The New Coke Saga: A Case of Innovative Decision Making Gone Wrong

Abstract

Decision making is a fundamental part in any management practice. Management policies and procedure are what essentially keeps a company going despite all prevailing circumstances. At the core of any action that is taken, is a decision making process which validates the worth of that action towards achieving the company’s goals.

There are several methods that have been put forward to guide decision makers in any organization towards choosing options that will give optimal results. When it comes to marketing strategy decisions however, a larger role is played by market research data. The insights that emerge from such data are critical in answering some of the questions that guide the strategy building process.

We shall hence evaluate the effects of poor decision making in the corporate world by looking into the New Coke saga of 1985. An overview of the assumptions underlying the product’s launch will demonstrate to us why most marketers consider it the biggest marketing mistake in corporate history. We shall then explain the flaws in these assumptions and how they could have been avoided.

Introduction

In the course of heated product rivalries with their main competitors Pepsi, Coca cola’s had dropped its market share from an enormous 60 percent to only 24 percent by 1983 (Davila, Epstein & Shelton, 2007). Given the resounding message that Coke was losing out on product quality, the firm chose to change its age old product formula.

The Research

Just like any normal product launch process, a thorough market research study was undertaken beforehand. The research was based on taste tests and focus group discussions. It conducted 200,000 taste tests in total to gauge a true picture of people’s reaction to the product (Bhasin, 2010).

The surveys pitted the new coke flavour well above both classic Coca Cola and Pepsi Cola. The 10 percent portion of negative feedback received was hence easily ignored following top managerial pressure to adopt the new formula and save the brand’s dwindling market share. What followed was the decision to take the former version of the drink off the market.

Market Reaction

Initially, the market had reacted quite positively to the introduction of the new Coke. The product had raised sales for Coke by eight percent up from the previous year . Nevertheless, it wasn’t long before devoted consumers of the classic Coca Cola started to strike back by influencing boycotts and protest on the new Coke. 10 weeks after its removal classic Coke version was returned (Clifford, 2009).

Poor assumptions made

i) Failure to investigate market’s reaction to Classic Coke’s withdrawal

It was quickly that the newer product would ultimately prove more superior to the former regardless of the period that either product had been in the market. The value of brief taste tests was not sufficient to validate an immediate shift of preference towards the new product.

The company had made a crucial mistake in disregarding the contradictory views presented in focus groups towards the older drink. The rational responses gathered from these discussions unveiled a huge difference between the consumers’ natural behaviour and their stated preferences (Davis, 1993)

ii) The prevailing attitude towards Classic formula

Again, we find that the product was launched at a time when a new mind set against high carbohydrate products was getting introduced. Coca Cola had interpreted the success of Diet Coke as a threat against their core commodity, Coke. They hence assumed that the negative change in market share could be attributed to a negative attitude towards their classic formula. The reality though was that this image has only been forged by Pepsi’s challenge campaign. (Capparell, 2007)

My Recommendations

More in-depth data concerning the new brand was needed. Blind taste tests were not enough. I would have chosen to test people’s reaction to the idea of having the old product out of the market. I would also have given a survey based query to establish the attitude of the general market towards other market variables such as pricing, distribution, packaging

To test the validity of the assumption that the new coke was a better product, these dimensions needed to be held into account. A weighted mean index based on this set of aspects for each tested drink would have revealed more information regarding people’s opinion about the drink.

References

Bhasin, H. (2010). Coca Cola Brand Failure. Retrieved from http://www.marketing91.com/coca-cola-brand-failure/

Capparell (2007). The Real Pepsi Challenge: he Inspirational Story of Breaking the Color Barier in American Business. New York: Free Press.

Clifford, S. (2009, January 30). Coca-Cola Deleting ‘Classic’ From Coke Label. The New York Times. Retrieved from http://www.nytimes.Com/2009/01/31/business/media/31coke.html

Davila, T., Epstein, M. J. & Shelton, R. (2007). The Creative Enterprise: Execution. Westport: Praeger Publishers.

Davis, M. B. A. (1993). God, What a Blunder: The New Coke Story. Retrieved from http://web.archive.org/web/20060515214006/http://members.lycos.co.uk/thomassheils/newcoke.htm