Coke Article

Market Research Fail: How New Coke Became the
Worst Flub of All Time

By Joe Benjamin
If there was a summer camp for market researchers, it’d be the scary story
counselors told around the campfire: The time an uber-successful juggernaut
nearly went bankrupt because of bad market research.
If the tale of New Coke is enough to send shivers down your

spine, then you know how vital accurate market research
numbers are. While Coca-Cola has never admitted to just
how much they lost as a result of New Coke, we know they
spent $4 million in development, and–after deciding to pull
New Coke from the shelves–were left with over $30 million
in unwanted New Coke concentrate after the fact.
When wondering just what went wrong, the finger has to be

pointed directly at the market research team that
conducted over 200,000 taste tests to confirm that
subjects preferred New Coke over both Classic Coke and
Pepsi. But, as it turns out, taste preference isn’t the only
factor that goes into purchasing decisions: A lesson Coca-
Cola had to learn the hard way.
The Cola Wars
The Coca-Cola Company had always maintained the lion’s share of the cola market,
easily outselling Pepsi five to one in the 1950s. But a genius marketing campaign
from Pepsi in the 1980s positioned the relative newcomer as the young person’s
drink. Pepsi pulled out all the stops: Celebrity spokespeople, hip advertising music,
and poking fun at Coke for being the cola of an older generation. By the early
1980s, Coke had lost its grip on the soda market and only controlled 24 percent of
the market share.
The Coca-Cola Company had to make a move; especially since time and time again,
sweeter-tasting Pepsi slayed Coke in the clever, blind, and very public Pepsi
Challenge. Coca-Cola’s idea was to come up with a new Coke formula that consumers
preferred over both old Coke and Pepsi.
Poor Taste in Market Research

No one could fault Coca-Cola for not doing their research: They tested the New
Coke formula on 200,000 subjects and came up with a drink that beat Pepsi and old
Coke time and time again. Therefore, when it finally went to market in 1985, the
company felt confident enough in their research numbers to simultaneously end old
Coke production. They even took out commercials to prove it.
The result? Consumers hated it. Coca-Cola fielded as many as 400,000 angry phone
calls and letters as Coke drinkers professed their dissatisfaction with the new
product. In less than three months, New Coke was pulled off the shelves and old
Coke–rebranded as Coca-Cola Classic–was back.
How did Coca-Cola get it so wrong when the market research surrounding taste was
so promising? Here are a few glaring errors that contributed to the flub:
Customers are motivated by more than just taste. The most grievous error
Coca-Cola’s researchers made was testing subjects on taste alone. Most people
loved New Coke–53 percent preferred it over old Coke–but taste isn’t enough.
Consumers make purchasing decisions based on habit, nostalgia, and loyalty as well.
Cola is an identity classification. The research was completed during the height
of the Pepsi and Coke wars, and consumers considered the brand of cola which they
drank a part of their identification. Changing Coke fundamentally confused
consumers’ identification and relation to the brand.
New Coke wasn’t a choice. The research was a blind taste test: What did
subjects like best? But researchers neglected to qualify what the response would
be if subjects understood that in choosing New Coke, they would effectively be
pulling old Coke from the shelves, which could have drastically altered responses.
Researchers only focused on the physical. What researchers failed to grasp was
that while subjects could appreciate changed physical characteristics like taste
and branding, Coca-Cola also had symbolic significance to buyers, particularly in the
American market. For a group that prefers tradition over novelty, New Coke
couldn’t hold a candle to the continuity and familiarity of old Coke, or eventually,
Coca-Cola Classic.
Market research isn’t just a numbers game. In failing to capture feeling and
attitude toward the brand and relying on taste tests alone, Coca-Cola was left with
a ton of product, cranky consumers, and a big, corporate black eye.
It all worked out, of course. Once Coca-Cola Classic was reintroduced, sales
actually improved over the same time the previous year (potentially because
consumers began to hoard the product in preparation of another Coke-ageddon).
Consumers were able to breathe a sigh of relief, and companies the world over
learned two valuable lessons: The customer holds the cards and solid market
research can prevent a failure of New Coke proportions.
Entrepreneurship & Name:

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Market Research Fail: How New Coke Became the Worst Flub of All Time
Directions: Read the attached article and answer the following questions in the
space provided on this paper.
1. Why did Coca-Cola change its formula in 1985?

Coca-Cola changed its formula in 1985 to introduce “New Coke” as a
response to declining market share and competition from Pepsi.
2. How much did Coca-Cola lose by changing its formula?

Coca-Cola’s exact financial losses due to the change in formula are not
publicly detailed, but the cost was significant in terms of marketing,
research, production, and the logistics of the rollout and subsequent
reversal.
3. How many taste tests did Coca-Cola perform before deciding to change the
formula?
Coca-Cola conducted around 200,000 blind taste tests, known as the “Pepsi
Challenge,” before deciding to change its formula in 1985.
4. Surprisingly, customers will often make purchase decisions based on factors
other than the taste of the product. What other factors can influence our
purchase decisions?
Brand loyalty: Customers may have a strong attachment to a brand
based on past experiences, emotional connections, or perceived
quality.
5. What eventually happened to Coca-Cola sales after New Coke was removed and
Coca-Cola Classic was introduced?
After the introduction of New Coke and the subsequent reintroduction of the
original formula as Coca-Cola Classic, Coca-Cola sales increased.
6. What can the example of New Coke’s failure tell us about the importance of
product branding?
Emotional Connection: Brands are not just about the product; they
represent an emotional connection with consumers. The strong
attachment to the original Coca-Cola formula was underestimated.

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Market Research Fail: How New Coke Became the

Worst Flub of All Time

If the tale of New Coke is enough to send shivers down your

When wondering just what went wrong, the finger has to be

The Cola Wars

Poor Taste in Market Research

Entrepreneurship & Name:

1. Why did Coca-Cola change its formula in 1985?

2. How much did Coca-Cola lose by changing its formula?

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