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- Subject Code : MCR007
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- Subject Name : Management
Project Management
Table of Contents
Introduction.
Background.
How it Started.
Promotion.
Early Victory.
Criticism..
Reasons for Failure.
Solutions for the problems.
Outcome of the Blunder
Reintroduction.
Comeback.
Conclusion.
Reference.
Introduction to New Coke Failure Analysis
A project can be said to be a failure if it does not deliver results within a fixed amount of time or a fixed budget. A project is a failure or not and is also decided on the satisfaction of the result. A project is also termed as a failure if it does not achieve the financial expectation or it fails to achieve the ROI target (Lee & Miesing, 2017). Although Coca cola sold more of its product through the vending Machine, fountain sales in the restaurants and in the sporting locations as they had the “pouring rights' ', Pepsi sold more products in the supermarkets. Over the years there were many failed projects even from the big companies. In this paper one of such projects is discussed. In a survey it was seen that the sweeter cola defeated both the Coke and the Pepsi in a very big manner. The testers were asked if the product was from Coca Cola would they buy it or not, and in a reply most of them said they would, although it is going to take a little time to get used to it.
This paper discusses about the failure of New Coke project of Coca Cola Company which was introduced in 1985 in the United States of America (Tadaion¸2016). This paper discusses why the project failed, what could have been done to save it and how the company overcome the failure.
Background of New Coke Failure Analysis
Coca Cola held almost 60% of the market share after the end of World War 2. Due to the competition faced by Pepsi- Cola in 1983, the market share of the Coca- Cola declined by nearly 24%. The market analyst thought that the “baby boomers” will prefer more diet coke than regular coke as they are ageing and are more health and weight conscious (Kuo, 2020). The market analyst thought that the growth in the high calorie market is only going to come from the young drinkers who during that specific time favoured more Pepsi than the coca cola by a huge margin. Also, the general market for coca cola was declining steadily during the starting of the 1980’s since most of the consumers preferred buying diet or non-cola products. This trend further downsized Coca Cola's market share. Roberto Goizuets became the Chief of Officer of Coca Cola in the year 1980.
How It Started
The senior executives of Coca Cola’s started a confidential project which was headed by the vice president of marketing Sergio Zyman and the Coca cola’s president of the United States of America Brian Dyson to make a new flavour of the Coke (Petroski, 2018). This project was named “Project Kansas” after the photo of the Kansas journalist William Allen White where he was drinking a coke. This photo has been used in many advertisements of the Coca Cola and it also hangs on many executives' walls. About 10% to 12% of the testers felt furious and said that may stop drinking coke completely. During that time the surveys were given a big significance in terms of the standard marketing process. The survey was less negative and it convinced the management to change the regular formula in the year 1985 (Butler, 2018). However, during the survey, the focus group gave a hint that how the change in the formula might play in the public, but the company did not pay any attention to it which later turned out to be really important.
An idea was given to the management of selling the new flavour as a separate variety of the Coca Cola which they refused. With the new coke another variety was also launched with it named Cherry Coke in 1985. During the early phases of his career Goizueta was in charge of Coca Cola’s Bahamian subsidiary. During that time, he changed the recipe of the drink slightly which increased the profit to a great extent. This led him to believe that change was needed. He even said that it was going to be a new coke or no coke. He was a firm believer that the change must take place openly and thus he wanted the containers to carry the name new from which it got its famous name. Goizueta has claimed that he had visited his mentor and the precious Coca cola’s chief Robert W. Woodruff. The same man who has made the company an international brand after World War 2. Goizueta said that he had got the blessing of Robert W. Woodruff for the change. But many of Goizueta friends who were in the company doubted whether Robert W. Woodruff understood Goizueta's true intentions.
Promotion
The coke at first was introduced in the year 1985 on April 23. Later during that week, the production of the original formula ended. Initially in many areas the new coke was introduced in the old remaining coke container unit the new packaging was available. The press conference which was held at the New York City’s Lincoln Centre for the introduction of the new formula did not go as planned. Goizueta in the press conference described the new coke as more “bolder”, “rounder” and “more harmonious”. He also backed the change by saying that the secret formula was not unimpeachable and unalterable (Adeyanju, 2020). He denied admitting the tasting of tests were the reason for the change. He claimed it to be the easiest decision he has ever made.The new emphasis on the sweeter taste of the new coke went completely against the coca cola advertisement where the spokesperson named Bill Cosby said the less sweet taste of the coke was the main reason to prefer it more from the Pepsi.
Early Victory
Coca Cola used marketing pushing techniques where it gave the new coke cans to the workers who were renovating the Statue of Liberty for the centenary. They also gave thousands of cans in Lafayette Park. The moment the new formula was introduced it was available at McDonalds and other drinking fountains in the United States. The sales figure from the cities where it had been introduced showed a promising reaction as it was predicted by the market research. The sales of coke were up by 8% when compared with the previous year during the same time. Many of the coke drinkers started buying the new coke in the same capacity they were buying the old one. The survey also showed that most of the regular new coke drinkers liked the new version (Amato, 2017). According to the survey nearly three quarters would buy the new coke again. However, the main taste remained in the Southeast where coke was first bottled and tasted.
Criticism
In Spite of the acceptance of the new coke in a large number of drinkers, many of the drinkers resented the change in the flavour, and were also very vocal about it. This was the same thing which happened in the focus group. Many of these people were southerners who considered Coca Cola as a base part of their regional identity (Bhat, 2017). They saw the change in the flavour as a civil war. The headquarter of the company at Atlanta started receiving angry letters and telephone calls which conveyed the anger and disappointment among the people. Nearly more than 40000 letters were received by the company, even including one which was directly addressed to the Chief of the Coca Cola company that is Goizueta. Even some letters asked for his autograph as the letter termed him as one of the dumbest executives in the history of the United States. The hotline of the company during that time received more 1500 calls a day, which was earlier only 400 a day. Coke hired a psychiatrist to listen to the calls, who said that the people on the phone sounded as if they were talking about the death of a family member.
This was later joined by voices from outside the region. Bob Greene a columnist at the Chicago tribune wrote some of the reprinted articles and made fun of the new coke’s flavour and damned the coke executive for going through with the change. Many comedians including Johnny Carson and David Letterman made regular jokes and mocked the change made by the Coca Cola. Even the ads of the new coke were heavily booed when they appeared at the Houston Astrodome. Fidel Castro, a very long- time drinker of the coke also made a contribution to the backlash where he called the new coke a sign of capitalist decadence. Even Goizueta’s father was not happy with the change.
In spite of the resistance faced in the south, The New Coke did well in many parts of the country (Zhang, 2017). However, the executives were not sure about how the new coke was going to do in the international market. The executives had a meeting with the international distributors at Monaco and to the surprise of the executives the distributor was not even interested in selling New Coke. Zyman even heard some doubts from his relatives and family members who lived in Mexico. The president of Pepsi at that time Roger Enrico mocked Coca Cola’s decision and called it the “edsel of the 80s”.
Reasons for Failure
There many reasons for the blunder committed by Coca Cola which are
- The market research had poor taste- Coca Cola before launching the New Coke in the market conducted test research on 200,000 subjects who said the drink beat both the Pepsi and the old coke at the same time (Samman¸2016). Thus, when it finally went into the market the company was very confident. However, the results were completely opposite as they received more than 400,000 angry letters and calls.
- The biggest mistake made by Coca Cola was that they completely based their research on taste alone. And it turns out most of the people that are nearly 53% loved the new coke taste and even many of them preferred it over old coke. But the customers not only buy products based on the taste but they make their decision based on the old habits, nostalgia, and even loyalty which the coca cola company did not take into consideration.
- This change was made at the time of war between the coca cola and the Pepsi. And many customers view the coke brand as a part of their identification (Jain¸2016). Changing the brand made these customers confused about their identification and their relation with the brand.
- During the research the company made a big error which is they conducted a blind test. They did not inform the tasters that in choosing new coke they would pull out the original old coke which would have completely changed the decision.
- What the market research failed to understand was that although the testers appreciated the new taste, the coca cola brand had a symbolic significance to the buyers mainly in the American market. Many American people preferred the tradition over novelty and thus New Coke did not have a chance of surviving in front of the old coke.
Solutions for The Problems
At first Coca Cola should not have conducted a blind test with the testers. They should have informed them that if they release the new flavour, they are going to replace it with the old product. They should have understood the connection the people share with the brand. They should have considered the feelings and the nostalgia which is shared by the customers of the brand. They did not fully follow the survey result, as it was seen people who did not like the taste were able to influence other people’s decision because of peer pressure. Though, it ultimately occurred when the product actually released as it was seen the product initially achieved some positives. In the survey many people also had some concerns about how this new product will play into public context but the company did not pay any attention. This was mainly because of the overconfidence of Goizueta who thought that it was a definite success.
Outcome of the Blunder
The Coca Cola Company never actually revealed how much of money they had actually lost from their brief coke blunder. However according to the New York Times, they had spent nearly 4 million dollars in research and marketing and the company also lost nearly 30 million dollars because of the unsold new coke inventory. From this a few positive things also came like it taught the caution tale of failed marketing campaigns.
However, Coca Cola also gained some things like due to this blunder it increased people's interest in the original coke recipe (Taylor, 2017). Thus, when the original coke came back into the market it outsold both the new coke and Pepsi. According to the New York Times coca cola’s market share increased by nearly 9% compared to Pepsi which had only 4% increase.
Reintroduction
David Pryor on the floor of the US senate called the reintroduction of the original formula “a meaningful moment in American History”. The hotline of the Coca Cola company received 31,600 calls in just two days. The new product sold as the coke while the original was named as the Coca Cola classic. For a very short time it was referred to as the old coke by the public. Gay Mullins was given the first case of the Coca Cola Classic.
Comeback
Although on May 21, 2019 Coca Cola announced the comeback of the New Coke with the same formulation of 1985 for a limited period of time. It would be reintroduced for promoting the third season of the popular Netflix show Stranger Things. The show which is set in the year 1985 had included the new coke cane in three of its episodes.
Conclusion on New Coke Failure Analysis
Coca Cola was losing a huge amount of market share in the soft drinks market for many years. This forced them to introduce the new coke, which instantly became a disaster. However, it made the people connect with the old Coca Cola and thus when the original coke was reintroduced it instantly became a hit. Just after the 79 days of the launch of New Coke the Coca Cola executives had announced the return of the original formula. On July 11, afternoon of the year 1985 the original coke was introduced. ABC aired a special bulletin to share the news with the viewers. After New Coke was named as Coke II in 1990 it was finally pulled off the market in the year 2002 of July month. If coca cola had launched New Coke as a separate product along with the old coke it would have been a big success. As many people appreciated the taste of the new coke. Many customers threatened boycotts and even Coca Cola’s own bottling partner were very reluctant to distribute the New Coke products. The food critic of the TIME magazine Mimi Sheraton also disliked the taste of the new coke. Thus, it teaches that even if a project fails one should not lose all of its hope and try to take something positive out of it, which will help in its next project. One should also not depend completely on market research. Though market research is very important they can be sometimes wrong.
Reference for New Coke Failure Analysis
Adeyanju, C. G. (2020). Drug Trafficking in West Africa Borderlands: from Gold Coast to Coke Acost. Journal of Liberty and International Affairs, 6(1), 70-86. Retrieved from https://www.ceeol.com/search/article-detail?id=853341 [Retrieved on 13 October, 2020]
Amato, N. (2017). The importance of killing projects. Journal of Accountancy, 223(4), 18. Retrieved from https://search.proquest.com/openview/9211e9901aabf0084e87d323b1650212/1.pdf?pq-origsite=gscholar&cbl=41065 [Retrieved on 12 October, 2020]
Bhat, A. K. (2017). Is Evidence-based Marketing an Old Wine in a New Bottle?. EVIDENCE BASED MANAGEMENT, 290.
Butler, E. (2018). Tasting off-flavors: food science, sensory knowledge and the consumer sensorium. The Senses and Society, 13(1), 75-88. Retrieved from https://www.tandfonline.com/doi/abs/10.1080/17458927.2017.1420028 [Retrieved on 12 October, 2020]
Jain, C. L. (2016). How to use big data and predictive analytics to improve the success of new products. Review of Business, 37(1), 48-56. Retrieved from https://go.gale.com/ps/anonymous?id=GALE|A456092719&sid=googleScholar&v=2.1=r&linkaccess=abs&issn=00346454&p=AONE&sw=w [Retrieved on 14 October, 2020]
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Samman, M. (2016, July). Bulging Patterns of Coke Drums. In Pressure Vessels and Piping Conference (Vol. 50398, p. V003T03A065). American Society of Mechanical Engineers. Retrieved from https://asmedigitalcollection.asme.org/PVP/proceedings-abstract/PVP2016/50398/V003T03A065/283858 [Retrieved on 11 October, 2020]
Tadaion, V. (2016). Cyclic fatigue resistance of silica based refractories for Coke ovens. Retrieved from https://aaltodoc.aalto.fi/handle/123456789/22160 [Retrieved on 12 October, 2020]
Taylor, B. (2017). How Coca-Cola, Netflix, and Amazon Learn from Failure. Harvard Business Review, 10. Retrieved from http://clarionconsulting.com.au/wp-content/uploads/2018/06/HBR-Learn.From_.Failure.CCA_.Netflix.pdf [Retrieved on 13 October, 2020]
Zhang, J. (2017). Design of a new PID controller using predictive functional control optimization for chamber pressure in a coke furnace. Isa Transactions, 67, 208-214. Retrieved from https://www.sciencedirect.com/science/article/abs/pii/S0019057816306796 [Retrieved on 11 October, 2020]
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