Case background:
When Pepsi cola was launched in America, Coca-Cola was slowly losing market share to Pepsi. Some consumers preferred the sweeter taste of Pepsi. Pepsi’s blind taste tests showed that most of customers said yes to Pepsi cola. So Coca-Cola spent 4 million dollars for researching the New Coke. In April 1985, New Coke was introduced with confidence and the Old Coke was dropped meanwhile.
After New Coke was delivered to the market, consumers instantly rejected it and sales plummeted. Some consumers panicked, filling their basements with Old Coke. Coca-Cola began receiving sacks of mails and phone calls from angry customers. “Old Cola Drinkers” staged protests, handed out T-shirts and threatened a class-action suit.
Three months later, Coca-Cola brought Old Coke back under the name Coca-Cola classic. Coca-Cola classic became the company’s main brand and the country’s leading soft drink again. As a result, by the end of 1985, the stock of Coca-Cola rose by 35%. Short time later, Coca-Cola classic was back to No.1
Failure analysis:
New Coke failed because of three reasons:
Firstly, Coca-Cola overestimated the effect of product’s taste. They introduced New Coke but took the Old Coke off the market. They ignored the influence on the culture, customers’ emotion and lifestyle.
Secondly, Coca-Cola made wrong new product strategy. They chose the product substitution strategy rather than complementary strategy.
Thirdly, the market research done by Coca-Cola was incomprehensive. Coca-Cola spent millions of dollars and three years to invite nearly 200,000 people in 13 cities to do taste tests. They did not explore consumers’ feelings about dropping the Old Coke and replacing it with a new version.
Recommendations:
We suggest that their marketing statics change from 4P to 4C (consumer, cost, convenience, communication) which means from market-oriented to customer-oriented.
First, based on the consumer’s demand, they should implement diversity...