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Case Analysis:

Introducing New Coke

MGMC01

Faria Nava

Professor: Tarun Dewan

January 19, 2023

Table of Contents

1.0 Company Overview………………………………………………………………….. 3

1.1 3 C’s of Marketing Analysis ……………………………………………… 3

1.2 Porter’s 5 Forces ………………………………………………………….. 4

1.3 SWOT Analysis ……………………………………………………………5

2.0 The Bump in the Road………………………………………………………………..6

2.1 The Issue at Hand…………………………………………………………. 6

2.2 What Did Coke Do and Why it Did Not Work……………….……………6

2.3 Market Research…………………………………………………………...7

2.4 Advertisement……………………………………………………………...8

2.5 Customer-Based Brand Equity…………………………………………….8

3.0 What They Should Have Done………………………………………………………9

3.1 Exploratory and Descriptive Research ........................................................9

3.2 5M’s .............................................................................................................9

3.3 Building Brand Equity.................................................................................11

4.0 Lost a Battle but Won the War……………………………………………………...11

1.0 Company Overview

In 1886, John Styth Pemberton created Coca-Cola. After a few rounds of selling the company,

Ernest Woodruff, whose family still owns the company today, came into possession of the

internationally recognized soft drink. Coca-Cola was able to gain international recognition

through efficient marketing and for many years, the business had been the leader in the soft drink

industry. In this report, we will utilize the 3C’s of Marketing Analysis, Porter’s 5 Force’s and a

SWOT Analysis to gain a thorough understanding of Coca-Cola as a company prior to outlining

the critical issues they had faced in their business venture

1.1 3C’s of Marketing Analysis

Company

One of the first manufacturers of carbonated soft drinks is Coca-Cola. The beverage holds great

significance to those all around the globe but specifically in North America. Coca-Cola has been

present at practically every significant historical event. Throughout the world wars, Olympic

Games, Super Bowl, and Soccer World Cup. Even the image of Santa Claus has been shaped by

Coca-Cola’s advertising impact. Coca-Cola is more than just a business that produces carbonated

non-alcoholic beverages and holds the greatest market share. It is a brand that holds values and

strong historical and cultural significance globally.

Competition

Although there are many soft drinks in the current market, Pepsi Co. has always been

Coca-Cola's main rival. Similar to Coca-Cola, Pepsi had a big increase in popularity and

customers after launching a highly effective marketing campaign called the "taste-test challenge.

Pepsi's main target market was the youth and the company had increased its advertisement to an

all-time high with its many successful attempts at getting younger celebrities to promote their
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beverage. This resulted in Pepsi and Coca-Cola waging a brutal advertising war. As a result, both

businesses now hold four of the top-selling soft drink brands. However, Coca-Cola won the

advertising war and has a market share of roughly 46%, compared to Pepsi's market share of

about 25%.

Customers

There is a huge diversity of Coca-Cola drinkers which makes it challenging to pinpoint a

particular demographic that consumes Coca-Cola products. However, Coca-Cola has released

different variations of Coke in an attempt to satisfy the needs of the various target markets. Such

as Diet Coke for those with health and dietary restrictions, Coke Zero for athletes etc.

1.2 Porter’s 5 Forces

Threat of New Entrants

The threat of new entrants is at a medium level. This is demonstrated as we saw that consumers

do not have a cost to switch their beverage when many Coca-Cola consumers switched to Pepsi

following Pepsi’s blind taste-test challenge. So with many new beverages entering the industry

with perfect competition, it increases the threat. Ultimately, Coke has solidified its position as a

global brand and has maintained a substantial market share for a long period of time, making it

less likely that many customers will transfer to other brands.

Bargaining Power of Buyers

Consumers have little negotiating leverage, however, large distributors of Coca-Cola have more

power than a single consumer. Yet, given the company's pervasive influence in our society, it is

highly improbable that large distributors will halt the distribution of Coca-Cola products.
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Threat of Substitutes

The threat of substitutes is high as there are many types of soft drinks for consumers to choose

from which are all within a similar price range. Additionally, while recalling the Pepsi blind taste

test challenge, we discover that participants were unable to distinguish between the two, making

it simple for customers to substitute Pepsi for Coke.

Bargaining Power of Suppliers

The bargaining power of suppliers is low as it can be presumed due to the large market share that

Coca-Cola is one of the largest customers for the suppliers that they buy their ingredients from.

Industry Rivalry

The industry rivalry level is medium to high as Pepsi and Coke were in constant competition

with one another to earn and maintain the title of being the number one soft drink and Pepsi at

one point had surpassed Coke. Due to their dominance as the leading brands in the soft drink

market, Coke and Pepsi are constantly competing for the first rank.

1.3 SWOT Analysis

Strength Weaknesses
● Strong global presence ● Poor management and leadership. In
● Effective marketing strategies the 1980s Oliver stated “No one was
● Variety of products targeting different really running the company”
markets ● Poor advertising responses after Pepsi
● Integrated themselves into society ran their blind taste test challenge
with the use of marketing during big ● Introduction of the “New Coke”
worldwide events (ex. Christmas)
● Strong distribution system

Opportunities Threats
● Ability to create a new product and ● Intense rivalry with Pepsi
use their effective marketing strategies ● Little cost for consumers to switch
to make it successful brands of soft-drink
● Many competitors and with little
product differentiation
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2.0 The Bump in the Road

We may conclude from Coca-market Cola's analysis that the company had successfully

established itself in the local and international market and had been in the lead for a substantial

period of time. Unfortunately for Coca-Cola, Pepsi had discovered their best advertising stunt

yet, the blind taste test challenge. Which revealed to consumers that the majority preferred the

taste of Pepsi over Coke.

2.1 The Issue at Hand

After Pepsi’s challenge was broadcasted to the public, Pepsi made the legal claim that its product

was superior to Coke’s. Coca-Cola replied to Pepsi’s campaign immediately in an attempt to

secure their number one spot in the industry by hosting their own blind taste tests and

counteractive ads. Unfortunately for Coke, these steps were not calculated sufficiently and failed

to hold their spot in the industry. Studies later conducted demonstrated that in 1972, 18% of soft

drink consumers drank Coke exclusively and 4% drank Pepsi exclusively. By 1982 only 12%

claimed loyalty to Coke and Pepsi loyalty increased to 11%.

2.2 What Did Coke Do and Why it Did Not Work

After this drastic decline, Coke looked for multiple ways to earn their way back to the top

whether it be through advertisement or management changes. After 99 years, Coke decided to

conduct a flavour change. Coke’s new president, Robert Goizueta believed that the new and

improved Coke would be able to bring the business to success once again, unfortunately, New

Coke fell flat. The New Coke received massive backlash and the loyal Coke fan base petitioned

to bring back the original taste. In 1985, the company reintroduced the original Coke flavour

back into the market.

After Coke’s success in the market, it is questionable how an organization that has been

operating so successfully for such a substantial amount of time create one of the biggest

marketing disasters in the history of new product launches. The analysis leads one to assume that

Coke's inadequate market research, mediocre pre-launch advertising and lack of brand equity

development contributed to New Coke's failure.

2.3 Market Research

In terms of market research, Coke was in desperate need to launch their new beverage in hopes

to earn their title of being the number one drink, therefore it explains the quick and poor market

research. When viewing the qualitative research, they had only conducted 2000 interviews. For

an organization operating at a global level, they required much more qualitative data to support

the New Coke. Their qualitative research could only prove that consumers showed a willingness

to try the new product but it was unable to give Coke crucial information regarding long-term

consumer behaviour and other important information.

From the quantitative standpoint, Coke held 30,000-40,000 blind taste tests and their results

demonstrated that 55% of consumers preferred the New Coke to the original. Even though Coke

had increased their number of interviews, the blind taste test was an ineffective way to gain an

understanding of if the consumers truly liked the new product. The blind taste test was hosted in

a mall and it can be assumed that interviewees were given a sip or two to choose from, but in

reality, consumers do not just drink a sip or two. Perhaps in the taste test, the initial sweetness

had blinded consumers and altered their preference but when they got their hands on the whole

product, the after-taste or sweetness was too much to handle, therefore resulting in the backlash.
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2.4 Advertisement

Besides the poor market research, the lack of advertising for their new product was a huge

miscalculation on Coke’s end as Goizueta planned to unanimously change the taste of the coke.

If Coke had advertised globally that they were going to start the distribution of a new flavour,

they would have been able to collect a substantial amount of market information by the reactions

of the consumers. Coke may have avoided the new introduction altogether if they had seen

unfavourable responses to their previous advertising, which allowed them to gauge if customers

worldwide were prepared and enthusiastic about the change. Prior commercials might have aided

the rollout in a variety of ways, such as by educating consumers about the shift and

demonstrating to them Coke's commitment to being open and honest with their devoted

customers.

2.5 Customer-Based Brand Equity

The business continued making errors even after the introduction of the New Coke. Their biggest

error was refusing to give their customers what they sought. Consumers made it very evident

after the introduction of New Coke that they were dissatisfied with this formula and requested

that Coke bring back the original flavour. Rather of heeding the pleas of their loyal customers,

Coke made it abundantly clear in public that they would never return to their previous formula.

This claim significantly damaged Coke's customer-based brand equity and demonstrated to

customers that Coke did not take their preferences into account.
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3.0 What They Should Have Done

After evaluation of the New Coke case, there are 3 plans that should have been implemented for

a more successful product launch.

3.1 Exploratory and Descriptive Research

Prior to the New Coke’s launch, they had placed their focus on exploratory research when they

should have completed both exploratory and descriptive research. With exploratory research,

Coke was only able to clarify that consumers were willing to try the product, if they had

conducted proper descriptive research they would have been able to make specific predictions

and calculate consumer behaviour in the long run. For effective qualitative data research Coke

needed to expand the number of interviewees as they had only conducted 2000 interviews in 10

metro markets in the United States, for a global market, this is not enough. As for quantitative

data, Coke had to select a focus group and send them the bottle of the new formula to understand

consumers' raw reaction to the drink and not just how they feel after one sip. With global

qualitative data and concrete quantitative data, Coke should have then decided whether to

proceed with the release.

3.2 5M’s

As mentioned prior, one fatal flaw of the launch of New Coke was secrecy. Coke should have

been transparent with their consumer base which would have also helped them gain consumer

reaction and attain more market research. My recommendation for effective advertisement is

with the use of 5M’s, I believe that if Coke had implemented the 5M’s to promote their New

Coke, it would have been beneficial and they would have been able to avoid massive backlash.
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Mission

Since the company was facing low brand loyalty at the moment with many of their consumers

turning to Pepsi, Coke needed to utilize a pull strategy. Their mission is to remind and persuade

consumers that they will always be the number one soft drink brand and that the New Coke will

be exactly that.

Money

Coke is well-known for their intensive and effective advertisements, therefore such a huge

product launch and company change requires a massive advertising budget that Coke typically

allocates which is around 35-100 million dollars.

Message

The message coke should deliver with their new advertisement is that the New Coke is young,

new and better than before, better than the best. This will pull in consumers and invoke curiosity

they will wonder, how can the best become better?

Media

During the time period when the New Coke was released, the most effective media channels for

Coke were Television, Radio and Newspapers. If they had personally curated an advertisement

for each media outlet, globally all Coke consumers would be prepared for the new and improved

Coke.

Measurement

Measuring sales volume is the simplest technique to determine whether the introduction of the

new product was successful. Since Coke is seeking to eliminate the old product from the market

with just one new product, they can readily determine whether the New Coke is able to make up
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for all of the lost sales and whether they are breaking even or generating as much profit as they

were before.

3.3 Building Brand Equity

Even after poorly distributing New Coke to the public, Coke had the ability to make it right for

their consumers, which it failed to do. When consumers requested to bring back the old Coke,

instead of the company being empathetic they denied the requests. If Coke had immediately

taken action and shown attempts to please their consumer base this would have helped to build

brand equity by benefitting their brand image as it demonstrates that Coke is not only a number

one brand, but they value and respect their consumer's opinions. This would demonstrate brand

duality which appeals to both the head and the heart of consumers and only helps to increase and

build brand equity.

4.0 Lost a Battle but Won the War

In the end, Coca-Cola went back to its original flavour, which was well received by customers

and profitable for the company. Despite their error, they managed to regain their former position

as the top soft drink brand. Even now, many marketers are still perplexed by the New Coke's

disastrous turn of events. It's possible that Coke invented the New Coke on purpose to make

people crave the classic flavour, bringing back attention to Coke and increasing sales. However,

as noted in the analysis, Coca-Cola is neither very stupid nor overly intelligent, therefore it might

be assumed that they introduced a product with little market research and poor promotion out of

a desperate and quick attempt to claw their way back to the top leading to failure. But ultimately,

the failure was what kept the business afloat.