KnowThis Blog Postings
- Published on October 15, 2010
- Posted by Paul Christ
A classic marketing mistake taught in nearly all basic marketing courses is Coca-Cola's 1985 decision to change the formula of their flagship Coke product. In a nutshell, during the mid-1980s Coke was being hammered by their main competitor, Pepsi. At the time, Pepsi was running highly effective taste test advertisements showing their brand being favored over Coke. As hard as Coke tried to counter this with their own ads and other promotions, Pepsi continued to gain market share. With changes to promotion, pricing and even distribution not working, Coke felt the need to respond with the only marketing mix decision it had not changed, the product. In particular, they altered the Coke formula, a drastic decision as the formula had not changed for almost 100 years.
While the “new” Coke got off to a favorable start, long-time customers quickly turned on the company and demanded the return of the old formula. In these pre-Internet, pre-social network days, the angry customer response involved public demonstrations and letter writing campaigns that caught the media’s attention. Things grew so intense that Coke had no choice but to reinstate the old product, renamed Coke Classic, while retaining the new formula product under the New Coke name.
The key lesson to be learned in Coke’s mistake is not to underestimate customers’ relationship with a brand, especially when the marketer is considering changing a key component. Marketers, who are considering major changes to their product, need to engage in marketing research to address the key issues of concern to their customers. In the Coke case, the company was very skilled at conducting marketing research involving customers, however, they made the mistake of not asking customers critical questions about their feelings toward the original product.
Of course, Coke is not alone in reversing a bad marketing decision. Many companies face this including the one featured in this story. As discussed, the clothing retailer, Gap, decided to change the design of their logo, which their marketing team felt is dated. And, just as in the Coke case, the decision had to be reversed when customers voiced their complaints on social media sites.
The new design was meant to show how the Gap chain has evolved from its long-standing, even preppy image. It was meant to complement Gap's sleeker new designs, new fits for black pants and khakis and more modern feel, company officials said. But instead the logo flap served as a lesson in the power of the Internet to influence a company's brand message.
Can it be argued that Gap’s response to online criticism will benefit them in the long-run? If so, how?
Image by thinkretail