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Case study: Lay´s Potato Chips in Hungary A presentation by the Purple Cow Riders: Rahul Singla, Tshering Dolma Gurung, Clemens Doerr, Mehak Gupta & Kennedy Kimutai

27/04/2015, MDM-Consumer Behaviour

+ History of PepsiCo

n  Established in 1965.

n  A merger of Pepsi-Cola & Frito-Lay.

n  Acquired: n  Pizza Hut in 1977

n  Taco Bell in 1978

n  KFC in 1986

n  Presence in more than 160 countries Major businesses – Beverages , Restaurants and Salty snacks.

n  Integral part of growth strategy: Expansion into new markets.

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+ PepsiCo in Hungary

n  PepsiCo salty snack division set up in April 1995.

n  Major Product: Lay’s Potato Chips.

n  Marketing strategy : Outdoor Billboard Campaign à proved ineffective in brand building…

n  By Dec. 1995, 10% market share à promotion together with Pepsi drink.

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+ Failed Advertising Campaign

n  Results of the billboard advertising campaign was a disappointment.

n  Lays suffered a weakness in:

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Brand Awareness

Purchase Intent

Brand Image

+Hungarian Potato Chips Market

n  In 1996, Market in terms of volume ~ 11,000 tons

n  Consisted of 5 major categories:

ü  Traditional snacks (49%)

ü  Nuts (14%)

ü  Potato chips (18%)

ü  Extruded product made of corn (17%)

ü  Other salty snack (2%)

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+ The competitors of Lay´s 6

Strong distribution

network

46% market share

Transparent plastic

packaging (medium quality)

Priced 2% higher than

Lay´s

Products - potato

chips to corn

product

Heavy marketing

Catchy Jingle

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Zweifel, 10%

United Biscuits, 27%

Chio, 46%

PepsiCo Snacks, 10%

Bahlsen, 7%

Zweifel ²  Austrian brand. ²  Low Price segment. ²  Price positioning 5%/

7% less than Lay’s and Chio.

²  Mostly price promotions.

United Biscuits ²  U.K. Brand. ²  Premium Price Segment. ²  Price positioning 12%

higher than Lay´s. ²  Metalised coloured foil

packaging (high quality). ²  TV and radio advertising.

Bahlsen ²  German Brand. ²  Premium Price Segment. ²  Price Positioning 10% higher

than Lay´s. ²  Metalised coloured foil

packaging (high quality). ²  TV and radio advertising.

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+Chio´s Winning Advert

In consumer minds à “ Chio equals Chips”

Jingle: https://www.youtube.com/watch?v=qQQxvlGpcJE

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Chio

Chio

Chio Chips

+Chio´s Winning Advert

In consumer minds à “ Chio equals Chips”

Jingle: “Chio, Chio, Chio, Chips”

Stimulus?

Sounds, Visual, Setting

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Chio

Chio

Chio Chips

+ Hungarian Consumer Behavior

n  Snack habits differed significantly with Western European markets.

n  In 1995, high inflation and rising unemployment.

n  Rapid decline in consumer buying power.

n  Price sensitive à preferred:

n  Traditional snacks

n  Homemade cookies & biscuits

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+ Hungarian Consumer Behavior

n  Consumers were asked why a particular brand was their favourite: 68% responded that taste is very important.

n  Sales of snacks were much less concentrated in large supermarkets.

n  Hungarinas have Impulse buying habits à competitors concentrated in promotions (price reduction, coupons, pay-back etc.).

n  Lays target consumers were: 8-54 years of age.

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+ Survey/Marketing Problems

n  In 1995 only 7% of consumers were aware of Lay’s billboard campaign - advertising awareness was very low.

n  Because 29% of all media advertising was done by Chio (memorable jingle etc. ). – mostly on TV and Radio

n  Only 9% of all media advertising was for Lay’s, mostly spent on the billboard campaign.

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+ Consumer Learning 13

Pavlovian Model of Classical Conditioning

+ Blind taste test

n  Lay´s was made of high-quality chips. But do consumers think that too?

n  Blind taste test: 69% preferred Lay´s taste instead of Chio.

n  50% preferred Lay´s to the “Gold Standard”.

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+ High quality not enough L

n  Lay´s focused on high quality chips (no brown spots) and packaging (metalised foil).

n  Not sufficient to establish a high-quality image in consumer minds:

n  81% of consumers surveyed said that Chio was of good quality compared with only 47% for Lay’s.

n  Further, 55% of consumers agreed that Chio offered good value compared with only 17% for Lay’s.

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+ Setting a powerful strategy in 1996

Market research proved Lay´s quality was superior to Chio. What should be next years strategy?

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Increase Lay’s

brand aware-

ness

Com-municate a brand image of superior quality

Promote trial of

the product

Strategic

Objectives

+ Key decisions to be made

US$1 million marketing budget for 1996

How to split the budget spending between media advertising and consumer promotions?

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+ Key decisions to be made

US$1 million marketing budget for 1996

How to split the budget spending between media advertising and consumer promotions?

n  Chio´s budget splitting – 44% media advertising and 56% consumer promotions

n  Lay´s could focus on a 60% consumer promotions and 40% media advertising (impulse buying by consumers, capitalize using promotions)

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+ Key decisions to be made

Which specific advertising media should be used and what message should the advertising convey?

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+ Key decisions to be made

Which specific advertising media should be used and what message should the advertising convey?

Mainly a strong message of taste! (68% consumer response) & also slightly quality

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TV 50%

Radio 30%

Cinema 10%

Outdoor 10%

+ Key decisions to be made 21

Which promotional activities should be included?

+ Key decisions to be made

Which promotional activities should be included?

n  Focus on taste as proven by the blind taste test.

n  A “taste challenge”: winner takes home coupons or free Lays delivery for a whole year…

n  Host “challenge” events (for families or young people) , winner takes home coupons.

n  Buy 1 get 1 free (BOGO)

OR Cross-selling with Pepsi:

Buy 2 Lay´s & get a free Pepsi

Buy 2 Pepsi & get one Lay´s chips free

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+Best Lay´s commercial ever:

https://www.youtube.com/watch?v=NsdU602juNM&feature=youtu.be

One of Lay´s Hungarian commercials:

https://www.youtube.com/watch?v=fXrTs4A1De8

What is your opinion? Stimulus?

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tasty Lay´s

a taste of

heaven

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