The previous Case Study, CS-112 Cola Wars 1936 Twice As Much, simulated an early Cola Wars battle between Coke and Pepsi. It reproduced the Market where Pepsi offered twice-as-much cola for the same Price. That Market Simulation quantified the “Vertical Differentiation” and “Horizontal Differentiation” of two Features:

1. the taste of Cola (Coke wins), and
2. the size of the Bottle (Pepsi wins).

This new Case Study also shows how Pepsi could offer twice-as-much cola for the same Price. But this Market Simulation offers a simplified alternative. Instead of analyzing the Features that make up Coke and Pepsi, this model focuses on just the Products themselves. This model creates a virtual 12oz bottle of Pepsi by bundling together two 6oz bottles of Pepsi into a single package.

This Case Study provides a high-level overview of the workflow without detailed explanation. It assumes you are already somewhat familiar with KNIME and Market Simulation. If not, start by reviewing the Building Blocks and Community Nodes.

This early “Cola Wars” battle between Coke and Pepsi took place during the Great Depression. Pepsi started to be sold in 12 oz bottles (twice the size of Coke’s 6 oz bottle) for the same price. Pepsi’s accompanying promotional jingle was:

Pepsi-Cola hits the spot
Twelve full ounces, that’s a lot
Twice as much for a nickel, too
Pepsi-Cola is the drink for you!

The larger bottle for the same Price also led to the tagline:

More Bounce to the Ounce!

Before Pepsi started selling the larger bottles, there were two competiting Products in the Market:

1. Coke 6oz, and
2. Pepsi 6oz.

Coca Cola enjoyed a Vertical Differentiation advantage as their average Customer Willingness To Pay (WTP) was higher than that for Pepsi. But the rising strength of the different Brands provided a degree of Horizontal Differentiation for Pepsi – ensuring that Pepsi had some Market Share (albeit less than 15%).

Sales Results

Pepsi originally gets less than a 15% Market Share.

Pepsi effectively creates a Product Bundle when it combines two 6oz bottles into a single 12oz bottle. But Customers place a much lower value on the second 6oz of Pepsi than they do on the first 6oz. This model assumes that the second 6oz is only worth 15% of the first 6oz. But the Bundling strategy works as Pepsi’s new Market Share leaps up to around 35%.

Pepsi now sells more than half of what Coke sells, but Pepsi’s Profitability is only a third of Coke’s.

Sales Results

Pepsi successfully grows Market Share to around 35%.