Case Study, New Coke failure

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Individual essay: Pre-work for Market Research

Market Research – MITB 39

Professor: Dr. Javier Blanch

Student ID: 315366

When market research fails: Case of Coca-Cola (New Coke).

        The world’s biggest producer of soft drinks Coca Cola co. did not evade the failure on its successful way. It happened on April 23, 1985, almost 33 years ago, when Coca Cola’s management decided to change the original and viciously kept in secret formula of their original soft drink to a new one. The feedback from it’s loyal consumers after releasing the “New Coke” was not pleasant at all and the company had to bring the old formula back and sell the good old Coke as they used to, while slowly letting the new one die.

        In the early 80’s Coca Cola soft drink was losing its market share to some of the drinks produced by Coca Cola Company (Sprite, Fanta and Diet Coke), and its main rival – Pepsi. 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 (Marketing91.com, 2017). Thus, management had to take measures to keep Coke’s market share from shrinking.

        Coca Cola conducted several blind taste tests in determined that most of consumers preferred Pepsi for its sweeter taste, therefore they wanted New Coke to be as sweet and pleasant for consumers as Pepsi was. They started creating a new formula with sweeter taste, and they came up with one year later. After conducting new tests, the new formula proved itself successful, beating Pepsi in blind taste tests and focus groups.  In the focus groups, though, around 11% would stop drinking Coke altogether if the new product would have been selling under Coca Cola’s name and this vocal minority was angry enough to indirectly influence the attitudes of others in the group, skewing results to the negative (St John's College Business, Economics and Psychology Blog, 2012).

        The decision was made to put the New Coke into production over the old Coke, it was a risk to take, however a justifiable one because in the eyes of management New Coke had much better prospects than the old one which was losing its market share. On April 23, 1985 the New Coke was released and the old one was taken off the shelves, and the outcome of that decision was devastating. Large part of American population decided to boycott the new product, the fact that they could not buy the old coke was horrible for them and thus the acceptance of New Coke simply wasn’t there (especially in southern part of United States). Regardless to better sweeter taste of New Coke, some people simply wouldn’t even try and buy it. The original Coke was something more than a soft drink brand, it was a brand with history and became part of culture and a symbol.

        To conclude, the management’s decision not to take into consideration these 11% in the focus groups was one of issues. The other one was that Coca Cola co. didn’t realize how much can a brand name mean in the eyes of a loyal customer, and once you gained their loyalty you cannot simply change your product because you think it will be better for the company. While Coca Cola Company tried to imitate its main rival Pepsi, they forgot to take into consideration the perception of their main brand, and its meaning for consumers. These things that they did not put into their market research determined the failure of “New Coke”.

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