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Failure of New Coke – Essay

Introduction
According to the American Marketing Association, brand is a form of representation of the consumer experience with a certain product or service and often refers to logo, name, and slogan. The factors influencing branding are the expectations of the consumer, design and product packaging, advertising, public relation, etc. (AMA, 1995). Traditionally, people considered marketing and salesmanship as the most important criteria for a successful business, but in today’s world, it is very important to develop and enhance the brand or else the product will be considered as a commodity. Branding is an integral part of Marketing Strategy as it creates an image in the minds of the people who are in direct and indirect contact with the product, for example, clients, employees, vendors, shareholders, etc. Successful branding can help in delivering the message of the company clearly, enhances credibility, motivates the buyer, builds brand loyalty of the user, and creates an attachment with the target audience. Organizations perform market research to measure the various aspects of their current products and new upcoming products. Similarly, they should perform brand research to understand how their customers perceive the brand, the reasons for differentiation from its competitors, and various other factors related to a brand. It helps in identifying the reasons the consumers prefer the brand over its competitors and the level of brand loyalty present in the mind of the consumers. So if market research helps in determining the price elasticity of a product, brand research helps in judging if a premium price can be charged for the product (Benson, 2009). Brand Research can be done in situations when a new company and a new brand is launched, existing company and to check brand elasticity, when two companies are merging then the two merging brands are measured, and when the company is revitalizing the brand needs to be rejuvenated.
About the Brand
Coca Cola as a brand is one of the most recognized brands in the world. Before organizing any advertisement, promotional strategy, public relation event, or any other form of media event, Coca Cola undergoes various processes of understanding their consumers and tailor their event accordingly. An extensive market research is conducted which includes surveys, focus groups, in-depth interviews, online forums and blogs, and any other form of obtaining information which helps in knowing the consumer. Creating marketing campaigns tailored to the life of its consumers has made Coca Cola a successful brand and increased brand loyalty. But in 1985, Coca Cola was responsible for one of the most disastrous blunders in marketing, also known as the ‘Coke Fiasco’, by introducing a new product called New Coke.
The rivalry between Coca Cola and Pepsi has been going on even before the introduction of New Coke. Since 1960’s Coca Cola’s market share has been same, whereas the market share of Pepsi was increasing steadily. It later on repositioned itself as the brand of youth which turned out to be really successful. In places where consumers were free to choose their type of cola drink to purchase like supermarkets, convenience stores, etc, Pepsi won the battle, whereas in places with restriction of choice like restaurants, clubs, etc, Coke was winning the battle as it already existed in those markets. This declined the market share of Coke from 60% after World War 2 to 24% in 1983 (Mikkelson, 2007). Moreover, in 1982 Diet Coke was launched without considering segmentation, and it was liked by everyone. By 1984, it reached rank 3 after Coca Cola and Pepsi in terms of liking. Pepsi introduced the Pepsi Challenge where the consumers were blind tasted between Coca Cola and Pepsi and everyone preferred the taste of Pepsi. Since, the market share of Pepsi was constantly increasing, it was important for Coca Cola to react (Cashberry, 2006). Considering all the factors, it was concluded that the taste was the major factor behind the success of Pepsi, and also Diet Coke as it tasted similar to its rival and not to its parent drink. Therefore, in 1985 Coca Cola introduced a new product called New Coke retiring the old one as they did not want the effect of cannibalization. Immediately after the launch, people revolted against the New Coke. Coca Cola was considered as an integral part of the Americans life and it was considered as a part of their identity. The company had under estimated the number of consumers shifting from the old Coke to the new one. According to Michael Ross, majority compared the change of Coke to stomping the American flag (Ross, 2005). Coca Cola received more than 40,000 letters of complaint and more than 6,000 calls daily on its toll free number. Consumers started buying the old Coca Cola on the shelf in bulk, and even started selling it for hiked up prices (Building Brands, 2009). After 87 days, the company reintroduced the old formula by calling it the Classic Coke. People forgave the mistake of the company and in the end of 1985; surveys showed that Pepsi was the leader in the competition. But due to this fiasco, Classic Coke gained a lot of popularity and out sold New Coke and even Pepsi and helped in regaining the number one rank. People who liked the New Coke bought the Diet Coke as it was similar and New Coke was abandoned. The market share of New Coke reduced from 3% to 0.1%.
Reasons for Failure
The launch of the New Coke was not a hasty decision. Coca Cola performed market research for a period of two years and spent an enormous amount of $4 million to compare the taste of New Coke versus Pepsi and old Coke. After performing 200,000 blind taste tests, it was concluded that people preferred the taste of New Coke over any other available beverage. Therefore, New Coke was given a new packaging and launched in the market with a bang and they discontinued the old Coke. Even though the introduction was carefully studied and many right steps were taken like reacting at the right time for a market change when the market share was decreasing, best research and development team was chosen to prepare the best flavor and packaging design which is appealing to the masses, no monetary compromises were done in terms of market research and the marketing campaign to launch the new product. But did it fail because of lack of enough research or misinterpreting the research result? During the press conference of the launch, New Coke was introduced but the reason for doing so was not declared. They never mentioned the reasons for change, that is, Pepsi Challenge and the other tests done by their research and development department which proved that the taste of the Coke was the reason it was losing its market share. During the blind taste test, people just take a sip of the cola and prefer a sweeter taste. But in reality they buy a can of 330 ml and they preferred the less sweet taste of old Coke. During the taste test, they did not ask if the New Coke taste would be preferred in a 330 ml can or a whole glass. Also, it was revealed in some tests that it was the taste of new Coca Cola, but no information was provided related to the discontinuation of the old Coke. Since Diet Coke was launched during that time, people considered it to be another variant of the parent beverage. Therefore, due to the wrong framing of questions for market research, they yielded wrong results which proved to be fatal. Moreover, the new packaging isolated itself from its consumers. The association of the word new was related to Pepsi as it was comparatively new into the market and a brand of youth. The old Coke was considered a legacy and an integral part of the American culture. Therefore, the brand loyal consumers of Coke were finding it hard to associate the ‘new’ change with Coca Cola. Also, during focus groups the loyal Coke consumers said that if Coke was changed, they might stop drinking Coke completely, and this influenced the Focus Group in terms of peer pressure, and provided misleading results. Coca Cola had ignored the sentimental value which its loyal American consumers had towards the brand. During the overall launch of the product, Coca Cola had its complete focus on the product and neglected the emphasis on the brand. The promotional campaign was different when compared to its previous campaigns and it is very important to have consistency in terms of advertising and promotion strategy. Therefore, changing the strategy for the launch of New Coke was not accepted by the people. This was one of the only major changes they performed, and after that kept it same for more than a century. To make matters worse, Pepsi launched advertisements in New York Times and other publications stating that Pepsi had won the ‘cola war’ and has taken a lead due to the mistake made by Coca Cola. Coke did not react to this, as they were already pressurized by the consequences of the fiasco. After all the havoc, the old Coke was launched with the name of Classic Coca Cola, and it was widely accepted by the American population.
Lessons for Market Research
There are a lot of major lessons to be learned from the blunder caused by the Coca Cola marketing even though it turned out to be a positive impact on the company. Coca Cola did not perform a complete and thorough SWOT analysis to understand its position in the market. Before any major decision is taken in an organization, it is very important to perform a SWOT analysis as it will help in defining the objectives clearly. Since there was no problem with the brand and even the product, they should have devised their strategies in terms of increasing sales. They could use promotional strategies like bundling offers, special packaging for occasions, coupons, competitions, or free giveaways. Or they could work on the public relation by sponsoring more events, or any other form of publicity. Moreover, they should have worked on their opportunities to their advantage. Since the consumers were emotionally attached to the product, they should have launched marketing campaign reminding their consumers the emotional attachment with the product and recall their memory. Coca Cola did not interpret its customers, their needs, and expectations from the company. It is very important to perform a brand research along with market research as it provides an insight of what people perceive the brand as. It is important to focus on the product as it should be according to the consumers liking, but at the same time, there should be equal focus to brand management. And depending on the information, marketing campaign is launched which will motivate the customers and decide the fate of the product. Moreover, conducting market research includes much more than conducting surveys, in-depth interviews, focus groups, etc. It involves collecting data, analyzing information, inferring result, and finally organizing the result which can provide easy understanding insights of the whole problem. It should be done carefully as minor mistakes like not revealing important information or asking questions in detail can cause misleading results.

Conclusion
Coca Cola is one of the most recognized brands on the globe and the main factor behind their success is their Marketing Strategy. But even the best company can make mistakes which can cause the shutdown of the company. Even though Coca Cola was really lucky as their sales increased after the whole fiasco, but it is very rare in the field of Marketing. Before making any changes to the company or introducing a new product, it is very important to find all relevant information related to it, and to accurately anticipate results. It is important to define the goal and reason for Market Research before conducting it and every detail must be considered while conducting it. To conclude, Market Research can only guide in making decisions, but ultimately it is the decision of the top level in the organization.

References
AMA Dictionary, “Dictionary”, Date Published: 01st January, 2005, Date Accessed: 23rd June, 2009, Link: http://www.marketingpower.com/_layouts/Dictionary.aspx?dLetter=B
Benson, Joseph, “Market Research versus Brand Research”, Date Accessed: 24th June, 2009, Link: http://www.brandchannel.com/papers_review.asp?sp_id=762
Building Brands, “The New Coke Fiasco – Marketing Lessons to be Learnt”, Date Accessed: 20th June, 2009, Link: http://www.buildingbrands.com/didyouknow/08_new_coke.php
Cashberry, “Classic Brand Failures: New Coke”, Date Published: 11th October, 2006, Date Accessed: 20th June, 2009, Link: http://brandfailures.blogspot.com/2006/10/new-coke.html
Mikkelson, Barbara, “Knew Coke”, Date Published: 13th March, 2007, Date Accessed: 29th June, 2009, Link: http://www.snopes.com/cokelore/newcoke.asp
Ross, Michael, “It seemed like a good idea at the time”, Date Published: 22nd April, 2005, Date Accessed: 20th June, 2009, Link: http://www.msnbc.msn.com/id/7209828/

Posted in: Essays and Reports

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