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New Coke Fiasco

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Assignment for CSU Global Campus ORG525

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New Coke Fiasco

  1. 1. Running head: NEW COKE 1 New Coke James Balle ORG525 – Leadership and Decision Theory Colorado State University – Global Campus James Ondracek August 26, 2013
  2. 2. NEW COKE 2 New Coke • April 23, 1985 – Coca-Cola announced the reformulation of Coke • July 11, 1985 – Coca-Cola announced it would bring back the original formulation of Coke as Coca-Cola Classic and continue with both New Coke and Coca-Cola Classic (Coca-Cola Company, 2012)
  3. 3. NEW COKE 3 Circumstances • Pepsi’s Pepsi Challenge Advertising – Pepsi conducted blind taste tests and determined that more people like the taste of Pepsi than Coke • Coke was losing market share – Coke’s overall sales lead was diminishing – Coke sales in supermarkets fell below Pepsi (Shindler, 1992)
  4. 4. NEW COKE 4 Coke’s Strategy • Reverse loss of market share • Beat Pepsi • Modernize (Cassels, 2010)
  5. 5. NEW COKE 5 Project Kansas • Research New Coke formulation – Focus Groups • • • • $4 Million spent over 2 years 200,000 participants Only small percentage tasted final new formulation Only small percentage told about reformulating Coke – Tests confirmed Pepsi’s taste test results • Pepsi better tasting than original Coke • New Coke better tasting than Pepsi (Gelb & Gelb, 1986)
  6. 6. NEW COKE 6 Coke’s Decision • New formulation • New packaging • New advertising campaign (Coca-Cola Company, 2012)
  7. 7. NEW COKE 7 The Announcement • Coke executives confident • Beverage analysts believed change would cause little impact • Pepsi criticized Coke for using new sweetener with higher caloric content (Shiver, 1985)
  8. 8. NEW COKE 8 Public Backlash • Negative press coverage (Koten & Kilman, 1985) • Coke deliverymen blamed and ridiculed (Koten & Kilman, 1985) • Hoarding of and black market for original Coke (Demott, Kane, & Pelton, 1985)
  9. 9. NEW COKE 9 Coke’s Framing Bias • Change Coke to beat Pepsi – Coke executives were singularly focused on Pepsi’s taste test results – Creating a better tasting Coke was the only thing that mattered – No concerns for anything else
  10. 10. NEW COKE 10 Groupthink • Some taste test participants, told of the possibility of replacing Coke, expressed dislike for the idea—executives ignored their concerns (Gelb & Gelb, 1986) • Junior executives at Coke seemed to not want to go against senior executives (Cassels, 2010)
  11. 11. NEW COKE 11 Bring Back the Old Coke • Coke executives began working on bringing the old Coke back 11 days after New Coke was introduced • The new name for the old Coke was decided just 2 days before the announcement was made (Zmuda, 2011)
  12. 12. NEW COKE 12 Coca-Cola Classic • Introduced 77 days after New Coke debuted • Coke executives brought back old formulation to placate loyalists • New Coke would still be flagship • Coca-Classic would have small market share (Koten & Kilman, 1985)
  13. 13. NEW COKE 13 Public Rejoicing • News Coverage – Peter Jennings interrupted General Hospital to make announcement (Zmuda, 2011) – News of Coke’s decision was covered by all three television networks (Zmuda, 2011) • Announced on the floor of the United States Senate (Spitznagel, 2013)
  14. 14. NEW COKE 14 Old Overtakes New • Coca-Cola Classic began outselling New Coke by a wide margin • Many bottlers gave Coca-Classic prominent shelf positioning over New Coke (Altaner, 1986)
  15. 15. NEW COKE 15 Coke’s Confirmation Bias • Coke executives still believed in New Coke (Koten & Kilman, 1985) • Coca-Cola Classic took its place as flagship (Koten & Kilman, 1985) • Coca-Cola Classic began outselling New Coke and Coke’s lineup began outselling Pepsi’s lineup (Altaner, 1986)
  16. 16. NEW COKE 16 New Coke Failed • New Coke changed to Coke II in 1990 (Shindler, 1992) • New Coke discontinued in United States (Shindler, 1992) • Coca-Cola Classic became Coca-Cola in 2009 (Zmuda, 2011)
  17. 17. NEW COKE 17 Alternative Option 1 • Release New Coke with a different name while keeping original Coke • Market new product to compete directly with Pepsi
  18. 18. NEW COKE 18 Alternative Option 2 • Re-energize Coca-Cola brand • New advertising • Reposition Coca-Cola in the market
  19. 19. NEW COKE 19 Lessons Learned • People are resistant to change (personal communication, August 24, 2013) • Conduct more thorough market research • Impact of media and social influences (Shindler, 1992)
  20. 20. References Altaner, D. (1986). Old, new or classic, Coke still number one now that marketing confusion has calmed, the old recipe outsells the new three to one. Sun Sentinel, March 30, 1986. Coca-Cola Company. (2012). The real story of New Coke. Retrieved from http://www.coca-colacompany.com/stories/coke-lore-new-coke Cassels, P. (2010). When image became everything: The New Coke fiasco at 25. Retrieved from http://www.thefastertimes.com/business/2010/04/23/the-new-coke-fiasco-at-25/ Colorado State University-Global Campus. (2013). Module 4 – Managing group dynamics in a decision environment. [Blackboard ecourse]. In ORG 525 – Leadership and decision theory, (p3). Greenwood Village, CO: Author. Colorado State University-Global Campus. (2013). Module 5 – Managing biases, and emotional influences in decision making. [Blackboard ecourse]. In ORG 525 – Leadership and decision theory, (p2). Greenwood Village, CO: Author. DeMott, J. S., Kane, J. J., & Pelton, C. (1985). All afizz over the New Coke: Some hate the taste, but sales have never been better. Time, 125(25), 60-60. Gelb, B. D., & Gelb, G. M. (1986). SMR Forum: New Coke’s fizzle lessons for the rest of us: New Coke fizzles understanding consumer resistance how better research can help what does the product do for the buyer? Applying the research references. Sloan Management Review, 28(1), 71-77.
  21. 21. Koten, J., & Kilman, S. (1985). Coca-Cola faces tough marketing task in attempting to sell old and New Coke. Wall Street Journal, Eastern Edition, July 12, 1985. Koten, J., & Kilman, S. (1985). Marketing classic: How Coke’s decision to offer 2 colas undid 4 1/2 years of planning --- after a successful Introduction of New Coke, firm began to see market slip away --- which one will be flagship? Wall Street Journal, Eastern Edition, July 15, 1985. Ross, M. E. (2005). It seemed like a good idea at the time: New Coke, 20 years later, and other marketing fiascoes. Retrieved from http://www.nbcnews.com/id/7209828/ns/us_news/t/it-seemed-good-idea-time/ Schindler, R. M., (1992). The real lesson of New Coke: The value of focus groups for predicting the effects of social influence. Marketing Research, (4)4, 22-27. Shiver, Jr, J. (1985). Coca-Cola will soon taste sweeter, report says. Los Angeles Times, April 23, 1985. Spitnagel, E. (2013). From Coke to Netflix: Consumers drive brands into retreat. Retrieved from http://mobile.businessweek.com/articles/2013-02-20/from-coke-to-netflix-consumers-drive-brands-into-retreat Zmuda, N. (2011). Inside the framework—and fallout—behind New Coke. Advertising Age, 82(18), 14-14.

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