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Market Research Example: How Coca-Cola Lost Millions with This Mistake

Market Research Example: How Coca-Cola Lost Millions with This Mistake

Market Research Example: How Coca-Cola Lost Millions with This Mistake

Author: Scott Smith, Ph.D.

Source: Qualtrics

In the mid-1980s, the Coca-Cola Company made a decision to introduce a new beverage product (Hartley, 1995, pp. 129–145).

The company had evidence that taste was the single most important cause of Coke’s decline in the market share in the late 1970s and early 1980s.

A new product dubbed “New Coke” was developed that was sweeter than the original-formula Coke.

Almost 200,000 blind product taste tests were conducted in the United States, and more than one-half of the participants favored New Coke over both the original formula and Pepsi.

The new product was introduced and the original formula was withdrawn from the market. This turned out to be a big mistake! Eventually, the company reintroduced the original formula as Coke Classic and tried to market the two products simultaneously.

Ultimately, New Coke was withdrawn from the market.

What went wrong?

Two things stand out.

First, there was a flaw in the market research taste tests that were conducted: They assumed that taste was the deciding factor in consumer purchase behavior.

Consumers were not told that only one product would be marketed. Thus, they were not asked whether they would give up the original formula for New Coke.

Second, no one realized the symbolic value and emotional involvement people had with the original Coke.

The bottom line on this is that relevant variables that would affect the problem solution were not included in the research.

Check out these old school Coke commercials.

Link: https://youtu.be/o4YvmN1hvNA

Link: https://youtu.be/ky45YGUA3co

So, what’s the lesson?

Market research matters.

When done correctly you gain decision making power. If done incorrectly, it could end up costing your company millions.

Questions

1. What are the reasons for New Coke to be withdrawn from the market?

2. What is the emotional involvement people had with the original Coke?

3. How could companies avoid this type of market failure? Please list at list three factors that you would use to predict a new product’s market performance and explain.


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