Crystal Pepsi Case Study

MARKETING MANAGEMENT                                

1. What could and should have been done differently.

The market already had a long list of colas, diet colas, caffeine colas, among others and Pepsi believed why not have another cola. Though initial sales of Crystal Pepsi were promising, consumers were not happy with the taste. Sales were probably more out of curiosity than anything else was. It was similar in taste to the original Pepsi. Customers were not sure how Crystal Pepsi was supposed to taste. Was it supposed to taste like Pepsi? Or not? If it was supposed to taste like original Pepsi, why was it more expensive? The main reason of failure of Crystal Pepsi is it did not have significant point of difference as compared with other regular colas. Pepsi could have highlighted the salient features of the new drink and align it with the target consumers’ preferences and ideals. As also stated in the case, there was incomplete market and product definition before product development started. Even though it had removed caffeine and the caramel color, Crystal Pepsi did not present an image of healthier soft-drink to most consumers as it was supposed to be. Crystal Pepsi should have first clearly identified and should have provided the image of healthy and distinctive beverage and highlight the product’s salient features that would catch the attention and interest of the target market - the health-conscious and less frequent cola drinkers.

Pepsi had failed to position the product correctly. In the meantime, Coca-Cola launched its own transparent product called “TaB Clear” in December 1992. Coca-Cola positioned the product as sugar/calorie free ‘diet’ product. On the other hand, Crystal Pepsi had sugar content and failed to find the right fit in the diet category. The clear soda market proved to be just a fad, as presented in the table below.

[pic 1]

Pepsi launched a massive and probably incredibly expensive ad campaign for Crystal Pepsi in 1993, which included the world’s first realistic, computer-generated bus wrap printing and a hilarious Super Bowl commercial featuring Van Halen, only to have the initially good sales drop so fast that they ended up pulling the drink from the market by the end of the year. Crystal Pepsi failed to catch the interest of consumers and was quickly and quietly disposed of.

In addition, Pepsi failed to choose the proper product name and description. As stated in the case, although Crystal Pepsi had a clear look from outside, it did not have the pureness of taste. It was difficult to relate with the product’s supposed identity of a “healthier” drink because consumers knew beforehand that the manufacturing is that of a carbonated goods. The new product should have been carefully studied up to the simplest detail before introducing it to the market. It could have been better if the whole concept was aligned to the real objective, which was to offer a drink which has lesser chemical additives but with the concept of attracting the health-conscious market by highlighting greater satisfaction but with lesser health effects. The formulation of the product, which highlights that the product has no caffeine and caramel color, should have been given emphasis in all aspects – in the formulation of tag line, packaging, TV ads, signage, leaflets, etc.

Generally, companies come up with aggressive innovation due to the stiffness of competition whether in the local or global market. But companies should also consider that innovations have corresponding costs, and so the return should exceed such costs. In addition, there is also a great challenge on sustainability and keeping the product stay salable in the market, and so, it should also be taken into consideration.

1. What do you think is the new-product critical success factor in the market that would have extended the Crystal Pepsi PLC?

The product life cycle helps a company understand the stages (introduction, growth, maturity, and decline) a product or service may go through once it is launched in the marketplace.  Looking at the success factors, as illustrated below, I also identified the drawbacks based on the case, as presented on the succeeding page.

[pic 2]

The critical success factors:

1. Excellent understanding of customer values and priorities

The importance of understanding the customers cannot be overstated. Companies operate without clear and well-defined understanding of true customer needs, what their customers actually value the most and the least, what they are willing to pay for and what would make them stay loyal.  And, even if these factors are well understood, the ability to build and execute a competitive strategy is often lacking, and so potential competitive strengths never materialize in the eyes of the customer.

Crystal Pepsi tried to revive itself and was re-introduced; however, since Pepsi failed to achieve excellent understanding of customer values and priorities, still the product failed.

1. Strong product management

Lack of proper organization and well-defined product management processes is an extremely typical cause of inability to bring even excellent product ideas to the market.  It is essential that the product owner is not merely a ‘technical’ one, but in fact measured on all these three components: profitability, time-to-volume and customer satisfaction.

As it is often said, the customers dictate how, what and when to produce a certain product. As for the case of Crystal Pepsi, profitability may have been achieved but on the first stage only, wherein sales were probably more out of curiosity than anything else. We can really infere that customer satisfaction is directly tied up with profitability and time-to-volume components. Naturally, unsatisfied customers would not patronize products.

1. Ability to identify and focus on the best product ideas

After having deep understanding of customer needs, strong and clearly focused product ideas, and management and processes in place should move forward. It is important though that company should focus on the salient feature of a certain product.

Just like in the case of Pepsi, its aim is to attract health conscious consumers by introducing a decaffeinated and non-inclusion of caramel colors in the product formulation. However, this was not fully highlighted and related to the target customers.

1. The right product architecture

Handling over the product’s competitive strategy and cost requirements from the idea phase to design and implementation is also a critical success factor.  Quite often, the few unique selling points get buried under hundreds of pages of functional requirements and detailed design specifications, implying the projected competitive strengths will never be achieved.