The Real Lesson of New Coke: The Value of Focus Groups for Predicting the Effects of Social Influence The embarrassing failure of Coca-Cola's attempt to change the flavor of its flagship brand has hecome a textbook case of how mar- ket research can fail. The lesson usually drawn is that Coke's researchers asked respondents the wrong questions. However, a more careful examination of the events surrounding the reformulation attempt suggests an alternative explanation: that the error result- ed from the standard market research practice of considering focus groups to be only a form of preliminary research and not appre- ciating their unique ability to predict the effects of social influence. By Robert M. Schindler ferred the new formula over the old for- n April 1985, the man- Pepsi began communicating these find- mula hy 61 % to 39%, agement of Coca-Cola ings to consumers through "Pepsi Chal- Well aware of the importance of the Co. announced its de- lenge" television ads .showing taste tests reformulation decision. Coke's manage- cision to change the fla- where Coca-Cola drinkers expressed pref- ment made sure that the taste test results vor of the cotnpany's erences for a cola which was then revealed were checked and coiToborated in every flagship brand. The to be Pepsi, This campaign contributed to major market in the country. Overall, events that followed from this decision, as Coca-Cola's slow, but steady decline of Coke's market researeh on the reformula- well as the faetors which led up to it, have market share in the soft-drink category. tion was one of the most exhaustive mar- been reviewed, discussed, and extensively This erosion was most apparent in food- ket research projects in history; It cost $4 analyzed in the popular press, the trade store sales, which reflect consumer prefer- million and included interviews with press, and in marketing textbooks. ences more directly than do vending- tiiachine or fountain sales. By 1977, Pepsi almost 200,000 consumers. After the deci- Two books and at least two marketing had actually pulled ahead of Coke in food- sion to reformulate Coke was made, Coca- cases have been written on the events sur- store market share. Cola chairman, Roberto Goizueta, termed rounding the flavor change decision. Also, the decision, "one of the easiest we have Although publicly expressing a lack of a well-known, but somewhat older Har- ever made," according to Hale N, Tongren concern about the Pepsi Challenge adver- vard Business School marketing case deals in his book. Cases in Consumer Behavior. tising, Coca-Cola's managetnent privately with some of the key events which led up On April 23, 1985, Coke announced the was quite worried because blind taste tests to the decision. Despite the extent of this reformulation with a grand flourish, slag- by the company's own market research attention, more can be learned from this ing a multicity satellite press conference in department had confirmed Pepsi's claims. dramatic pieee of marketing history. New York, Atlanta, Chicago, Houston, Secretly, Coke's management began Los Angeles, and Toronto. The next day, a researching the possibility of reformulat- front-page article in The New York Times The Attempt to Reformulate ing Coca-Cola to respond to the apparent reported: "The Coca-Cola Company said changes that had occurred in consumer Coca-Cola yesterday that il had scrapped the formula tastes. By 1984, researchers had arrived at for the world's best-selling soft drink. The a new formula for Coke whieh, in blind he 87-year old rivalry between Coca- recipe, concocted 99 years ago, has been taste tests, beat Pepsi by as much as six to Cola, the traditional market leader, piaeed in the vault at the Trust Company eight percentage points. In addition to and Pepsi Cola, the perennial runner of Georgia Bank, never to be used again, T beating Pepsi, cola drinkers chose this new up, took an unexpected turn in the mid- said Roberto C. Goizueta, chairman of formula over the old Coke formula by 1970s. Pepsi's consumer research discov- Coca-Cola. "We have a new formula for 55% to 45% in blind taste tests and loyal ered in blind taste tests that a majority of Coke," he added." consumers preferred the taste of Pepsi Coke drinkers chose it over the old Coke In addition to the extensive publicity. over thai of Coke. In fact, even a majority formula by 53% to 47%, In taste tests Coke announced that the new Coke would of loyal Coke drinkers reported preferring where the drinks were identified as "new come in a new ean, with updated red and Pepsi in the tests. Coke" and "old Coke," cola drinkers pre- 22 Decetnber1992 silver graphics replacing the traditional red Goizueta explained that the company had back the old formula. Coke's president. and white look. Clearly. Coke had decided adopted a "megabrand strategy" in which Donald Keough told Time magazine, to make sure that consumers would be some promotion expenditures were direct- "...you cannot measure it any more than aware that Coca-Cola's flavor was being ed at enhancing the image of the compa- you can measure love, pride, or patrio- changed. ny's entire line of cola drinks. tism," The initial reactions of most consumers During the following years, the market However, most observers did not appeared to be positive. Many bottlers share of new Coke continued to decline. attribute the failure of Coke's research in reported that sales of new Coke were By 1990. new Coke's share had dropped this instance to an intrinsic limitation of greater than expected and. during the first to .6%, In April 1990, the company began the capabilities of marketing research. few weeks after the new Coke introduc- test marketing new Coke under the name Rather, they judged that the research was tion, the company's weekly survey of 900 •'Coke II." It was advertised as having conducted or interpreted incorrectly. respondents showed consumers preferring "real cola taste" with "the sweetness of Although some have argued that Coke's new Coke over old Coke by a margin of Pepsi," according to the Wall Street Jour- research error was to overgeneralize from 53% to 47%. nal. Although Coke's management has inexact taste test results, the vast majority However, during this period, there was claimed that these tests were successful, of people who have publicly voiced an also intense media coverage of those con- they appeared to have developed a consid- opinion concerning where Coke's research sumers who did not like the new Coke and erable degree of caution on the question of efforts went wrong espouse what could be were angry about the change. In a number supporting Coke TT with a national rollout. called the "wrong-question explanation." of cities, old Coke loyalists sponsored In this view, the reason that Coke's protest rallies and boycotts and received marketing research did not detect the con- widespread media attention. sumer outcry which resulted from the By June, it was becoming apparent to reformulation was that they did not make Coke's management that consumer dissat- it clear to the taste-test respondents that if isfaction with the reformulation was most people chose the new Coke flavor, increasing. The stream of angry letters and then the traditional Coke flavor would no phone calls was becoming a flood, and longer be available. In other words, rather weekly tracking surveys confirmed that marketers have used than ask. "Which flavor do you like bet- consumers were becoming increasingly these events to disparage ter," consumers should have been asked a negative about the change. In a survey more relevant question. This question conducted during the first week of July the discipline of , might have been something like. "How only 30% of consumers interviewed marketing research I would you feel if we discarded Coca- reported preferring the new Coke to the Cola's current taste and replaced it with old. this new taste?" On July 10. the company announced its In the years since the introduction of decision to respond to public pressure and new Coke and the reintroduction of Coca- bring back the old Coke formula. It would Cola Classic, the wrong-question explana- be available in the form of a product with The Wrong-Question tion is the one that has been most often the name "Coca-Cola Classic," and was repeated. It appears to have become the intended as a flanker brand to satisfy those Explanation standard explanation for this highly publi- consumers who wanted the original taste cized failure of market research. as an option. The reformulated soft drink he widespread awareness of these was to be known simply as "Coke" and events has led many observers to An Alternative Explanation would remain the flagship brand. Tsearch for an explanation. The par- However, sales of new Coke eroded ticular question which most frequently has ince the intense publicity has died rapidly. In August, sales of Classic began arisen is why Coke's extensive market down, some further details of the to exceed those of new Coke, and by the research was unable to provide manage- Sresearch behind the new Coke deci- end of September, Classic had a 70% ment with better guidance in the reformu- sion have come to light. In particular, it is share of the combined volume of the two lation decision. now known that Coca-Cola's market products. Over the next few months, large Anyone who is or has been a marketing research department did indeed ask the fountain accounts, such as McDonald's, research practitioner will not find it sur- right question.