coca cola Classical Case on Marketing Failure

New CokeThink of a brand success story, and you may well think of Coca-Cola. Indeed, with nearly 1 billionCoca-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 itwith a formula it would market as New Coke. To understand why this potentially disastrous decisionwas made, it is necessary to appreciate what was happening in the soft drinks marketplace. Inparticular, we must take a closer look at the growing competition between Coca -Cola and Pepsi -Colain the years and even decades prior to the launch of New Coke.The relationship between the arch-rivals had not been a healthy one. Although ma rketing experts havebelieved for a long time that the competition between the two companies had made consumers morecola -conscious, the firms themselves rarely saw it like that. Indeed, the Coca -Cola company had evenfought 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, Timemagazine was already celebrating Coke?s ?peaceful near-conquest of the world.? In the late 1950s,Coke outsol d Pepsi by a ratio of more than five to one. However, during the next decade Pepsirepositioned itself as a youth brand.This strategy was a risky one as it meant sacrificing its older customers to Coca -Cola, but ultimately itproved successful. By narrow ing its focus, Pepsi was able to position its brand against the old andclassic image of its competitor. As it became increasingly seen as ?the drink of youth? Pepsi managedto 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 ofCoca-Cola?s longstanding company president, Robert Woodruff, most of those who participatedpreferred Pepsi?s swee ter formula.In the 1980s Pepsi continued its offensive, taking the Pepsi Challenge around the globe and heraldingthe arrival of the ?Pepsi Generation?. It also signed up celebrities likely to appeal to its target marketsuch as Don Johnson and Michael Jackson (this tactic has survived into the new millennium, withfigures 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 tolook vulnerable. It was losing market share not only to Pepsi but also to some of the drinks produced2by the Coca -Cola company itself, such as Fanta and Sprite. In particular the runaway success of DietCoke was a double-edged sword, as it helped to shrink the sugar c ola market. In 1983, the year DietCoke moved into the number three position behind standard Coke and Pepsi, Coke?s market share hadslipped 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 ?PepsiChallenge? phenomenon was to launch an advertising campaign in 1984, praising Coke for being lesssweet than Pepsi. The television ads were fronted by Bill Cosby, at that time one of the most familiarfaces on the planet, a nd 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 themarket remained the same while Pepsi was catching up. Another worry was that when shoppers hadthe choice, such as in their local supermarket, they tended to plump for Pepsi. It was only Coke?s moreeffective distribution which kept it ahead. For instance, there were still considerably more vendingmachines selling Coke than Pepsi. Even so, there was no getting away from the fact that despite theproliferation of soft drink brands, Pepsi was winning new customers. Having already lost on taste, thelast 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 hadhighlighted millions of times over, Coke could always be defeated when it came down to taste. Thisseemed to be confirmed by the success of Diet Coke which was closer to Pepsi in te rms of flavour. Soin what must have been seen as a logical step, Coca -Cola started working on a new formula. A yearlater they had arrived at New Coke. Having produced its new formula, the Atlanta -based companyconducted 200,000 taste tests to see how it fared. The results were overwhelming. Not only did it tastebetter 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 competingproducts on the shelves at t he same time. It therefore decided to scrap the original Coca-Cola andintroduced 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 decidedto boycott the new product. On 23 April 1985 New Coke was introduced and a few days later theproduction of original Coke was stopped. This joint decision has since been referred to as ?the biggestmarketing blunder of all time?. Sales of New Coke were low and public outrage was high at the factthat 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 yo u,? said Goizueta at a press conference on 11 July 1985. He then left it to the3company?s chief operating officer Donald Keough to announce the return of the product. Keoughadmitted:? The simple fact is that all the time and money and skill poured into co nsumer research on the newCoca-Cola could not measure or reveal the deep and abiding emotional attachment to originalCoca-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 lovelyAmerican enigma, and you cannot measure it any more than you can measure love, pride orpatriotism.?In other words, Coca -Cola had learnt that marketing is about much more than the product itself. Themajority of the tests had been carried out blind, and therefore taste was the only factor underassessment. 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 inventeda new category and the brand name became the name of the product itself. Throughout most of the lastcentury, 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 isCoca-Cola itself. It?s the real thing.? By launching New Coke, Coca-Cola was therefore contradictingits previous marketing efforts. Its central product hadn?t been called new since the very first advertappeared 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 t he 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 softdrink as the ?sublimated essence of all America stands for ? a decent thing, honestly made, universallydistributed, conscientiously improved with the years.? Coca -Cola had even been involved with thehistory of US space travel, famous ly greeting Apollo astronauts with a sign reading ?Welcome back toearth, home of Coca-Cola.?To confine the brand?s significance to a question of taste was therefore completely misguided. As withmany big brands, the representation was more significant than the thing represented, and if any softdrink represented ?new? it was Pepsi, not Coca -Cola (even though Pepsi is a mere decade younger).If you tell the world you have the ?real thing? you cannot then come up with a ?new real thing?. Toborrow the comparison of marketing guru Al Ries it?s ?like introducing a New God?. Thiscontradictory marketing message was accentuated by the fact that, since 1982, Coke?s strap line hadbeen ?Coke is it?. Now it was telling consumers that they had got it wrong, as if they had discovered4Coke wasn?t it, but rather New Coke was instead.So despite the tremendous amount of hype which surrounded the launch of New Coke (one estimateputs the value of New Coke?s free publicity at over US $10 million), it was destined to fai l. AlthoughCoca-Cola?s market researchers knew enough about branding to understand that consumers would gowith their brand preference if the taste tests weren?t blind, they failed to make the connection thatthese 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 thelaunch, it ran a TV ad with an old man sitting on a park bench, staring at the can in his hand. ?Theychanged 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 towarrant a newsflash on ABC News and other US networks. Within months Coke had returned to thenumber 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, certainconspiracy theorists have even gone so far as to say the whole thing had been planned as a deliberatemarketing ploy to reaffirm public affection for Coca -Cola. After all, what better way to make someoneappreciate the value of your global brand than to withdraw it compl etely?Of course, Coca-Cola has denied that this was the company?s intention. ?Some critics will sayCoca-Cola made a marketing mistake, some cynics will say that we planned the whole thing,? saidDonald Keough at the time. ?The truth is we are not that dumb, and we are not that smart.? But viewedin the context of its competition with Pepsi, the decision to launch New Coke was understandable. Foryears, Pepsi?s key weapon had been the taste of its product. By launching New Coke, the Coca -Colacompany clea rly 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 CEORoger 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 thetaste of their flagship brand. They can?t change its imagery. All they can do is to defend the heritagethey nearly abandoned in 1985.?5Discuss (check midcourse.net for the help you need)ion Questions:1. What factors led to Coca-Cola?s huge initial popularity?2. What was Pepsi?s strategy?3. Coca-Cola responded with New Coke: what happened as a result?4. How did Coca -Cola end up making such a big mistake?5. What would you have done?6. What lessons c an we learn?PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET AN AMAZING DISCOUNT Category: essay

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