Thursday, November 30, 2006

Recognizing Smart Brands Can Do Dumb Things

Always Remember The Customer Knows Best

Back in the 1980's, the world's most valuable and recognizable brand, Coca-Cola decided that their core product needed a new formula. In the years leading up to this decision, Coke had been victimized by The Pepsi Challenge where Coke customers participated in blind taste test across the country preferring Pepsi to Coke.

Coke decided to do their own research testing a new formula with Coke drinkers and discovering that more preferred the new taste than the old.

The decision was made. The introduction of New Coke to considerable media fanfare as the Chairman and CEO of The Coca-Cola Company, Roberto Gouizeuta announced the new formula.

The result was one of the biggest marketing blunders in history. Almost immediately, loyal Coke drinkers rebelled with protests and boycotts that filled the consumer and trade media. Their message? What have you done? We want our old Coke back.

Of course, Pepsi was delighted. It's eventual Chairman and CEO, Roger Enrico later wrote a book entitled, "The Other Guy Blinked: How Pepsi Won The Cola Wars".

But what happened? Coke had some of the brightest marketing people in the world. It's SVP of Marketing, Sergio Zyman, an architect of New Coke, was recruited from Pepsi. How could smart people make such a dumb decision?

The answer, in hindsight, is that no one asked the right question. The research they did was sound. When asked which they preferred in blind taste tests, they did, indeed, choose New Coke.

What was the question they didn't ask? They did not ask "Would you be willing to give up your existing Coke for New Coke? Had they asked this question, they would have received a resounding no. What Coke failed to take into consideration was the very thing that made Coke a great brand - brand loyalty. This misjudgement was fatal for New Coke.

Of course, there was a happy ending for Coke. They immediately pulled New Coke and launched Coca-Cola Classic.

There is a critical marketing lesson here and it's not that loyal patrons will resist change. It's you cannot get the right answers unless you ask the right questions.
Coca-Cola Classic is a trademark of The Coca-Cola Company. All rights reserved. 2006