The Pepsi Paradox


A few decades ago, Pepsi executives conducted a macro market study called "The Pepsi Challenge", which consisted of offering people to drink two cola drinks in two identical glasses, with no way to identify the brand. One was, of course, Pepsi. The other was Coca-Cola. The result was overwhelming: 2 out of 3 people preferred the Pepsi flavor.

If I ask you which is the best cola soft drink, your answer is very likely to be Coca-Cola. It is no coincidence that its market value is currently $262 billion dollars, while Pepsi's is "only" $18 billion dollars.

Let's start with the basics: what is brand value? It is the additional value that the brand name gives to a product. In other words: it is what makes the brand more recognizable, more respectable, more influential and therefore more commercially valuable.

What are Coca-Cola's brand values? They are many and very easily identifiable: Christmas, family, friends, happiness. Surely, as you read this, you are imagining the polar bear, Santa Claus, plump and smiling, some girl drinking from his glass bottle and the parade of Christmas trucks and cars that travel through Latin America every year.

If I ask you what Pepsi's brand values are, do you recognize them? I bet you'd have a harder time listing them.

The Pepsi Paradox is that, despite having a better taste, 3 out of 4 people prefer to drink Coca-Cola because they are convinced that it is a better cola. Coca-Cola's branding work is worthy of admiration and study. It has been tremendously consistent over the years and has been very careful in every step it takes. When we review the value of each brand, we can see that it is 15 times more valuable than its closest competitor.

It is not enough to have the best product. It is not enough to have the best price and the best conditions for users or customers. Coca-Cola has built loyalty among its consumers: many of them would rather not drink anything than drink another brand. That's great branding!

If you focus your brand on making a great user experience for your consumers, it will pay off. If you don't believe me, ask Pepsi. Or better yet, ask Coke.

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