Critical Perspective to the Company Decision in the 1980s to Launch Reformulated Coca Cola - Case Study Example

A critical Perspective to the company decision in the 1980s to launch reformulated Coca Cola and suggest where a different approach to the loss of sales might have produced a different outcome Contents Contents 2 Introduction 3 Discussion 4 Critical Perspective to the company decision in the 1980s to launch reformulated Coca Cola 4 Critical Perspectives 5 Whether a different approach to the loss of sales might have produced a different outcome 10 Conclusion 11 References 13 Introduction The Coca-Cola Company is a multinational beverage company originated in America. The flagship product of the company for which it gained so much importance was the Coca Cola product which was invented in 1886. The company sells in more than 200 countries its beverage products. The flagship product is a carbonated soft drink that is sold in restaurants, vending machines and stores throughout the world. The company was originally invented by John Pemberton which was later acquired by Asa Griggs Candler, who then used all the marketing expertise to make Coke a dominant player in the soft drinks market during the 20th century. Coca-Cola has been in a very crisis situation in 1980s in order to maintain its market leader position. It faced a strong competition from PepsiCo. The company decided for developing new strategy for product development in order to face the competition from PepsiCo. Coca-Cola reformulated its product from diet coke to a new sweeter drink called as the ‘New Coke’. The general outline of the decision making process was to adapt to the changing taste of the consumers and to re-launch an innovated product. According to the company such a new product development strategy was adopted to maintain the market share which faced turmoil with PepsiCo strongly competing in the market (Watters, 1978, pp.150-152). The entire packaging of the product was changed with a new beverage, and even a new slogan for the product. The company even changed the advertisement campaign in order to launch New Coke. Coca-Cola removed the old formulation of its product from the market. The new strategy adopted by the company did not bring a lot of success to the brand. The company launched a marketing strategy that failed miserably. Coca-Cola failed to analyze the requirements of the market and the consumer demand (Hays, 2000, pp.123-124). The question of this research is important as it would help the readers to understand where a company can make mistakes in framing a decision. It would also help to analyze the different ways the company could have attempted to come out of the crisis situation. The company attempted to increase its market share and maintain its market leader position but the strategy the company formulated did not proved to be a success but a major failure in its history. The paper will try to analyse the decision of the company to launch reformulated Coca Cola and whether a different approach might have lead to different results. This essay would mainly focus on the critical perspective of the decision making of the company to reformulate their product, it would even focus on the major areas where the decision making went wrong, and lastly it would analyze the different aspects that could be focused by the company to develop a better marketing strategy. This essay deals with critical analysis of reformulation strategy adopted by the company and is precisely divided into the three parts. Discussion Critical Perspective to the company decision in the 1980s to launch reformulated Coca Cola Coca Cola has performed the biggest blunder in marketing strategy planning by launching the product New Coke. The product was launched because the company on facing a strong competition from PepsiCo started a survey to know the consumer demand in the market. It performed some blind taste tests from where it got the results that Pepsi was preferred more than Coke by the consumers. On basis of such a survey the company decided to launch a soft drink that would taste sweeter like that of Pepsi. It was then that New Coke was launched. It is often misinterpreted by many companies that if it spends millions of dollars to know the needs and wants of consumers by carrying out extensive market research a fruitful outcome will be generated. But market research are always not that reliable to make some major changes in the product line and New Coke was an example of such a product launched due to extensive market research but failed drastically (Bell, 2003, pp.33-34). On the basis of a taste tests conducted on 200,000 respondents Coke decided to reformulate its old Coke formula with that of a sweeter drink which was preferred more by the customers as the result of taste tests. Often companies try and re-launch their products for striking the minds of the customer and capture a desirable market share. But the main reason behind the failure of the reformulation strategy adopted by Coca Cola was its failure to understand the brand loyalty it possessed in the market (Oliver, 1986, pp.134-135). The brand loyalty was so strong that such a new product development strategy was not liked by the customers but they became angry on the company for shifting from the old product formulation. The result of such a strategy adopted by the company was a decline in the consumer’s interest towards the brand. The company performed some very serious methodological mistakes in the taste test survey it performed. Coca Cola through its market research tool could not judge the psychological content of the consumer’s for brand loyalty. The company used three different formulations in its taste testing against the Pepsi and the traditional Coke. Only 40,000 of the total 200,000 respondents tasted the new formula which was to be launched. The consumers were uninformed regarding the product they tasted. Being uninformed the consumer’s did not have the slightest idea that their preference for the taste was helping the company to adopt a new strategy for Coca-Cola to develop a new Coke formula for the market. Critical Perspectives On the contrary if the company would have a launched a voting system for the customers between the Old Coke and New Coke it would have given a much more positive result as the majority of the customers would have chosen the Old Coke superior to the New Coke on basis of brand loyalty and emotional attachment. The taste test survey revealed that the consumers preferred the new Coke formula. However the research technique adopted by the company only had yes/no options which were unable to highlight the emotional attachment people had towards the brand and the old Coke. The company did not place the conditions in front of the respondents that their preference towards a particular product would keep them away from tasting the old product forever (Daveni, 2010, pp.234-235). The company had created a hypothetical situation for the company while performing the taste test research survey. Such a situation resulted into undesirable outcomes, and structuring those outcomes into reformulation of the old product led to a drastic marketing blunder committed by the company. The research technique of the company even failed to analyze the consumer buying behaviour. The research tool implemented by the company gave equal weight to all of the consumer responses in spite of the 80/20 rule that clearly states that in a product category even a small minority accounts for a vast majority of purchasers. If the company would have kept in mind this concept then it would have gone ahead with a reformulation strategy. Coca Cola Company did not focus on its symbolic character rather it focused more on the Coke’s physical properties throughout its market research. The company failed to keep in mind the fact that there is certain section of consumers who closely linked themselves with the Coca Cola brand. This association of consumers to a specific brand often is regarded as the ‘I use this, this is me’ principle (Steers, 2006, pp.244-245). According to this principle such kind of mindset is developed in those consumers towards the products that are close to them. Thus the consumers who were emotionally attached with the old Coke brand posed a strong resistance towards the new coke. It failed to analyze the psychology of the US consumers who prefer tradition and continuity over novelty. Amongst the majority of the US population was belongers who did not like constant changes but preferred stability. The Coca Cola Company for years has followed a method of being appealing to those customers who resembled traditional values (Pendergrast, 2000, pp.67-69). Sudden reformulation of the old Coke was a slap for those customers who associated the brand with familiarity and tradition. The new product development strategy adopted by the company resulted in more of market share loss compared to what it faced with PepsiCo in the market. In order to maintain its market leader position the strategy it implemented by launching new Coke proved to be a total failure for the company. The company’s decision of taking the classic coca cola beverage away from the market made the consumers angry. There was a lot of protest from the consumer’s end forcing the company to shift back to its old strategy. The attempt of re-positioning of its product was not accepted by the consumers at all. The company again came back to its original product formulation strategy realizing the fact that they already possessed a competitive advantage through its large base of loyal customers and that there is no need for a new product to be launched in the market to create a new competitive advantage. The brand loyal customers associated Coke with their identity, youth, and country. Coke has an added advantage of having such a large base of loyal customers who are emotionally attached with the brand which makes it much more gripping than the taste of the product (Batey, 2012, pp.32-35). PepsiCo is often considered as the timely brand as it changes its taste and appearance according to the taste and demand of the youth whereas Coke is considered as the timeless brand which attains more loyalty from the consumers as the years passes by. Thus shifting away from such timeless brand recognition was not a sensible decision made by the company. Each company has its own positioning strategy often duplicating what the other brands do will not give positive outcomes. Coke had a brand loyalty has it did not change with time, launching a new product was not a solution to remain competitive in the market. On the contrary the company should have launch some campaigns to trigger in the minds of the customers that no matter how much innovative soft drinks come in the market they will remain the key players for the expertise and the customer base they possess and has maintained over the years. But for this approach the company needed to analyze the opinions of the customers well where they failed very badly as a consequence was the launch of new Coke (Schnaars, 1998, pp.131-132). The company could not face the challenge from Pepsi as it was the only cola brand with no such competition in the earlier stage. The research results of Pepsi also proclaimed that the sweeter taste of Pepsi was preferred more compared to that of the Coca Cola which made the company to rethink on its business process and launch the new Coke. The difficulty the company faced after the launch was mainly because of the way the decision was framed. The problem analyzed by the company was of taste. The decision framed by the company was that they could once again enter the market with a superior product once they had made some considerable changes in the formulation of its product’s taste (Hastings, 2013, pp.154-155). The decision thus framed overlooked the fact that there was a strong emotional relationship that the consumers had with the brand. The strategic decision of launching a new product has a series of hypothesis such as the customer need, functional and emotional benefits of the product can give a competitive edge to the brand, growth in the market size, product will help to serve the available market opportunity, product will not have a cannibalizing affect on the existing products, and it will yield very good profit margins thus covering up the cost associated with launching the product into the market. In this situation these possible hypothesis was not tested appropriately thus resulting into ignorance of the fact that not all of the Coke drinkers would like to switch. Launching a new marketing strategy requires proper analyses of all the respective areas. As in the case of Coke the company was only considered to maintain its leadership position and while doing so it ignored the strengths it already possessed. Some modifications in slogans and packaging would have been much more beneficial for the company than taking the risk of launching a completely new product in the market. The dependence of the company on a blind taste test survey and on the results that PepsiCo had formulated made the company to take some decision that proved to not so strategic for a long run. The positioning of any product plays a vital role in the market. It is not always beneficial for a company to re-position its brand name by developing a completely new product (Ulwick, 2005, pp.59-62). The product configuration of PepsiCo and Coke was totally different and the high sales of PepsiCo do not necessarily mean that the entire population liked the sweeter soft drinks more than that of Coke. Coke duplicated the strategy followed by PepsiCo by re-launching its new product and washing away the old formulation strategy. The brand name it had developed was because of the old Coke and such a marketing strategy would have never ever ended up giving possible outcomes. In the 1980s the strategy of Coke is the biggest blunder in the marketing history. The company was unaware of the fact that only physical properties do not drive sales of a company but there are additional factors such as consumer buying behaviour and customer loyalty that initiates the profit growth for a firm. A sudden change in the entire appearance of the product and to the extent of changing the product formulation decreases the trust level of the consumers which was there towards the original brand. Over the years the brand has been associated with a timeless entity which people associated with familiarity and tradition. A sudden change from being a timeless brand to a changeable brand made it unacceptable to the customers who showed extensive brand loyalty. Thus the strategic decision of the management of the company failed due to improper research techniques and analysis of market conditions and resulted into strong protest from the customer which affected the company’s sales. This acted as a driving force in order to make the company go back to its initial product formulation methodology. Whether a different approach to the loss of sales might have produced a different outcome When the company faced a stiff competition in the market in 1980s some other approach instead of a new product development would have been beneficial for the company with a different outcome. To make strategic approach I think it was needed that the company carefully analyzed the physical component associated with the emotional attachment of the consumers to the brand. This could be achieved by careful observation by some experts of the company regarding the way the products of the same category were handled to what extent differently by the consumers. The difference in handling of the products by the consumer would subsequently reveal the emotional attachment that a consumer possessed towards a particular brand. A second approach according to me in knowing what the customer’s real desire for would have been a focus group study rather an objective survey. Such focus group studies often highlight the fears and assumptions behind the consumer’s reaction which are often not disclosed by performing a survey. Instead of carrying out a survey the company could have personally asked the opinion of the customers towards a beverage, and their product. I think would help the company to analyze whether they are being able to meet the consumer demand or not. Often a good research technique does not only comprise of huge investments in dollars but it requires efficiency in carrying out the research. It is essential for the company to combine both the quantitative and qualitative approach to know the exact feelings of a consumer towards a particular product. The Coca-Cola Company failed in its approach because they did not correctly judge the consumer’s feelings. Instead of product renovation the company could have attempted for extending their product line. Diversification in its product category could have been a better approach. This is simple because of the fact that the old customers would have retained by the old Coke brand and the new product under the same brand would have captured that market share that preferred more of a sweeter taste in the soft drink. This need not necessarily mean that the company had to reposition its product but it only had to invest to launch a new product range by not slashing off the old product formulation due to which it had brand equity. Another approach which I think the company should have approached could is of strong positioning in the minds of the customer. This would have been possible through a more strong advertisement of the product. The product positioning could have been strong by associating the product with youth and more of the individual identity (Hill and Jones, 2012, pp.124-125). The large youth mass would be attracted with the brand’s association with the youth. Even if the frequency of the advertisement campaign is increased it would result into more of triggering the minds of the customer to purchase Coke instead of any other beverage product. Often in situation of fierce competition an act of corporate responsibility proves beneficial for the company. Is any such campaigns was carried out by the company towards building a better world or campaign related to the major issues at that period of time that affected human life would create a strong brand position in the consumer’s mind. Thus these are some of the alternative approaches which would have created a positive outcome for Coca Cola compared to the approach that it had adopted in 1980s. Conclusion Coca Cola, one of the famous multi beverage companies had faced a lot of competition in 1980s from PepsiCo. When such a pressure was created on the company because of the changing consumer demands towards a sweeter soft drink than the original Coke, the company over analyzed the situation and created a product which was totally different to what the brand actually stands for. The New Coke that was launched by the company was totally a reformulated technology adapted by the company. The company even washed the original coke formulation from its entire business operations. This led to a lot of unrest in minds of the consumers who being branded loyal towards the original Coke could not associate themselves with a totally changed product launched by the company. The company had seen a serious turmoil where it started to lose the trust of the consumers. In order to adopt the strategy the company started losing its brand name. The company failed to analyze that it had a large loyal customer’s base that were strongly associated with the original Coke. Whereas some other approaches such as a strong brand positioning instead of total modification of its product line would have been a better approach. Analyzing the consumer’s perceptions is the major factor while positioning and marketing a product, and this is the area where the company lacked its expertise. Coca-Cola failed in its marketing strategy and had to re-launch its original Classic Coke with the old formulation strategy. References Batey, M. 2012. Brand Meaning. USA: Psychology Press. Bell, L. 2003. The Story of Coca-Cola. USA: Black Rabbit Books. Daveni, R. A. 2010. Hypercompetition. USA: Simon and Schuster. Hastings, G. 2013. 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