Why New Coke Failed

Introduction

Coca-Cola is one of the most famous brands in the world keeping its position as a reliable, unchangeable symbol of the United States. However, April 23, 1985 was the one of the most controversial days in the world of marketing history. Coca-Cola Company has gone to great risk by announcing the changes of the “classic” formula of the most popular soft drink in the world. Consumers did not appreciate the change, refusing to give up on beloved Coca-Cola taste. Nowadays, the New Coke case is an example of marketing failure. The purpose of the paper is to learn the history of the company and the product (New Coke), to investigate the marketing environment and to analyze why did New Coke fail.

Coca-Cola Company: Brief Description

The history of Coca-Cola begins with the invention of a drink in Atlanta (Georgia, USA) on 8 May 1886 by the pharmacist John Stith Pemberton, a former U.S. Confederation Army officer (Gorman & Gould, 2015). Pemberton’s accountant Frank Robinson, who also created a logo of “Coca-Cola,” invented the name for the new drink. In 1892, the businessman Asa Candler that owned the rights to the “Coca-Cola”, founded The Coca-Cola Company. In 1902, with a turnover of $120 thousand, Coca-Cola became the most famous drink in the United States (Gorman & Gould, 2015). Later, under pressure from competitors, who produced drinks without caffeine and sugar, Coca-Cola began to produce drinks: “Classic Coke,” “Cherry Coke,” “New Coke,” “Tab,” “Caffeine-Free Diet Coke,” “Caffeine-Free New Coke,” and “Caffeine-Free Tab” (Gorman & Gould, 2015).

The history of the “New Coca-Cola” is described in many sources, as it was a great marketing issue of a large multinational corporation and a good lesson to learn. In 1985, the share of Coca-Cola beverage in the U.S. market continued to decline, and that tendency was for the 15 years in a row (Gorman & Gould, 2015). Indeed, the entire category of such beverages was in the stage of “lethargy.” Consumers’ trust and preference to Coca-Cola was melting as well as brand awareness. Everything changed overnight in the spring and summer of 1985 (Gorman & Gould, 2015); it was the moment when a new recipe became the base for New Coke. That event has changed the whole philosophy of Coca-Cola Company and the other beverages companies.

Marketing Environment: Micro, Macro, Internal

At the core of the marketing environment, there are internal and external environments. External marketing environment consists of microenvironment and macroenvironment. It includes all of the objects, factors, and events that are beyond the company (Coca-Cola Company) that have a direct impact on its operations. The company’s micro-firm relationships are concluded with suppliers, intermediaries, clients, and competitors. Macroenvironment of the company is represented in more general factors for most businesses, and those factors are predominantly a social sphere. These factors include demographic, economic, natural, political, technical and cultural ones.

The target audience of Coca-Cola is all age groups throughout the whole world; however, some products were designed for special people (like no-sugar Cola or Cola in a new green design for looking more natural). There are two branches of the corporation’s market, and they are retailers and customers. Coca-Cola is distributing its products to large and small supermarkets, cafes, restaurants, hotels, fast-food chains and convenience stores for further selling. It is working in both industrialized countries and developing countries. The company considers demographic factors as the main factors to analyze the customer-marketing environment.

Demographic factors include age, income, ethnicity, and location. All age groups eagerly buy Coca-Cola drinks. The marketing strategies are, however, different: showing Coca-Cola as a cool drink for young and as a classic drink or holiday drink (especially Christmas or New Year) with a good old taste for adults. It is also important that almost all people can afford Coca-Cola as it is inexpensive and easily accessible. Therefore, individuals with any income can buy the drink. Moreover, Coca-Cola does not represent any particular social status. Coca-Cola made it possible to all people of all nationalities to recognize the brand and taste. Interestingly, Coca-Cola suits well even to national dishes of different countries. Moreover, supply chain management allows people to buy Coca-Cola everywhere, even in remote villages.

The microenvironment includes the continuous improvement and striving for market leadership. One more point that is important is having reliable market intermediaries. To provide a high quality, the company collaborates with painstakingly chosen suppliers based on so-called “The Supplier Guiding Principles.” To improve microenvironment, Coca-Cola holds Stakeholder Panel annually to discuss novelties, strategies, and challenges.

The internal environment of the enterprise characterizes the potential of its manufacturing and marketing capabilities. The essence of marketing management now is to adapt the company to changes in external conditions, taking into account the available internal capacity. The internal marketing environment includes the elements and features that are inside the enterprise: the main enterprise funds; the composition and qualifications of personnel; financial opportunities; skills and competence of leadership; use of technology; the company’s image; and experience at the enterprise market. In general, Coca-Cola puts great emphasis on the use of the most modern technology. Importantly, technology allowed the company to become sustainable and eco-friendly (by lowering the use of water and recycling). Additionally, Coca-Cola Company provides best working conditions for its employees, trainings, and encouragement.

In sum, the marketing strategy of Coca-Cola is the management of ideas. Its products, such as beverages, are sold because they are consistent with the idea that Coca-Cola Company has developed and promoted. That was the true reason and not because they have any specific taste, color or scent. At the same time, Coca-Cola builds different associations and develops the ideas through brand and given taste. The key point of Coca-Cola marketing is that it deliberately creates needs and markets, and then furnishes everything, so that these needs can be met only through the consumption of beverages and other products from their company. Coca-Cola Company promotes not products but ideas. At the same time, Coca-Cola offers consumers identity marketing, thereby promoting consumers themselves, making them feel more attractive, successful and belonging to a certain culture.

The Analysis of New Coke as a Product and Its Marketing Campaign

4Ps for New Coke

Marketing mix or 4Ps is a marketing theory. The base of that theory is the analysis of four main factors that take place in marketing planning. These factors are product (product or service, product range, quality, product features, design and ergonomics); price (actual price, margins, discounts); promotion (promoting complex, which includes promotion, advertising, public relations, sales promotion); place (location of the point of sale, distribution channels, the seller’s staff).

The first thing to analyze is the “product”. The new product of Coca-Cola Company was a beverage called “New Coke”. It had a new design, emphasizing on the word “new” on the package. The company announced that the recipe was changed. However, the changes remained unknown as even the original formula of Coke is still a secret. According to blind surveys, New Coke tasted good for customers. The price was the same of the original Coke; the problem was that the company wanted to replace the previous product with a new one. Coca-Cola Company launched a powerful advertising campaign. It was designed for TV, print media, street advertisement, and free publicity cost have reached $10 million (Gorman & Gould, 2015). However, the whole idea in the center of promotion campaign contradicted the image of “old” Coke and was unsuccessful. The “place” factor was meant to be equal to the original Coke. New Coke was most available in the United States, and the time of its existence was too short to spread and establish it worldwide.

Target Market of New Coke: Specify Segmentation Bases

Markets consist of buyers; buyers are different from each other, depending on a variety of parameters. Different factors include resources, geographical location, buying attitudes, and habits, and any of these variables can be used as a basis for market segmentation. However, Coca-Cola treats all nations, countries, and age groups equally, so the segmentation is not sharp.

Even after customers’ claims, there were two products on the market for a while: the “classic” and “new” Coca-Cola held various advertising campaigns. New Coke was a novelty promoted among younger audiences, but the traditional recipe advertisement based on families and adults preferences. Then New Coke name was changed to Coke II, and soon the drink altogether disappeared from the market (Gorman & Gould, 2015). The events happened in 1985 forever changed the dynamics of the soft drinks industry and determined the continued success of Coca-Cola. Brand conquered new heights, as consumers realize that nothing can replace their favorite Coca-Cola.

New Coke Competitors

Coca-Cola secret formula changed after careful research. For that purpose, the company conducted research with focus groups of almost 200,000 consumers. The only thing these studies have not shown was the most powerful attachments that customers could feel towards their favorite drink. That period was also special by extreme competition with Pepsi. The competition between Coca-Cola and Pepsi lasts for almost a century and usually, Coca-Cola was ahead of its main rival. In fact, the only time when Pepsi won, was in the 1980s. Pepsi organized a massive campaign called Pepsi Challenge. Activists across the country held soft drinks blind tests. It turns out that people not seeing the labels are increasingly choosing Pepsi. The Coca-Cola Company’s decision was to create a novelty product. When the company has just announced plans to change the formula, some customers panicked and began to hammer packages cellars of houses with Coca-Cola. Some were even depressed about the loss of their favorite drink. All media spoke only of Coca-Cola to make people realize that this drink had an important role in the American culture. With introducing New Coke, the company got declines in sales. Therefore, it is possible to say that it gained more competitors, namely, all other soft drinks producers. However, at any case, Pepsi and Fanta were the main competitors on the market.

The Reasons Why New Coke Failed

Almost 31 years ago, Coca-Cola Company offered its customers an updated formula for Coca-Cola called “New Coke,” changing beverage recipe for the first time in 99 years (Gorman & Gould, 2015). The creators of the new prescription wanted to give the brand more energy on the most important market for the enterprise that was the United States. However, the company had no idea that soon it would evoke a powerful stream of consumer anger. A few months later resulted in customer dissatisfaction with the return of the original formula, which was named the “classic Coca-Cola.” In fact, 79 days, during which the new drink was being sold, have radically changed the carbonated beverage industry (Gorman & Gould, 2015). The fail with New Coke transformed Coca-Cola company, and today that case serves as evidence of informed risk making strengths, even if that risks are not justified.

Across the country, there were protest groups such as “Conservation of Real Values Society” and the “Community of American Fans of the old Coca-Cola.” The last group mentioned stated that they had 100,000 people, who joined being eager to return to the old formula (Benjamin, 2015). Moreover, in May, in Atlanta, during one of the company’s corporate events, outside the offices of Coca-Cola, there were demonstrators with placards with such slogans, as “Our children will never know what the feeling of freshness is” (Benjamin, 2015).

After arriving in the shops, a “new Coca-Cola”, the experts proclaimed replacement of the prescription as “marketing failure of the century”, and the company received thousands of complaints from outraged consumers all over the country. Resentment has fallen not only on the hot line, but also on all the regional offices of Coca-Cola in the United States. Up to June 1985, the company received 1,500 calls a day from customers while before the “new Coca-Cola” the average daily number of calls did not exceed 400 (Benjamin, 2015). People accused all those who have at least an indirect relationship to the emergence of new products – from the guards at the head office to its neighbors, who worked for Coca-Cola. All those events eventually changed the future strategy of the company. The decision to issue the “new Coca-Cola” was the first example of a “reasonable risk,” and there are proposals and encouragements for employees to use such risks in their work, as they are very important to the whole success of the company.

Finally, in July, Coca-Cola gave up under the pressure of protests and announced the return to the market of the classical formula. This news has become the main topic on the news channels and appeared on the front pages of national newspapers. Buyers were overjoyed and during two days after the announcement, the company received 31,600 phone calls from Americans (Benjamin, 2015). As the result, the company lost a lot of money, and the known figures were $4 million for the New Coke development and $30 million of the final product that customers did not want to buy (Benjamin, 2015). There were also such ideas that the failure of New Coke was advantageous for the company. Such assumptions belong to conspiracy theories. For example, the company knew about future customer dissatisfaction and returning the well-known product back would increase sales considerably. However, it is most likely the most famous marketing mistake and a lesson in the history.

Conclusion

In sum, the Coca-Cola Company was once famous for marketing failure, namely, for introducing New Coke. The reason for that novelty was the desire to reinvigorate the beverage company and to win in competition with Pepsi. The new product caused the outrage of customers; they understood the importance of Coke in culture, everyday life and wanted it back. Of course, New Coke was abandoned, but the lessons were made.

There are numerous reasons why New Coke failed. First, it was an attempt to replace the beverage that became the symbol of America. Second, the promotion contradicted the philosophy of the original Coke and customers saw that. Then, it appeared that better taste does not mean more success, and Coca Cole became the brand that the notion of New Coke was trying to violate. Finally, there were mistakes in the market research. Indeed, New Coke tasted good, but the trial was without comparisons, and the beverage was tried alone. After solving these issues, Coca-Cola Company gained a stronger position in the world market of beverages.

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