Reference no: EM132268017
Coca Cola Case Study
"The Introduction of the "New Coke"
Coca Cola was first concocted by a druggist in 1885 and for over a hundred years maintained a commanding lead over its nearest rival, Pepsi Cola, in distribution, market share and profitability. By the beginning of the 1980's, however, Coke began losing market share to Pepsi. Halfway through the decade it was a virtual dead heat between the two reigning colas. Coca Cola executives felt that it was time to re-evaluate the 100-year-old Coke formula. To explore ways to regain their former popularity, the company undertook a major research project, which had remarkably contradictory results:
- In blind taste tests, most people preferred Pepsi.
- In taste tests in which the two colas were identified, most people preferred Coke.
- In focus groups, consumers said that Pepsi could be improved.
- In focus groups, customers felt strongly that Coke could not be improved.
While consumer research was being pursued, laboratory tests were also conducted to determine if the Coke formula could be improved. The outcome was a new formula that beat Pepsi overwhelmingly in blind taste tests. Based on these studies that focused on the product's recipe, Coca Cola decided to change the 100 year-old formula of Coke and call it "New Coke". On April 23, 1985, more than 10 million cases of the New Coke were delivered to stores.
The response from consumers was staggeringly negative. Newspapers carried stories of people stockpiling the "Old Coke" before it was discontinued. Coke fans were quoted as saying how terrible - indeed, even unpatriotic - it was to change Coke. Less than three months after introducing the New Coke, the company went back to the old formulation and has continued to outsell Pepsi. In 2003, the U.S. market share for Coke was 18.5% with a 11.9% share for Pepsi.
Questions:
a) What were the key mistakes that Coca Cola made?
b) What are the lessons learned about market research and its limitations?
c) What was the impact of the "Pepsi Generation" advertising campaign?
d) What steps would you have taken to compete against Pepsi?