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Last year Coca Cola announced that it would drop the word "Classic" from "Coca-Cola Classic", thereby-as Bloomberg reported it-"writing the final chapter in one of the greatest marketing blunders in U.S. business history." That might be too harsh: New Coke was a tactical blunder but a strategic victory, and it offers us a few lessons about market research along the way.  

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. 

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Faced with all of this, Coca-Cola executives thought the only way to compete was to reformulate the cola to be sweeter and better tasting than Pepsi-Cola. They launched "Project Kansas" to come up with a new formula. Project Kansas took its name from this famous photo of the Kansan journalist William Allen White drinking a Coke (right).

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.

  1. 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.
  2. 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.)
Enter the second marketing-research issue. After taste tests confirmed that "Project Kansas" did in fact taste better than Coke or Pepsi, Coca-Cola's marketing department began conducting focus groups and surveys. When participants were asked if they would buy and drink "Kansas" if it were called Coke, a low percentage of respondents in surveys said they would stop drinking Coke altogether. In the focus groups, though, around 11% would stop drinking Coke altogether and this vocal minority was angry enough to indirectly influence the attitudes of others in the group, skewing results to the negative. Coca-Cola executives chose to dismiss the negative findings from focus groups, since they were not backed up quantitatively by the surveys done after the taste tests.  

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)...

Mr King's question:

Do you think Coca Cola made a mistake in their market research on the ‘New Coke’? Explain your answer.

 


Comments

Ememily
02/25/2012 12:00pm

Ys,i cant agree more.
Firstly they were used "sip tests" involving just a small samples to try out.i think the result are not accurate because of the small sample And the second thing is although they were done focus groups and surveys but Coca-Cola executives chose to dismiss the negative findings from focus groups,since they were not backed up quantitatively by the surveys done after the taste tests.This is the one of the mistakes.
All in all,New Coke evitalized the brand and reattached the public to Coke.thats why they were a success.
continue.......
not finish yet... ;p

Reply
ememily
02/27/2012 2:53am

Ys,i cant agree more.
Firstly they used "sip tests" involving just a small samples to try out.i think the result are not accurate because of the small sample.Then the perceptions of taste may not be possible to separate product taste from product packaging and brand.And the second thing is although they've done focus groups and surveys but Coca-Cola executives chose to dismiss the negative findings from focus groups,since they were not backed up quantitatively by the surveys done after the taste tests.This is one of their mistakes.
All in all,New Coke evitalized the brand and reattached the public to Coke.thats why they were a success.
They've made a lot mistakes in their market research on the ‘New Coke’.

Reply
Chantelle
02/28/2012 11:54am

Yes. because as the veido said when the new coca cola was launched, no one even noticed at that time. Coca-Cola executives didn't do much research on what customers like and that opinions hav changed, the 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.
When they enter the second marketing-research issue by using taste test. When participants were asked if they would buy and drink "Kansas" if it were called Coke, a low percentage of respondents in surveys said they would stop drinking Coke altogether. Customer tend to copy what the others. So i think Pepsi-Cola would replace the original as the Coca-Cola executives don't even do much research on what customers needs, therefore the new coca cola is fail.

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Jason Lam
02/28/2012 12:07pm

Market research can let company to know more about their business size and popular of their product,etc.First of all , CocaCola start their first market research which is taste test to let their customers to give an opinion or view to them to develop the product ,which is call qualitative market research , it is the great idea to get opinion.However, they sip the test to let the process of market research more quickly, they just let a small sample to try out , some people like the taste more sweeter, another people think the new product is too sweet.This explains that the opinion is not enough , they should get more opinion to sum up. So, they lost a lots of qualitative market research, although the time is shorter than before.secondly, they start a second market research which is focus group to get some people opinions and views , this explains that they can get more opinions and views to develop their products,but some of people who are in focus group say won't drink the Coca Cola anymore . 11% is the huge member to them to focus in and find the reason why they unlike the drink. However , they don't care about that. As a result, though the test , people get an negative opinion for their product, however they don't accept to improve and still sell the products.This explains that their customers will not buy much more than before because the opinions explain what the product problems but they still sell and not change it. this is another mistake they have .

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Marco
02/29/2012 12:48am

Yes, I think Coca Cola made a mistake on the 'New Coke'. Firstly, for the first market research which was a taste test conducted by both Pepsi and Coca-Cola showed Pepsi-Cola having a better taste than Coke, it got at least two flaws for the result. The first is they were a 'sip tests' which just involves small samples to try out. Consumers may like the sweeter taste for the Pepsi in these small sample but come to a different opinion when drinking it in a normal-sized portion because it may perceived as too sweet. The second is 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. These two flaws shows that the first market research is a bad research.
Secondly, for the second market research, after taste tests confirmed that "Project Kansas" did in fact taste better than Coke or Pepsi, Coca-Cola's marketing department began conducting focus groups and surveys.When participants were asked if they would buy and drink "Kansas" if it were called Coke, a low percentage of respondents in surveys said they would stop drinking Coke altogether. Which was a quite good result. But when asked in the focus groups, quite a high percentage of 11% of them said they would stop drinking Coke altogether and this vocal minority was angry enough to indirectly influence the attitudes of others in the group, skewing results to the negative. It shows that the second market research was not not a good one too.

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Aaron
03/01/2012 10:55am

yes,i think cola-cola make a mistake on the New coke,because first the research is taste task conducted cola-cola and pepsi showed that cola cola is not tastely that pepsi. also the task only contain little sample that is not enough. alought cola cola did the focus group and surveys, they were not backed up quantitatively by the surveys done after the taste tests.This is one of their mistakes.
So i really think cola cola is fail when doing their market research.

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