions for PepsiCo
as well as other competitors.

BASES OF SEGMENTATION:
Demographic

In focusing on the Pepsi-Cola beverage product, PepsiCo has retained a long history of
concentrating on youth as its main target market – “Generation Next!” It has spent billions of
dollars in trying to woo the young and nearly young, implying that Coca-Cola is for the older
generation. The reason why Pepsi-Cola has fiercely targeted this market is because it is the
largest amongst its users. Market segment profiles have shown that the majority of carbonated
beverage drinkers are youth and middle age people. Also, Pepsi continually targets the college
market in which they spend huge amounts of money to compete with Coca Cola in acquiring
contracts with universities (ie: CSUF) to have sold representation of their product distribution.
Pepsi’s use this behaviorist segmentation has been a key to the company’s success.

Market Targeting
Pepsi customers are mostly Teenagers and Young Adults between the ages of 14 to 30. It also
targets at Schools, Colleges, Universities, Homes, Restaurants, Hotels, and Stores.
Market Positioning

PepsiCo plans to further create positions that will give products the greatest advantage in their
target markets. Pepsi has been positioned based on the process of positioning by direct
comparison and have positioned their products to benefit their target market

Marketing Mix of Pepsi:

1.PRODUCT

2. Promotion

PepsiCo has advertised its products through many different ways and media. Through TV, we
have seen different advertisements of its products such as Pepsi or Dew. PepsiCo also advertise
its products by targeting those favorable television programs, like sports, TV series etc. In
addition, PepsiCo has also made used of some events like “Pepsify Karogey?” to promote its
products. Through newspapers like Jung and Dawn, PepsiCo has advertised a wide range of
products it offers to its customers. The usage of Posters are also used to create awareness of the
products that PepsiCo offers.

3. Place

Decisions with respect to distribution channel focus on making the product available in adequate
quantities at places where customers are normally expected to shop for them to satisfy their
needs. Pepsi’s supply is low uncertainty. Some of its supply source capabilities are:

•
Less breakdowns
•
High quality
•
Flexible supply capacity
•
Mature production process

Venues where Pepsi is sold off-site consumption include grocery stores, convenience stores and
vending machines. However, Pepsi is most effective in grocery stores where it has 33% market
share. This is contrary to the fountain station channel, where Pepsi has less than half the market
share.

Price
Pepsi being a company that emphasizes on product quality tends to sell its products with price
range from moderately low to high prices, depending on the use and the targeted customers.

11
5. Consumer Solution

PepsiCo offers a wide variety of products that ranges from Energy drinks, Tea, Water, to
Carbonated drinks. Each variety aims to meet the needs of different consumers of different
demographics. For example, Energy drinks such as Gatorade are catered for athletes whereas Tea
such as Lipton Iced Tea aims to provide quality taste for regular consumers. Therefore PepsiCo
is able to reach a large group of customers from different demographics because of its product
variation.

6. Customer Cost

Despite the fact that PepsiCo frequently lowers its price and eventually raises its price again,
buyers have not been affected by this pricing strategy. On top of that, Pepsi has always been very
flexible and reasonable with its pricing strategy. Depending on the product, prices are ranged
from moderately low to high.

7. Convenience

As PepsiCo products are readily found in Supermarkets, Convenient Stores and Vending
machines, it is very accessible and convenient for consumers to purchase these products.
Especially so for Vending machines, which can be found in most buildings or public places.

8. Communications
Through various medium of Advertising such as TV advertisements, Posters, Newspapers and
Events, customers are aware of the different ranges of PepsiCo products. PepsiCo has also made
used of several celebrities such as Britney Spears to market its product. This creates a perception
of a young and cool image for the brand, which is easy for PepsiCo’s target market – Teenagers
and Young Adults, to identify.

Conclusion

Pepsi has been successful in generating profits in this extremely rivalrous industry. What the
company should do now is employ a strategy that now only addresses its own deficiencies in an
effort to grow market share, but one that will increase the overall size of the pie. This strategy, in
the end, will allow Pepsi to grow and sustain above-average returns