Pass or Fail, Pepsi's Refresh Will Be Case for Marketing Textbooks

Rest of Industry Eyeing Bold Social-Media Experiment

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NEW YORK (AdAge.com) -- Pepsi's Refresh Project, a first-of-its-kind experiment in social media that invests the brand in community-building projects, won't simply leave a legacy for the recipients of its financial grants. It's also a pivotal test case for other brands trying to navigate an ad-cluttered, cynic-rich marketing landscape.

Pepsi has shifted almost one-third of its budget to interactive and social media, per CEO Indra Nooyi.
Pepsi has shifted almost one-third of its budget to interactive and social media, per CEO Indra Nooyi.
Refresh Project will be closely watched by the industry for its scope and ambition to put digital media at its forefront, its purpose-driven strategy and the way it restructures relationships within Pepsi's agency circle. What Pepsi is trying to accomplish is unprecedented; its philosophy rips up the traditional marketing rulebook.

"This is big, new, getting a lot of attention. It's impactful; it's innovative," said Cheryl Damian, a director in the cause-branding group at Cone, who said many of her clients have been asking her about Pepsi's program and watching its progress. "What the industry is talking about now is, is this a gamble that was worth taking, in terms of a lift in sales? That's the holy grail."

"If Pepsi succeeds, it'll only elevate this embrace of digital," said Marc Lucas, who left digital agency Razorfish in December to head creative at Kirshenbaum Bond Senecal & Partners. "I am talking to clients now who used to be scared to walk away from million-dollar TV ads, but that's not the case anymore."

Of course, Pepsi's new direction is far more philosophical than a case of shifting media. "It's not about digital as its own channel anymore. It's, how do we infuse digital across all of our marketing programs?" said Bonin Bough, global director-digital and social media for PepsiCo, who joined the company in September 2008 to jump-start social-media programs. "The first step was socializing the brands and getting all the brands to quickly move away from destination sites and start creating experiences."

Dramatic shift
Pepsi, which is shifting as much as one-third of its marketing budget to interactive and social media, per CEO Indra Nooyi, is hardly alone among marketers aggressively moving dollars to digital. But the way it has gone about the shift, pulling its high-profile Super Bowl spots in favor of heavy spending to push a digitally focused social-responsibility campaign is both compelling and risky.

"I applaud Pepsi for embracing social media and technology -- on the flip side, I think it's very bold to not be in a place where you know you're going to have an audience," said Mr. Lucas.

The Refresh Project is a single, year-long marketing effort, and Pepsi will need to find ways to keep the effort fresh and continue to drive sales in a challenged category. Through the Project, launched Jan. 13, consumers apply for grants ranging from $5,000 to $250,000 in one of six areas: health, arts and culture, food and shelter, the planet, neighborhoods and education. One thousand applications are accepted monthly via refresheverything.com, and consumers vote on the winning projects. By the end of the year, Pepsi expects it will have given out more than $20 million in grants. The danger, however, is that consumers could conceivably tire of the effort or decide that Pepsi, a marketer long known for its ability to amuse and entertain, is taking itself too seriously.

"Pepsi has been wonderful for years at entertaining us," said Kevin Keller, professor of marketing at Dartmouth College. "This [program] is reflective of the times and the realities that people love entertainment but also care and have concerns about the world as a whole. But I would hate to see them stop entertaining us altogether."

For now, consumers are taken with the campaign. In the weeks leading up to the Super Bowl, Pepsi was the second-most discussed advertiser associated with the Super Bowl, as a result of its decision to bypass the game and focus on Refresh Project, according to Nielsen.

'Ripple effect'
But while its game-pass resonated with exactly the type of message it was trying to tell -- sentiment was 71% positive between Jan. 28 and Feb. 3, according to Viralheat, and tweets lauded the brand's decision to "wise up and focus online" and applauded it for "exploring what matters" -- the question is whether it can keep up that conversation while bypassing marquee traditional media events, such as the Super Bowl.

"Any marketing tactic that precipitates 'earned media' has efficiency upside," said Pete Blackshaw, exec VP-Nielsen Online, in an e-mail.

KEEPING IT FRESH: Through the Refresh Project, consumers apply for grants ranging from $5,000 to $250,000 in areas such as health and education, and consumers vote on the winning projects.
KEEPING IT FRESH: Through the Refresh Project, consumers apply for grants ranging from $5,000 to $250,000 in areas such as health and education, and consumers vote on the winning projects.
"Cause campaigns regularly borrow equity from the movement at hand, and marketers who execute such programs well can ride that momentum. The challenge is that the 'ripple effect' isn't always easy to predict, and skepticism often enters the airwaves, especially if detractors think the brand isn't credible in pushing the cause."

Other brands in the PepsiCo portfolio have had success with non-traditional marketing, namely Mtn Dew, which has turned over the creation and marketing of new flavors to consumers through its Dewmocracy campaign. Doritos has also had success with social media through its user-generated Super Bowl ads. But this, of course, is the flagship brand.

The payoff is the opportunity to build ongoing connections with consumers who begin to see Pepsi as a brand that supports them rather than just another marketer blanketing the airwaves and internet with impressions.

Forging relationships
"This will do quite a bit to deepen the relationship with consumers," said Cone's Ms. Damian.

Added Mr. Keller, "the one thing becoming more and more true is the importance of cause marketing for any brand, but particularly a brand that has a more youthful target and appeal, which Pepsi clearly has."

It might be tempting to write off Refresh Project as a cost-saving exercise, but the company has insisted the decision wasn't motivated by finances. Instead, Mr. Bough says the company's approach to marketing has completely changed. The idea of creating a TV spot and then making that spot into an online or Facebook strategy "does not exist anymore. That is not relevant whatsoever," Mr. Bough said. "Some [PepsiCo] brands have digital-led strategies and the TV spot will be reflective of the digital work."

Pepsi, too, is learning as it goes along. The company has been sharing best practices internally and educating executives through "The Social Circle" and "Lunch and Learn," digital and social media-focused programs held on a monthly and quarterly basis, respectively. A wiki, Digital Compass, has also been rolling out internally. Developed by Edelman, the wiki, which has an editorial component allowing users to share comments, gives executives access to internal case studies, as well as a tactical-planning tool.

To work on the company's digital strategies, PepsiCo's beverage brands have also developed a stable of digital-agency talent. Huge, Firstborn, Tribal DDB and VML have all picked up business in the past few months. TBWA/Chiat/Day, Los Angeles, is Pepsi's creative and advertising agency. Weber Shandwick and Edelman is handling social media around Refresh Project and OMD is handling media.

"We expect digital thinking to be a part of all the agencies we work with," Mr. Bough said, though he declined to comment further on the company's agency relationships or reasoning for bringing in new digital shops.

An agency executive who participated in one of the recent digital reviews said that, in short, the company is looking for something different. "They have the conflicting interests of being a giant conglomerate that needs an agency of a certain traditional structure to service them, because they are a complicated business, but also some genuinely new thinking and creative approaches," the executive said.

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Contributing: Kunur Patel

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