Learning from the Pepsi Refresh Project

Last year executives at PepsiCo made a rather bold move: they would spend less money promoting the Pepsi brand through advertising and invest instead in helping communities. To bring the idea to life, they created the Pepsi Refresh Project, inviting consumers to submit applications and vote for the most promising ideas. Pepsi then funded the most popular programs.

How did it all work out?

It appears not too well. Pepsi is getting clobbered, with declining sales and a falling market share. Pepsi now trails both Coke and Diet Coke. Not surprisingly, the company is changing course, boosting advertising spending and developing new creative promoting Pepsi.

There is a lot to learn from Pepsi’s experience.

First, people like companies that do good things in the community but this doesn’t necessarily drive purchases. People don’t pick up a Pepsi because the company built a playground in Omaha. They pick up a Pepsi because they are thirsty and want refreshment.

Second, be careful what people tell you. I suspect the team at PepsiCo did a lot of research on the Pepsi Refresh Project and heard from consumers that this was just a terrific idea. Indeed, I bet people said that more companies should do exactly this sort of thing, cutting self-serving advertising and instead investing in making the world a better place.

The problem is that there is a big difference between what people say they will do and what they actually do. Confusing these two things is a consumer research trap.

Third, it is always risky to promote your good works; it looks a bit self-serving and invites criticism. Pepsi has taken a lot of flak for the way they administered the program; the overall feedback has been rather mixed. Pepsi is also now stuck with it; cutting the program would be difficult. It would look rather, well, awkward to announce, “Well, so much for saving the world. We’re canceling that program and doing a sponsorship deal with Kesha instead.”

Update: Improving the Chicago Tribune

Two weeks ago I wrote a post about the Chicago Tribune’s new strategy. At the time, it appeared that the newspaper would be introducing a new premium edition of its daily paper. I thought this seemed like a rather complex strategy and one not likely to
succeed.

It turns out that the Chicago Tribune is actually just enhancing its core product, adding more pages of editorial content to different sections of the paper and expanding the reporting staff. This makes much more sense and is a step in the right direction.

Ultimately, the Chicago Tribune needs to deliver an outstanding product to its readers. Cutting cost is not a long-term strategy; at some point the quality of the paper will decline to such a degree that there will be little reason for people to pay to read it, whether in print or online. So investing in quality is the right move.

The challenge, of course, is making the numbers work. Improving quality is expensive; the Tribune certainly seems to be spending a lot of money on the new strategy. Unfortunately, the changes won’t quickly translate into incremental revenues; the improvements might slow the circulation decline but the strategy isn’t likely to lead to a major jump in new readers. In the short run, the incremental costs will probably outweigh the benefits and the paper’s financial situation will get worse.

The Chicago Tribune needs to be patient; building a business by improving quality is a long process. Cutting costs is quicker and easier, but in the long run having a unique and special product will pay off.

Yoplait’s Smart Decision

Today executives at General Mills announced they were pulling its latest ad for Yoplait.

 The ad features a slim woman debating eating a piece of cheesecake. She tries to rationalize the decision, eventually going for a yogurt after another woman makes that choice. You can see the ad here:

http://www.huffingtonpost.com/2011/06/15/yoplait-pulls-ad-that-pos_n_877618.html?utm_source=DailyBrief&utm_campaign=061611&utm_medium=email&utm_content=NewsEntry&utm_term=Daily%20Brief#s292650&title=iMac

A number of consumers complained about the ad, noting that it might prompt eating disorders.

How did General Mills respond?

Company executives immediately pulled the ad. As the Huffington Post reported:

“We had no idea,” Tom Forsythe, VP of Corporate Communications for General Mills, said to the Huffington Post. “The thought had never occurred to anyone, and no one raised the point. We aren’t sure that everyone saw the ad that way, but if anyone did, that was not our intent and is cause for concern. We thought it best to take it down.”

This was a very smart decision.

The Yoplait team clearly did a lot of consumer research when developing the spot; the insight is spot on. But when an ad inadvertently touches a sensitive issue like eating disorders, there is only one way to respond: take it down.

There are three learning points from the story.

First, even the best marketers can make mistakes. General Mills is a conservative, thoughtful company. If this can happen to Mills it can happen to anyone.

Second, the best way to respond to a negative situation is quickly and with sincerity.

Third, it is always smart to have backup copy, so you have something to run if the lead spot gets into trouble.

The Chicago Tribune’s Premium-Edition Strategy

Today the Chicago Tribune announced that it would be introducing a premium edition of its home delivery newspaper.

According to Crain’s, the Tribune will apparently now be available in two versions: the standard home delivery paper and a premium home delivery version with expanded content and features. The new version will be more expensive. You can read the Crain’s article here:

http://www.chicagobusiness.com/article/20110606/NEWS06/110609861/tribunes-expanded-edition-to-debut-june-15

The basic strategy seems to be fairly clear. First, reduce the quality of the core product in a bid to cut costs. Second, offer a new version that restores the quality at a higher price.

This approach can certainly work. Indeed, it is the formula that PepsiCo has followed at Frito-Lay with considerable success: gradually reduce the number of chips offered in each bag, saving money on product cost. Then, when each bag has only two or three chips, introduce a new “Big Grab” size with more chips and a higher price.

So will it work for the Tribune?

I am fairly skeptical.

I am very supportive of charging for content. Indeed, I think the only way a publication will make money these days is to have articles that people will pay to read. This is why the Financial Times is doing so well; the paper has terrific content and people happily spend to get it.

The Tribune’s approach, however, is likely to be very tough to pull off. The Chicago Tribune has a free on-line site and a free daily paper called Red Eye. Not surprisingly, fewer and fewer people have been buying the traditional print version. To solve this problem, the Tribune is introducing an enhanced version. So there will soon be an enhanced version, a standard version and a free version. This will be a nightmare to manage. The New York Times tried a similar approach with its website several years back and eventually abandoned the effort.

The likely outcome of this move: the heart of the franchise, the traditional delivered paper, will decline faster than ever. And the company’s troubles will get worse.

 Of course, this might be just one step in a broader strategic shift, so there could be a very smart and savvy play developing.

At the moment, however, it looks like a company struggling to fix a fading core business by introducing new products that make things much harder to manage. And this is rarely successful.