Coca Cola-Brand Repositioning Failure- A detailed study

Introduction
Think of a brand success story, and you may well think of Coca-Cola. Indeed, with nearly 1
billion Coca-Cola drinks sold every single day, it is the world’s most recognized brand.
Yet in 1985 the Coca-Cola Company decided to terminate its most popular soft drink and
replace it with a formula it would market as New Coke. New coke was a Coca cola brand
failure story. To understand why this potentially disastrous decision was made, it is necessary
to appreciate what was happening in the soft drinks marketplace. In particular, we must take a
closer look at the growing competition between Coca-Cola and Pepsi-Cola in the years and
even decades prior to the launch of New Coke.
Coca cola brand failure: Case Analysis
The relationship between the arch-rivals had not been a healthy one. Although marketing
experts have believed for a long time that the competition between the two companies had
made consumers more cola-conscious, the firms themselves rarely saw it like that. Indeed, the
Coca-Cola company had even fought Pepsi-Cola in a legal battle over the use of the word
‘cola’ in its name, and lost.

Outside the courts though, Coca-Cola had always been ahead. Shortly after World War II,
Time magazine was already celebrating Coke’s ‘peaceful near-conquest of the world.’ In the
late 1950s, Coke outsold Pepsi by a ratio of more than five to one. However, during the next
decade Pepsi repositioned itself as a youth brand.

This strategy was a risky one as it meant sacrificing its older customers to Coca-Cola, but
ultimately it proved successful. By narrowing its focus, Pepsi was able to position its brand
against the old and classic image of its competitor. As it became increasingly seen as ‘the
drink of youth’ Pepsi managed to narrow the gap.

In the 1970s, Coke’s chief rival raised the stakes even further by introducing the Pepsi
Challenge — testing consumers blind on the difference between its own brand and ‘the real
thing’. To the horror of Coca-Cola’s longstanding company president, Robert Woodruff,
most of those who participated preferred Pepsi’s sweeter formula.

In the 1980s Pepsi continued its offensive, taking the Pepsi Challenge around the globe and
heralding the arrival of the ‘Pepsi Generation’. It also signed up celebrities likely to appeal to
its target market such as Don Johnson and Michael Jackson (this tactic has survived into the
new millennium, with figures like Britney Spears and Robbie Williams providing more
recent endorsements).

By the time Roberto Goizueta became chairman in 1981, Coke’s number one status was
starting to look vulnerable. It was losing market share not only to Pepsi but also to some of
the drinks produced by the Coca-Cola company itself, such as Fanta and Sprite. In particular
the runaway success of Diet Coke was a double-edged sword, as it helped to shrink the sugar
cola market. In 1983, the year Diet Coke moved into the number three position behind
standard Coke and Pepsi, Coke’s market share had slipped to an all-time low of just under 24
per cent.

Something clearly had to be done to secure Coke’s supremacy. Goizueta’s first response to
the ‘Pepsi Challenge’ phenomenon was to launch an advertising campaign in 1984, praising
Coke for being less sweet than Pepsi. The television ads were fronted by Bill Cosby, at that
time one of the most familiar faces on the planet, and clearly someone who was too old to be
part of the Pepsi Generation.
The impact of such efforts to set Coca-Cola apart from its rival was limited. Coke’s share of
the market remained the same while Pepsi was catching up. Another worry was that when
shoppers had the choice, such as in their local supermarket, they tended to plump for Pepsi. It
was only Coke’s more effective distribution which kept it ahead. For instance, there were still
considerably more vending machines selling Coke than Pepsi.

Even so, there was no getting away from the fact that despite the proliferation of soft drink
brands, Pepsi was winning new customers. Having already lost on taste, the last thing Coca-
Cola could afford was to lose its number one status.

The problem, as Coca-Cola perceived it, came down to the product itself. As the Pepsi
Challenge had highlighted millions of times over, Coke could always be defeated when it
came down to taste. This seemed to be confirmed by the success of Diet Coke which was
closer to Pepsi in terms of flavour.

So in what must have been seen as a logical step, Coca-Cola started working on a new
formula. A year later they had arrived at New Coke. Having produced its new formula, the
Atlanta-based company conducted 200,000 taste tests to see how it fared. The results were
overwhelming. Not only did it taste better than the original, but people preferred it to Pepsi-
Cola as well.

However, if Coca-Cola was to stay ahead of Pepsi-Cola it couldn’t have two directly
competing products on the shelves at the same time. It therefore decided to scrap the original
Coca-Cola and introduced New Coke in its place.

The trouble was that the Coca-Cola company had severely underestimated the power of its
first brand. As soon as the decision was announced, a large percentage of the US population
immediately decided to boycott the new product. On 23 April 1985 New Coke was
introduced and a few days later the production of original Coke was stopped. This joint
decision has since been referred to as ‘the biggest marketing blunder of all time’. Sales of
New Coke were low and public outrage was high at the fact that the original was no longer
available.

It soon became clear that Coca-Cola had little choice but to bring back its original brand and
formula. ‘We have heard you,’ said Goizueta at a press conference on 11 July 1985. He then
left it to the company’s chief operating officer Donald Keough to announce the return of the
product.
Keough admitted:

The simple fact is that all the time and money and skill poured into consumer research on the
new Coca-Cola could not measure or reveal the deep and abiding emotional attachment to
original Coca-Cola felt by so many people. The passion for original Coca-Cola — and that is
the word for it, passion — was something that caught us by surprise. It is a wonderful
American mystery, a lovely American enigma, and you cannot measure it any more than you
can measure love, pride or patriotism.

In other words, Coca-Cola had learnt that marketing is about much more than the product
itself. The majority of the tests had been carried out blind, and therefore taste was the only
factor under assessment. The company had finally taken Pepsi’s bait and, in doing so,
conceded its key brand asset: originality.

When Coca-Cola was launched in the 1880s it was the only product in the market. As such, it
invented a new category and the brand name became the name of the product itself.
Throughout most of the last century, Coca-Cola capitalized on its ‘original’ status in various
advertising campaigns. In 1942, magazine adverts appeared across the United States
declaring: ‘The only thing like Coca-Cola is Coca-Cola itself. It’s the real thing.’
By launching New Coke, Coca-Cola was therefore contradicting its previous marketing
efforts. Its central product hadn’t been called new since the very first advert appeared in the
Atlanta Journal in 1886, billing Coca-Cola as ‘The New Pop Soda Fountain Drink, containing
the properties of the wonderful Coca-plant and the famous Cola nuts.’

In 1985, a century after the product launched, the last word people associated with Coca-Cola
was ‘new’. This was the company with more allusions to US heritage than any other. Fifty
years previously, the Pulitzer Prize winning editor of a Kansas newspaper, William Allen
White had referred to the soft drink as the ‘sublimated essence of all America stands for — a
decent thing, honestly made, universally distributed, conscientiously improved with the
years.’ Coca-Cola had even been involved with the history of US space travel, famously
greeting Apollo astronauts with a sign reading ‘Welcome back to earth, home of Coca-Cola.’

To confine the brand’s significance to a question of taste was therefore completely

So despite the tremendous amount of hype which surrounded the launch of New Coke (one
estimate puts the value of New Coke’s free publicity at over US $10 million), it was destined
to fail. Although Coca-Cola’s market researchers knew enough about branding to understand
that consumers would go with their brand preference if the taste tests weren’t blind, they
failed to make the connection that these brand preferences would still exist once the product
was launched.

Pepsi was, perhaps unsurprisingly, the first to recognize Coca-Cola’s mistake. Within weeks
of the launch, it ran a TV ad with an old man sitting on a park bench, staring at the can in his
hand. ‘They changed my Coke,’ he said, clearly distressed. ‘I can’t believe it.’

However, when Coca-Cola relaunched its original coke, redubbed ‘Classic Coke’ for the US
market, the media interest swung back in the brand’s favour. It was considered a significant
enough event to warrant a newsflash on ABC News and other US networks. Within months
Coke had returned to the number one spot and New Coke had all but faded away.

Ironically, through the brand failure of New Coke loyalty to ‘the real thing’ intensified. In
fact, certain conspiracy theorists have even gone so far as to say the whole thing had been
planned as a deliberate marketing ploy to reaffirm public affection for Coca-Cola. After all,
what better way to make someone appreciate the value of your global brand than to withdraw
it completely?

Of course, Coca-Cola has denied that this was the company’s intention. ‘Some critics will say
Coca-Cola made a marketing mistake, some cynics will say that we planned the whole thing,’
said Donald Keough at the time. ‘The truth is we are not that dumb, and we are not that
smart.’ But viewed in the context of its competition with Pepsi, the decision to launch New
Coke was understandable. For years, Pepsi’s key weapon had been the taste of its product. By
launching New Coke, the Coca-Cola company clearly hoped to weaken its main rival’s
marketing offensive.
So what was Pepsi’s verdict on the whole episode? In his book, The Other Guy Blinked,
Pepsi’s CEO Roger Enrico believes the error of New Coke proved to be a valuable lesson for
Coca-Cola. ‘I think, by the end of their nightmare, they figured out who they really are.
Caretakers. They can’t change the taste of their flagship brand. They can’t change its
imagery. All they can do is defend the heritage they nearly abandoned in 1985.’
Lessons from New Coke from repositioning point of view

Concentrate on the brand’s perception. In the words of Jack Trout, author of Differentiate or
Die, ‘marketing is a battle of perceptions, not products’.
Don’t clone your rivals. In creating New Coke, Coca-Cola was reversing its brand image to
overlap with that of Pepsi. The company has made similar mistakes both before and after,
launching Mr Pibb to rival Dr Pepper and Fruitopia to compete with Snapple.
Feel the love. According to Saatchi and Saatchi’s worldwide chief executive officer, Kevin
Roberts, successful brands don’t have ‘trademarks’. They have ‘lovemarks’ instead. In
building brand loyalty, companies are also creating an emotional attachment that often has
little to do with the quality of the product.
Don’t be scared to U-turn. By going back on its decision to scrap original Coke, the company
ended up creating an even stronger bond between the product and the consumer.
Do the right market research. Despite the thousands of taste tests Coca-Cola carried out on its
new formula, it failed to conduct adequate research into the public perception of the original
brand.
Key takeaways from business point of view and Brand Concepts
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. Pepsi co was marching ahead with the renewed
vigour 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?
1)IGNORE YOUR COMPETITORS
Benchmarking your competitor, their products, behaviour 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.
2)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 programmes are targeted at the conscious rational minds rather than
speaking to the unconscious mind(Real desires, attitudes, behaviours 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 recognisable,
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 rationalise 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 centres in the brain were activated indicating a huge
effect of coke label.
3)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, behavioural inconsistencies and analyse 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 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)
4)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.
5)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.

CONCLUSION
If you are bringing out a product that is completely different from existing consumer’s mental
models and affect consumer’s habitual behaviour, 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.
Submitted by
SHUBHAM ARORA
G-56