The Pepsi Refresh Project

The Pepsi Refresh Project

            In the mid-2000’s, social media began reshaping the marketing landscape and challenging traditional advertising. According to Gerber (2016), traditional advertising relies on one-way communication to consumers through media such as newspaper, radio and television advertisements.  There are two basic benefits from social media marketing. First, social media marketing began exploring the use of two-way communication with consumers by allowing consumers to interact with the advertisements and companies directly, providing feedback in real time. Secondly, social media marketing is also substantially less expensive than traditional advertising which allowed smaller businesses entry into the advertising market (Gerber, 2016).

Social media and the implications associated therein have changed the advertising landscape for organizations around the globe. Over the past decade, social media and the effects thereof have provided additional avenues for corporations to reach their consumers. The purpose of this paper is to discuss the impact of social media and how one company sought to facilitate change while adapting to technological innovation.

Antecedents of the Change Process

            One of the unintended results of social media advertising is it creates significant ad-fatigue. This fatigue, also referred to as banner blindness is the tendency for users to ignore banner ads, or anything resembling a banner (Resnick & Albert, 2014). Shah (2017) reported that social media users are constantly bombarded with a variety of advertisements in their feeds and messages. The consequence, users become desensitized from even noticing the ads. The consequence of which, users are desensitized from even noticing the ads. This in turn increases marketing costs significantly as the frequency of displayed advertisements increases as other ads are competing for placement (Shah, 2017). Consequently, many companies began exploring additional marketing techniques to attain a competitive advantage.

            The Pepsi Refresh Project is one of those attempts to make advertisements stand out in a cluttered marketing mix. In late 2019, Pepsi announced that it would sit out of the Super Bowl to launch the Pepsi Refresh Project (Avery & Norton, 2013). Pepsi pulling its advertising from the Super Bowl generated significant buzz about the upcoming project. Interestingly, Pepsi was the second highest trending brand around the time of the Super Bowl. During this time Pepsi added 300,000 Facebook fans (Avery & Norton, 2013). Coca-Cola, who took advantage of Pepsi’s absence, added 390,000 Facebook fans (Avery & Norton, 2013). However, some felt that Pepsi missed a major opportunity to increase awareness of the program by sitting out of the Super Bowl (Avery & Norton, 2013).

The purpose of the Pepsi Refresh project was to increase brand awareness by using cause marketing. Cause marketing is a newer practice that developed out of the need for businesses to be socially responsible. Consumers are drawn to businesses who share similar interests for improving their communities and like knowing that a portion of their purchases is being used to help others (Ballings, McCullough & Bharadwaj, 2018). If brands do not stand for something, consumers will ultimately move toward companies that do. Millennials consider social capital when shopping: 69% considered social commitments when shopping and 89% would switch brands if they aligned with a good cause (Avery & Norton, 2013).

Similarly, the mid-2000’s began the era of healthier eating. One of the results of a more health conscious society was less consumption of sugary drinks. Pepsi, and Coca-Cola, were seeing decreasing sales revenues and analysts were projecting that trend was not going to change in the next decade (Avery & Norton, 2013). That is a trend that continues to today as carbonated-sugary-soft-drinks are declining while sales of healthier options like bottled water are still on the rise (Taylor, 2018). Furthermore, government involvement was bringing the obesity epidemic to the forefront of the news. Soda and fast-food companies were identified as the instigators of the obesity problem by then First Lady Michelle Obama (Avery & Norton, 2013).

For these reasons, Pepsi was faced with a multi-faceted problem for which there was no easy solution. It was the hope that through social media advertising that the Pepsi Refresh Project would put the company back into society’s good graces by doing good in the world, through donating money, while increasing their sales revenue. The Pepsi Refresh Project was launched in 2010 with the $20 million originally allocated to Super Bowl advertising. This money would fund grants, ranging from $5,000 to $250,000, spanning six topical categories (Avery & Norton, 2013). Consumers were directed to www.refresheverything.com to contribute ideas and vote for projects they deemed worthy.

The Stakeholders of the Change Process

First and foremost, the employees of Pepsi were a major stakeholder regarding the Pepsi Refresh Project. Considering that revenues were declining, and the forecasts showed less than promising futures, it is clear why the employees have a major stake in the success of this new business process (Avery & Norton, 2013). A failure could mean further declines in sales which could lead to a loss in employee jobs. Furthermore, Pepsi employees were to be key players in generating excitement about the Pepsi Refresh Contest and were encouraged to tell at least ten people they knew. Additionally, Pepsi created an employee engagement program where groups within the organization could submit ideas for a $10,000 grant to be voted on by employees (Avery & Norton, 2013).

Consumers were also a major stakeholder. It was clear Pepsi was losing customers to the health era that was starting. Baby boomers were drinking less soda as they aged, while health conscious millennials were turning to healthier options such as teas and bottled water (Avery & Norton, 2013). The Pepsi Refresh Project needed to succeed to stop the decline in their customer base and hopefully recapture former Pepsi drinkers.

Non-customers, particularly millennials, were one of the more critical stakeholders in this social media experiment. Millennials prefer to associate with companies that are socially responsible (Avery & Norton, 2013). Millennials are also the smallest percentage of Pepsi’s market segment at 12% (Avery & Norton, 2013). The continued success of Pepsi was in attracting the younger generation to adopt their products. 

Lastly, a bottler engagement program was also developed like the employee engagement program. The bottling companies were physically in the stores and communities. They also served as the front line for Pepsi. Like the employee program, bottlers were able to submit and vote on ideas for grants independent of the Pepsi Refresh Project. However, these groups were skeptical that the program would be able to generate sales for Pepsi (Avery & Norton, 2013).

The Immediate Effects of Change

Initial results of the Pepsi Refresh Project were positive. Within 72 hours of the launch of the website, in early 2010, the submission limit of 1,000 project ideas was reached and 141,000 votes were cast (Avery & Norton, 2013). By the end of November 2010, 182.931 ideas were submitted, over 3.24 billion media impressions and 3 million Facebook followers were added (Avery & Norton, 2013). Pepsi was soon ranked the number one brand in 2010 when consumers were asked about brands that place importance on doing good (Avery & Norton, 2013).

Even though on the surface the program appeared to be a success there were problems arising during the first year. Pepsi soon realized they were not generating the grass-roots campaign that they had hoped. Large non-profits began submitting their own ideas for projects and driving their supporters to the Refresh website to increase the vote count (Avery & Norton, 2013). With no way to vet the sources of the projects, or the projects themselves, accusations of Pepsi allowing cheating soon began to materialize. The millennial target audience that Pepsi was hoping to engage was a very small subset of the grantees during the first year (Avery & Norton, 2013).

Additional negative press started to arise from high profile bloggers. One blogger posed the question:

What do Pepsi and Coke actually sell? Soft drinks; liquid with a lot of sugar and no    vitamins. And now they want to get associated with health, planet, art and culture, food and shelter, neighborhoods, and education? Using social media? I am very sorry, but I think there is a value clash somewhere (Avery & Norton, 2013).

It was becoming apparent that the lack of alignment was an issue for the Pepsi Refresh Project. Pepsi was certainly doing good in the world and gaining brand equity. However, Pepsi was not driving sales with their advertising initiative. In fact, Pepsi, and Diet Pepsi, sales revenues dropped by 4.8% and 5.2% by the end of 2010, respectively (Avery & Norton, 2013). Coca-Cola interestingly gained 0.01% of market share during this time (Avery & Norton, 2013). Pepsi began to question whether the Pepsi Refresh Project should continue forward out of the brand marketing budget or be transferred to their non-profit, the PepsiCo Foundation.

Unaccounted Considerations of the Change Process

The Pepsi Refresh Project was intended to show current and potential customers that Pepsi was socially responsible and trying to make a difference in the communities that they served. However, a critical component to cause marketing is ensuring that the selected cause shares alignment with the company in some way. “For example, when Procter & Gamble's Olay brand skin-care line partnered with the American Society for Dermatologic Surgery, its campaign goal was to inspire women to protect their skin from the sun” (Gordon, 2008, para. 6). The Pepsi Refresh Project had no such alignment.  

            Another issue was the lack of engagement on the Refresh website. The website was clearly branded Pepsi but did not encourage visitors to do anything other than vote. The team noted that voters were spending between three and four minutes on the website (Avery & Norton, 2013). These statistics were troubling to the company as it was in Pepsi’s interests to determine ways to engage users to stay on the website longer instead of voting and leaving.

            Lastly, it became extremely problematic that large non-profits were submitting ideas and dominating voting on the website (Avery & Norton, 2013). Pepsi did not anticipate that it would need to put in place a vetting system to prevent large organizations from manipulating the voting on the Refresh website. Pepsi was in a position after the first year that it would need to put in place substantial changes to prevent manipulation of the program by non-profits. These changes would allow Pepsi to direct engage with the grass-roots audience that it was looking for.

Recommendations

            If Pepsi desires to continue the Pepsi Refresh Program the three most likely options are as follows; (1) refocus the program, (2) turn the program over to the PepsiCo Foundation or (3) terminate the entire campaign. Refocusing its efforts could involve a variety of new effects not previously considered such as; limiting/reducing the scope of the program, changing the program to have direct linkage to the products or making it a seasonal event by only offering the program during certain times of the year; maybe around holidays.

The PepsiCo Foundation is already in the business of providing grants. Using the buzz generated by the Pepsi Refresh Project to direct people to the arm of Pepsi that specializes in philanthropy seems like the best choice. This will allow Pepsi to focus on what it needs to do, sell products. They can indirectly reap the rewards of being philanthropic by raising awareness for their non-profit.

Long-term Results of the Change Process

Some could argue that the Pepsi Refresh Project was a major success. It generated substantial buzz around the product, increased the brand’s social media engagement and is often referred to as the biggest social media advertising campaign in history (Avery & Norton, 2013). It is hard to deny that brand awareness was increased during this time simply by looking to the increase in Facebook followers. However, the Pepsi Refresh Program was considered a failure and the initiative was quietly abandoned in late 2012.

Strategically, it did not make sense for Pepsi to continue the program despite the positive and overwhelming results socially. Pepsi was certainly doing good in the community by donating its brand advertising funds to notable causes, but it was failing to do the one thing the campaign needed to do, generate sales. Pepsi continued to lose market share eventually falling to third place in the soda rankings behind Diet Coke (Bida, 2012).

The main reasons contributing to the failure of the project was lack of connection to Pepsi’s products, its brand recognition or the company in general. Doing good for the sake of doing good did not create a strategic advantage for Pepsi. It failed to increase the number of Pepsi drinkers or convert Coca-Cola drinkers. One can question if this is truly cause marketing. Pepsi was just donating money to causes specified by participants in the program which seemed more like a philanthropic initiative than a cause marketing campaign. This made the campaign seem disingenuous as if Pepsi was trying to pay-off consumers or even worse, distracting from the health concerns of using their products.

Conclusion

            The Pepsi Refresh Project, while good intentioned, did not achieve the success that the company had hoped for. The program was successful in terms of generating social media engagement across multiple platforms and increased brand equity. It was also successful in terms of distributing funds for charitable causes that positively impacted many people. Even with these major successes the advertising campaign failed to inspire consumers to purchase Pepsi, causing the company to lose revenue over the course of the campaign. Although the Pepsi Refresh Project was discontinued it did provide valuable insight to Pepsi, and other businesses, regarding the impacts of an unfocused advertising campaign and the critical need to ensure any cause marketing program is aligned with the business and its products.

References

Avery, J., Norton, M. I. (2011). The Pepsi refresh project: a thirst for change. Harvard Business School Cases, 1. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&AuthType=shib&db=buh&AN=79657716&site=eds-live

Ballings, M., McCullough, H., & Bharadwaj, N. (2018). Cause marketing and customer profitability. Journal of the Academy of Marketing Science, 46(2), 234–251. https://doi.org/10.1007/s11747-017-0571-4

Bida, C. (2012). Why Pepsi canned the refresh project. Media Post. https://www.mediapost.com/publications/article/186127/why-pepsi-canned-the-refresh-project.html

Gerber, R. (2016). Rise of social media takes toll on traditional advertising. Forbes. Retrieved from https://www.forbes.com/sites/greatspeculations/2016/05/04/rise-of-social-media-takes-toll-on-traditional-advertising/

Gordon, K. (2008). Cause marketing matters to consumers. Entrepreneur. Retrieved from https://www.entrepreneur.com/article/197820

Resnick, M., & Albert, W. (2014). The impact of advertising location and user task on the emergence of banner ad blindness: an eye-tracking study. International Journal of Human-Computer Interaction, 30(3), 206–219. https://doi.org/10.1080/10447318.2013.847762

Shah, U. (2017). Advertising fatigue: concept, measurement and solutions. Medium. Retrieved from https://medium.com/@urmit/advertising-fatigue-concept-measurement-and-solutions-tentative-49fdc70e6390

Taylor, K. (2018). People are drinking less Pepsi and Coke than ever – and it reveals the power of the ‘biggest marketing trick of the century’. Business Insider. https://www.businessinsider.com/pepsi-coke-decline-while-bottled-water-grows-2018-5

Zmuda, N. (2010). Pepsi expands the refresh project. AdAge. https://adage.com/article/news/pepsi-expands-refresh-project/145773