In 1985 The Coca-Cola Company was losing ground rapidly to Pepsi.
Between 1946 to 1983 they had gone from 60% to 24% market share.
Their then CEO, Roberto Goizueta, demanded they try something new to fight back.
To the shock of many in the company, that even included changing the formula for Coca-Cola itself.
This new Cola was unofficially dubbed ‘New Coke’ and it’s one of the most public marketing failures of all time.
They had done some research which indicated people preferred Pepsi’s sweeter taste.
So they went to work creating a sweeter version of Coke.
They ran TONNES of blind taste tests with New Coke prior to the launch.
And people LOVED ‘New Coke’.
Coke comprehensively proved that ‘New Coke’ was better, but the market’s perception of them changing the old classic (even with waning sales), caused so much negativity that they were left dead in the water.
Two business lessons here for you:
- Don’t mess with a winning thing. If you have a popular or established product which owns a specific place in your marketplace’s mind, don’t mess with that. If you want to try something different, brand it clearly separate.
- Reality ≠ Reality, Perception = Reality – Your product can be quantifiably better, but if your market’s perception of that product is poor then you are dead in the water. Coca-Cola checked if they liked the flavour by itself, which they did, but they didn’t check if they were okay with them changing the original flavour to that – in which they would’ve been extremely against the idea.
In any case you probably shouldn’t be drinking Coke because it’s bad for you.
Have a great week,
Ray
I do feel for Goizueta though, he’s seen market share slide from 60 to 24%, he’s probably been told by the board, get it back up or your out – he’s done most of the right things, such as develop and test a new product. So I suppose the only (very expensive) mistake was not launching it as a separate product. Is that what your advice would be? Or what else could the leader have done? Did they they ever utilise the other formula (if that was made public)? Also coke seems to dominate today, what have been their successful strategies to grow?