The ’cola wars’ between Coca-Cola and Pepsi are arguably the longest running competitive battle in the history of branding. I have been teaching case studies on these wars to MBA students for more than a decade because, aside from it involving two of the world’s biggest brands, they also illustrate many of the key aspects of brand management. Market segmentation, integrated marketing, line and brand extension, the role of portfolio management – these topics and more are the key lessons from a century of skirmishes between these two branding behemoths.
And we now can add one more: the value of social media.
Last year Pepsi shocked American marketers by announcing a major change in its US brand strategy. After 10 years and $150m of investment in Super Bowl TV ads, Pepsi passed up the chance to buy any media during Super Bowl 2010. Instead, as part of a wholesale shift away from traditional media, Pepsi invested as much of 50% of its American branding budget into social media. “The project is about creating a movement, not just a moment,” said Bonin Bough, PepsiCo’s global director of digital and social media. Bough went on to claim the new strategy would enable Pepsi to “build deeper relationships and deeper dialogue with our customers”.
At the heart of this new strategy was the Pepsi Refresh Project. Using Facebook, Twitter, live Ustream video and an iPhone application, consumers were encouraged to suggest social causes that would “refresh the world”. Consumers could then vote – again through social media – for their favourite causes and Pepsi would donate millions to these and use social media to promote the impact that its generosity had on these worthy causes. Any traditional advertising Pepsi did commit to was largely aimed at promoting its social media channels.
The response was spectacular: 80 million votes registered; 60,000 followers on Twitter; 4 million “likes” on Facebook. And all at the expense of arch-rival Coca-Cola which, despite also investing in social media, had continued to invest most of its budget in outdated traditional media like Super Bowl advertising and old-fashioned product placement deals with the likes of American Idol.
There was only one snag. For all the big social media numbers and even bigger talk of communication revolutions and social movements – Pepsi’s sales started to slide. And Coke’s didn’t. Last month the Wall Street Journal reported that both Pepsi and Diet Pepsi had each lost about 5% of their market share over the past 12 months in the US – that’s about half a billion dollars worth of sales. And market share was not the only thing Pepsi had lost, for the first time in living memory it also lost its number two spot. Diet Coke is now the second biggest cola brand in the US.
An overt focus on social media had blinded Pepsi to the realities of its market. It was not marketing a movement, it was marketing cola. Marketing at Pepsi should have never been about conversations or dialogue – it should have been about reminding consumers what Pepsi stands for and encouraging them to go buy it.
I can already hear the furious rattling of keyboards as the social media disciples of Britain send forth a phalanx of rebuttals and excuses for their beloved approach. So let me add two more nails in the social media coffin before they start.
First, senior Pepsi personnel have admitted to the failings of social media. In a presentation to the Association of National Advertisers last year Pepsi’s vice-president of marketing Ralph Santana (who subsequently left the company) told attendees: “The key learning for us was that in addition to having a cultural idea that taps into a mass sensibility, you need to make sure that your idea is getting enough exposure to be successful.” Or as John Sicher, the editor of Beverage Digest, more plainly put it: Pepsi needs “more product-oriented advertising and marketing”.
Second, not only is Pepsi aware of the failings of social media, it is now reversing course. More money is to be pumped back into traditional media including a $60m sponsorship deal with the American version of The X-Factor. So much for social media movements, Pepsi is going back to traditional media moments before it’s too late for the brand.
My argument against social media was never that it was pointless or worthless – just that its advantages and applications have been wildly overstated by those who will benefit most from its adoption. It certainly does add an interesting new set of tools to the traditional media mix that brand managers should consider. But it is not a new platform. It is not a new way of thinking. And it is clearly not the end for traditional media. Social media adds an extra couple of options to the integrated marketing mix that could prove worthwhile for some brands, and entirely unnecessary for others.
Or to put it another way, the way I will teach my MBA students next week: Learn from how not to do social media from Pepsi, and how to get it right from Coke.
Mark Ritson is an associate professor of marketing, an award winning columnist, and a consultant to some of the world’s biggest brands