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Index Proposal – 2010

Submitted by
Jab We Marketed
INTRODUCTION
This proposal aims at bringing out the approach, methodology and tools to be used by the
team to conduct the research and generate concrete results which can be interpreted to
determine effectiveness of various consumer sales promotions as well as identify newer
methods of sales promotion. Our proposal is based on a series of primary & secondary
research which has helped us develop a better understanding of the consumer behavior.

M anage me nt Ob jective
To improve the effectiveness of consumer sales promotion schemes in increasing sales
of Pepsi

M arketi ng O bjective
To understand the effectiveness of various consumer sales promotions on
different segments of consumers
To identify the best methods of sales promotion to target the different segments
based on their behavior, attitudes and preferences
M arketi ng Researc h Proble ms
What are the different segments of consumers in terms of their perceptions,
attitudes and behavior towards sales promotion schemes?
What are the consumers’ perceptions regarding various schemes in this category
and what are the consumer responses towards them?
What are the consumer perceptions towards the brand (in terms of quality,
image) offering sales promotion schemes?
What are the consumer preferences towards different schemes?
What are the consumer attitudes towards such sales promotions (in terms of
rejection, liking, preference, insistence)?

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What are the behavioral aspects of the consumer in terms of the following patterns:
Consumers who “do without” the sales promotion scheme
Consumers who “postpone” the purchase
Consumers who “substitute” the brand with other brands
Consumers who “use the brand on a trial basis”
Consumers who are “1st time buyers”
Consumers who “Regularly repeat the purchase” because of the sales promotion
What are the barriers in picking up a promotion offered by a company?
Ke y De live r ab le s
Develop a model that performs comprehensive consumer segmentation in the CSD
market
Evaluate the appropriateness of existing promotional schemes for each consumer
segment
Propose methods to enhance the current sales promotions for all consumer segments
Recommend new promotion schemes/campaigns as per the consumer segments to propel
sales
Develop projections on impact of the proposed improvements/campaigns on sales and
brand

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The Indian Soft Drinks Market
The Indian soft drinks market has Sales Value of the Indian Soft Drinks
leading players like The Coca-Cola Market
Company, PepsiCo and Parle Agro Year $ INR %
which collectively account for around billion billion Growth

88% of the market volume. The 2004 2.6 113.6

constituents of the soft drinks market 2005 2.7 120.1 5.7%

are bottled water, carbonates, 2006 2.9 127.5 6.2%


2007 3.1 136.7 7.2%
concentrates, functional drinks, juices
2008 3.4 147.2 7.7%
and ready-to-drink tea and coffee.

In India, colas, by industry estimates,


Growth in the Indian Soft Drinks Market
comprise only 38% of the Rs.7500-
crore domestic market for sparkling Sales ($ billion)

drinks, while flavours (clear lime, 4 3.4


2.9 3.1
3 2.6 2.7
cloudy lime, orange and apple)
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command a market share of 54%. This
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is in contrast with the situation three
0
years ago when colas had a 46% share
2004 2005 2006 2007 2008
of the market. According to industry
experts, the reason for this has been the
switching of consumers from colas to Pie Graph showing breakup of sales amongst

healthier beverages. the Players in the industry

The Indian soft drinks market grew by


Sales
7.7% in 2008 to reach a value of $3.4
billion. This represented a compounded Coca Cola
12%
20% 41%
annual growth rate of 6.7% in the
Pepsico
period from 2004 to 2008. By 2013, the
Parle Argo
market is expected to grow to $4.6 27%
billion of revenues, indicating a CAGR Others

of 6.5% for the period.

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The carbonated soft drinks (CSD) Coca-Cola and PepsiCo, the two giants in the
market is the leading revenue source for industry, together control about 90 per cent of
the broader soft drinks industry in India, the carbonated beverage market in India. The
generating 57.3% of the total value. The greater energy focus in both is on expanding
major brands in the carbonated soft their CSD portfolio by way of flavours and
drinks industry and their market shares variants. PepsiCo, for instance, has witnessed a
are shown in the table below. big shift from a portfolio dominated by

Table for the market share enjoyed by carbonated beverages to a more balanced one
individual brands (as of 2009, the ratio of CSD to non-carbonated
was 2:1 as compared to 9:1 a few years back).
Brand Market Share
Coca-Cola is identifying new flavours. Its core
Thums Up 15.8% cola brands continue to contribute more to

Sprite 14.2% revenues; Thums Up is the top-selling soft


drink in India. But the scales are now shifting
Pepsi 13.7%
in favour of flavoured beverages. (Dogra,
Coca Cola 8% 2009)

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L i te r a ture Re vi e w
belonging to different age groups,
We conducted a thorough review of
marital status, occupation and income showed
published research papers relevant to
significant differences in the interest
the management objective to get a
developed in the offers. However, the study
better understanding of the consumer
stops short of discussing the details regarding
behaviour in the beverage industry. We
the behaviour of various segments related to
have also looked for information
promotional activities.
related to the effect of promotions on
consumer behaviour. The findings of Several studies have been conducted on
our research are given below. consumer response towards promotions,
although none could be found specific to the
A few studies have been conducted on
soft drinks industry. It has been found that
consumer behaviour in the carbonated
temporary retail price reductions substantially
soft drinks market. One such study
increase sales in the short term (Woodside &
(Vijayakumar, 2005), which was
Waddle, 1975). Also, higher market share
conducted in certain urban centres in
brands have lower deal elasticity though
Tamil Nadu found that in the case of
higher share brands may capture a large
consumption of chilled or warm soft
proportion of switchers (Bolton, 1989).
drinks, consumers who were less than
26 years of age and who had completed Promoting higher quality brands impacts
their education up to the college level weaker brands disproportionately, causing a
preferred chilled carbonated soft large proportion of consumers of the weaker
drinks. Younger consumers (less than brand to switch (Blattberg & Wisniewski,
26 years old) were found to consume 1989). Promotion was found to result in a
more soft drinks than all other age significant temporal and cross-sectional
groups. Also, in terms of gender, males shifting of category demand.
consumed more soft drinks than
Studies indicate the apparently obvious fact
females. that display and feature advertising have
It was also found in this study that strong positive effects on item sales. It has also
during special offer periods, consumers been found that promotions lead consumers to

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stockpile (i.e., buy extra quantity of the People less that 26 years of age consume
product and store for future use) and upgrade more soft drinks than all other age groups
to higher quality products (Blattberg, Briesch, Display and feature advertising have
& Fox, 1995). strong positive effects on item sales
Promotions lead consumers to stockpile
Studies Reveal
and upgrade to higher quality products
Males consume more soft drinks than
females

P r o mo t i o n a l C a mp a i g n s i n t h e I n d i a n S o f t D r i n ks
M a r ke t
Due to the intense competition in the Indian soft drinks industry, there have been a
host of promotions, especially by the industry giants – Pepsico and Coca Cola
Company. Given below is a list of popular promotions which were introduced in the
market in the past few years.

The Pepsi Challenge – This involved taste tests designed in response to the
view that Pepsi and Coca Cola are identical drinks
In blind taste tests, more consumers were seen to have preferred Pepsi to
Coke
Campaigns featuring Bollywood celebrities
Akshay Kumar, Aamir Khan, Shahrukh, Priyanka Chopra and several
others
Promotional codes on the back of labels in bottles
SMS the codes to get rewarded with ringtone, MMS or other prizes
Promotional codes under the crown
Limca „Laptop ki Barish‟ - Computer generated lucky draw to give away
a laptop every hour
Campaigns focusing on the health aspect with “Diet” variants of the drinks
Coke‟s “Open Happiness” campaign
Buy one get one free/free samples during the initial launch of the product and
some of the seasons

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Pepsi‟s Youngistaan campaign to attract the youth
Campaigns centred around cricket and cricketers
During IPL, Coke had a contest wherein a person buying 2 pet bottles of 2 liters
gets a chance to meet the KingsXI Punjab team
The popular “Main Kaun Hoon, Main Kahaan Hoon” with the Sachin/Warne duo,
launched during an India-Australia Cricket Series
“Men in Blue” campaign by Pepsi during the Cricket World Cup
Sprite had a special „Sprite Kolkata Knight Riders‟ edition with insignia of key players
Coca Cola and McDonald‟s had a „We go together‟ campaign
Cola companies providing refrigerators (visicoolers) to retailers boards displaying shop
names
Thumbs Up Chowfulla - This promotional scheme entails one to buy a 600 ml bottle of
any of the Coca-Cola products and get a free ticket to the Thumbs Up Chowfulla. The
event is based on folk dance in Maharashtra. This is targeted at rural folks.

All these campaigns have seen varying levels of success in attracting consumers from the
competitor. The actual list of promotions would be much larger, but this list includes the
most popular ones which the consumers could recall

C o n s u me r I n s i g h t s

To get a feel of the perceptions of the target group, we conducted an exploratory research on
carbonated soft drinks promotions. The research was conducted in the form of in-depth
interviews and focused group discussions (FGDs). The FGDs were centred on consumer
promotions in general. The interviews were qualitative involving questions like “What is your
favourite soft drink?”, “What are the recent promotion schemes that you recall?” etc. The
insights from these interactions have been summarized below.

SEC A is not affected by promotion schemes; SEC B is the most sensitized to promotions
and SEC C is not aware about the various schemes.
Brand loyalty is not very important in the purchase decision in case of large purchases

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Consumers prefer rewards that “make their life better” such as scholarship or money to
promotions such as “meet a celebrity”.
Consumers are likely to switch back to their favourite brands after the promotion period.
Some of the consumers would prefer a discount to other promotions
Most females belonging to SEC A preferred fruit-based drinks over carbonated drinks
since they considered carbonated drinks to be unhealthy.
Females in SEC A were observed to have poor brand recall and they are not motivated by
major promotions such as winning a trip or some other gift, whereas males in this SEC
were found to have good brand and promotion recall and were ready to switch brands
based on promotions.
Most consumers claimed that promotions do not motivate them to switch brands.
SEC C consumers were generally not aware of promotion schemes.
Promotions were effective motivators for people who look for big rewards in activities
like gambling.
Consumers of Sec A (maybe all) would like to be rewarded for brand loyalty by getting
offers on more consumption. Also small gifts which are easily gettable are often preferred
over expensive

Re se a rc h Obje c ti ve s And Me tho do lo gy

1. R e s e arc h Ob je c t ive 0 :

To segment the consumers based on demographic and psychographic variables

1.1. Research Questions:

How are the attitudes, perceptions and behaviour towards consumer promotions
different, based on Socio-Economic Class?
How are the attitudes, perceptions and behaviour towards consumer promotions
different, based on income?
How are the attitudes, perceptions and behaviour towards consumer promotions
different, based on gender?

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What are the underlying personality and lifestyle traits that define a consumer‟s attitude,
perceptions and behaviour towards consumer promotions?

1.2. Data Analysis Tools and Techniques:

Factor analysis : to identify the underlying variables which can be use to segment the
consumers
Cluster analysis: to identify the segments of consumers based on the variables identified
Discriminant analysis: to understand the demographic and psychographic characteristics
that help to differentiate between consumers based on their response to consumer
promotions

1.3. Expected Output:

List of underlying variables which can be used to segment the Target Group

Clusters of consumers exhibiting similar behaviour based on demographic and


psychographic variables

Segregation of the target group (based on psychographic and demographic factors) with
respect to their response (attitude and behaviour) towards different types of promotion
schemes.

2. Research Objective 1:

To assess current consumer sales promotion schemes undertaken by Pepsi and other cola
players in the market.

2.1. Research Questions:

Which brands‟ promotion schemes that the consumers recall from the past?
What effect did the promotion schemes have on the consumption pattern of the
consumers for that particular brand?
What effect did the promotion schemes have on the attitude of the consumers towards
the brand?

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How effective have the promotion schemes been at inducing brand switching?
How do Pepsi‟s promotion schemes fare against those of the competition?
Have the promotion schemes been able to attract first-time buyers?
Do the promotion schemes create brand loyalty and repeat purchases among the
consumers?

2.2. Data Analysis Tools and Techniques:

Correlation analysis: To determine the impact of promotion on sales


Multiple regression analysis: to show the relative importance of various factors (type of
scheme, quantum of reward, immediacy of benefit, brand, and deal-proneness of the
consumer) on the buying behaviour of consumers
Multi-dimensional scaling: to plot spatial maps that help to analyze the perception of
consumers regarding the promotion schemes of Pepsi vis-a-vis its competitors

2.3. Expected Output:

Impact of the customer sales promotions on sales


Relative strength of various factors like type of scheme, quantum of reward, immediacy
of benefit, brand, deal-proneness of the consumer, etc.) in impacting sales of the product
Perceptual maps that help to understand how the consumers perceive the promotion
schemes of Pepsi

3. Research Objective 2:

To study consumer perceptions regarding various schemes in this category and


preference towards them

3.1. Research Questions:

What is the purpose of these promotion schemes as perceived by the consumer?


What are the promotion schemes that the consumers participate in?
What is the reaction when a peer participates in these promotions?
What are the motivations that govern a customer‟s participation in a promotion scheme
(size of reward, ease of participation, chances of winning etc)

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What is the perception of consumers about the kind of people participating in a particular
promotional scheme?(Eg: Collecting crowns is for kids)
Is there a difference between the stated attitude towards promotion schemes and the
behaviour towards them?
What are the kinds of schemes liked and disliked by the consumers?

3.2. Data Analysis Tools and Techniques:

Factor Analysis: To arrive at the factor loadings for the various factors (size of reward,
ease of participation, chances of winning) that influence a customer‟s participation in a
promotion scheme.
Discriminant Analysis: A Discriminant Analysis performed on the results of the Factor
Analysis would give us some groups of consumers: consumers inclined to buy,
indifferent consumers and consumers who are put off by promotions
Fishbein Model: To analyze whether the likelihood of benefits from the scheme or the
importance of that benefit plays a more vital role in participating in a scheme
T-test (with significance test): To understand the most preferred schemes of consumers

3.3. Expected Output:

List of factors that influence a customer‟s participation in a promotion scheme


Difference in perception towards promotion schemes between different segments in the
TG based on their demographic and psychographic characteristics
Insight on relative importance of benefits that consumers see in sales promotions

4. Research Objective 4:

Study the attitudes of consumers towards such sales promotions in terms of rejection,
liking, preference, insistence

4.1. Research Questions:

Does the kind of promotion scheme offered on a carbonated drink affect the choice of
drink by the consumer?
Does the presence of sales promotion induce a consumer to buy a bigger SKU?

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What aspects of a promotion scheme might de-motivate a consumer from participating?
What aspects of a promotion scheme might motivate a consumer to participate?
Does the presence of a promotion scheme induce purchase of a product not normally
bought by the consumer?
Do consumers stick to their preferred brand in case other brands offer promotion
schemes?

4.2. Data Analysis Tools and Techniques:

Factor Analysis: To understand which factors cause rejection, liking, preference and
insistence
Discriminant Analysis: To understand if there is any difference in rejection, liking,
preference and insistence based on demographic and psychographic characteristics
Multi Dimensional Scaling: to plot spatial maps that help to analyze the perception of
consumers regarding different types of promotion schemes

4.3. Expected Output:

List of factors causing rejection, liking, preference and insistence


List of demographic and psychographic characteristics that cause a difference in
rejection, liking, preference and insistence
Perceptual maps that help to understand how the consumers perceive the promotion
schemes of Pepsi

5. Research Objective 5:
To study the behavioural aspects of the consumer

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5.1. Research Questions:

What are the personality traits of a consumer who will purchase his favourite brand
regardless of consumer promotions?
What are the personality traits of a consumer who will postpone purchase to take
advantage of a consumer promotion?
What are the personality traits of a consumer who will purchase another brand offering a
consumer promotion in place of his favourite brand?
What are the personality traits of a consumer who will purchase a brand on a trial basis
during the promotion period?
What are the personality traits of a consumer who will try out a category or brand of soft
drinks for the first time based on consumer promotions?
What are the personality traits of a consumer who will purchase a particular brand more
frequently during the period of sales promotions?

5.2. Data Analysis Tools and Techniques:

Factor Analysis: To understand which personality traits cause different behaviours with
respect to loyalty, postponement, substitution, etc.
Discriminant Analysis: To understand if there is any difference in loyalty, postponement,
substitution, etc based on psychographic characteristics

5.3. Expected Output:

List of personality traits that cause different behaviours with respect to loyalty,
postponement, substitution, etc
List of psychographic characteristics that cause a difference in loyalty, postponement,
substitution, etc

6. Research Objective 6:

What are the barriers in picking up a promotion offered by a company?


6.1. Research Questions

What are the barriers that prevent consumers from participating in a promotion offered by the
company?
Are the barriers different for different segments of consumers?

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6.2. Data Analysis Tools and Techniques

Factor Analysis: To understand the underlying barriers that prevents a consumer from
participating in a promotion
6.3. Expected Output

List of factors preventing a consumer from participating in a promotion

7. Research Objective 7:

Consumer‟s perception towards the brand (in terms of quality, image) offering sales
promotion schemes

7.1. Research Questions:

Do promotions significantly affect the attitude towards the brand?


Is there any link between quality levels and promotions?
Do promotions improve the brand image in the consumers‟ mind?
Is the consumers‟ perception towards the brand influenced by demographic or
psychographic characteristics?
7.2. Data Analysis Tools and Techniques:

T-test (with significance test): To determine whether promotions make a significant


impact on the perception of quality and brand image
Discriminant Analysis: To determine positive/negative link between quality, brand image
and demographic/psychographic characteristics
7.3. Expected Output:

Presence or absence of significant difference in perception of quality and brand image


based on promotions run by the company
Relationship between quality, brand image and demographic/psychographic
characteristics

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Hypotheses Generated
“There are two possible outcomes: if the result confirms the hypothesis, then you've made a
measurement. If the result is contrary to the hypothesis, then you've made a discovery.”~ Enrico
Fermi

H1: There is no significant effect of promotion schemes on the long-term behaviour of Sec A
consumers

H2: There is a significant effect of promotion schemes on the behaviour of Sec B consumers

H3: The level of awareness about promotion schemes is very low among Sec C consumers

H3: The perceived low “probability of winning” is a de-motivator for participation in promotion
schemes

H4: Consumers prefer “smaller but assured” gifts to “big but rare” gifts

H5: For bulk purchases, consumers are more sensitive to sales promotions than to the favourite
brand of the CSD.

H6: Sales promotions which offer material gifts (price discounts, scholarships, gifts) are
preferred over promotion schemes which offer non-material gifts (meeting with movie stars)

H7: There is no significant difference between the recall rates of different promotion schemes

H8: Promotion schemes have significant effect in the form of increased soft drink consumption

H9: Promotion schemes have been effective at inducing brand switching only until the life of the
promotion

H10: Consumers perceive promotion schemes as an attempt to push a sub-standard product

H11: A lottery –like promotion scheme gives the same thrill as a real lottery

H12: Promotions do not affect the perception about quality of the product

H13: Promotions affect the perception about the brand image of the product

H14: Lack of awareness of promotions is the most important barrier in preventing consumers
from participating in promotions

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Appendix

Work Flow Chart

Preliminary FGDs and In-Depth Preparation of


Research Interviews Research Instruments
Questionnaires based on:
•Literature survey To analyse:
• Preliminary Research
•Industry analysis • Promotion recall • FGD
•Market analysis • Influencers • In-depth Interviews

Pilot Testing
Game Design
Beta Testing To identify flows in:
To properly disguise
To verify the veracity •Questionnaire
the questionnaire in the
of the game design •Test instructions
game
•Time limits

Index Fair (Data Preliminary Data Conclusions


Collection) Analysis & Recommendations
• Inviting target segment
• Dedicated escort to ensure To analyse the collected Based on research
respondent care and data using specific objectives and data
proper process flow statistical tools analysis
• Time limits

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Timelines
It is assumed that the final project presentation will be on January 16, 2011.

Indicative sampling frame


We plan the sample frame to be as follows. The outcome at the index fair maybe different. This
frame is only indicative.

Sec A Sec B Sec C Total


In Depth 1 3 2 8
Interview
Pre-Test 8 7 5 24
Index 72 110 13 188

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Sample Output

Discriminant Analysis
The discriminant analysis is used to differentiate which set of customers respond to a particular
promotion method. With this we can target a particular promotion on to a particular segment.

Factor Analysis
Gives the explanation of variance in the decision of whether the customer will respond to a
particular promotion or not.

Variance Factor 1 Factor 2 Factor 3 Factor 4 Factor 5

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Factor Loading Matrix
The matrix helps us in arriving at the major factors that play a role in the effect of promotion on
buying decision. With the help of these factors we arrive at the perceptual map illustrated below.

Segmentation Variables Factor 1 Factor 2 Factor 3 Factor 4

SEC Classification

Psychographic Variables

Demographic Variables

Behavioural Variables

Family Income

Family Size

Perceptual Map
The perceptual map specifies what customer attributes play a role in deciding which promotion
will provoke maximum response among a set of customers. In this indicative map the attributes
shown are age and income. The different promotion types are placed in the perceptual space.

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References

Blattberg, R., & Wisniewski, K. (1989). Price-Induced Patterns of Competition. Marketing


Science , 291-309.
Blattberg, R., Briesch, R., & Fox, E. (1995). How Promotions Work. Marketing Science
, 122-132.
Bolton, R. (1989). The Relationship Between Market Characteristics and Promotional
Price Elasticities. Marketing Science , 153-169.
Dogra, S. (2009, March 3). Carbonated drinks losing fizz to flavours. Business Standard
, pp. -.
Vijayakumar, S. (2005). Consumer Behaviour Relating to Carbonated Soft Drinks in
Selected Urban Centres in Tamil Nadu. Finance India , 600-607.
Woodside, A., & Waddle, G. (1975). Sales Effects of In-Store Advertising. Journal of
Advertising Research , 29-33.

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