BUSINESSWEEK ONLINE : JANUARY 22, 2001 ISSUE
BUSINESS WEEK E.BIZ -- SPECIAL REPORT Pepsi's Aim Is True The cola giant's Web strategy finds the new generation of customers Would you shop for a soda online? Seems like a silly question. Of all the products for sale in the universe, soda is probably the last one shoppers will want to buy on the Internet. Even frozen food has more e-potential. But soft drinks? They're cheap. They require no research to purchase. And they're available on every street corner in America. So why is Pepsi-Cola Co. (PEP) trying so hard online? While many traditional advertisers have dabbled in the Net, Pepsi has a range of programs on the virtual air, from music sites to banner ads to Internet sweepstakes. Though only about 3% of its estimated $400 million soft drink ad budget goes online, that belies the emphasis the company places on the Web. ''This medium is here to stay, and we buy that,'' says John Vail, director of digital media and marketing for Pepsi-Cola. One reason: Despite the difficulties in measuring online ad performance, Pepsi has crafted deals that already show benefits. In a barter arrangement with Yahoo! Inc. (YHOO) this summer, Pepsi plastered the portal's logo on 1.5 billion cans. In return, Yahoo took the cola company's already established loyalty program, Pepsi Stuff, to new heights. A co-branded Web site, PepsiStuff.com, let consumers collect points from bottle caps. The points were redeemable on the Web site for prizes--everything from electronic goods to concert tickets. The results were considerable. Three million consumers logged on and registered at the PepsiStuff site, giving the cola company detailed consumer data that normally must be paid for in market research or gleaned from focus groups. Information that once took months could now be had in days. What's more, Vail was able to tweak the program while it was in progress, maintaining the right inventory of the most popular prizes. ''Instead of lag-time data, we had real-time, and we could react to it,'' says Vail. Sales volume rose 5% during the online promotion and the cost was about one-fifth what it had been as a mail-in project. Pepsi has no intention of slowing its Internet rush. The Web is the medium of choice for Pepsi's prime demographic audience--those under 25. ''They are going to where their customer hangs out and flashing their name,'' says Tom Pirko, a beverage consultant for Santa Barbara-based Bevmark LLC. ''This is aimed at flipping the next generation. For Pepsi, the Internet is serious. It's not a toy.'' No, but it's a work in progress. Pepsi's online marketing road has been long and bumpy. On Feb. 29, 1996, the company launched Pepsi World, a Web site of sponsored content designed to attract the youthful consumer. Sports and music news was mixed with online games and animation. A seven-figure publicity budget backed the debut. But it quickly became clear through focus groups and traffic numbers that Pepsi hadn't reached its target. Eyeballs were too fleeting, visitors too fickle. By the summer of 1997, Vail revamped the site to be less of a sports news digest and more of a vehicle to promote Pepsi-sponsored athletes, such as NASCAR driver Jeff Gordon. Going forward, Pepsi plans to expand on the Web site-centric marketing efforts. While banner ads and other more traditional ad buys have had some success, it's the creation of engaging Pepsi Web sites that has given the brand the most traction online. For example, Vail would like to bring a virtual experience to other promotions, such as Choose Your Music, a current in-store create-a-CD promotion. ''We're looking ahead to the next evolution,'' says Vail. For consumer Shane Erstad, 29, that's good news. Intrigued by the prizes and the ability to collect the points online, he became devoted to Mountain Dew and a fan of the PepsiStuff site. Even now that the game is over, he hasn't cut back. ''I hope they repeat the promotion.'' Count on it. By ELLEN NEUBORNE _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Do e-Ads Have a Future? TABLE: The Wide World of Advertising CHART: Dot-Coms Are Spending Less to Advertise Online... ONLINE EXTRA: Unilever's Mark Olney: "It's Tough to Flex a New Muscle" Pepsi's Aim Is True INTERACT E-Mail to Business Week Online

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