On April 23, 1985, the Coca-Cola Company took a HUGE marketing risk.
That was the day they announced they were changing their 99-year-old formula; a recipe that helped them become one of the most popular and iconic soft drinks in the world. They called it “New Coke.”
The reason for the change was to reenergize the brand. The result was a firestorm of protests and very angry customers who were outraged by the decision. Calls flooded in to Coca-Cola offices across the US – roughly 1,500 per day. The CEO was bombarded with angry letters, calling him one of the dumbest, most irresponsible executives in American business history.
Protest groups – such as the Society For The Preservation Of The Real Thing and Old Cola Drinkers Of America (which claimed to have recruited 100,000 in a drive to bring back “old” Coke) – popped up around the country. Songs were written to honor the old taste. Protesters at a Coca‑Cola event in downtown Atlanta in May carried signs proclaiming “We want the real thing” and “Our children will never know refreshment.”
Was this a wild, irresponsible and poorly thought-through decision? An early Bud Light–style marketing blunder made by foolish and ego-driven executives who held disdain for their customers?
Before you answer, you need to know a few facts.
At that time, the cola market was lethargic, and consumer preference and brand loyalty were down. Market share for Coke had been slipping for 15 consecutive years. Then their biggest competitor, Pepsi, not only made the brilliant decision to partner with Michael Jackson but also initiated one of the most successful campaigns for the brand, the Pepsi Challenge, proving that cola drinkers preferred Pepsi over Coke in blind taste tests.
Coke had to do something.
That’s why they decided to launch a new formula. They ran taste tests with nearly 200,000 people and discovered that consumers preferred the new formula by a margin of 53 to 47. They initially were going to sell both the new and the old, but store owners pushed back, stating they didn’t want to use their limited space to stock both versions. The company considered rolling out New Coke only to McDonald’s restaurants, but the marketing team thought that would diminish the new brand. So they decided to go “Full Monty,” announcing the change.
So, what mistake did they actually make?
First, they forgot that people buy on emotion, not logic. They underestimated the brand loyalty of their best customers – the smaller 20% of any Pareto distribution that make up 80% of sales. If you try to appeal to the 80%ers, you’ll inevitably make decisions that will push away the 20%ers.
Second, focus groups are inherently flawed because they don’t always represent what people will actually do. They represent what people like to believe about themselves – that they are logical, analytical thinkers who make decisions based on facts, not frivolous, silly emotions.
BLIND taste tests are just that – unhooked from the emotional, psychological connection we have with the brands we buy. People behave differently in a lab than they do in the wild.
When Frito-Lay runs focus groups for what type of potato chip consumers prefer, taste testers insist they like less greasy, less salty and healthier chips…but what they buy paints a much different story.
And finally, nobody likes things taken away from them. Had Coke launched the new product alongside the old one, there would have certainly been a different reaction.
Right now, Cracker Barrel is experiencing a “New Coke” moment. I’m not quick to judge like the majority out there, because we don’t know the reason, research and story behind the decision. Maybe it WAS a Bud Light type of logic based on disdain for the “old” customer who likes their kitschy, cluttered stores and old-fashioned decor – and if it was, they deserve what they got.
But maybe it was a much-needed risk taken to reenergize sales and stay relevant that worked in “the lab” but proved wrong once rolled out to the masses. Sometimes we all need to roll the dice on a big, new idea. And sometimes those decisions simply don’t work.
The lesson? Never “focus group” your ideas to everyone. If everyone is your customer, you don’t have a brand and you don’t have a true target market. Pay attention only to the 20%ers who are the true and loyal buyers.
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