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CASE STUDY Pepsi vs Coke For decades, Pepsi and Coke have battled over who gets the biggest market share. For the most part, Coke has always won the battle, with Pepsi outselling them in few occasions. Nevertheless, their market share is not that apart from each other in specific countries. The battle continues nowadays...Half a century ago, in the 1970s, Pepsi came up with an idea: The Pepsi Challenge: Pepsi would organize public tastings of its main drink and have it compared with Coke. With a twist: people would taste both colas blind-folded. The participants were given two glasses of cola, one being Pepsi, the other being Coke. Of course, the colas would be not tagged in any way - making it impossible for the participants to know which is which, and leaving the choice purely to the taste. For the most part, people would pick up Pepsi. Most of the time, thinking it was Coke. The most noted reason for picking Pepsi was its sweeter taste. Therefore, with no Branding at all, no tags, no nothing: people preferred Pepsi. To many people, this challenge was the introduction to one of the fundamentals of scientific inquiry and market research: the double-blind experiment. The Pepsi challenge was a success, and inspired a series of commercials during many decades. In fact, after the challenge, Pepsi was outselling Coke in supermarkets, leaving Coke dependent on its larger infrastructure of soda machines and fast food tie-ins to preserve its lead. However, something happened shortly after. Some of the people that preferred Pepsi over Coke began to switch to Coke once again, and Coke regained its lost marketshare. This gave birth to what is known as the Pepsi Paradox: Without tags of any kind, people would choose Pepsi; but with Branding playing its role, people would choose Coke. In spite of its dominant position, Coke executives felt threatened by the Pepsi Challenge so much, that they insisted in changing Coke's formula, leading to one of the biggest market mistakes ever made: The New Coke. The new reformulated Coke, that was much sweeter (like Pepsi) than before, was a huge flop, with Coke receiving many complaint letters and calls. Shortly after, the company brought back the original Coke formula selling it with a new packaging that had the world "Classical" next to the Coca-Cola name. CASE STUDY QUESTIONS: 1. As you see, Branding is very important. Particularly, Branding is extensively involved in 2Ps of the Marketing Mix. Which ones? Explain why. 2. What information did Coke misunderstood, in regards to the outcome of the Pepsi Challenge, that made them do the New Coke mistake? 3. Speaking of the P of Place, what could Pepsi do to gain new consumers that Coke is already doing with much success?CASE 2-7 Mcdonald's and Obesity THE PROBLEM that use celebrities to market high-calorie foods. According to USA Today, one study found that the average American child sees Governments and influential health advocates around the world, 10,000 food ads a year, mostly for high-fat or sugary foods and spooked that their nations' kids will become as fat as American drinks. kids, are cracking down on the marketers they blame for the explo- Traditionally, in developing countries, the poorest people sion in childhood obesity. Across the globe, efforts are under way have been the thinnest, a consequence of hard physical labor to slow the march of obesity. and the consumption of small amounts of traditional foods. In the United States, roughly 30 percent of American children But when these people in poor countries migrate to cities, obe- are overweight or obese. According to the U.S. Centers for Dis- sity rates rise fastest among those in the lowest socioeconomic ease Control and Prevention (CDC), an estimated 64.5 percent of group. Americans tip the scales as overweight or obese, the highest per- Even as food companies' battle U.S. lawsuits and legislators centage of fat people of any country in the world. However, adults who blame them for inducing childhood obesity, they're being at- and kids in other countries are catching up. tacked on another front-Europe-which is threatening, among other things, to ban advertising icons such Tony the Tiger and THE WORLD Ronald Mcdonald. "I would like to see the industry not advertis- ing directly to children," said one European health commissioner. The World Heart Federation reports that globally there are now "If this doesn't produce satisfactory results, we will proceed to more than 1 billion overweight adults and that at least 400 million legislation." The European Health Commission has called for the of those are obese. An estimated 155 million children are over- food industry to set its own regulations to curb so-called junk-food weight worldwide including 30-45 million who are obese.' advertising aimed at the European Union's 450 million citizens In many countries, the worst increases in obesity have oc- or face bans similar to the tobacco industry. curred in young people. About half a million children in Europe The ominous comparison to cigarettes is increasingly being are suffering classic middle-aged health problems because they made in the United States as well. Commenting on a Mcdonald's are too fat. Obesity among European children has been on the plan to send Ronald Mcdonald to schools to preach about nutri- rise over the last 25 years. The number of overweight children tion, an aide to a U.S. senator said, "No matter what Ronald is in Europe did not change much from 1974 to 1984; then the rate doing, they are still using this cartoon character to sell fatty ham- started to creep up during the next 10 years, and it exploded burgers to kids. Once upon a time, tobacco companies had Joe after 1995. Camel and they didn't get it either." In Britain, one in five children is overweight or obese; in Spain Also under fire is TV advertising of kids' foods, as calls for 30 percent; and in Italy, 36 percent. While less than 1 percent of curbs or bans rise around the world. "If the rise in [the] child obe- the children in Africa suffer from malnutrition, 3 percent are over- sity trend continues, within five years we'll be in the same situation weight or obese. as America is today," said a senior child nutritionist at the Univer- Perhaps the most distressing data come from Asia, where the sity of Copenhagen who sits on the board of Denmark's National measure of being overweight used in Western countries may un- Board of Nutritional Science. "Banning TV ads that are targeting derestimate the seriousness of weight-related health problems kids is an important strategy to adopt." But there is an argument faced by Asians. In Japan, for example, obesity is defined as a that those measures won't help. "In Sweden, Norway and Quebec, body mass index (BMI) level of 25 or more, not 30 as it is in West- where food ads are banned from kids' TV, there's no evidence that ern countries. But Japanese health officials report that a BMI of 25 obesity rates have fallen." or more is already causing high rates of diabetes. About 290 mil- A new law in France will force food marketers to choose be- lion children in China are thought to be overweight, and research- tween adding a health message to commercials or paying a 1.5 ers expect that number to double in the next 10 years. The World percent tax on their ad budgets to fund healthy-eating messages. Health Organization has warned of an escalating global epidemic Other measures under consideration in Europe include banning of overweight and obesity. celebrities and cartoon characters from food ads aimed at children and preventing food marketers from using cell phone jingles to GLOBAL REACTIONS TO OBESITY reach kids. Ireland bans celebrities from food and beverage ads aimed at One of the perplexing questions is why there has been a relatively children and requires confectionery and soft-drink spots broad- sudden increase of obesity worldwide. Some opine that fast-food cast in programs where half the audience is younger than 18 years portion sizes are partly to blame; the average size order of French of age to carry a visual or voice-over warning that snacking on fries has nearly tripled since 1955. Some people say advertis- sugary foods and drinks can damage teeth. Ireland is a small mar- ing is to blame, particularly ads aimed at children, such as those ket, but there are fears that these measures could spread to the United Kingdom and then to the rest of Europe, especially since many advertisers run the same campaigns in the United Kingdom "Obesity," World Heart Federation, May 2007, http://www.world-heart-federation.org. and Ireland.Unlike France and Ireland, the United Kingdom is trying a Size Me, Mcdonald's Corp. broke a U.K. campaign called more carrot-and-stick approach, encouraging self-regulation with "Changes" with poster ads that omit the Golden Arches for legislation as a last but threatened resort. The U.K. government the first time, replacing them with a question mark in the same published health recommendations giving the food and beverage typeface and the tagline "Mcdonald's. But not as you know industries until early 2007 to act more responsibly or face formal it." Promoting ongoing menu changes, the posters feature items legislation. The document followed a high-profile U.K. govern- such as a salad, a pile of free-range eggshells, pieces of fruit, ment inquiry into child obesity. Marketing and agency executives and cups of cappuccino. The effort preceded a direct-mail cam- called to give evidence were grilled publicly over the use of celeb- paign to 17 million households touting healthier menu items rities in ads, inciting kids' "pester power" and high salt and sugar and smaller portion sizes. content in foods. Mcdonald's aim was to cause people to think differently The paper's proposals include clamping down on using cartoon about Mcdonald's and to make the public aware of new products. characters to appeal to kids in food and beverage ads, potentially "There's no intention to abandon the Arches" but only to focus dooming brand icons such as Kellogg's Tony the Tiger. There have attention on the "healthy" additions to the menu. Despite the new also been calls for a ban, like Ireland's, on celebrity endorsement in campaign, research showed the chain hadn't received the hoped- "junk-food" advertising. In a country where the biggest grocery- for awareness for some of the newer items on its menu, including store brand, PepsiCo's Walker's Crisps, relies on celebrities in its the all-white-meat Chicken Selects and the fruit bags. More wor- ad campaigns, that's a big deal. risome, a research study revealed that frequent users didn't like to The Nordic countries are the most militant about enacting laws admit to friends that they ate at Mcdonald's. "We don't want to to ban or restrict marketing of foods that they consider unhealthy have closet loyalists." to children and fighting to extend those restrictions to the rest of One researcher urged more time for Mcdonald's "Changes" Europe. The toughest laws against advertising to children have campaign to get traction. "The market position and market stature long been in Scandinavia, where the health risks of obesity and of Mcdonald's in the U.K. is not nearly as strong as it is in the U.S. diabetes from high sugar consumption are sometimes compared and accordingly, you have to stick with the program longer," he to tobacco. The legislatures in Sweden, Finland, and Denmark are said. But he warned that the "Changes" campaign could backfire. all considering even tighter controls on marketing sugary foods. "Trying to suppress the logo is not likely to change the hearts and Denmark's National Consumer Council has petitioned the gov- minds of many fast-food voters in Europe." ernment to ban marketing "unhealthy food products" to anyone In anticipation of the release of the documentary Super Size under 16 years of age, and Finland's legislature is hearing from Me in the United Kingdom, Mcdonald's in London went on health groups that want a total ban on TV ads for sugar-laden food. the defensive with full-page newspaper ads discussing the film. Commenting on such proposals, the CEO of the Finnish Food and The ads, headlined "If you haven't seen the film *Super Size Drink Industries Federation said, "Implementing stricter controls Me,' here's what you're missing," have appeared in the film- on advertising food and drinks will not be a quick-fix answer to all review sections of six newspapers to coincide with filmmaker these problems." Morgan Spurlock's appearance at the annual Edinburgh film "The European Union is on it, Washington is on it, the ball festival. The copy describes it as "slick and well-made," and is rolling now and the food companies have to do something," says Mcdonald's actually agrees with the "core argument" of said one top advertising agency executive. But he added, "I hope the film-"If you eat too much and do too little, it's bad for food companies won't be bullied into doing things that play to you." However, it continues: "What we don't agree with is the the politicians," noting there are other contributing factors for idea that eating at Mcdonald's is bad for you." The ad high- obesity, such as low income. He said food marketers could truly lights some of Mcdonald's healthier menu items such as grilled contribute to a solution by putting money into programs like the chicken salad and fruit bags. A spokeswoman for Mcdonald's USDA's Nutrition Program for Women, Infants and Children, said it ran the ads to ensure there was a "balanced debate" about a subsidized food and education program that also happens to the film. Super Size Me distributor Tartan Films has retaliated be very good at driving sales for the products approved for the by running identical-looking ads in newspapers promoting list. The key is to translate the hype to real solutions like physi- the film. cal education in schools and parents-the most important role As a direct response to government calls for food marketers to models according to substantiated research-reclaiming respons promote a more active lifestyle, Mcdonald's U.K. launched an ad sibility. "If a food has a right to exist, a marketer has the right to campaign aimed at kids featuring Ronald Mcdonald and animated advertise it." fruit and vegetable characters called Yums. In two-minute singing- Marketers are struggling against a crackdown on food adver- and-dancing animated spots, the Yums urge, "It's fun when you eat tising amid growing concern over obesity throughout the world. right and stay active." Marketers are trying to avert a clampdown with greater self- regulation. But despite a slew of individual company efforts to shift new-product and marketing focus to healthier offerings, the industry has, until now, largely shied away from defending itself Super Size Me is a documentary about the fast-food industry and the addictiveness more broadly. of fast food, its allure to children, and so forth. Scenes in the film feature Morgan Spurlock (the director, producer, and star of the documentary), whose fast-food feat consists of cating some 5.000 calories a day. twice what his doctor says he MCDONALD'S RESPONSE needs to maintain his starting weight of 185 pounds. He also avoids exercise because, he says, that's what most Americans do. Spurlock gains weight- For the last few years, Mcdonald's has reacted to the obesity nearly 25 pounds over 30 days. His cholesterol goes up, and so does his blood pressure. His doctor describes his liver function test results as "obscene." Spurlock issues in several ways in the United Kingdom and other coun- complains of sluggishness, depression, shortness of breath, impotence, chest tries. Concerned about consumer reaction to the film Super pressure, and headaches.Even though Mcdonald's plans to expand its healthier menu of- 320,000 more people a day than the year before visited Mcdonald's ferings, it does so cautiously, so people remember that the Golden in Britain. Around 90 percent of them are buying traditional prod- Arches at its core still means burgers and fries. ucts such as burgers, fries, and ice cream rather than the healthier Mcdonald's, throughout Europe and elsewhere, is testing ways sandwiches and salads the chain stocks. The estimates mark a to address the obesity issue. In Scandinavia, for example, popular big turnaround for Mcdonald's, which bounced back after nega- healthy local foods have been added to the McMenu, like cod wrapped tive publicity about fat content in its food. Mcdonald's changed in rye bread in Finland. In Norway, some outlets sell a salmon burger menu-with such items as porridge, smoothies, and chicken wrapped in rye bread. In Sweden, no salt is added to the food served. wraps-is one reason for the growing business. In Australia, Mcdonald's took a different approach-it reduced its The government has spent large sums on promoting healthier budget for ads directed to kids by 50 percent. diets and the message to eat five portions of fruit and vegetables a Mcdonald's French operation raised the ire of the parent com- day as obesity levels continue to rise. There's been enough public- pany when it ran a print ad in a women's magazine quoting a nu- ity about the relentless rise and impact of obesity, but from the tritionist's suggestion that kids shouldn't eat at the restaurant more figures, it seems the public is choosing to ignore them. More than than once a week. While the ad was meant to promote Mcdonald's 88 million visits were made to Mcdonald's worldwide restaurants and seems reasonable since the French only visit quick-service in one month, up 10 million on the previous year. restaurants every two weeks on average anyway, such a campaign would have been heresy in the United States. Mcdonald's Corp. THE PRINCE CHIMES IN later issued a statement claiming that "the majority of nutrition- ists" believe Mcdonald's can fit into a balanced diet. Later, the Just as the focus on obesity was giving away to concerns about company recruited a pair of French nutritionists who declared anorexia and the pressure being put on young girls by so-called the Big Mac and cheeseburger healthier than traditional French size zero models at a British Fashion Week, Prince Charles, Prince fare such as quiche. of Wales and future King of England, tipped the scales back in the Marketers in France have lobbied hard to be allowed to use posi- direction of obesity, On a royal visit to the Middle East, the Prince tive lifestyle messages in ads-like emphasizing the importance suggested that Mcdonald's was to blame for an obesity epidemic of physical exercise and a balanced diet-rather than grim health among children. Charles asked: "Have you got anywhere with warnings. France's Ministry of Health appears to be listening and is Mcdonald's? Have you tried getting it banned? That's the key." now expected to let marketers choose among three or four positive His comments were reported internationally, with reactions that health messages. Industry experts say the government changed its were more positive for Mcdonald's than one would expect. mind out of fear that strong warnings might backfire, causing anxi- Positive comments from several sources attested to the ef- ety among consumers about eating. Moreover, France may hope its fectiveness of the work that Mcdonald's had done to improve new law, if not too extreme, will become a blueprint for Europe. its image. Health advocates and nutritionists said a ban on Although Mcdonald's responded to the obesity issue with Mcdonald's was "certainly not the answer" to Britain's obesity menu changes and reworking its advertising, Mcdonald's epidemic. Even the press ran articles favorable to Mcdonald's. didn't stop advertising to children. The chief executive of One referred to the Prince as a hypocrite, because his company, Mcdonald's pooh-poohed the idea that Mcdonald's should Duchy Originals (one of the United Kingdom's leading brands of "go dark on communications" to kids-two-and-a-half million organic food and drink),' offered fast foods whose fat and calorie U.K. customers every day, a fair portion of them under 16 years. content was no better, if not worse, than Mcdonald's. The Duchy Mcdonald's is keeping children firmly in its marketing sights. Originals' Cornish pasty carries 264 calories per 100g, consider- School's out, ads for the kids' big summer movie releases are ably more than the 229 per 100 g of the Big Mac, and the fat slapped on burger boxes, and a trip to Mcdonald's is on the hol- content is 13.6g per 100g, which is higher than the 11.12g in the iday menu. Mcdonald's defense is that Mcdonald's Ronnie's Big Mac. A medium portion of fries from Mcdonald's contains YumChum friends are positively bursting with healthy advice. 298 calories per 100g; again this amount is considerably less than There's even a song: "Don't let your Yum-Chums get glum, put the 464 per 100g contained in the Duchy Original Organic Hand healthy stuff in your tum." Cooked Vegetable Crisps. A 100g serving of Duchy Original's One of the casualties of the obesity turmoil may have been the Organic Lemon Tart has 337 calories (one-third more than the tie between Mcdonald's and Disney's line of cartoon characters, a Mcdonald's Apple Pie). marvel for attracting young children to the Golden Arches. Disney The Prince's comments were later downplayed, stressing that failed to renew its 10 year exclusive partnership with Mcdonald's. he was merely advocating a balanced diet, especially for children, Both parties insist it was a mutual decision that would allow and wanted to make the point that burgers and chips were not the each to seek more profitable promotions. However, the growing only foods available to them. concern over the obesity epidemic may have proved critical for Mcdonald's took a conciliatory tact stating, "The comment Disney, which has become increasingly worried that its links to made by the Prince of Wales appears to be an off-the-cuff remark Mcdonald's would damage its family-friendly image. For its part, that, in our opinion, does not reflect either our menu or where we Mcdonald's may have wanted to avoid being linked to box-office are at as a business. We know that other Royal Family members flops such as Treasure Planet. have visited and have probably got a more up-to-date picture of us." Prince Harry certainly does not share his father's distaste for THE MARKET'S REACTION Initially, Mcdonald's sales worldwide, as well as in England, suf- In 1990, the Prince created Duchy Originals because of his belief in the clear advantages of organic farming, the production of natural and healthy foods, and sound fered. However European sales last year, from restaurants open husbandry, which helps regenerate and protect the countryside, All of the profits from all year, was 5.8 percent, outstripping even U.S. growth. Some Duchy Originals are donated to the Prince of Wales's Charitable Foundation.Case Study 1 The purpose of this case study activity is to enhance your learning in the course by exposing you to a real-world business scenario. You will be asked to use key principles learned in the course as well as critical thinking skills to make specific decisions and to recommend a course of action in each scenario. A case study is a scenario that requires you to use your judgment and your knowledge of key principles and concepts learned in the course to make a management-level decision or recommendation. Please, write your assignment in Microsoft Word. After you have completed your work on the assignment, save the document in the following format: "YOUR NAME - CASE STUDY 1". Submit the assignment document to the correct location in the course. Your instructor will retrieve the file you have submitted, grade your work and save your grade in the course gradebook. Keep in mind that you must submit your work by the deadline specified in the course. The Case for Mobile Advertising In this simulation, you are assigned the role of a senior advertising consultant at Enhanced Analytics, Inc., a provider of marketing and consulting services, with headquarters in Austin, Texas. In this role, you lead a team whose goal is to devise strategy and offer advice to your consulting clients as they seek out advertising solutions. Your new client is a soft drink company whose latest energy drink has been a hit among teenagers in Europe and certain parts of Asia. The drink has been associated with fun and excitement in Asia and it has benefited from a successful campaign focused on celebrity marketing, in Europe. The energy drink company is now seeking to introduce their hit product to the US market. They want to reach the same demographic of 13-18 year olds. The marketing department at the soft drink company stubbornly believes that the key to success is mobile advertising. In an extended conference with your team, the company's in-house marketing director laid out a strategy of introducing the popular drink to the US market by association with cool music and a fun lifestyle. The key to this introduction, the company believes, lies in a successful mobile advertising campaign. The company plans to spend $500,000 in the first year on an aggressive campaign targeting the teen market. Your task, as a consultant, is to determine the two best ways to spend the money and make a recommendation. Specifically, you are to research mobile advertising options offered by Pandora, Spotify and Youtube. You must arrive at your recommendation by focusing on cost and effectiveness.In your own words, prepare a report for the company's executives, containing the following sections (do not worry about being right or wrong; simply offer your findings (from your research) and your recommendation): 1. Mobile advertising on Pandora - a brief but precise description of the advertising options and costs involved in deploying a mobile campaign, using Pandora's music service 2. Mobile advertising on Spotify - a brief but precise description of the advertising options and costs involved in deploying a mobile campaign, using Spotify's music service 3. Mobile advertising on Youtube - a brief but precise description of the advertising options and costs involved in deploying a mobile campaign, using Youtube 4. Decision - a clear recommendation, outlining the best strategy for proceeding, within the financial and choice constraints offered Include outside research to support your ideas and recommendation. There is no page limit to this assignment. The assignment will be considered well-done if it contains all the required sections, if it is clearly written and your thoughts and ideas are supported by specific data and research