Debacle Of New Coke

THE

DEBACLE OF NEW

{1985}

Venkatesh

Topic Under Consideration April 1985 Production of Old Coke stopped Launch of New Coke •

New Coke faces customer wrath

•

July 1985 Relaunch of Old Coke as Coke Classic

The Trigger… 1970’s : ‘Pepsi Generation’ great ads: youth & vitality 1980’s: ‘Pepsi Challenge’ blind taste test

The Trigger… The previous 15 years saw Coca-Cola's market share remain flat while Pepsi's continued to climb. Coke's market share fell from 24.3 in 1980 to 21.8 in 1984. Coke was trailing in supermarkets by 1.7 percent, which represented a third of coke's total sales Coke was in danger of becoming the #2 soft drink With aging baby boomers increasingly concerned about their weight and turning to non-sugar drinks, most growth in the sugar segment was expected to come from the teen drinkers.

Brand personality Pepsi

Youthful

Energetic

Exploring

Sporty

Rebellious

Tradition

Status-quo

Archetypical

Sophistication

Laid-back

PROJECT KANSAS By April 1983, Coke’s top brass decides to explore the possibility of a reformulation. Study conducted over a period of about 2 1/2 years between 1983 and 1985 Cost about $4 million 191,000 blind taste-tests in 13 cities Only 30,000 to 40,000 of these involved the specific formulation that was eventually introduced

THE DETAILS Market Research ‘New ingredient added’ Would you be upset? Would you try the new product? Result: 10 to 12% would be upset, half of which would get over it strongly favourable/unfavourable 55% favoured New Coke above old version & above Pepsi

CROSSING THE RUBICON September 1984 The technical division brewed a formula of Coke that beat Pepsi in blind taste- tests, by as much as 6 to 8 points. Before, Pepsi had beaten Coke by 10 to 15 points. This was an 18point swing. After 99 years with essentially the same taste, Coca-Cola decided to switch to a new, high-fructose corn syrup, to make Coke taste sweeter and smoother--more like its

New Coke was introduced on 23 April 1985…

THE REACTION Media: ‘marketing blunder of decade’ 81% awareness within 24h, 150 million trial 5000 calls a day + > 40,000 letters Here's a sample: "…like spitting on the flag" "I couldn't have been more surprised if someone had told me that I was gay." "Changing Coke is like God making the grass purple or putting toes on our ears or teeth on our knees." "…they violated my freedom of choice. It's as basic as the Magna Carta, the Declaration of Independence. We went to war in Japan over that freedom."

THE REACTIONS

Problem: Coke lost market share despite : $100 million more advertising 2 times more vending machines More shelf space Competitive price

BEATING THE RETREAT  ‘…we heard you, original taste is back.’  At a July 11, 1985 press conference, two Coca-Cola executives announced the return of the original formula.

…the real thing

What Went Wrong With The Research Coke's research did a pretty good job of predicting consumer response, at least initially. When the reformulation was first introduced, the consumer response was favorable. But by the end of May 1985, it had begun to change. It was this that Coca-Cola had not anticipated. "It is this change in consumer opinion, and only this change, that Coke's market research had failed to predict."

RESEARCH @ FAULT? The conflict between the focus group and the survey of individuals is crucial. “Initially people made individual decisions, and most at least acquiesced to the change. But as the majority of the population had the opportunity to be stimulated by the media reports and other social interactions with angry Coke loyalists, most changed their minds.” Given the 10%-12% figure from the quantitative survey, a typical 8-12 focus group is likely to have at least one angry loyalist. The focus group results showed that, exposure to the views of angry Coke loyalists is likely to sway the others in the group.

DIFFERENT SELF-IMAGES Actual SelfImage

Ideal Self-Image

Ideal Social Self-Image

Social SelfImage Expected Self-Image

Possessions Act as SelfExtensions By allowing the person to do things that otherwise would be very difficult By making a person feel better By conferring status or rank By bestowing feelings of immortality By endowing with magical powers

WHY THE HUE & CRY Daily Subtle Reminders of Ones National Identity and Its Related Consumer’s Response Model

Consumer Patriotism The pairing of a product with a national symbol

National identity salience

Feeling closely Related to the nation

Higher positive attitude towards the product

AM AMERICAN INSTITUTION Coca-Cola is the "sublimated essence of all America stands for--a decent thing, honestly made, universally distributed, conscientiously improved with the years." -- William Allen White, Pulitzer Prize-winning editor of the Emporia (Kan.) Gazette, 1938.

CORE AMERICAN VALUES Success Materialism Freedom

Core American Values

Progress Youth Capitalism

AM AMERICAN INSTITUTION "...consumers have an emotional attachment to their soft drink brand..." Coca-Cola was the quintessential representation of Americana. "Baseball, hamburgers, Coke – they're all the fabric of America." When Coca-Cola announced that it would bring back Old Coke, Democratic Senator David Pryor of Arkansas, called Coke's capitulation "a very meaningful moment in the history of America. It shows that some national institutions cannot be changed."

REASONS FOR EMOTIONAL ATTACHMENT

Coke considered part of American Culture Part of Social Fabric Strong Emotional Attachment

• How they achieved this?????

ACHIEVING THE EMOTIONAL ATTACHMNET During 1910s associated itself with the ideal AMERICAN GIRL the American first love BASEBALL During 1920s depicted the American Prosperity Great Depression – showed a pleasant man having Coca Cola on his way to work, reminding people of the good old days. Gave people hope and showed them what the perceived ‘Real America’ was. Became an emotional buffer for them.

ACHIEVING EMOTIONAL ATTACHMENT •Showed happy scenes of ‘everyday’ American Life (Woman taking break from gardening ) •They gave the people an ‘idealized reality’ which the people wanted to emulate. •Became associated with SANTA CLAUS, reassuring people that goodness still existed in the world •Became part of everyday life of America…

WORLD WAR-2 The true nationalization Reminded soldiers of comforts of home. Ads showed two smiling soldiers drinking Coca Cola, the happy, no worries lifestyle image prevailed. The ad appeared tidy, neat, in order, and under control. As long as there was Coca-Cola, everything was fine. Company convinced government Coke that as an alternative to alcoholic beverages, Coca-Cola would be a more desirable beverage for a commanding officer to give to his troops.

“It's the little things, not the big things that the individual soldier fights for or wants so badly when away. It's the girl friend back home in a drug store over a Coke, or the juke box and the summer weather. The average soldier wants to come home, get back in those old clothes, and do the things he always did.” { ALLEN,258}

PEARL HARBOUR Nationalism Ignites Company declares: "We will see that every man in uniform gets a bottle of Coca-Cola for five cents-wherever he is and whatever it costs" (Watters, 162).

PEARL HARBOUR Nationalism Ignites The Coca-Cola company became a source of surging patriotism. •Company convinces government that Coke would provide a boost to soldiers’ morale •64 bottling plants behind Allied lines •Entire bottling plants were shipped to the front lines with other supplies •As the battle front moved, so would the bottling company. •When America went to war, Coca-Cola followed...

THE PROBLEM

Coca- cola did not understand consumer behavior issues related to branding well enough to realize that what it was measuring was not the prime reason why people choose Coke! FATAL ERROR !! Very accurate measurement of the WRONG thing…Focused on the product, not the brand.

Alternative I

Could have simply changed its campaigns to give Coke a younger image. Sponsor football matches Sponsor parties at discotheques Sponsor college events Advertise it as add-on to liquor especially the ones which youngsters drink

Alternative II If Coke was determined to change the recipe, it could have done it without letting anyone know. •Do not change the name •Do not advertise the new formulation •Introduce in a phase wise manner •Monitor the customer response in that territory •Let advertising expenditure remain constant & if the sales increase it will be because of the new product’s better taste

LESSONS LEARNT How people’s self-image can become so tightly connected with a brand that changes to the brand’s image may be received as a personal assault. Constituency analysis is extremely important because you never want to alienate or abandon your base. Some things cannot be measured by taste tests, opinion polls, or market research. Don’t try to fix something that is not broken yet Don’t burn your bridges Ineffectiveness of sheer advertising $ Power of the media

“We did not understand the

deep emotions of so many of our customers for Coca-Cola. It is not only a function of culture or upbringing or inherited brand loyalty. It is a wonderful American mystery, a lovely American enigma. And you cannot measure it any more than you can measure love, pride or patriotism." -President Donald R. Keogh

THANK YOU