Failed Product Report: Crystal Pepsi

Failed Product Report: Crystal Pepsi

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Failed Product Report: Crystal Pepsi


There was a marketing fad in early 1990s equating clarity with purity. Just to name a few, Miller Brewing Co. came up with Miller Clear(March 1993), Coors Brewing Co. came up with Zima Clearmalt (1992), Procter & Gamble came up with Ivory clear liquid hand cleanser and Colgate-Palmolive came up with Clear Sparkling fresh dishwashing liquid. Last but not least, PepsiCo came up with Crystal Pepsi in April 1992.
Company Brief Description
Pepsi Company (PepsiCo) owns many brands of beverages, snacks and other foods. Its major product, Pepsi Cola, is one of the most popular carbonated beverages. Besides that, PepsiCo owns the brands Quaker Oats, Gatorade, Frito-Lay, Tropicana, Mountain Dew, Naked, Mirinda and SoBe. In order to maintain, or preferable expand, its market share, PepsiCo constantly introduced new products under its brands. This is a marketing strategy known as Product Development. By modifying the formulas and ingredients, PepsiCo had invented and marketed more than 50 types of carbonated beverages under the brand of Pepsi. To name a few, Pepsi Free introduced in 1982, Pepsi AM introduced in 1989, Pepsi Tropical introduced in 1994, Pepsi Blue introduced in 2003, Pepsi Edge introduce in 2004, Pepsi Lime introduced in 2005, and Pepsi Ice introduced in 2007. Some of the products survive and being accepted by consumers, however large number of the new formula Pepsi had failed and been removed from the market shelves in as short as 6 months.

Product, Price, Distribution, Promotion
Product (A good, service or idea to satisfy the consumer’s needs):
Crystal Pepsi was introduced to the market from April 1992 to 1993 in United States and Canada. It was formulated differently from the original brown cola, and the new colorless cola was 100% naturally flavored with no preservations and no caffeine. It did have a lighter taste than the original Pepsi.
According to Tom Pirko, who runs a beverage consulting company in Los Angeles called Bev Mark, figured that there are two reasons Pepsi decided to bring out this Crystal Pepsi product (Pepsi Product ‘Crystal Pepsi’ is Clear, 1992). The first reason was due to competition with Coca-Cola whereby this new idea was intended to obtain a great deal of attention from the market. PepsiCo has been head-to-head positioning with Coca-Cola for many years and thus, they were considering differentiation positioning to expand their business.

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The second reason was due to society’s perception in 1990s towards healthier beverages based on its taste, its ingredients and its clear look. But, in actual fact, it was still not a healthier drink because it was still sugar and water with little bit of flavoring.
PepsiCo tried to rescue Crystal Pepsi’s negative positioning in the market performance by adding citrus flavor to its clear cola. The company also decided to shorten its name to just Crystal and added “from the makers of Pepsi” on the packaging. The steps taken were intended to reinforce that Crystal was a completely different formula and brand from Pepsi-Cola. However, the product still failed eventually.
Although Crystal Pepsi was short-lived, it cannot be considered a mistake, because the innovative product will allow for favorable consumer attitudes toward the Pepsi name (Lavinsky, 1993). Crystal Pepsi was voted the best new grocery product of 1992 in a poll by Richard Saunders international (Erickson, 1994). Voters did not taste, try or use the product; it was just ranked based upon how interested the voters or consumers were buying the product, how creative the product was and how good a value the product was.
Price (What is exchanges for the product?):
Crystal Pepsi was sold at regular cola prices, which were usually less than two thirds the cost of current new age drinks, ranged from 89 cents to more than one dollar. Crystal Pepsi came in both clear bottles and silver cans.
Due to its clearness color, it initially did attracted many consumers to try the product because consumers do tend to like testing new products. Unfortunately, the fad diminished and did not have repeated purchases, because as reported by David Lavinsky (1993), the lack of real benefits of the product will not persuade 7Up or Sprite drinkers to change their preferences to cola.
However, the initial sales were believed to be sufficient to cover Pepsi’s costs. Crystal Pepsi was able to sell $335 million in its first year sales, but it is still well below its projected $1 billion sales target.
Distribution (or Place '' A means of getting the product into the consumer’s hands):
Crystal Pepsi was taste tested by 5,000 participants of consumers before releasing to test markets in April 1992. The test markets were conducted in Dallas, Denver and Providence, Rhode Island for nine months. It was then later launched nationally in December 1992. Crystal Pepsi was basically available in most major retail and grocery stores through out the nation, similar as where normal Pepsi was distributed.
However, Crystal Pepsi was only available in the market from April 1992 to 1993 in United States and Canada. It was sold in the market for an even shorter period in Australia, and it was sold in the market for a slightly longer period in Europe.
Promotion (A means of communication between the seller and buyer):
Using “Right Now” music from Van Halen with the tag, “You’ve never seen a taste like this”, Crystal Pepsi TV advertisement appeared in 1992. It was also aired on network TV during Super Bowl XXVII on Jan 31st, 1993. Besides TV commercials, PepsiCo also advertised on buses using world’s first photo-realistic, computer generated bus wrap as part of its promotion campaign. For a short period, Crystal Pepsi merchandise such as pool float, glass and wall clock were also available in the market.
Pepsi also arranged promotions with major retailers, including USA Today. However, Crystal Pepsi’s advertising failed to identify and stress the importance of product attributes. As stated by McCarthy (1993), Crystal Pepsi was designed to give consumers a new benefit -- a 90’s reason '' to drink cola: Without color, caffeine or preservatives, it is supposed to be perceived as “better for you.”
Target market
The first group of target market of Crystal Pepsi was the health conscious consumers. By removing the caramel color of regular cola has, Crystal Pepsi was presenting an image of “good health, purity, and icy cold water” to its drinkers (Grossman, 1992). It was following the fashion existed during early 90s that many products had been made colorless in order to give their consumers the impression of pureness and clarity.
Another category of target market Crystal Pepsi aimed for was consumer of soft drink besides cola. There were about $47 billion of soft-drink market in the United States as of 1993 (McCarthy, 1993). According to Wall Street Journal reporter Laurie Grossman, the traditional beverages only had 2% to 3% growth annually. However, the “new age” beverages such as Cleary Canadian and Quibell managed to grow at least 10% a year (Grossman, 1992). For that reason, PepsiCo had invested millions of dollars and spent 15 months to invent a whole new product Crystal Pepsi.
Meanwhile, Crystal Pepsi also targeted older consumer with age of 21 to 25, compare to regular colas, which are most popular among 14 to 21 years old. Michael Bellas, president of Beverage Marketing Corp, pointed out that consumer among these range (21 to 25 years old) prefer healthier soft drinks (Grossman, 1992).
Competitors
Crystal Pepsi was developed to compete with new age beverages such as Clearly Canadian and Quibell, which are still selling today. Clearly Canadian is currently selling Clearly Canadian Sparkling, a naturally fruit flavored sparkling water, and Clearly Canadian Natural Enhanced Water, a premium non-carbonated daily beverages which uses pristine Canadian artesian water. On the other hand, Quibell has fruit flavored carbonated mineral water.
After Crystal Pepsi was launched into the market, Pepsi’s close competitor, Coca-cola, then introduced Tab Clear, a clear, sugar-free and calorie free diet cola to 10 U.S. cities in mid January 1993 and launched nationally by mid year of 1993. However, Coca-Cola also suffered a great financial lost with Tab Clear.
Marketing Reasons for New-Product Failures
1. Insignificant point of difference.
The main reason of failure of Crystal Pepsi is it did not have significant point of difference compare with other regular colas. Even though PepsiCo stressed that it was produced by different formulas from its Pepsi Cola, consumers could not tell the difference. During development stage, PepsiCo had tested 3,000 variations of formulas with 5,000 consumers in their company laboratories and malls taste-tested survey (Grossman, 1993). Finally the company decided a smoother and lighter taste than traditional colas, and most importantly the clear color had been selected as their new product. However, Crystal Pepsi did not success in maintaining repeat purchases from consumers.
2. Incomplete market and product definition before product development starts
Crystal Pepsi did not exactly meet consumers’ needs and wants. The clear color of Crystal Pepsi was to target health-conscious consumers. Even though it had removed caffeine and the caramel color, Crystal Pepsi did not present an image of healthier soft-drink to most consumers as it was supposed to be. In fact, Crystal Pepsi contains 130 calories compare to 150 calories in regular Pepsi Cola in a 12 ounce serving (Grossman, 1993).
3. Too little market attractiveness
Lack of market attractiveness was another major factor of failure of Crystal Pepsi. Health-conscious and less frequent cola drinkers were the target market of Crystal Pepsi. However, it failed to provide the image of healthy and distinctive beverage, so Crystal Pepsi could not fully attracted its target market.
4. Poor Name Execution
“Crystal” implicitly means clean, pure and clear. Although Crystal Pepsi had a clear look from outside, it did not have the pureness of taste. The name “Crystal” was very ordinary that could not attract Generation-X to purchase or try. In addition, consumers had the impression of Pepsi related with Pepsi Cola, it was very difficult for health-conscious consumers to accept that the Crystal Pepsi was healthier simply from its brand.
Recommendations: What could and should have been done differently.
As written by Judann Pollack (2007), David Novak, former adman on Crystal Pepsi, stated that the thing that upset him about Crystal Pepsi isn’t that it faded '' it’s that it could have been so great.
PepsiCo should have had recognized earlier that there is a greater growth driven by flavors. They should have developed a drink with distinctive taste compared to cola to attract the targeted market segments. Besides that, a unique and cool bottle design would also be able to boost some attention from the market because of its differences from normal cola design and competitor’s design. Consumers were still having the perception that Crystal Pepsi was water plus sugar. To satisfy the health conscious drinkers, PepsiCo should have studied the wants and needs of health conscious drinkers more thoroughly in order to create a healthier formulation.
In order to create market attractiveness, PepsiCo need to develop a healthy drink with competitive advantage, such as including daily vitamins as ingredients. After that, PepsiCo should initiate multiple media advertising, campaigns, and promotions such as sponsoring national sport events to build up brand loyalty to expand sales. “Crystal Pepsi” or “Crystal” was not an attractive brand name. PepsiCo should have considered using a brand name with brand personality, such as “Pepsi” which is associated with personality traits of being young, exciting and hip.
Conclusion
Triplett (1994) highlighted in his article that clear cola and clear beer failed to impress consumers who saw through the marketing strategy, analyst said, and recognized the product’s lack of color as more of gimmick than a benefit. Crystal Pepsi would not have become a failed product if thorough analysis has been done in the new-product process. Hence, a proper consideration in new-product is critical in determining a product’s success in the market.

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