DECLINE IN THE SALES OF THE ENERGY DRINK STING, AND ITS CONTRIBUTARY FACTORS

Zoya Hussain 08U0288 Research Methods

Introduction

Behind the launch of every new product, several factors play a major role in its success or failure. The effectiveness of a products launch is measured by many factors and variables, these being adequate market intelligence, long term forecasting, effective strategies as well as consumers viewpoint about the product. In this paper we discuss the factors responsible for the decline in sales of the energy drink Sting. Sting energy drink is a PepsiCo International product. It is a carbonated energy drink available in two flavors; Berry Blast and Gold Rush. It was launched in Pakistan with a widespread campaign started by PepsiCo. It included TV commercials, roadside advertisements, advertising vehicles offering free sample to people on roads. Sting was first introduced in a can, like all the other energy drinks are offered traditionally. Later when the hype wore off and people went back to their old brands, Sting became available in glass bottles too. Even then it could not achieve a bigger market share despite its low price offering. PepsiCo is a well renowned brand, and although Sting became popular overnight following its launch and early publicity, its popularity began to decline within the year and with the accompanying literature, we will determine the variables that have contributed to this.

Company History

PepsiCo is considered a world leader in convenient foods, snacks and beverages with revenues greater than $60 billion and with 285,000 employees. Its brands include Pepsi-Cola, Frito-Lay, Tropicana, Quaker and Gatorade. the four major divisions of the PepsiCo International are PepsiCo Americas Beverages, PepsiCo Americas Foods, PepsiCo Europe, PepsiCo Middle East and Africa. PepsiCo Asia, Middle East & Africa makes, markets and sells a number of leading snack food brands including Lays, Chipsy, Kurkure Doritos, Smiths, Red Rock Deli, Cheetos, and Ruffles. It also makes, markets and sells various Quaker-brand cereals and snacks as well as beverage concentrates, fountain syrups and finished goods, brands including Pepsi, Mirinda, 7UP and Mountain Dew. It licenses the
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Aquafina water brand to certain of its authorized bottlers too. One of its recent ventures in Pakistan is the energy drink Sting and without a year closure, its sales have declined despite its popular brand name.

Literature Review

In order to determine the factors involved in the decline in sales of the energy drink Sting, following studies might prove useful in understanding the variables and how they contribute.

Malinauskas et al. (2007), assessed in their study that energy drink consumption pattern among college students prevails mainly to subside the affect of inadequate sleep, to get an energy boost, during studying, while driving for lengthy time intervals, during partying and for treating hangovers. To evaluate the consumption pattern, a focus group of 32 students and a field test along with a survey of 496 randomly selected students of a university in the United States was conducted, out of which 51% reported that they consume more than one energy drink a month, which makes them the energy drink users. 67% consumed them for inadequate sleep, 65% for energy and 49% while partying. The users also reported to have suffered from their side effects in which 29% experienced crash and weekly jolt episodes, 23% had headaches and 19% had heart palpitations after drinking them.

Benedetto (1999), in his research determines the factors that contribute to an effective product launch. The most critical information gathering activities, strategies and tactics were reviewed which majorly influence a launchs success. A retrospective methodology in which managers were questioned regarding their perceptions regarding new products and their performance, profitability, relative sales and market shares was used. For data collection, mail survey method was used. Perceptual data on 17 tactical activities, 14 strategic activities, 8 marketing information gathering activities and 7 skills and resources was provided by the respondents on newly launched products. It was concluded that successful launches were a result of superior activities and high quality research and development efforts, including logistics and timing of the launch.
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Lilien et al. (1990), evaluate the decision of a product to enter the market and sets forth several propositions regarding the timing of entry of a new product and how they are likely to have an effect on the sales and market share of that product. A data base containing 112 new industrial products was chosen to be the sample and the firms were subjected to a telephone interview, a telephone contact and a personal interview. Three key entry times were found to be important factors relating to the market success of the new product; order of entry, stage of product life cycle and product development time prior to market entry. Through these propositions, an appropriate time could be estimated for a new product launch.

Mahajan et al. (1986), portray that advertising plays a key role in creating awareness of new products. In todays dynamic world advertisements are easy to forget and this study tries to determine which type of advertising is more beneficial. It also shows the impact of different methods of advertising on customers. It keeps into consideration the law of diminishing returns. Another factor elaborated in the research is that the customers exposure to an advertisement should be spread over a period of time and not clustered together. Exponential forgetting also occurs as the amount of relearning rises with the amount of time passed since the original learning occurred, and thereby the original learning decreases with time.

Pekelman et al. (1978), offer a formulation relative to the life cycle of an advertising campaign and its effects wear out. Three variables are given for decision; the optimal advertising expenditure for a given time, the optimal time for copy replacement and the optimal investment in new copies which are used in two models; sales advertisement model and copy replacement model. The relativity between the impact of an ad initially as well as the total investment done in creating it can be measured through the data but as more numbers are gathered, they can be adjusted in the proposed formula and optimal levels of expenditure, investment and replacement time can be calculated.

Soderlund et al. (1999), explore the links that exist between customer satisfaction, purchase behavior, their repurchase intentions as well as customer profitability. Research was conducted on the basis of the track records as well as revenues over time kept by a firm which included telephonic interviews of 418 customers recorded in their database. The results exhibit a strong linkage between customer behavior and their profitability and a rather insignificant link between satisfaction and profitability while a modest link between repurchase intentions and following behavior. The study was unable to discern the reason

that why some customers respond in a more profitable manner than other and how to make the others respond in that manner.

Anderson (1973), considers four certain psychological theories which determine the effects on customer satisfaction and perceived product performance of disconfirmed expectations. These theories are of cognitive dissonance, contrast, generalized negativity and assimilation contrast. Dissonance theory assumes that a consumer will adjust his own perception of a product if a feels any discrepancy arising between his expectations and the actual product performance. In contrast theory it is implied that a consumer will tend to magnify whatever the difference he feels between his expectation and product performance. Generalized negativity poses that if and any difference exists between the two, the consumer will automatically generalize it to be unfavorable and assimilation contrast theory proposes that a consumer will rate a product performance in varying zones depending upon his expectations. The models however concur on the point that there is a limit to the discrepancy the consumers will tolerate and if that rejection threshold is reached, they will see the product unfavorably.

Pauwels (2004), introduces restricted policy simulation in order to emphasize four dynamic forces; consumer response, competitor response, company support and company inertia. Aside from consumer demand, current marketing tactics also influence the future marketing strategies. All the time series properties are examined for sales and marketing variables and their net impact on each other is measured. Through this, calculation of consumer response, competitor response, company support and company inertia is done

separately and this evaluation helps the managers to assess the long term marketing effectiveness.

Boas (2004), considers a model where customer get to know about the product they buy in the first period and then contemplate about competing products in the second period on the basis of what they felt about the product in the prior period. If the distribution of valuation for a product is negatively skewed, it is beneficial for that product to have a bigger market share in the present. Conversely, if it is positively skewed, it would hurt in the future. It also signifies the importance of the consumer learning effects on the market outcome.

Farley (1964), tests his hypotheses that why brand loyalty differs for varying products. In his paper he has used factor analysis and two summary measures; cross sectional and time series, to check how variables in the market affect them. These measures being an average number of brands bought by families of products during a certain time and the percentage of families in market whose preference in brands varies over time. 16 products against 119 families were tested and it was found that customers were loyal to brands that were distributed widely and where the market share of the brand was heavy, brand switching is related to distribution, price and the significance of the product in the customers consumption pattern.

Moisecu (2010), investigates the relationship between brand loyalty and market share while considering repurchase behavior as well as recommend intentions as basic measures of loyalty. The data for this research was collected through questionnaire survey and distributed among 119 random Romanian urban consumers. The results indicate that the relation between brand loyalty and market share is not only sustained in durable goods but brand loyalty is also the driving factor in gaining and maintaining market share.

Seifert et al. (2011), review the health related affects and consequences of energy drink consumption. Self report surveys and manufacturers websites were used for product information. Through these, it was found that about 30% to 50% teenagers and young adults
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consume energy drinks which contain an unregulated amount of caffeine. The contents in these drinks are responsible for many adverse affects like diabetes, seizures, behavioral disorders, cardiac abnormalities and mood swings. Out of 5448 cases of caffeine over doses in a year in the US, 46% occurred in teenagers. Several states and countries have banned the advertising of energy drinks as well as their sales.

Miller (2006), examines the relationship between problem behavior and energy drink consumption among youngsters. 1500 students were invited for a 45 minute questionnaire and about 52% responded to the questionnaire. It was found out that energy drink consumption was related with drug usage, sexual risk taking and risky dares. Regular intake of energy drinks can be used as an indicator to help identify students at risk for health compromising behavior and substance use.

Pediatrics (2011), have put forward an awareness report in which the debate over the propriety of marketing energy and sports drinks to the youngsters. They believe that these are inappropriate, containing understudied ingredients, and totally unsuitable for an adolescents diet. These contain high amount of caffeine and other stimulants which adversely affect the health of people. All of these arguments are backed up with clinical reports and health concerning results.

Miller (2009), links energy drinks with several health compromising issues and since a large population of energy drinks consumers are athletes, they face a threat of developing the toxic jock identity which is also linked to risky masculine behavior among males. A survey of 795 undergraduate students was randomly chosen and questioned over their energy drink consumption and certain tendencies. It was found that energy drink usage is quite common, especially among men, it is closely associated with toxic jock characteristics and frequent users are more vulnerable to health risks.

Theoretical Framework

Justification

Life Style Malinauskas et al. (2007)

Market Research Benedetto (1999) Lilien et al. (1990)

Advertising Mahajan et al. (1986) Pekelman et al. (1978),

Consumer Satisfaction Soderlund et al. (1999) Anderson (1973) Pauwels (2004) Boas (2004)

Brand Loyalty Farley (1964) Moisecu (2010)

Awareness Seifert et al. (2011) Miller (2006) Pediatrics (2011) Miller (2009)

Definition of Variables

Dependent Variable Sales

All the firms are dependent on sales for the success of their product. Sales of a product are a means of profit generation, and it is crucial for every company. Factors affecting sales are as follows.

Independent Variables Life Style

Certain products are life style oriented. They are made especially to fit into the demands of a certain lifestyle. Life style means the way a person lives. In order to market a product successfully, it is essential to understand the life style of the target market. Market Research

It helps to understand what position a product holds in the market and how it can be improved to increase sales. Advertising

Advertising a product properly and effectively ensures atleast one time purchase of the product by the consumer. If the product becomes popular through advertisements, even customer satisfaction takes a second seat to the trend. Consumer Satisfaction

It is one of the most important components in repurchase behavior of a product. If a product manages to meet the expectation of a customer, he will recommend the product to other and resume its recurring purchases. Brand Loyalty

No matter how good a new product might be in the market, some people tend to be hardcore loyals and despite finding another product better, they usually stick to their preferred brand. Brand loyalty is beneficial to the existing products but could mean decreased sales for new entrants. Awareness

Awareness of a product, its composition and its benefits also drive a consumer to purchase or not purchase it.

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Hypothesis

Ho: There is no significant relationship between sales and life style H1: There is a positive significant relationship between sales and life style

Ho: There is no significant relationship between sales and market research H2: There is a positive significant relationship between sales and market research

Ho: There is no significant relationship between sales and advertising H3: There is a positive significant relationship between sales and advertising

Ho: There is no significant relationship between sales and consumer satisfaction H4: There is a positive significant relationship between sales and consumer satisfaction

Ho: There is no significant relationship between sales and brand loyalty H5: There is a negative significant relationship between sales and brand loyalty

Ho: There is no significant relationship between sales and awareness H6: There is a negative significant relationship between sales and awareness

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