Crisis Management

Learning from the Pepsi Refresh Project

30 Jun , 2011  

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.”


5 Responses

  1. […] post from Professor Tim Calkins on the Pepsi Refresh Project. The goal was to move dollars from […]

  2. Mridul Joshi says:

    Great POV, however you also need to factor in other issues surrounding the campaign.

    • How good a job Pepsi did to spread the word about the charity initiative?
    • How much was the awareness of the campaign?
    • Doing charity is always good but giving so much weight to one single initiative, Could they have balanced out across several channels/campaigns?
    • Last but not the least, the project got lots of bad PR for mismanagement of the funds and several fraudulent entries came to light during the later stages of the campaign.

    I think Pepsi had great learnings from the campaign and to be fair this wasn’t advertising strategy failure alone, there were other factors at play.

    Mridul Joshi

  3. Gowthaman says:

    My humble opinion on such issues is to say that it is too early to comment on this. It is the intent that matters and once critical mass is achieved, popular culture will take care of it! Too early…

  4. josh duncan says:

    Professor,

    Great summary on the lessons learned. I believe you are spot on will all the points, especially the research aspect. I am sure the feedback from people asked was that this would be an outstanding project and would translate into major word of mouth benefits. However, as you point out, there is a big difference between what people say and they will do.

    You could probably go as far as to say that people expect Pepsi, due to their size, to build parks and sponsor other social projects – it really isn’t something that would surprise people or get them talking about the efforts in a new conversation.

    Thanks again for sharing!

    Josh

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