EP3: The Brand That Went Back for Their Future
you're listening to the marketing rescue. Podcast the weekly show where we take a look at some epic marketing failures along with some pretty amazing and rescues and comebacks. And now your hosts you go and chat. Hey Chad did you know that coca CODA is a hundred and thirty one zero company? I knew it was old but I didn't realize one hundred thirty one years noted I and it actually began in a Soda Fountain of all things in downtown Atlanta. Eighteen eighty six. Oh that's cool which I think is also interesting because today. The distribution of fountains is massive. But that's actually the first time coke was served in in fact. It was may eighth year. That John is Hambleton Creative Coca Cola and serve the Jacob's pharmacy. We're a long ways from those days when the Burger counter at the pharmacy was the social gathering. Alright yeah we sure are and a fun fact about this. During the first year only nine drinks a day were sold which is roughly eight thousand. Two hundred eighty five drinks for the entire year so to put it in perspective today consumers across will enjoy nine hundred nine thousand four hundred coke products every second nineteen thousand four hundred per second. That's crazy crazy a massive jump. That is a message. While it's a hundred and thirty one years. They had to run that some time to build up to the but this number would not be in a reality if this story that we brought to unpack that really unfold way that it did. Yeah that's right. Basically coke made a series of really good decisions after one really bad one and that became essentially a textbook marketing rescue. Then I think for most people coca-cola's such an iconic well-of brand. I mean I know it is for me growing up That you don't think of words like the worst marketing disaster in history in relation to Coca Cola so Nico I know you love storytelling. We're both super into it. And I think this is such a great story because it shows even the biggest the best companies in the world with the most sophisticated and polished marketers can get it wrong from time to time and co currently found this out when it launched new coq back in nineteen eighty five but importantly that doesn't have to be the end of the story when things go wrong and researching. This episode was really really fun because most of the research and continent books and all the opinions of artists talks about. This is the biggest marketing failure to dates. But the way that we think about is one of the biggest rescues and the no you need a failure to have rescue sure but to your point this was based on a bad decision but the decisions after that it was just really really smart and bold. So let's start so let's at the scene in one thousand nine hundred ninety. Five Pepsi launched a campaign called the Pepsi Challenge and throughout this whole picture. China's campaign is a blind taste of the two different products. The tooth and Sodas Pepsi and Coke and in the United States. It started to show that people actually preferred Pepsi or Coca Cola Listing Yup and in this campaign you can Imagine Pepsi. Mock disliked greater sure as a result of this. Betsy started gaining ground over Coca Cola United States. There's a lot of chipping away slowly but surely over coca-cola's market share in Nineteen eighty-five cookie-cutter share laid over the chief competitor in the flagship market the US and they flagship products. Coke started slipping for fifteen consecutive years. That's a long in steady slide. Sure is so the customer Wayne as coca-cola started dipping right the board and the CEO and the executive team. They noticed so in desperate times calls for desperate measures so they announced in Nineteen eighty-five that they can a yank the hundred year old recipe of Coca Cola and introduced a new product called nuke. Wow so they're not introducing a new product. They're literally just completely pulling the old one absolutely and at this time the Coca Cola sat in a press release this is the surest moved the company has ever made and they launched us with a massive integrated full three sixty ad campaign so when new. Coq Launches Robert goes at a coke. Ceo and chairman said quote. Some may choose to call this. The boldest single marketing move in the history of the packaged goods business. We simply call it. The surest move ever made. Coca-cola President Donald Keough echoed the certainty. I've never been as confident about a decision as I am about. The one we're announcing today so cokes market research team had gone through this massive research project in which they conducted over two hundred thousand taste tests that confirmed that subjects preferred new coq over both the one hundred year old recipe and over. Pepsi. So this is really critical right. They they get this data that tells them that this new coq would outperform both of those two pieces and two hundred thousand tests. That's pretty are. That's not a small sample size. And so this is the point in the story where things really start to get interesting. As a few critical of mistakes were made so I the taste tests were done with just a few ounces of soda but that's definitely not how people especially Americans because we have to do everything big in America How we consume products especially soda so we drink it in twelve sixteen thirty to an even sixty four ounce big gulp servings so you know a much sweeter more sugary drink which was what the new coq recipe was like maybe okay in small doses in those two ounce servings that they served in the taste tests but in large amounts you know that could actually become a turn off if you're having a drink of large volumes of very sweet sugary tasting fluids. So what you're saying. Is that an abundance of quantitative research and Miss Thought on the whole qualified the quantitative side the behavioral side right. Yeah so they did have some qualitative research but had some holes in it and it wasn't taken as seriously as the quantitative research because of the fact that the quantitative research was so large. The sample size was so large as two hundred thousand taste tests versus a couple of small focus. Groups is reason they were so confident or this coach we just heard. Is that as any good marketer? They made these decisions on big data and boy. They had a lot of big data. Your two hundred thousand sample. Yeah exactly but market research isn't just a numbers game right so it's kind of like when you go to the doctor. They don't make a diagnosis in most cases. Based on a single number on your tests they might run a whole panel of twenty different tests to figure out what all of your different levels are of different chemicals or biomarkers in your blood. They'll do a physical exam right. They'll look at your lifestyle and open up your chart and look at your medical history so in medical terms. It's called diagnosing. Whole person diagnosing the whole entire bottle so they actually had conducted some focus groups and surveys and in the focus groups. Ten to twelve percent of testers felt angry and alienated at the thought of changing the recipe so significantly that they actually said they might stop drinking coke because of it and these people were also really influential in the focus groups exerting kind of like indirect peer pressure on the other participants and influencing them a little bit interesting. Yeah but the surveys. They ran were far less negative. Yeah the service lacked the social dynamic right if you think about us the feeling towards the brand or the brand affinity. It's like looking at a puzzle and this is a few pieces missing and you making informed decisions based on what you're seeing. Yeah Yeah So. This is actually when they had three different choices to make essentially right so based on the data they were seeing. They could either completely replace old product with the new better tasting. Drink war keep the existing drank and roll out in additional drink with a different name. Kinda like what they did with cherry coke and diet coke or lastly they could take a gradual phased approach over time to it right so like most business situations. This was super complex during this time as well cookie-cutter was actually in the middle of various lawsuits from the bottlers over the surp- pricing policies. And Cook was very worried about them. Cannibalizing though and sales and obviously about Pepsi potentially taking advantage of oldest shirt so that any began launching a variety of additional flavors like diet coke three years before nineteen eighty two and when they were launching. Cherry coke at the same time. A new coke in Nineteen eighty-five. They will just worried. It's going to be to disrupt for them to have both at the same time right. Yep So this is before the massive amount of flavors that we have today right if you walk into any grocery store th as a whole coke fridge basically yeah back then it was like coke was the only game in town at least from Coca Cola. And that's actually a really important new wants here. Is that the insights were not actually wrong. Both Pepsi's taste test as well as coaxed tests and surveys confirmed it. The data set was just kind of an incomplete piece of the puzzle. That didn't factor in the power of the fact that humans are social animals right and we have very deep cultural and emotional attachments. And so that's really easy for us to see now because the impact of social media but it wasn't so obvious in the eighties so what happens next is actually really big. It's April Twenty. Third Nineteen eighty-five when new. Coq Launches in the Coca Cola Company's own words quote to hear some tell it April twenty third nineteen eighty five was a day that will live in marketing infamy spawning consumer angst the likes of which no business has ever seen kind of it kind of happened right here. We are thirty five years later. Still arguing about us. Very amazing very prophetic statement. So the emphasis on the sweeter taste is a new flavor also ran very contrary to all the previous coke advertising. In which for example spokesman Bill Cosby had touted cokes? Less sweet taste as a reason to prefer it only Pepsi. Another big lesson year no yards brand and why people care about you and make sure that you don't forget that yeah like you said. Their confidence was super high in spite of the fact that they were departing from what made them the most iconic brand in the beverage industry and granted. You know they were going through this slow decline and there was kind of a lack of interest in Cola and Soda Category in general at the time but you know the fear of competitor creeping up on you in gaining ground powerful. Absolutely so in. Mark Pendergrast Book for God country and coca-cola the definitive history of the great American soft drink and the company that makes it. He recounts that on the day. New Coke launched. They had a press conference at New York. City's Lincoln Center. That was pretty difficult since Pepsi had actually very cunningly fed questions to reporters before the press conference but if you think about it that's like preparing for an interview you interview the questions beforehand right. They should have known something was going to happen over there. Yeah exactly gotta come prepared for the worst right so one of the reporters asked whether Diet Coke would also be reformulated quote. Assuming new coke is a success to which the which the CEO Gazeta curtly replied. No and didn't assume this is a success. This is a success so the company stock went up on the announcement and market research actually showed eighty percent of the American public was aware of the change within days. It is prudent credit. If you think about the majority of companies will sell the left arm to get eighty percent of the American hundred fear of new product launch within a span of a couple of days. It's trivial remarkable. Yeah it's just amazing and the backlash was equally as remarkable. Despite the fact that most people buying new coq were kind of like buying it out of curiosity to try the new flavor and there is actually kind of overall in a fairly warm initial reception to coke but over the next seventy nine days coke received forty thousand calls and letters including one letter delivered to go to the CEO that was addressed to quote chief. Dodo of the Coca Cola Company so the company hotline one eight hundred get coke received over fifteen hundred calls a day compared to around four hundred before the change and a psychiatrist. That coke had actually hired to listen in on calls told executives that some people sounded as if they were discussing. The death of family. Member is incredible and there was a small but extremely vocal group of objectors. Mainly there were people from the southeastern United States that considered coca-cola to be a vital part of their regional identity and felt alienated by the new formula so they actually viewed the company's decision to change the formula through the prism of the civil war as kind of like another surrender to the Yankees. Yeah they actually staged protests and there was another group that staged these grass roots protests. They were called the Old Cola drinkers of America who were founded by Gay mullins. Who was a Seattle retiree? Who was looking for something else to do and wanted to start a public relations firm and he saw an opportunity in this so he borrowed one hundred twenty thousand dollars to start the organization to lobby coke to reintroduce to formula or sell it to someone else and he even filed a class action lawsuit but it was actually very quickly dismissed by federal district. Judge Walter McGovern. Who said he liked the taste of Pepsi? Got The wrong. Yes he lost in the game of Judge Lewis. This story could have going to hold different routes if the judge actually preferred yeah they got a little lucky they're also comically well. Lawsuit was in process. Gay was actually trying to get coke to be his client so he could help them. Reintroduce classic coke even more ironically in a couple of informal blind taste tests that he did. He couldn't even distinguish the difference between old and new coke in this blind taste test. So needless to say coca didn't hire him so now it's June and the temperatures are starting to rise not just from a from a temperature burn to view but also from a customer point here. Yeah so coke is leveling among its customers after this initial bump that you just talked about the initial fear assigned to creep in to the executive board because they can actually see that this Salesa plateauing where usually in summer it spikes ratty in addition not only the customers were complaining but now the bottle of souls are complaining and there were starting to express concern of actually selling this new thing to their in products. Yeah partly because those saying they were using the real thing which was the ad campaign up to this point and now the had to change the real thing is all the restaurants and gas stations and they were starting to push back from the B. Two B. Sales so something that's supposed to be constant and unchanging is now in constant and Jada. It's no longer the real thing. It's not the new real thing. Yeah so yeah. So there's these twenty bottlers that are still suing Coca Cola and they actually use this to their advantage in their legal arguments over the Sierra pricing. So coca-cola had argued in its defense when the lawsuit was originally filed the formulas uniqueness difference from diet coke justified different pricing policies. From Diet Coke. Which is you know why everyone was so upset. But if the new formula was simply just a high fructose sweetened diet coke the bottler said you know Coca Cola. Can't argue that. The formula is unique at that point so with the bottlers specifically in the south they who started getting personal backlash from their families and relatives about pushing the new Coq Cambridge asked people knew that people knew they worked for coke and they started getting like personal backlash not just from their customers so in June. Twenty third a small bunch of bottlers actually got together and private with executives to really air. They grievances so at this point. Coke is starting to face pressure from the customers. They sales is not spiking. That's supposed to be in summer. And now they're distribution units or. The bottle is are really upset with this. Well Yeah So. If you don't have bottlers you can't really do business right. So switching back to the old formula basically at that point just changes from if to win finally the Coca Cola Board decided that enough is enough so they set these plans in motion to bring back the old coke and this is why this is a marketing race skew textbook story and not a failure. Yeah because of what happens now in the accidental information which is a very bold right so company President Donald Keough reveals Years later in the documentary the people vs Coke that was From two thousand and two. They realized that this was the only right thing to do when they visited a small restaurant in Monaco and the owner proudly said to them that they served the real thing. It's real coke offering them a chilled six. And a half ounce glass bottle of the original Coca Cola on the afternoon of July Eleventh Nineteen Eighty Five Coca Cola. Executives held a press conference yet again and they announced. Wait for it. They bringing Coca Cola back and they branding it Coca Cola. Classic Nice a quote from the CEO. O Donald Keough Love Sport. He said our boss is the customer we want them to know. We are really sorry. And this is seventy nine days after the launch. The new COQ. Wow very bold right. Yeah this was such a big deal that a lot of networks actually broke. They regular programming with a special bulletin announcing this. Abc News Anchor. Peter Jennings interrupted General Hospital at the massive soap opera at the time with a special bullets into share the news on the floor of the US Senate prior holding reintroduction a meaningful moment in US history. So the company hotline received Thirty One thousand six hundred Kohl's in the first two days after the announcement so the natural question here for me is what is Pepsi doing this whole time. Because you have to think that they're seeing blood in the water now right absolutely so Pepsi try to take advantage of this and they ran a number of campaigns mocking coke for tossing Pepsi as the real thing after all and one of these commercials they say goal sitting on the floor having a dialogue with herself about Pepsi and Coke It. Let's play this quickly. Seek in Europe. Because it's is gold. Tell me why coke did it by changed I. They said they were the real thing. Then they said they were in in Kabul. They changed now. I'm trying my first Pepsi. Still want to know why coq change wowing know why Pepsi the choice of a new generation. Yes Oh Pepsi is basically Giddy at the softball. That's just been lobbed. Their Way and Roger Enrico who was the director of Pepsi's North American Operations Declares this company-wide holiday and takes out a full page ad in the New York Times proclaiming. That Pepsi had won the Long Running Cola wars super premature but it makes for a great headline so after the new coq announcement PepsiCo gives its employees. The day off saying by today's action coke has admitted that it's not the real thing and this next quotas amazing. He says these two products Pepsi and coke have been going at it eyeball to eyeball and in my view. The other guy just blinked. I love that that's great. I remember watching the clipping sideburns. All the way down t's cheek is amazing stuff. The theater we had a yes so the question here is how to actually benefit from one of this. They did benefit from a short term but Pepsi gained very few long-term converts from Coca Cola throughout this whole thing. They saw a sales jump of fourteen percents increase from the previous year which was actually one of their record years when this all went down while but in the long run coca cola market share really grew exponentially past them yet again in an interview of this guy why Sergio Zsigmond the cookie-cutter former head of marketing said yes inferior to the public cost a lot of money and lasted saving on days before we reintroduce. Coca-cola classics stole New Coke was so successful because his revitalize the brand and reattached the public to coke so Pepsi won the battle but lost the war. Yes this is just such a powerful example of the same type of blind spot. That co CAD. But you know at the time around understanding the emotional and social behavioral dynamics at play here so Pepsi's critical failure was in not facilitating a complete customer conversion right so they had this super catchy ad they lobbed a few zingers but they weren't able to really translate that into being able to change these deeply seated lifetime brand preferences that people had so. Let's stop for a second here and really picture. The customer journey right and then the gaping holes in marketing tactics in a to address the entirety of the journey imagine for a second your lifetime Coke Drinker Nico. So you've been drinking coke for thirty to forty years your parents drink coke your whole family's into it you take the Pepsi Challenge because you saw commercials and you actually think. Hey this Pepsi stuff is pretty good. I mean it's no coke but it's good so over the next couple of days you try another Pepsi or two and that was fun but then you simply just do. What's habitual like you? Keep picking up that beloved coke especially when all coke did was. Make it less distinguishable between coke and Pepsi. So obviously it's a lot easier now. With digital to engage you know beyond just simply like disruptive ad messages that were really the only scalable options back then but this is I think a really important lesson for today's marketers that even though coke didn't realize it at the time they were. Actually I think a lifestyle brand absolutely and I am not a coke or Pepsi drinking and never have been. Which do you prefer coke why it's not a sweet in a like that that Less sweet taste. And you're gonNA say that Coke has twelve teaspoons of sugar and Pepsi and has seven. That is yeah. Yeah they hold little world. Anyway we digress so yeah and with today's social media platforms available to us with instagram blogging and influences and just social media as a whole all digital tools that we have to exposal. There's no real excuse not to engage with our customers. A much more meaningful way is a little bit of a myth that customers act. Rationally is a very well known at age that sales with the emotional signing just simply works better you know emotionally beats logic with when the chips are basically all down. Yeah Yeah I mean if you're a lifestyle brand right and you're trying to unseat another lifestyle brand the only way to unseat. A lifestyle brand is to provide an alternative to that lifestyle right a more attractive lifestyle and kind of help facilitate that transition right so that means engaging on a daily basis beyond the actual usage of the product itself right it literally means helping people build a new personal identity so you know that has to tap into culture and self image and really be a constant presence besides just being you know a zippy campaign slogan and this is where the market research when wrong initially because they didn't measure the impacts of the brand Infiniti or the rooted memories affiliation that people have with actual brand right these emotions lie really deepen our brain they anchored into the actual brand name of coke right versus Mac campaign but the reality is that without the emotional anchor is just not gonNA drive any change. And that's exactly what played out of your son. The end of nineteen eighty five. Co Classic was outstanding. Both new coke and Pepsi and this was just six months after they rolled out cook. Sales had increased more than twice the rate of Pepsi. While at this point and again this doesn't happen automatically right. This was a series of really good decisions that the management team did to steer in that direction. And this is why exactly why we talk about this being a classic rescue versus a failure sophisticated will they didn't just have this sunk costs fallacy. Like you know. We've got a double down on a mistakes because we've already spent so much money sir. Anything like what happened in episode one with American Airlines. They did exactly just thought they did. Of course correct in the skin piling on more and more and more on the EIB mistake that they made and coke did the exact opposite here right and it could have been very easy for them to fall into that sunk cost fallacy. Right so I mean anything is big as new. Coq HAD TO BE SUPER EXPENSIVE TO LAUNCH. And just the cost related to like supply chain logistics alone to mind blowing. How huge that must've been. We don't know we didn't ever find the amount you're how much they spent on this right or how much they lost. You know. We couldn't find anything from Coca Cola in terms of them ever really like admitting exactly how much they lost as a result of new coke but we do know that they spent four million in development and after deciding to pull new coq from the shelves were left with over. Thirty MILLION. In just unwanted. Concentrate just the syrup after the fact so you know. There's gotta be a lot more beyond that I. It's not easy and it takes a lot of humidity sekine. They really listened to their customer year. And they listened to the bottlers and they looked at their sales center so they took all the different aspects into account when making these decisions. Coca-cola director of Corporate Communications Carlton Curtis Realize over time that customers were more upset about to withdrawal of the old formula. Then the taste of the new one to be drinking this really interesting. And then thirdly they effectively leverage the learnings so they learn to fell forward. Which is something that I talk about. Lots in our both personal and our our corporate lives they use learnings for future robots and we can actually see that in today's marketing which is another bold move that they were the partnership to have with netflixing stranger. Things yeah I totally agree. That was equal parts brilliant and self deprecating actually so far listeners. If you're one of the few people who haven't seen stranger things it's this really cool period piece set in the nineteen eighties in suburban America and coke partnered with Netflix to feature new coke on the show coordinated bring the flavor back for a limited time during the third season of stranger things which is actually set in the summer of nineteen eighty five perfect. Yeah so they're just writing this massive wave of this eighty s nostalgia. That's coming back through stranger things but the actually launching an actual the old the old new coq during this time to right. Yeah and by the product. They made the product available. Didn't you say that a lot of surp- sitting in a vault somewhere and she'll be purposing? Thirty million dollars worth of expired syrup sitting somewhere so who's amazing taking the digital marketing tie into the real live customers. They saints is drinking the old new coke. Which is this incredible. Yeah Yeah exactly. And Stewart Krona Jr the president of Coq Sparkling Business Unit and S VP of marketing for Coca Cola. North America said in a May two thousand nine hundred nine interview for CNN. Business quote bringing new COQ. Back is a way for Coca Cola to not take ourselves too seriously. Maybe a while ago we wouldn't have done this. But we're changing and trying to innovate in ways that are beyond a traditional new products. This is a cultural innovation. Buying THIRTY SECOND AD to drop into a certain timeframe is not as valuable as it once was Kronur said the world is changing into streaming and non ad platforms and subscription based platforms. So it's important for us to make sure that we are where our consumers eyeballs and hearts and spirits are. The new promotion is designed to break the Internet. She said it's just really it's amazing. It just shows such incredible confidence and not the kind of confidence you know. You typically think of but You know this is. I think a little bit more of a correct picture of of what confidence really is. It's not as much bravado in my opinion as it is just the humility to be authentic and realize that it's actually our struggles that is what makes us relatable and I think that's such a powerful brand insight rights soak eventually rebranded. The new format has cooked to in one thousand nine hundred eighty before they eventually abandoned completely in two thousand two besides his fiasco. Coca-cola emerged from this whole fiasco stronger than they've ever been amazing. And of course due to the intimate they are a gazillion conspiracy theories the new coq failure was purple marketing. But Donald Keough the chief operating officer we find a way. Say some sitting say that we are planned the whole thing. The truth is that we not that dumb and not that smart. Which is his. Love that quote as very self-aware Yup coca-cola that weren't very crystal clear about the insights. Initially they made all these good decisions based on floor data but the willingness for them to take massive risks to win year is his outstanding. The most amazing thing for me throughout this whole story is that the leadership could pivot the company on a dime. Yeah so once. They had information from their from their sales. In from their bottlers they made really big moves and change everything around which is just absolutely incredible. Yeah I mean there really is like flipside to the coin in this story. Isn't there that like you know what often is billed as the greatest marketing disaster in history actually was the catalyst that allowed coke to crush Pepsi and put a stop to the market share bleeding that they were experiencing. It has definitely something to be said about the value of all this free attention that they received and again thirty five years later year. We are still talking about us. You know there's an old adage shing is bad price but it isn't really actually true if you think about it if you don't have a way to harness this that negative press and take advantage of it then it's actually not good for you so this took coke as a stagnant brands and they in turn into one of the most debatable topics for every virtually every American family. Right like just around the dinner table every night there. Yeah that's exactly why I think. The word provocative is used like twenty four seven in advertising award shows right. It's virtually impossible to win an award without a provocative ad campaign. Not that you know that actually means good advertising but it just shows the value of of how important it is within the advertising industry. Yes and there's an actual another poplar adage. That goes something like this. The only thing worse than bad price is no press Especially for a challenger brand. That doesn't have that high level awareness. Controversial press can give a massive boot of awareness within that market positioning. But as we've seen throughout this entire story this is definitely not for the faint of heart. Yeah you're right and this whole thing is just so fascinating to me. I think this is a great place. I to wrap up episode three. Thanks for listening and I hope you enjoyed as much as we did. Speak to you next week. You've been listening to the marketing rescue. Podcast this show is hosted by Nico Cassia shelters the CO founders of KPI AGENCY. A marketing rescue agency be sort of visit marketing rescue. Podcasts DOT COM to join the conversation access. The show notes contact the hosts and discover fantastic bonus content.