When it comes to social media, Coke is it!

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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of arch-rival Coca-Cola which, despite also investing in social media, had continued to invest most of its budget in outdated traditional media like Super Bowl advertising and old-fashioned product placement deals with the likes of American Idol.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.

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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

Readers' comments (20)

  • I wouldn't quite call myself a social media evangelist but I do disagree with your statements "its advantages and applications have been wildly overstated and "It is not a new way of thinking". I think Pepsi went wrong by abruptly moving 50% of their marketing budget into social media. I think the right approach would have been to test the waters first, by launching small efforts, and seeing where that takes them. To blindly jump in and change your marketing strategy that drastically is ridiculous and I'm not surprised one bit that they lost market share.

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  • Or to put it another way...

    It was the message that failed -- not the medium. As you rightly point out, Pepsi chose to market a movement instead of any emotional connection to their brand or the value of their cola over Coca-Cola's.

    Meanwhile, Coca-Cola focused on their larger emotional marketing message of "happiness" and refreshment and integrated this into their social media strategy of empowering their fans to spread "happiness" about the brand. Pretty simple and classic approach. Put your fans first and they will do your heavy lifting and celebrate (and market) your brand for you.

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  • What???? You mean when I clicked Like it did not help sales. I am staggered..... I clicked Like, I clicked Like.

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  • Ha ha ha ha ha hah! So, social media is not all it's quacked up to be as a PR and marketing tool - the "be all, end all" - is it? Someone get me a rum and Coke...

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  • No one should be surprised by this. It's amazing how often discussions (online and otherwise) on social media omit the crucial element of it's impact on revenue. When was the last time any of you saw words like revenue and sales being the focus of social media --- and I say all this having coauthored the book, "The ROI of Social Media"

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  • There are several problems here....market share is different than profit. Anyone can take share at the expense of profit. The growth in CSDs in North America is done. The game is now profitability, and to be most profitable, you need to connect with your most loyal consumers. We need to know what Pepsi's internal goals are. The media may still care about who is #1 or #2 and share but PROFIT is king. Do they still teach that in business school Prof Riston? The cola wars led to ever decreasing profit margins. Being #1 or #2 may more may not mean greater profit. Profit isn't a web-traffic measure...

    Also, Pepsi had been involved and tested social media before 2009-2010, they just made that their top marketing platform for 1 year, that too was a test......it took balls to do that. Pepsi learned from it.....This article could just as easily be about celebrating risk taking in marketing, trying out new ideas and having bigger balls to kill something that doesn't work. Pepsi's willingness to try a new approach is not a one off, but part of the DNA.....it deserves to be celebrated as least as much as you want to hammer a nail in social media.

    It probably can be argued that Pepsi knows more about social media through this experience than anyone, including Coke.

    Lastly, Coke as a company is only a beverage company (Pepsi is not) and an even larger share of its sales are tied to CSDs than Pepsi......Pepsi has better brands in non-carbs and non-CSD beverages, where all the share grow it taking place....There is no chance the media spend of Pepsi is even close to that of Coke.....Price, distribution, media spend still carry the most weight in driving share....in that order.

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  • I'm fairly certain traditional media evangelists have also overstated the ability of their medium on occasion.

    As Gerard suggests, not all campaigns are born equal. Some messages are wrong. There are examples of traditional media campaigns coinciding with losses in market share also.

    You're right, social media is host to a range of valuable tools but they have to be used alongside, not instead of, traditional media advertising.

    Lastly, and something you don't mention in this post; social media is not a medium famed for its ability to reach varied demographics. Perhaps the problem was also due to a lack of reach as much as a disjointed and frankly unconvincing message.

    Click on the "More than friends" link here for more on this:
    http://www.makeitclear.co.uk/contact

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  • Agree with the comments from both Gerard and Michele - wrong message and too much too soon. This is always the potential danger when vested interests skillfully overplay the advantages. One positive aspect of the focus on social media, though, is that it truly does demand an excellent understanding of your consumer base to be successful. Something which marketers sometimes surprisingly lack.

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  • For the most part, I agree with what you've written here. But not completely.

    I wouldn't be so quick to say that what failed here is "the message". I can tell you that Pepsi Refresh resonated FAR more with me than Coca-Cola's "Happiness" did. Happiness is all fine and dandy, but the idea of trying to do something good in the world is a message that connected with me strongly, and still does...far more so than Coca Cola's message.

    Pepsi Refresh was driven by Pepsi's social listening, specifically their listening of millennials. Here's a video from Pepsico that talks about it.

    http://youtu.be/CD2LRROpph0

    So it's not as if their message was created out of the blue. It came from insights and listening, which is key in creating a successful social media program.

    In some respects, Pepsi Refresh was insanely successful---2.8 billion media impressions, 80+ million votes, etc.---but in other respects, it wasn't, as Pepsi has now fallen to the #3 spot. But as Gerard rightly points out, I feel Pepsi falling to the #3 spot had more to do with the fact that Pepsi put too much of its budget in social, and not enough in other media outlets, which are still just as powerful and influential.

    The message obviously resonated with a lot of people, including myself. If it hadn't, then 80+ million people wouldn't have participated in the voting. So it's not the message that failed. Instead, it's more so that the strategy wasn't even. It was too lopsided, in favor of social, and not well balanced in other places.

    It's a learning experience for Pepsi. But Pepsi Refresh isn't being abandoned, as they are launching another round of voting this coming May. 80+ million people isn't something to ignore or simply throw to the curb. There's an audience there...and one they can still utilize in a powerful way.

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  • Good article and refreshing to see someone taking a more balanced perspective on social media. Social media is and will always be another means of communication with consumers, especially for brands that sell a physical product. It sits alongside all other marcomms channels and shouldn't be the sole focus of any business. 80m people voting is powerful, but unless you can convert to sales (and profit) at some future point, the investment is futile and could be better spent elsewhere.

    Pepsi makes it money from selling CSD's, not how many people vote for a good cause. This might be simplistic, but it's a fact.

    I also don't buy the thought that has been a learning experience for the brand. These type of 'what-if' scenarios should be played out in a private and low-risk environment, once you understand the threats to the brand and before you go live.

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