How PepsiCo Uses Different Pricing Strategies to Gain Competitive Advantage
PepsiCo is one of the leading food and beverage companies in the world, with a diversified portfolio of products such as Pepsi Cola, Mountain Dew, Lay’s, Gatorade, Tropicana and Lipton. The company faces intense competition from rivals like Coca-Cola, Dr. Pepper Snapple and Red Bull in the carbonated soft drinks (CSD) market, as well as from other snack and juice brands. To gain a competitive edge, PepsiCo uses different pricing strategies for different products, depending on the consumer demand, the product life cycle and the competitive landscape.
Key Takeaways
PepsiCo uses different pricing strategies for different products to gain a competitive advantage in the food and beverage industry.
PepsiCo uses market-oriented pricing strategy for its CSD products, hybrid everyday value pricing strategy for its snack products and premium pricing strategy for its healthy products.
PepsiCo’s pricing strategies are based on the consumer demand, the product life cycle and the competitive landscape of each product category.
PepsiCo’s pricing strategies help the company to appeal to a wide range of consumers, respond effectively to the market changes and optimize its profitability and growth.
1. Market-oriented pricing strategy
One of the main pricing strategies that PepsiCo uses is the market-oriented pricing strategy, which involves setting prices based on the prevailing market conditions and consumer perceptions. This strategy allows PepsiCo to adjust its prices according to the changes in consumer preferences, income levels, inflation rates and competitor actions. For example, PepsiCo follows the market-oriented pricing strategy for its CSD products, such as Pepsi Cola and Mountain Dew, which are in a stable stage of the product life cycle. The company does not engage in price wars with its competitors, but rather follows the predetermined prices that reflect the value of the products to the consumers. PepsiCo also offers different sizes of bottles and cans at different prices, to cater to different segments of consumers based on their affordability and consumption patterns.
2. Hybrid everyday value pricing strategy
Another pricing strategy that PepsiCo uses is the hybrid everyday value pricing strategy, which involves offering low prices on some products while maintaining high prices on others. This strategy aims to balance between volume growth and profitability, as well as to attract both price-sensitive and quality-conscious consumers. For example, PepsiCo adopted this strategy for its snack products, such as Lay’s, Cheetos and Kurkure, which face stiff competition from local and regional brands. The company reduced the prices of some of its snack products by 5-10%, while keeping the prices of other products unchanged or slightly increased. This way, PepsiCo was able to increase its market share and sales volume in the snack market, while also maintaining its profit margins and brand image.
3. Premium pricing strategy
A third pricing strategy that PepsiCo uses is the premium pricing strategy, which involves setting high prices for products that offer superior quality, performance or benefits to the consumers. This strategy is used to target niche segments of consumers who are willing to pay more for higher value products. For example, PepsiCo applies this strategy for its healthy products, such as Gatorade and Tropicana, which are in a growth stage of the product life cycle. The company charges higher prices for these products than its competitors, to reflect their superior nutritional value, taste and brand equity. PepsiCo also invests heavily in marketing and promotion of these products, to create awareness and loyalty among the health-conscious consumers.
By using different pricing strategies for different products, PepsiCo is able to gain a competitive advantage in the food and beverage industry. The company can leverage its diversified portfolio of products to appeal to a wide range of consumers with different needs, preferences and budgets. The company can also respond effectively to the changing market dynamics and consumer trends, by adjusting its prices accordingly. Moreover, the company can optimize its profitability and growth potential, by balancing between volume and margin objectives.
Tips
- To gain a competitive advantage in the food and beverage industry, use different pricing strategies for different products depending on their demand, life cycle and competition.
- To attract both price-sensitive and quality-conscious consumers, use hybrid everyday value pricing strategy for some products while maintaining high prices for others.
- To target niche segments of consumers who are willing to pay more for higher value products, use premium pricing strategy for products that offer superior quality, performance or benefits.
- To adjust your prices according to the changing market dynamics and consumer trends, use market-oriented pricing strategy for products that are in a stable stage of the product life cycle.
- To optimize your profitability and growth potential, balance between volume and margin objectives when setting your prices.
Pepsi Pricing Strategy and Its Impact on Global Demand
Pepsi is one of the most popular carbonated soft drinks in the world, with a diversified portfolio of products that includes beverages, snacks, and juices. Pepsi’s pricing strategy is based on several factors, such as consumer perceptions, market conditions, product quality, and competition. In this report, we will analyze how Pepsi’s pricing strategy affects its global demand and market share.
Market-Oriented Pricing Strategy
Pepsi uses a market-oriented pricing strategy for most of its products, which means that it sets its prices according to the demand and preferences of the consumers, as well as the prices of its competitors. This strategy allows Pepsi to maintain a competitive edge and attract different segments of customers by offering various sizes and flavors of its products. For example, Pepsi offers different sized bottles at different rates, depending on the consumer’s pocket size and occasion. Pepsi also offers diet versions, such as Diet Pepsi and Pepsi Zero Sugar, for health-conscious consumers who want to reduce their calorie intake.
Hybrid Everyday Value Pricing Strategy
Pepsi also uses a hybrid everyday value pricing strategy for some of its products, especially in the US market. This strategy involves cutting off all the holiday discounts and offers, and instead offering consistent and reasonable prices throughout the year. This strategy aims to increase the loyalty and satisfaction of the customers, who do not have to wait for special occasions to buy Pepsi products at lower prices. This strategy also helps Pepsi to reduce its promotional costs and increase its profit margins.
Impact on Global Demand
Pepsi’s pricing strategy has a significant impact on its global demand and market share. By using a market-oriented pricing strategy, Pepsi can cater to the needs and wants of different customers in different regions and countries. Pepsi can also adjust its prices according to the changes in the market conditions, such as inflation, currency fluctuations, taxes, and regulations. By using a hybrid everyday value pricing strategy, Pepsi can enhance its brand image and reputation as a reliable and affordable provider of quality products. Pepsi can also increase its customer retention and loyalty by offering consistent value and satisfaction.
Frequently Asked Questions:
Q1: What is market-oriented pricing strategy?
A: Market-oriented pricing strategy is a pricing strategy that involves setting prices based on the prevailing market conditions and consumer perceptions.
Q2: What is hybrid everyday value pricing strategy?
A: Hybrid everyday value pricing strategy is a pricing strategy that involves offering low prices on some products while maintaining high prices on others.
Q3: What is premium pricing strategy?
A: Premium pricing strategy is a pricing strategy that involves setting high prices for products that offer superior quality, performance or benefits to the consumers.
Q4: What are some examples of PepsiCo’s products that use market-oriented pricing strategy?
A: Some examples of PepsiCo’s products that use market-oriented pricing strategy are Pepsi Cola and Mountain Dew.
Q5: What are some examples of PepsiCo’s products that use hybrid everyday value pricing strategy?
A: Some examples of PepsiCo’s products that use hybrid everyday value pricing strategy are Lay’s, Cheetos and Kurkure.
Q6: What are some examples of PepsiCo’s products that use premium pricing strategy?
A: Some examples of PepsiCo’s products that use premium pricing strategy are Gatorade and Tropicana.
References:
http://www.beverage-digest.com/pdf/top-10_2009.pdf
https://web.archive.org/web/20120415011259/http://www.pepsi.com/PepsiLegacy_Book.pdf
https://www.businessinsider.com/pepsi-perfect-sold-on-ebay-costs-hundreds-of-dollars-2015-10
https://www.chroniclelive.co.uk/whats-on/food-drink-news/pepsi-sugar-change-recipe-taste-26576517
http://www.pepsiproductfacts.com/infobyproduct.php
https://www.thestrategywatch.com/pricing-strategy-pepsico/
https://panmore.com/pepsico-marketing-mix-4ps-analysis
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