The Real Lesson of New Coke

Topics: Coca-Cola, Pepsi, Marketing research Pages: 16 (5536 words) Published: July 14, 2010
The Real Lesson of New Coke:
The Value of Focus Groups for Predicting the Effects of Social Influence By Robert M. Schindler
n April 1985, the management of Coca-Cola Co. announced its decision to change the flavor of the cotnpany's flagship brand. The events that followed from this decision, as well as the faetors which led up to it, have been reviewed, discussed, and extensively analyzed in the popular press, the trade press, and in marketing textbooks. Two books and at least two marketing cases have been written on the events surrounding the flavor change decision. Also, a well-known, but somewhat older Harvard Business School marketing case deals with some of the key events which led up to the decision. Despite the extent of this attention, more can be learned from this dramatic pieee of marketing history. Pepsi began communicating these findings to consumers through "Pepsi Challenge" television ads .showing taste tests where Coca-Cola drinkers expressed preferences for a cola which was then revealed to be Pepsi, This campaign contributed to Coca-Cola's slow, but steady decline of market share in the soft-drink category. This erosion was most apparent in foodstore sales, which reflect consumer preferences more directly than do vendingtiiachine or fountain sales. By 1977, Pepsi had actually pulled ahead of Coke in foodstore market share. Although publicly expressing a lack of concern about the Pepsi Challenge advertising, Coca-Cola's managetnent privately was quite worried because blind taste tests by the company's own market research department had confirmed Pepsi's claims. Secretly, Coke's management began researching the possibility of reformulating Coca-Cola to respond to the apparent changes that had occurred in consumer tastes. By 1984, researchers had arrived at a new formula for Coke whieh, in blind taste tests, beat Pepsi by as much as six to eight percentage points. In addition to beating Pepsi, cola drinkers chose this new formula over the old Coke formula by 55% to 45% in blind taste tests and loyal Coke drinkers chose it over the old Coke formula by 53% to 47%, In taste tests where the drinks were identified as "new Coke" and "old Coke," cola drinkers preferred the new formula over the old formula hy 61 % to 39%, Well aware of the importance of the reformulation decision. Coke's management made sure that the taste test results were checked and coiToborated in every major market in the country. Overall, Coke's market researeh on the reformulation was one of the most exhaustive market research projects in history; It cost $4 million and included interviews with almost 200,000 consumers. After the decision to reformulate Coke was made, CocaCola chairman, Roberto Goizueta, termed the decision, "one of the easiest we have ever made," according to Hale N, Tongren in his book. Cases in Consumer Behavior. On April 23, 1985, Coke announced the reformulation with a grand flourish, slaging a multicity satellite press conference in New York, Atlanta, Chicago, Houston, Los Angeles, and Toronto. The next day, a front-page article in The New York Times reported: "The Coca-Cola Company said yesterday that il had scrapped the formula for the world's best-selling soft drink. The recipe, concocted 99 years ago, has been piaeed in the vault at the Trust Company of Georgia Bank, never to be used again, said Roberto C. Goizueta, chairman of Coca-Cola. "We have a new formula for Coke," he added." In addition to the extensive publicity. Coke announced that the new Coke would come in a new ean, with updated red and

The embarrassing failure of Coca-Cola's attempt to change the flavor of itsflagshipbrand has hecome a textbook case of how ma ket research can fail. The lesson usually drawn is that Coke's researchers asked respondents the wrong questions. However, a careful examination of the events surrounding the reformulation attempt suggests an alternative explanation: that the error res ed from the standard market research...
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