It Isn't Just the Product
"If you build it, they will come." - Field of Dreams
Other than in films, the "Field of Dreams" philosophy is a really bad way to build a business. After all, it isn't just about the product. It may not even be primarily about the product. It is about the entire package - the product, packaging, price, placement, promotion, channels - that we call "strategic marketing", combined with the ability to execute - operations, product development, etc.
This week, one of the largest drinks manufacturers in the world taught a lesson in channels.
Pepsi
Pepsi is releasing a new soft drink, "Pepsi True." Responding to growing concerns about artificial sweeteners and their impact on health - possible carcinogens, more recently indications that it so negatively affects gut bacteria that it may cause increased weight gain - Pepsi True is made with sugar and an all-natural sweetener called Stevia.
A major drink company responding to changes in tastes and health demands in the market by releasing a new drink is hardly innovative or different. What is different is that PepsiCo is selling True exclusively through Amazon. Pepsi True is unique among Pepsi's drinks not only because of its formulation, but because of its radically different channel.
Unlike a new entrant, with extremely restricted cash and few existing relationships, PepsiCo already has an entire global distribution and retail marketing network, a mixture of company-owned and contracted providers. For a mythical "NewSoftCo" to avoid the issue by going Amazon might not be radical, as it has nothing in place; for PepsiCo to actively ignore its existing networks, many of which it actually owns, is radical.
Clearly, Pepsi, which spends untold millions on each new product (I quite look forward to the next 10K to see if they report how much they spent on developing and launching Pepsi True), is going the Amazon-only route because it believes two very important things:
- The best way to reach its target market - those who want an all-natural soft drink with lower calories - is through Amazon, since that is where they do much of their shopping.
- Selling through their existing channels is a bad idea because either:
- It will cause losses, since not enough people will buy via direct retail channels. OR
- It will negatively impact the Pepsi True brand, reducing purchases by those who do buy online.
Either way, for a major market-driven retail consumer goods company to recognize that selling online via a major partner is not only the best way to sell its product, but the only way to do so without either losing money offline or negatively impacting online speaks volumes about changes in consumer behaviour, even in the humdrum soft drink market.