Pepsi Uses Consumer Savvy to Gain on Coke

PURCHASE, N.Y. (TheStreet) -- When you compete directly with the most famous brand in the world, victories come one bottle cap at a time.

BusinessWeek and Interbrands released their list of the 100 best global brands last week, with PepsiCo(PEP) sitting cozily at No. 23. The estimated value of Pepsi's brand rose 3% from a year earlier to $14 billion. While unranked Dr. Pepper Snapple Group(DPS) can only aspire to such fame, it's well short of No. 1 Coca-Cola (KO), whose red-and-white behemoth was valued at $69 billion.

The key difference between Pepsi and Coca-Cola is as plain as the caps on their bottles. This past summer, when consumers bought a 20-ounce bottle of Coke Zero in the U.S., the bottle cap directed them to the My Coke Rewards Web site where they were asked to bank their points green-stamp style for prizes such as T-shirts and Omaha Steaks. The same cap on a Pepsi product gave the buyer a free song download for the Viacom(VIA) and MTV-backed video game Rock Band. It was not only a $2 prize from a $1.59 purchase, but it allowed fans to play Spinal Tap's Big Bottom instantly instead of waiting to accumulate enough points for a free subscription to Redbook.

So what? Ask the click counters. Coca-Cola's Web site drew nearly 5.3 million unique visitors in August 2008 compared to Pepsi's 2.3 million, according to market research firm comScore(SCOR). A year later, Coke's traffic had dropped to 3.9 million visitors while Pepsi's held relatively steady at 2.2 million. For Pepsi, a little innovation made a big difference.