7up India: Approach To Solve A Managerial Decision Problem - Improving Monthly Sales

The soft drink market is a duopoly worldwide and India is no exception. 95% of sales are shared between 2 companies- PepsiCo and Coca-Cola. Soft-drink is a product with very little differentiation and high degree of impulse purchases. Given these two facts, Place and Promotion assume paramount importance in the marketing of soft-drinks.

Through this report we intend to discuss the approach for addressing a particular managerial decision problem of 7UP. It is with this intention we have decided to do the following study.

PART A:

* To prepare a write-up on the designated Marketing Research Process for 7UP

o Defining the Managerial Decision Problems and Research Problems

o The Research Design and the specific Research Methodology fixed to address the research problems and the informational needs

o The Sampling Plan and the Research Tools designed for the data collection

o A detailed Report on the pre-testing carried out on the research tools

PART B:

* To prepare a write-up on the Marketing Plan implemented by PepsiCo for 7UP

o A brief account of the existing Marketing Objectives set for 7UP

o A brief account on the existing Generic Marketing Strategies fixed for 7UP

o A brief account on the existing Marketing Organization set up for 7UP

After doing a secondary survey and talking to a few knowledgeable persons in the industry, the managerial decision problem of 'How should the company go about dealing with the low monthly sales volumes?' has been chosen. The corresponding exhaustive list of the research problems were listed down along with the individual approach.

INTRODUCTION

COMPANY AND THE PRODUCT

PepsiCo is one of the leading soft drinks company in India. It is second after Coca Cola. But its core brand Pepsi captures the highest percentage share of all the CSDs. The company portfolio of soft drinks consists of Pepsi, 7UP, Mirinda, Mountain Dew, Tropicana Juices and their variants.

7UP is one of the three (7UP, Mirinda, Mountain Dew) lemon based drinks of PepsiCo. However the market leader in this segment is Coca Cola's Sprite assuming almost 10% of the market share of Carbonated Soft Drinks.

NATURE OF MARKET

Intense Competition: The Soft drink market in India is one of intense competition between 2 major players- Pepsi and Coca Cola. This ensures large advertisement expenses.

Low Average Consumption: The consumption is a low average of 10 bottles/person/year, which is even lower than countries like Pakistan and Sri Lanka. One of the factors contributing to this is the perception that soft drinks are not good for health.

Seasonal Demand: The demand is highly seasonal with close to 45% of the sales coming in three months of April- June. This creates an inherent problem for the distribution network as well as asset utilization.

Low Product Differentiation: Differentiation can only be created by such aspects as brand image, high visibility, heavy promotions and aggressive marketing.

Habitual Buying Behavior: A soft drink is typically a low customer involvement product with low product differentiation leading to a "habitual buying behavior".

Spreading Network: The network is spreading from traditional grocery and retail outlets to include bars, eateries, restaurants and other leisure places.

Customer Preferences: The customer preferences are determined by factors like taste, chill, visibility, packaging and advertisements.

Reverse Supply Chain: Since most of the sales take place through bottled products, a system to collect these back has to be in place. The container in this case is costlier than the product. More than 95% of the bottles come back (consider damaged goods).

MANAGERIAL DECISION PROBLEM

After a thorough investigation through secondary research and talking to a few knowledgeable persons in the industry, one thing was very evident: the market share of 7UP is decreasing. The carbonated soft drinks market is about Rs. 7000 crores in India. Pepsi and Coke lead the market currently. The market of clear lime sodas is only about 40% of the total carbonated soft drinks in India. Although, the market share of Coca Cola owned Sprite grew by 30% in the last quarter, the lime category lags behind the cola category. Sprite however showed a lot of promise with its sales outperforming all the other fizzy drinks in the category in the first quarter of 2008. This definitely shows the success of the marketing strategy of Sprite. It also mandates the need for 7UP to make its strong imprint in the sector. The CSD industry in itself too, faces severe competition from the packaged juices and the non-carbonated drinks. Increasingly, the consumers have been showing tendencies to opt for healthy drinks as opposed to the fizzy CSDs. Much has to do with the 'pesticide controversy' of cola brands Pepsi and Coke. To keep up its presence in the clear lime category in the face of soaring competition from rival Sprite, 7UP needs to address the problem of comparatively lower sales volumes. Hence the managerial decision problem chosen is "How can 7UP increase the monthly sales volume?"

RESEARCH DESIGN

The process of decision making involves the following steps:

a. Identification of the problem

b. Identifying alternative courses of action to resolve the problem

c. Specifying criteria for evaluating alternative courses of action for resolving a problem

d. Evaluating each course of action on the criteria for the problem, and

e. Selecting the best course of action for the problem

The purpose of the research study has to be consistent with the above steps. The type of research design used depends on the information available and at what step are we at the start when we look at the steps.

For the chosen managerial decision problem of 'How can 7UP increase its monthly sales volume?' the following five research problems have been chosen.

1. Measuring the industry trend and the company position in the industry

2. To