In the early 1980s, Coke (the drink) was steadily losing market share to Pepsi-Cola. One reason was that Diet Coke had cannibalized Coke sales, quickly rocketing past 7-Up to become the #3 soft drink in America. Another reason was that Pepsi had been positioning Pepsi-Cola for the youth market in the 1960s and was winning a greater share of new cola drinkers than Coke was. Finally, Pepsi-Cola was reported to taste better.
Enter the first marketing-research issue. Taste tests conducted by both Pepsi and Coca-Cola showed Pepsi-Cola having a better taste than Coke. Only later would it be determined that those tests had at least two flaws.
- First, they were "sip tests", involving small samples to try out. Many consumers liked the sweeter taste of Pepsi-Cola in these small samples, but disliked drinking Pepsi in a normal-sized portion (soda can) because it was then perceived as too sweet.
- Second, perceptions of taste are affected not just by the food or drink itself but by its packaging and presentation; this "sensation transference" can change the perceived taste. Ultimately, it may not be possible to separate product taste from product packaging and brand. (For more on this, see Malcolm Gladwell's Blink: The Power of Thinking Without Thinking.)
With the results of Project Kansas in, Coca-Cola executives felt that they had to replace Coke with New Coke. If they introduced New Coke alongside the existing Coke, thereby cannibalizing its sales, Coke would no longer be the #1 selling soft drink in the United States: Pepsi-Cola would be. That would be a marketing disaster. So New Coke had to replace the original.
Of course, what enfolded was a marketing disaster of a different type. Millions of consumers were outraged to learn that the original formula was being discontinued; some even began to stockpile "classic" Coke. These consumers hated New Coke - without ever having tasted it! Those detractors in the focus groups weren't outliers: they were a significant force in the larger population of consumers. Less than three months after announcing that the original formula was being discontinued, Coca-Cola caved in and announced its return as "Coca-Cola Classic." Had executives paid closer attention to the focus-group results, they might have handled the roll-out differently.
From the philosophy of "even bad press is good press," the launch of New Coke and re-launch of Coca-Cola Classic generated such publicity and discussion that Coke sales increased at twice the rate of Pepsi-Cola's that year. "Yes, it infuriated the public, cost a ton of money and lasted only 77 days before we reintroduced Coca-Cola Classic," said Sergio Zyman, then vice president of marketing for Coca-Cola. "Still, New Coke was a success because it revitalized the brand and reattached the public to Coke."
Watch this 4 minute video (sorry about the german subtitles)...
Do you think Coca Cola made a mistake in their market research on the ‘New Coke’? Explain your answer.