A dynamic timeline might look something like this:Ĭoke vs Pepsi Case Study Solution – Recommendation Pepsi could then evaluate whether creating a very broad product portfolio, and launching each of these products into the market over time, would be a successful strategy. For Pepsi, the Market Model could evolve to look something like this: And they can be used to simulate very specific market phenomenon. Market Models can evolve to be increasingly complex. And today Diet Pepsi is considered to be Pepsi’s flagship product, with regular Pepsi being considered to be the product line extension. Note that the Diet Pepsi product that was added to the Market Map is just like Pepsi (it is also a Cola Drink with the Pepsi Brand) but it has the additional benefit of being low in calories. To test whether making a product line extension to the Pepsi product would be a successful strategy, Pepsi could make this adjustment to the Market Map: This genuine finding, in part, led Coke to launch its unsuccessful “New Coke” strategy. It turns out that a statistically significant majority of Coke drinkers did, in fact, prefer the taste of Pepsi. In these televised blind-taste challenges, a Coke drinker was asked to determine whether they actually preferred the taste of Pepsi. In fact the “Pepsi Challenge”, which was a market strategy centered on improving the customer’s perception of the taste of Pepsi, was another enormously successful strategy. To test whether targeting a particular market demographic would be a successful strategy, Pepsi could make this adjustment to the Market Map: Not only would it require changing the size of the Coke bottle, but it would also require changing the size of all of the Coke refrigerators which were built to only accommodate the smaller 6.5 oz bottle. The campaign was a huge success at the time and allowed Pepsi to double their profits.Ĭoke, which also sold for a nickel (5 cents), had difficulty matching Pepsi’s new product. COKE PEPSI AD WARS FULLThey accompanied the new product feature with the advertising jingle “ Pepsi-Cola hits the spot / Twelve full ounces, that’s a lot / Twice as much for a nickel, too / Pepsi-Cola is the drink for you”. In fact, Pepsi did introduce a large 12 oz bottle early on in the Cola Wars to compete with Coke’s 6.5 oz bottle. To test whether adding the additional benefit of a larger bottle would be a successful strategy, Pepsi could make this adjustment to the Market Map: This is how Pepsi would use the Market Model to simulate the market outcome from each of these possible strategies. They might add a product line extension.They may try and improve the taste of the cola.They might target a different geography.They might try to improve the Pepsi brand.They might try and add an additional feature, such as a different sized bottle.Once the base model has been constructed and tuned the user can think about how they might change the conditions in the market. The new data can then be integrated into the Market Map. For example, after setting up an initial Market Model, the user can run very targeted Conjoint Analysis study to better inform them about what is new to the market (like a new feature). The Market Model allows the user to integrate their own knowledge, and then focus on understanding just those new changes relative to the existing state of the market. Unlike with other statistical techniques, the user does not have to commission an expensive market research report just to tell them what they already know about the existing market. If we also have data for another point, say at a time that Pepsi was offering a substantial discount on their product or from another geography, then we would have more than enough data to completely tune a model as simple as the one we are starting with.īecause the Market Model uses a proprietary statistical algorithm to impute customer distribution data, the data collection problem becomes much easier and cost effective. With these 6 data points we can start to tune our model. We know the Price for Coke and Pepsi, we know their Market Share, and we have a pretty good idea of the Profit Margin (or Marginal Cost) of both from their public financial reports. Data from the market already gives us a lot of information that we can use to tune the Market Model.
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