Coke had been a dominant soft drink for a very long time. In 1980s Coke’s flagship product’s share was on the decline and Pepsi’s shares were on the rise. Despite huge spends on the advertisement, wide availability of vending machines, global presence, deeper network of sellers, competitive pricing, Coke’s market share was slowly slipping away.

Pepsi drove another wedge in the coke’s shares by announcing a commercial called “Pepsi Challenge” – Pepsi conducted blind tests of cola drinks – To everyone’s surprise, consumers preferred Pepsi in the blind test. Pepsico was marching ahead with the renewed vigor by making use of those blind test results.

Though Coke disputed Pepsi’s findings, it went ahead and did its own blind tests. It was shocking to know that people preferred Pepsi in blind tests than the famous Coca-Cola’s century old secret formula. Coke felt that the audience has changed the way of quenching the thirst and the time had come to change the long-held formula of secret taste.

Scientists fiddled with the formula, made it sweeter like Pepsi. The made new coke – Smoother than earlier Coke, Sweeter than earlier Coke, Less harsh than earlier coke. Coke’s market researchers noticed massive improvements in blind tests of new Coke conducted with thousands of consumers. It appeared that the “New Coke” would create a sensation and improve its market share. Coca-Cola’s CEO announced, “The Surest move the company made”. They launched the product with much fanfare.

The results were disastrous for the company. As soon as taste change was announced, many panicked customers went, bought so much coke and stocked their basements and empty rooms. After so many blind tests and focus group tests, the company did not expect such a backlash. Coca-cola faced massive protests and outrage at all its promotional events. Protestors shouted “We want the real thing”

“Our children will not know the meaning of Refreshment”

Coco-cola company was finally forced to bring the coke with original formula with the name “Classic Coke”. What lessons could we take from this failure?

IGNORE YOUR COMPETITORS

Benchmarking your competitor, their products, behavior, and strategy are a distraction and it is noise – They are not proper market signals. To get proper market signals, we need to look at users/consumers.

If you are trying to incorporate everything that your competitor does, then you won’t be doing what he is not doing.

Coke fell into the trap of Pepsi’ marketing tactic and started to develop a product which was sweeter like Pepsi and thereby losing its uniqueness.

Cadbury’s Chief Strategy officer Todd Stitzer(Who later became CEO) once asked his teammates

Look for a Strategy to grow the market rather than just the company’s market share. If I ask you to increase our market share, you will look at our competitors, and we may not succeed.

Coke exactly looked at the competitor and followed blindly this time.

Pepsi had been targeting “Youth Market” whereas the Coke had a wider reach with middle age and older age target segments. Coke completely lost focus on their major target segments. Though for any business to survive, we need to target next generation of customers – but this was not the way to do.

MYTH OF A CONSUMER’S RATIONAL MIND

In focus group tests, everyone agreed that new coke was tasting good, sweeter and smoother. Many had expressed their willingness to buy the new coke. Then how did New Coke fail in the real market scenarios?

To understand this, we need to look at how consumers make decisions – We think we are rational decision makers, but our decisions are controlled by the intuitive mind(Emotional mind) rather than the rational mind. They are more influenced by heart than logic.

Our decisions are based on how products make us feel, what identity the brand makes me experience and express, and to whom we are dealing with – all are of emotional feelings.

Most of the marketing programs are targeted at the conscious rational minds rather than speaking to the unconscious mind(Real desires, attitudes, behaviors, and motivations).

When you see a brand, our sub-conscious mind immediately fires up learned cultural associations, memories, habits associated with the brand in our brain, and we act according to those thoughts. In the real world, we do not buy a cola blindly. The Coke brand reminds us many deeper associations formed over a long period of time. It is an instantly recognizable, well-appreciated brand.

The Coke market researchers did not measure intuitive, non-descriptive, associative memories/emotions that lie deep in our brain and anchored to the brand name “Coke”.

The consumer’s rational mind may not know exactly why they like a particular product. In focus groups, due to the new environment, thought of being observed by somebody on the back of mind, the presence of other unknown users, chances of being embarrassed makes rational mind active than the subconscious mind. In those focus groups – the consumers mostly rationalize their thoughts and make up their own logical reasoning to justify any of their activities. Most of their feelings were connected to the subconscious mind. So the results of focus group would not be a right measure to know the new product’s success.

In one the tests conducted through FMRI machines, when the consumer was aware of the coke brand before consuming, pleasure centers in the brain were activated indicating a huge effect of coke label.

THE RIGHT RESEARCH METHOD

The research method has to understand the inner subconscious mind than the rational mind to forecast a product’s success or failure. To understand the inner self of consumer – you may need to observe body language, eye reactions, look for linguistic hints, micro facial expressions, behavioral inconsistencies and analyze how they respond to their choices of preferring Pepsi or Coke.

To observe the users, the ideal conditions would be to keep the users in natural context rather than the artificial context. How about asking consumers to take cans of Coke to home and use them, drink a whole beverage while watching cricket or some other sports? That’s the way the consumers had been using the product. That was the real context. Coco-cola should have tested the new product in real context and looked for real observations. Coke was a refresher product for consumers and they were not expecting it to be sweeter.

Consumers wanted to feel good rather needing more sweet in the drink. (Coke focussed on new sweet taste)

PROBLEM WITH THE SIP TEST

In blind tests, the tasters would not drink the whole can. They just take a sip to test. Did any real consumer take a sip and give the container back? No. Pepsi is a sweeter product than coke(Meant to refresh people – so less sweet) – So, Pepsi right away had a big advantage in Sip tests, as people would feel it tasting good. But when consumers drink a whole can of sweetness, it would be overpowering and some could feel dizzy. In the words of Malcolm Gladwell, “Pepsi is designed to shine in Sip Tests”. Coke feels good when you drink as a whole can.

HABITS

Drinking coke had become a habit – it was a subconscious activity. As long as it remained subconscious, the brand would face no difficulties. It was not easy for any competitor to break a habitual product.

If you are bringing out a product that is completely different from existing consumer’s mental models and affect consumer’s habitual behavior, then the subconscious mind elevates the problem to the rational mind. If your rational mind interferes – your selling cycle starts new. In the case of breaking a habit, you need to face the negative implications too. Coke earlier made changes in the secret formula – sugar to corn syrup, but never communicated – They did not force the change issue into rational minds and people continued to buy the product.

There would be huge resistance if you try to break a habit.

References: Blink by Malcolm Gladwell, Habit by Neale Martin, Unconscious Branding by Douglas Van Praet

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