Analysis That Identifies the Strategic Direction of Price and Promotion for Dr. Pepper
Introduction
This report revolves around the pricing and promotional strategy of Dr. Pepper Snapple Group, which is a soft drink and Beverage Company who started its journey in 1880. It is one of the oldest companies which manufactured cold drinks with the addition of artificial and natural flavors. The company has an entrepreneurial business model and enjoys the culture of innovation and uniqueness. New flavors are being added in its portfolio from time to time to engage the customers. Dr. Pepper operates in one of the toughest competing industries with Pepsi Cola and Coca-Cola as its dominant competitors; it has to remain relevant in the market regarding its pricing and promotional strategy. Currently, the company is enjoying 9 to 10% of the market share, which is less than its competitors’. However, with the current market trend of inhibiting the consumption of soft drinks due to health concerns, Dr. Peppers has done well enough to not only retain its market share but also grow its revenue when its competitors are losing it.
1-Provide pricing examples that compare and contrast various factors that influence promotional strategies for each of the five pricing strategies: premium pricing, penetration pricing, economy pricing, psychological pricing, and promotional pricing
As varying with the nature of the pricing strategy, there can be different pricing and promotional strategies for the companies. Premium pricing calls for higher pricing than its competitors from a beverage company. The management is required to create a perception of high value in the eyes of the consumers, making them assume that the product value is higher than its price. Key elements of the packaging of the product should represent its high quality. The furnishings, selling points, customer service and all features of the promotions and product should convey and deliver high status of the product.
Another Pricing strategy that is penetration is used to set an initial lower price than competitors. The aim is to attain a greater market share and attract customers to try the new product. One such example of penetration strategy is that of Wal-Mart’s Everyday low Pricing strategy and AT&T’s perceived cheaper bundle of products.
Economy pricing is the one in which a very low price is to be set by the company. However, this low pricing comes along with some small benefits as well. The main aim is to sell the number of products as possible at lower prices. For this type of pricing, the promotional strategy needed is that of mass marketing. Psychological pricing is the one in which the marketers target the audience to buy the product in response to some raised emotion or association with the product. The pricing of $699 instead of $700 is one of the tactics used under this category. Promotional pricing is the one in which free products are bundled up with main products. Prices are set high for one product and then the free product is bundled with it.
2-Determine which pricing strategy is represented by your brand’s price and discuss why (or why not) the pricing strategy is effective
Dr. Pepper follows the strategy of competitive pricing strategy for setting up the price on their product. The products of Dr. Pepper are generally cheaper than its competitors Pepsi Cola and Coca-Cola. It enables Dr. Pepper to be a relatively cheaper brand, however with greater trust and experience. The Pricing strategy of this company is very customer oriented as the company wants to retain its current market share and its loyal customers. They want to remain affordable and have a flexible pricing strategy. It usually comes up with discounted prices to attract new customers towards it, and it bears it by cutting short its distribution costs.
Dr. Pepper’s pricing is kept lower as compared to its peers. It is its positive mix strategy which has fueled its growth in the last year than its positive pricing strategy. As the company is not in its small packages’ segments like its competitors Pepsi Cola and Coca-Cola which has been one of the growth drivers for these companies for a higher price per unit, Dr. Peppers has the opportunity to tap this segment and earn more growth opportunities. With the entire health-conscious trend causing a reduction in volume sale of the beverage industry, using the smaller packages can help raise its revenue stream (Trefis, 2015).
3-Discuss if the pricing strategy is aligned with the messaging strategy in the promotions
The Dr. Pepper major market is centric in the US, Canada, and Mexico, while its competitors Pepsi Cola and Coca-Cola have more than half of its revenues streaming from outside the US. It shows that the vulnerability of the emerging markets except that of Mexico is not impactful on Dr. Pepper. With all the challenges present in the beverage market, Dr. Pepper has managed to have the top line growth in the CSD market as emphasized by its positive price mix. It has proved itself as being worthy of being a competitor to Pepsi and Coca-Cola by gaining its market share in the CSD market.
The promotion of Dr. Pepper showcases it as a unique and fun drink at lower prices than its competitors. The company has recently changed its slogan from “Always One of a Kind” to “The One You Crave.” Traditionally, the company has focused on its uniqueness. However, recently it has changed its marketing, promotional slogan showcasing more of its product. It is more representative of the current market perception of the product as being unique is a very old and highly used adjective by companies. Customers do not get attracted to the companies who say it is unique as everyone is saying this all the time. The current campaign is more focused as it answers why the customers want to prefer it. It is because it is a fun treat, and this is a more appropriate representation of the product and its perception. The promotional strategy portrayal of Dr. Pepper is aligned with its pricing strategy as it does not portray it to be a high-class beverage (Schultz, 2017).
While being smaller than its rivals like Pepsi and Coca-Cola, Dr. Pepper has managed to slowly navigate through the beverage market, which has been the target of the changing consumer tastes. The company is tiny as compared to its competitors, however it has weathered the startling side of the market better than its competitors. It did this by understanding its customer base and increased its spending on the market by researching more and having more effective advertising. With consumers turning to flavored waters and juices, Dr. Peppers ramped up its flavored water line which resulted in 20% growth (Olson, 2015). Other than this, the company has been very focused on cutting its costs while identifying every minor point of waste for raising its profits (Esterl, 2016)
Conclusion
The company also engages its customer base by introducing promotional schemes frequently. Giving bonus points to its customers on every purchase that can be used on the next purchase is one of these promotional schemes aligned with its pricing strategy. To conclude, it can be said that Dr. Pepper may not be following a very trendy strategy for its pricing and promotion; it is at least consistent and is reaping growth for its revenue streams.
References
Esterl, M. (2016, February 21). How Dr Pepper Cuts Costs. And Keeps Cutting. Retrieved from https://www.wsj.com/articles/how-dr-pepper-cuts-costs-and-keeps-cutting-1456110339
Olson, E. G. (2015, April 23). Dr. Pepper: A scrappy survivor in a sea of struggling soda giants. Retrieved from http://fortune.com/2015/04/23/dr-pepper-snapple-soda/
Schultz, E. J. (2017, March 13). WHY DR PEPPER IS DITCHING ‘ ONE OF A KIND’. Retrieved from http://adage.com/article/cmo-strategy/embargo-6am-monday-dr-pepper-ditching-a-kind/308245/
Trefis. (2015, February 17). Dr Pepper Earnings Review: Growth In Both Sparkling And Still Segments Boost Q4 Volume Growth. Retrieved from https://www.forbes.com/sites/greatspeculations/2015/02/17/dr-pepper-earnings-review-growth-in-both-sparkling-and-still-segments-boost-q4-volume-growth/#44d0bc327fe3
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