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Sometimes Research can lead you astray: The Coca Cola Case Study

Working on new products brings a lot of excitement. And confusion. A million decisions are to be made which would be pivotal for the success or failure of the product.

How does one go about making those decisions?

While working on new products in the design phase, one of the best tools marketers have is research. After all numbers don’t lie, do they?

At every stage, we invest time and money in getting the consumer feedback and to check if we are on the right path. Sometimes, results from research match the voice of our gut.

But sometimes they are exactly the opposite of what we expect. What do you do in that case?

Let us look at one of the most famous new launches in history, which was backed by tons of consumer feedback (and miserably failed): the launch of New Coke.

The Pepsi Challenge

The story goes back to 1970s, when Coca Cola was the uncrowned king.

In those days, Coke was the market leader, and was an extremely popular drink. It had many challengers, but nonetheless, Coke outsold every single one of them.

Many me-too brands, imitators entered and tried to challenge coke. But all fell by the wayside, except Pepsi.

Pepsi had been around for a long while, surviving against the behemoth in the form of “Pepsi-Cola”. It targeted the price sensitive consumers and sold at half the price of Coke. It had a set of loyal customers.

Although Coca Cola was selling 5 times more than Pepsi back then, things were beginning to get competitive. Pepsi was turning up the heat with strong advertising campaigns and disruptive ideas.

Pepsi, in order to gain some market share, started re-branding itself as the drink for the youth, whereas previously, it was viewed as a drink for the older generation.

Their product was deemed sweeter than that of Coca Cola and Pepsi decided to leverage that to their advantage.

After a decade or so of successful campaign towards the younger generation, Pepsi introduced “Pepsi Challenge”.

Have you ever tried identifying Unbranded Cola Drinks?

This involved two Colas being given to consumers in unbranded format and allowing them to take a sip of each. Then they were asked which one they preferred.

After the respondents gave their choices, the brands were revealed. It was indicated that most consumers preferred the taste of Pepsi over that of Coca Cola.

Pepsi went around many cities doing this test, in malls, shopping centers and other public locations.

Although the validity of the test was questioned later on by many researchers (including Malcolm Gladwell, in his book, “Blink: The Power of Thinking without Thinking”), it created some major waves back then.

“Author Malcolm Gladwell presents evidence that suggests Pepsi’s success over Coca-Cola in the “Pepsi Challenge” is a result of the flawed nature of the “sip test” method. His research shows that tasters will generally prefer the sweeter of two beverages based on a single sip, even if they prefer a less sweet beverage over the course of an entire can”

From Wikipedia, on Malcolm Gladwell’s book titled: “Blink: The Power of Thinking without Thinking”

Coca Cola began losing market share

Coke was horrified when the Challenge caught on. This was something they hadn’t foreseen and soon it started to lose market share.

Something had to be done.

They decided to listen to what the consumers said in the Pepsi challenge and concluded that the verdict is loud and clear: consumers prefer the sweeter taste of Pepsi.

They thought reformulation would be the right answer since Pepsi was beating them hands down in blind tests. They went back to the drawing board and started working on a new formula that would beat Pepsi and Original Coke.

They came up with a new formula which was sweeter and went out to test it with consumers.

Numerous consumer studies were done and in each study, the new formulation beat Pepsi and Original Coke in blind taste tests. Around 200,000 consumers were tested and the results were consistent.

Everyone loved the new formulation in the blind taste tests.

The birth of New Coke and the further decline

Coke decided that this was it. This was the new formulation that would lead them to salvation and win against Original Coke and Pepsi, both.

They thought they had hit the magic formula to gain the market share back, and without delays, launched the New Coke.

They couldn’t have kept both the products on the shelf for the fear of confusion in consumers’ minds and withdrew the Original Coke.

Coke was quite hopeful, but it did not go as planned.

As soon as they announced this decision, the consumers began protesting. They were pretty disappointed that their beloved Original Coke was no longer on the shelves.

In order to be heard, people started boycotting the New Coca Cola, and this led to drastic loss of market share to Pepsi.

After waiting for a few months to recover, Coke was forced to scrap the New Coca Cola, and reintroduce the Original Coca Cola.

Did the research fail them?

So, what went wrong? Was their research flawed or did people lie in the research about preferring the sweeter formulation?

Well, in the hindsight, we know for a fact that Coca Cola misjudged the power of their brand, the emotional value and attachment to it.

When the taste tests were being done, the consumers never realized that they were having Coca Cola. They gave their verdicts without realizing that its the brand they love. Had they known it, probably they would have responded otherwise.

Coke had been around for over 100 years, and in those years, it had created a bond with the consumer. The bond delivered memories, trust and a feeling of pride.

When a consumer picks a product from the shelf (if the product/brand is not new), he/she doesn’t just buy the product. They buy the brand name that they have trusted all these years, they buy the promise of same quality, same taste every time in every pack they spend their money on.

They want to have the same experience that they have gotten used to. They pay for the brand name because of the perception they have made based on that name and not for just the product irrespective of labels.

When coke withdrew its original product, it was taking away something that people loved and saw as a part of their lives.

Once a product/brand has become popular, consumers attach a lot of their experience to the brand and expect it to remain the same.

And that is the reason that all marketers should be cautious of launching a new logo, pack design or modified product under the same brand name.

Yes, Coke did consumer research and the new product won. But all those studies were done blind.

Would the results have stayed same if they had introduced the brand name after a certain point during the research?

Or better if they had tested hypothetically, if we only sell New Coke, would you still buy it? Or that do you think this Coke can replace your original Coke?

I am sure the answers might have been a bit different if they had factored the brand name in.

This case study is a great lesson for all brands who aim to reformulate their products or to re-introduce them to new segments, or when working on new products under the same brand name. Sometimes we are blinded by standard research, however well formulated.

We can’t always ride on the research data in individuality. It needs to be coupled with many other relevant market realities.

Research results depend a lot on the questions being asked. We need to frame the questions right to get the right answers.

We need to introduce variables that may affect consumers’ choices to be able to ascertain what will work. And should try to listen to the inner voice in addition consumer research and keep working till both of them are aligned!

If you think this has been helpful or if you could add more to this, please feel free to drop your comments in the section below!

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