Does Sachin Tendulkar sell more Pepsi ...
I was having this debate with a few friends in Bangalore. I would think that this must be quite a common theme of discussion amongst Indians around the world ...
One of my friends argued that there was no logical connection between Sachin and Pepsi and that there was no intrinsic advantage in using him to promote the brand. He believed that people drank colas purely to quench their thirst and/or because they liked the taste. He believed that almost no one would go to a second store if the first store was out of their preferred cola brand - In other words, a Pepsi-drinker would in most cases accept a Coke if Pepsi was not available.
I believed that paying Sachin millions to promote Pepsi was worthwhile because of the following reasons:
1. Buying a cola is an emotional decision - Demanding Rs.10 for something worth Rs.1 is only possible if there is a strong brand/emotional connection or an association with a perception such as "coolness", "being IN" etc ...
2. Substitution would be accepted by most people, but the challenge is to be people's first choice and then develop a good distribution strategy that would prevent your product from being out of stock.
3. What else can a Cola company do with their money ? Their product is already as cheap as it can possibly be, the distribution network is set up ...
And it even makes sense economically. Lets assume Pepsi pays Sachin Rs. 10 crores/year for his endorsement.
India's population is about 105 crores.
Of this, about 75 crore people are probably not regular consumers (<6 per year)
Of the remaining 30 crores, the average yearly consumption is probably about 18 bottles.
Lets then assume that the 30 crores is evenly spread amongst Pepsi brands (Pepsi, Mirinda, 7Up), Coke brands (Coke, Fanta, Sprite) and local brands (Kali Mark, Bovonto, Fruitang !).
The profit/bottle is probably about Rs 1.50 for the cola companies. So, the value of a cola-consumer is Rs.27/year. In order to justify paying Rs. 10 crores to Sachin, he has to increase the Pepsi drinking population by (10 Crore/Rs.27) = 0.37 crores.
This can be achieved by converting a Coke/Regional brand consumer or by making a non-regular consumer a regular consumer. In other words, the target audience is 95 crore people. So the desired conversion ratio is (0.37/95) or 1 in every 256 people.
Of 256 people you know, would one person drink Pepsi just because Sachin drinks it ?
I think so ...
One of my friends argued that there was no logical connection between Sachin and Pepsi and that there was no intrinsic advantage in using him to promote the brand. He believed that people drank colas purely to quench their thirst and/or because they liked the taste. He believed that almost no one would go to a second store if the first store was out of their preferred cola brand - In other words, a Pepsi-drinker would in most cases accept a Coke if Pepsi was not available.
I believed that paying Sachin millions to promote Pepsi was worthwhile because of the following reasons:
1. Buying a cola is an emotional decision - Demanding Rs.10 for something worth Rs.1 is only possible if there is a strong brand/emotional connection or an association with a perception such as "coolness", "being IN" etc ...
2. Substitution would be accepted by most people, but the challenge is to be people's first choice and then develop a good distribution strategy that would prevent your product from being out of stock.
3. What else can a Cola company do with their money ? Their product is already as cheap as it can possibly be, the distribution network is set up ...
And it even makes sense economically. Lets assume Pepsi pays Sachin Rs. 10 crores/year for his endorsement.
India's population is about 105 crores.
Of this, about 75 crore people are probably not regular consumers (<6 per year)
Of the remaining 30 crores, the average yearly consumption is probably about 18 bottles.
Lets then assume that the 30 crores is evenly spread amongst Pepsi brands (Pepsi, Mirinda, 7Up), Coke brands (Coke, Fanta, Sprite) and local brands (Kali Mark, Bovonto, Fruitang !).
The profit/bottle is probably about Rs 1.50 for the cola companies. So, the value of a cola-consumer is Rs.27/year. In order to justify paying Rs. 10 crores to Sachin, he has to increase the Pepsi drinking population by (10 Crore/Rs.27) = 0.37 crores.
This can be achieved by converting a Coke/Regional brand consumer or by making a non-regular consumer a regular consumer. In other words, the target audience is 95 crore people. So the desired conversion ratio is (0.37/95) or 1 in every 256 people.
Of 256 people you know, would one person drink Pepsi just because Sachin drinks it ?
I think so ...
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