If there was a summer camp for market researchers, it’d be the scary story counselors told around the campfire: The time an uber-successful juggernaut nearly went bankrupt because of bad market research.
If the tale of New Coke is enough to send shivers down your spine, then you know how vital accurate market research numbers are. While Coca-Cola has never admitted to just how much they lost as a result of New Coke, we know they spent $4 million in development, and–after deciding to pull New Coke from the shelves–were left with over $30 million in unwanted New Coke concentrate after the fact.
When wondering just what went wrong, the finger has to be pointed directly at the market research team that conducted over 200,000 taste tests to confirm that subjects preferred New Coke over both Classic Coke and Pepsi. But, as it turns out, taste preference isn’t the only factor that goes into purchasing decisions: A lesson Coca-Cola had to learn the hard way.
The Cola Wars
The Coca-Cola Company had always maintained the lion’s share of the cola market, easily outselling Pepsi five to one in the 1950s. But a genius marketing campaign from Pepsi in the 1980s positioned the relative newcomer as the young person’s drink. Pepsi pulled out all the stops: Celebrity spokespeople, hip advertising music, and poking fun at Coke for being the cola of an older generation. By the early 1980s, Coke had lost its grip on the soda market and only controlled 24 percent of the market share.
The Coca-Cola Company had to make a move; especially since time and time again, sweeter-tasting Pepsi slayed Coke in the clever, blind, and very public Pepsi Challenge. Coca-Cola’s idea was to come up with a new Coke formula that consumers preferred over both old Coke and Pepsi.
Poor Taste in Market Research
No one could fault Coca-Cola for not doing their research: They tested the New Coke formula on 200,000 subjects and came up with a drink that beat Pepsi and old Coke time and time again. Therefore, when it finally went to market in 1985, the company felt confident enough in their research numbers to simultaneously end old Coke production. They even took out commercials to prove it.
The result? Consumers hated it. Coca-Cola fielded as many as 400,000 angry phone calls and letters as Coke drinkers professed their dissatisfaction with the new product. In less than three months, New Coke was pulled off the shelves and old Coke–rebranded as Coca-Cola Classic–was back.
How did Coca-Cola get it so wrong when the market research surrounding taste was so promising? Here are a few glaring errors that contributed to the flub:
Customers are motivated by more than just taste. The most grievous error Coca-Cola’s researchers made was testing subjects on taste alone. Most people loved New Coke–53 percent preferred it over old Coke–but taste isn’t enough. Consumers make purchasing decisions based on habit, nostalgia, and loyalty as well.
Cola is an identity classification. The research was completed during the height of the Pepsi and Coke wars, and consumers considered the brand of cola which they drank a part of their identification. Changing Coke fundamentally confused consumers’ identification and relation to the brand.
New Coke wasn’t a choice. The research was a blind taste test: What did subjects like best? But researchers neglected to qualify what the response would be if subjects understood that in choosing New Coke, they would effectively be pulling old Coke from the shelves, which could have drastically altered responses.
Researchers only focused on the physical. What researchers failed to grasp was that while subjects could appreciate changed physical characteristics like taste and branding, Coca-Cola also had symbolic significance to buyers, particularly in the American market. For a group that prefers tradition over novelty, New Coke couldn’t hold a candle to the continuity and familiarity of old Coke, or eventually, Coca-Cola Classic.
Market research isn’t just a numbers game. In failing to capture feeling and attitude toward the brand and relying on taste tests alone, Coca-Cola was left with a ton of product, cranky consumers, and a big, corporate black eye.
It all worked out, of course. Once Coca-Cola Classic was reintroduced, sales actually improved over the same time the previous year (potentially because consumers began to hoard the product in preparation of another Coke-ageddon). Consumers were able to breathe a sigh of relief, and companies the world over learned two valuable lessons: The customer holds the cards and solid market research can prevent a failure of New Coke proportions.
This article was syndicated from Business 2 Community: Market Research Fail: How New Coke Became the Worst Flub of All Time
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