Market Research and the Coca-Cola Problem
This is a copy of an article called "When Market Research Fails, or Why They Don't Sell 'New Coke' Anymore" found in the following source: Sadava, S. W. & McCreary, D. R., (1997). Applied Social Psychology. RR Donnelley & Sons Company: Upper Saddle River, NJ. (p 203-4).
"In the early 1980's the makers of Coca-Cola were concerned. Coca-Cola's market share was slipping, and Pepsi's was on the rise. In spite of expensive and extensive ad campaigns, and successfully launching Diet Coke, Coke still dropped 1 percentage point in market share in 1984. Although 1 percentage point doesn't sound like a lot, it accounts for millions of dollars in lost sales - most of the loss going to Pepsi. Furthermore, this was a trend that had started in the mid-1960's and showed no signs of stopping.
"This was not very long after Pepsi's highly successful "Pepsi Challenge" ad campaign. In the challenge, ads showed candid shots of regular Coke drinkers amazing themselves by their preference for Pepsi in a blind taste test. Coke's own taste tests showed a very disturbing preference for the taste of Pepsi, by a 58-42 margin. There was a crisis climate at Coke. Confidence in the product was low. The company believed there was only one explanation for Coke's continual slide: The taste simply wasn't as good as Pepsi's. Consumers preferred a sweeter drink.
"The research and development team took over. Under orders of great secrecy, they were charged with the task of changing the formula for Coke. They were to try make it taste "smoother," and give it less bite. In short, they were to make it taste more like Pepsi. They eventually came up with an altered formulation that beat the classic formula by 6 percentage points in blind taste tests.
"While the formula was being altered, market researchers asked long-time Coca-Cola drinkers how they would feel if Coke "added a new ingredient" to make the drink "smoother." Results indicated that only about 11 percent of confirmed Coca-Cola drinkers would be angry. Notice, the question did not specifically ask the consumers how they would feel if Coca-Cola was replaced with a drink that tasted different. The Coke executives, confident that people would be thrilled with the new formula, went ahead with plans for a new ad campaign and launched the new formula.
"The first negative reaction encountered was at the news conference announcing the new formula. Reporters at the conference challenged the Coke executives with the assumption that the reformulation had been a defensive response to the Pepsi challenge. The Coke people denied that assertion, of course, but unconvincingly.
"The next negative reaction came when long-time Coke drinkers realized that Coke was actually replacing their favorite drink with a Pepsi clone. Many devoted Coke drinkers became extremely upset. People complained and wrote letters in droves. Some people poured New Coke into sewers. Thousands of people each day called the company. In short, the Coca-Cola manufacturers had created a huge mess.
"How could the Coca-Cola people have been so wrong about the reaction of their loyal customers to change in the formula? The easy answer is that they simply asked the wrong questions. They did the taste tests, and they asked about adding a new ingredient to the old formula, but in all of the market research conducted prior to the distribution of the new formula, they never asked customers how they would feel if the makers of Coca-Cola changed Coke. Coke was more than a soft drink to many people. An example of the comments the company received from the thousands of letters written sums up the sentiment: "Changing Coke is just like breaking the American dream, like not selling hot dogs at a ball game" (Pendergrast, 1993, p. 363). People identified with Coke; they had memories of significant times in their lives with Coke. To them, changing Coke was blasphemy.
"After 3 months of bad publicity and complaints, Coke reintroduced the original formula as "Classic Coke," much to the delight of many consumers. New Coke stayed on the market for 5 years and never received more than a 7% market share. The company officials were accused of planning the whole New Coke debacle simply to improve sales of Classic Coke. However, in the words of Coke CEO Roberto Goizueta, "We are not that dumb and we are not that smart" (Pendergrast, 1993).
"Could the Coca-Cola executives have avoided these problems with New Coke? It is difficult to say with certainty. Because they were concerned with developing the product secretly, it would have been impossible to survey a few thousand consumers and ask them how they would react if Coca-Cola changed its formula. The Coca-Cola experience certainly points to the importance of asking the relevant questions. In defense of the marketing researchers who conducted the work for Coca-Cola, it is easy to see after the fact what questions they should have asked. Much more difficult is anticipating what issues are important to consumers in advance of marketing campaign.
"Perhaps the most important lesson that can be taken from the failure of New Coke is that it is important for marketers to consider not just market share and net profits, but also what their products mean in the lives of their customers. According to McKracken (1986), consumer goods became invested with cultural meaning. It is a tribute to the success of early marketing of Coca-Cola that its customers have invested so much meaning in their product. Many of the letters written to Coke to protest the new drink touched on just this sort of feeling: that the makers of Coke were destroying their memories, their identity, and their culture by tampering with "their" Coca-Cola. If market research in the development of New Coke had been sensitive to the values associated with Coca-Cola, they might have been able to circumvent the difficulties in changing the formula. Perhaps they might have decided to abandon entirely the attempt to change the formula.
"A final point that Coca-Cola's experience clearly illustrates is that there are limits to what marketers and social psychologists can persuade consumers to accept. In spite of decades of research on persuasion, and in spit of millions of dollars spent on the ad campaign, the majority of cola drinkers chose not to purchase the product. Consumers do not mindlessly act in accordance with the whims of advertisers. Consumers can have a powerful effect on huge corporations such as Coca-Cola simply be refusing to buy a product that clashes with their own values."