CASE 4 Essay Example

  • Category:
    Marketing
  • Document type:
    Case Study
  • Level:
    Undergraduate
  • Page:
    2
  • Words:
    999

Failure5

NEW COKE MARKET FAILURE

New Coke Market Failure

By 1970s, the competition between Coke and Pepsi to control the soft drinks market had intensified with the latter making considerable gains in the United States. Pepsi’s end user survey in blind taste tests had confirmed that a majority of respondents favored its brand to that of their rivals Coke. Based on the findings of that research, Pepsi came up with new television commercials dubbed the “Pepsi Challenge” showing taste tests where Coca-Cola consumers displayed a preference for Pepsi. Moreover, the campaign was so effective that it made Pepsi the most preferred drink by 1977. On their part, the Coca-Cola management was getting worried due to their company’s diminishing market share. As a result, its management embarked on a secret researching mission to reformulate Coke taste to match the new trends in the market. After the introduction of the new Coke, its sales picked during the first few weeks but plummeted due to perceived flaws in the consumer research design as well as the implementation of the process.

On April 23, 1985, Coke announced that they had introduced the New Coke. Their market research had revealed that their new product would be an instant hit with a majority of the Coke consumers. Coke researchers came up with a new formula that indicated that this formula had six to eight points compared to Pepsi in a blind taste test. Also, Cola drinkers had favored the new formula by 55% to 45% in the same taste tests while loyal Coke consumers picked it over the old Coke formula by 53% to 47% (Fournier, 2016, p. 11). Furthermore, in tests where the drinks were labeled as new Coke and Old coke, cola consumers favored the former to the latter by 61% to 39%. The Coke’s organization ensured that the test outcomes were verified and verified in all main marketplaces in the country. The research had cost Coke’s management $4 million and encompassed interviews of close to 200,000 people.

Nonetheless, the move was met with resistance from old Coke drinkers with some even threatening legal action against the company. Initially, sales of the New Coke were high as reported by bottlers but by June the trend had taken a negative turn. To make matters worse, a survey exercised on June that year showed that only 30% of the customers interviewed preferred the new Coke to the Old one (Fournier, 2016, p. 17). On July 10, the company backtracked on its plans and announced its decision to bring back the Old Coke formula.

There were several flaws in the research design and implementation of the of the Kansas research that might have led to the failure of the New Coke to excite the market. Firstly, the research was judged wrongly, as the questions were wrongly interpreted. Coke did not make it clear to the respondents that if a majority of them chooses the new Coke flavor; the old taste will cease to exist. The researcher apart from asking what flavor the respondents like better, they would have sought their opinion on how they would feel if the new taste substituted the current Coke taste. Wilson and Ogden (2008) say the research was unable to measure the types of buyer’s emotional state that would result from the reformulating Coke. The use of wrong questions might have led to the faulty interpretation of the surveys (p. 23).

Secondly, Coke deviated from the standard practice of first starting with a focus group the followed by a quantitative survey. The norm was to start with a focus group experiment then followed by a study using individual interviews targeting a large representative sample of the public. It is important to note that personal interviews are usually used to check and quantify the results of focus groups. Schindler (1992) claims that the normal market exercise has confidence research survey over the focus groups. Focus groups and individual interviews have their particular strengths and weaknesses (24). Mainly, focus group involves the chance for the respondents to relate with others and this makes it a useful technique that measures the effects of interpersonal influence. On the other hand, individual interviews cannot measure the consequences of interpersonal influence. Furthermore, after the focus groups and individual interview survey, it would have been prudent for Coke to test the prototype to get actual results before rolling the product to the market.

Truly, Coke’s research had done a decent job of forecasting customer’s response after the introduction of the new formula. Research findings had shown that only 10%-12% would be upset by the reformulation (Fournier, 2016, p. 11). The survey had also revealed that out of 8 to 12 focus group, at least there existed one angry loyalist. However, the research failed to consider that the consumer’s behavior can be swayed by the press and public opinion. Without the information on how the public would react when only the new Coke was available, the company was unable to predict how individual’s feelings would change after being exposed to other people responses.

Conclusively, flaws in the design, as well as the implementation of the research process, might have contributed to the failure of the new Coke to live to its expectations. Apparently, the survey did not reveal to the consumers that if they choose the new flavor, the old one will cease to exist in the market. In addition, Coke opted to deviate from the standard practice when they started with an interview followed by focus group surveys. Individual interview reviews are usually used to verify and quantify focus group studies; thus, Coke might have erred in the interpretation of the results.

References List

Fournier, S. (2016). Introducing the New Coke. Harvard Business School.

Schindler, R. (1992). The Real Lesson of New Coke: The Value of Focus Groups for Predicting the Effects of Social Influence. 1st ed. [ebook] Available at: https://archive.ama.org/archive/ResourceLibrary/MarketingResearch/documents/9602193014.pdf [Accessed 12 Sep. 2016].

Wilson, L. & Ogden, J. (2008). Strategic communications planning. Dubuque, Iowa: Kendall/Hunt Pub.