Pepsi’s ad failure shows the importance of diversity and market research

The backlash over the Kendall Jenner ad shows marketers need an outside perspective, whether from an ad agency or by conducting thorough market research and reaching out to consumers.

At last year’s Cannes Lions Festival, PepsiCo’s president Brad Jakeman energetically talked up its decision to form Creators League Studio, a new in-house content creation arm.

Laying down the gauntlet to ad agencies, he barked: “Instead of five pieces of content a year, a brand like Pepsi needs about 5,000 pieces of content a year. Instead of taking six months to develop an ad, we have six hours or six days. And instead of it costing $2m, it needs to cost $20,000.”

PepsiCo, he said, was sick and tired of the complicated structure that working with ad agencies created. “There is no infrastructure to advertisers to be able to quickly produce that content. You have to patch it together. Certainly the traditional agencies can’t do it.”

Following this week’s controversy, Jakeman might regret these comments, according to Lucky General’s founder Andy Nairn.

READ MORE: ‘Pepsi’s tone-deaf Kendall Jenner ad deserves to be criticised’

Pepsi’s tone-deaf ad featured model Kendall Jenner as the leader of a group of protestors, who awkwardly mirrored the Black Lives Matter movement. And after the campaign, which was created by the soft drink brand’s in-house creation arm, insulted the daughter of Martin Luther King and created a mass social media backlash, Pepsi was forced to pull it and issue a groveling apology.

Should Pepsi have enlisted an agency?

Nairn believes Jakeman’s Cannes comments suggest Pepsi’s in-house team worked so quickly on the Jenner campaign that it failed to properly vet it for controversy.

“Look, I own an ad agency so I’m sure people will say I have a vested interest here, but what happened at Pepsi clearly shows the dangers of not having an external perspective,” he tells Marketing Week.

READ MORE: Why are brands taking agencies in-house?

“Agencies mess up too, we get it wrong all the time. But if you run an in-house creative department like Pepsi does you need to really interrogate your own approach and make sure you’re not blinkered by your own brand. It is clear Pepsi didn’t do that.”

Nairn adds: “It is basic common sense that if you are surrounded by people who live and breathe your brand when creating an ad, then you’re much more prone to disaster than working with an ad agency, who will take a more balanced approach.

“Yes, an agency will take longer to make an ad, but a longer trial and error approach typically avoids controversy so it’s worth it.”

The diversity debate

A poll of 754 marketing professionals conducted by Marketing Week in partnership with One Poll’s consumer survey reveals nearly half (42%) of marketers believe the brands they work for are failing to reflect a contemporary, racially-diverse, society in their marketing and advertising.

And on the agency side only 13.1% of staff currently come from a black, Asian, and minority ethnic (BAME) background, according to the IPA.

It is basic common sense that if you are surrounded by people who live and breathe your brand when creating an ad, then you’re much more prone to disaster.

Andy Nairn, Lucky Generals

These stats show the marketing industry rarely seeks diverse voices when creating content, so surely Pepsi’s failure stems from a wider industry failing? While Nairn agrees both brands and agencies need to hire more racially diverse marketers, he believes the Pepsi controversy would have still happened regardless.

He adds: “Even if an in-house agency is filled with people of colour then they will still likely become so wedded to the brand, and see things through the lens of the brand, that they fail to spot tone or how the outside world perceives their brand. Diversity is a broader issue.

“We talk a lot about drinking the cool aid but Pepsi is an example of a organisation drinking too much of its own fizzy liquid.”

Prioritising market research

Would this tone-deaf scene have been avoided if Pepsi had conducted thorough market research?

Yet, a possible lack of diversity in Pepsi’s own team is not the only issue. For Fern Miller, chief strategy officer at DigitasLBi, Pepsi failed because it didn’t reach out to protest groups.

“Corporations like PepsiCo need to over-index in how much they worry about the outside world perceiving them yet somehow there’s stil a sense of tunnel vision,” she explains.

“If you get involved with the protest movement in your ad then you need to really engage with these people on the front line and try to understand the nuances of what they are doing. If you don’t, well, then you can see what the results will look like.”

Pepsi experienced a “difficult” 2016 with its brand value dropping by 4% to $18.3bn according to Brand Finance, with it stating the Kendal Jenner controversy “could create further losses in the value and strength of its brand”.

Brand Finance could have a point. Pepsi’s buzz score is statistically significantly down over the last week, according to YouGov BrandIndex. Over this period, its buzz has fallen a massive 9.5 points to -9.2, placing it bottom on a table of the UK’s 26 biggest carbonated drinks brands.

Ultimately, Miller says the in-house vs agency debate is irrelevant. To avoid a similar brand  meltdown, it all comes down to doing proper market research.

She concludes: “This theory was invented in 1960s and 1970s that advertising went after the views of the public before it launched an ad – it is called planning and research. Sometimes when you work for yourself you lose all perspective. Brands and agencies just need to make sure there’s somebody on their team who reflects the voice of the consumer. I don’t think Pepsi had that here.”



There are 11 comments at the moment, we would love to hear your opinion too.

  1. Jason Chastain 7 Apr 2017

    Market research shows it’s stupid to insert politics into business, taking a very public side on controversial issues. Just ask Target, Macy’s, Kellogg’s, and Starbucks.

  2. David Perry 9 Apr 2017

    Content is easy, advertising is hard. Pepsi is making its own content. They should hire an ad agency to do their advertising. They’ve been stumbling around in the dark ever since they left BBDO. That would be a great place to start.

  3. Shanghai61 10 Apr 2017

    This is what happens when a brand drinks its own Koolaid.

  4. Hailey Fink 10 Apr 2017

    Advertising in today’s society can be difficult when you have to consider the variety of views and beliefs that people hold and the possibility of offending an individual or a group of people. I think that in this case it does go beyond the issue of whether it Pepsi chose to hire an ad agency or to attempt to create a commercial themselves. Yes, an ad agency does have more specific experience in evaluating how a commercial will be perceived, how well it will reflect the brand, or in conducting research on their audience, however, in this case, Pepsi seemed to have just forgone market research as a whole. It is important to have a diverse set of voices and opinions giving input, but I think that if more research has been done a disaster to this extent could have been avoided despite who Pepsi employs. Diversity in the work place helps us to see problems and ideas through the eyes of others and to take different approaches which can give us better insight as to how to better reach our audience in a positive manner. Pepsi has received lot of attention because of this controversial commercial but despite popular belief, all publicity is not good publicity!

  5. Macy Graver 10 Apr 2017

    I cringed every second of this commercial. Honestly, I am not really sure what Pepsi was expecting to receive from their audience, but their good intentions were brutally knocked down. It stinks not being number one (Coke) but it must especially hurt after receiving the negative feedback after the advertisement aired. In attempts to potentially rise above their competitors, they did not move up a hair. Pepsi certainly made a mistake in not having an external perspective on their project. Like the article read, “It is basic common sense that if you are surrounded by people who live and breathe your brand when creating an ad, then you’re much more prone to disaster.” I believe that the majority of the youth of this upcoming generation are a bit more sensitive when it comes to global issues and sharing a clip as such, I am not sure how Pepsi did not see what was coming for them. The subject of protest and riots is not something which I am sure anyone ever wants to talk about when it comes to important political concerns. I think that there are a million great ideas out there to promote this number two brand, and bringing real world problems into the mix was a decision that Pepsi will suffer from.

  6. neil christie 10 Apr 2017

    The headline of this article suggests that Pepsi didn’t research this approach. This conclusion seems to be based on the assumption made by an interviewee who doesn’t work at Pepsi. We don’t know whether Pepsi pretested the ad and, whether they did pretest or not, we don’t know if pretesting would have predicted the real world reaction.
    “People don’t think what they feel, don’t say what they think and don’t do what they say” – David Ogilvy.

    • Thomas Hobbs 10 Apr 2017

      Even if Pepsi had done any market research here, the outcome makes it pretty clear that it wasn’t nearly thorough enough. The point that a brand like Pepsi must ‘over index in market research’ remains.

    • Ferdinand Edwards 30 Apr 2017

      Sure many researchers get mugged by reality but the really good ones have a sensitive BS/faking it monitor and will eventually get to the truth. The ‘I don’t know what I want but I want it now’ part of human nature is never easy to deconstruct.

  7. neil christie 10 Apr 2017

    Thomas Hobbs – you’re assuming that, even if they had done research, however thorough, it would have been able accurately to predict the real world reaction. This isn’t a question of thoroughness, it’s a matter of the difficulty in using the artificial circumstances of research pre-testing to predict real world outcomes. Plenty of extensive, thorough market research was unable to predict – for example – Trump’s victory, the failure of ‘new Coke’, or the success of Cadbury’s ‘Gorilla’.

    • Thomas Hobbs 10 Apr 2017

      I sense Pepsi needed to combine thorough market research with reaching out to the protest movement – my understanding, not an assumption – is they did neither.

  8. Andy Moore 10 Apr 2017

    Not sure this even needed a particularly sophisticated research approach. Pepsi would have probably learned all they needed to know from what years ago used to be called a ‘disaster check’ . That would surely have highlighted that the political sensitivities around this issue made the topic too risky and the ad as constructed a non starter.

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