A Drinking Problem: Pepsi Challenge

The 3E Learning site discussed in another post includes a nice writeup on using the classic Pepsi challenge but including generic soda. Here is an excerpt: “In this exercise, student volunteers blindly taste three different soft drinks: Coke, Pepsi, and a store brand. The student then tries to assess which one each drink is. Across several years of performing this, in every semester a majority cannot identify their preferred drink, nor can many identify any of them correctly. After several volunteers make the attempt, the class engages in meaningful conversation about how and why Coke and Pepsi capture so much market share, when their products cost 50% more than store brands.” What, then, is the basis for competitive advantage when imitation is so evident? It’s worth noting that Pepsi did not include generics in the original challenge — why might that be?

Feedback about the exercise (from 3E-Learning)
  • “The soda taste test definitely opened my eyes to realize the importance of branding, marketing, and customer brand loyalty in a business.”
  • “Before participating in this experiment, I was sure it was going to be relatively simple to distinguish my preferred brand (Coke) since each brand uses a variation of the formula used when producing their product. However, I was surprised to see that very few people including myself, were able to taste the difference. The quality in the taste between the three products are so similar, and the sales profits earned for each brand are so different across each brand, that it clearly proves the impact of business strategies on a company.”
  • “This experiment clearly showed that factors such as marketing strategies, package design, geographic availability, and customer loyalty can sometimes have a greater impact on the success of a business than the product itself (if the product compares closely to that of the competitors’).”

Contributed by Steve Stewart

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