NO NAME MATRIC NO.

1 AMANDA BERNICE A/K PETER JOHN REMEK EFC140110

2 ARTISHAH BINTI SEHARING EFC140113

3 ERNA BINTI ZAKARIA EFC140120

4 NUR HAFIFAH BT MOHD HALIM EFC140199

5 SITI FAIRUZ BINTI MOHD SAIDI EFC140218

CASE STUDY: STRATEGIC BLUNDERS – COCA COLA

GROUP 20

EPFE 5107 LEADERSHIP & STRATEGIC MANAGEMENT

THE ORIGIN OF

1886 Original recipe of Coca-Cola was invented by a pharmacist named John Pemberton from Atlanta.

The soda fountain was rising in popularity as a social gathering spot led him to create a soft drink that could be sold at soda fountains .

Frank Robinson registered Coca-Cola's formula with the patent office, designed the logo with the slogan, "The Pause That Refreshes”

1888 Dr. Pemberton died and majority of the interest sold to Atlanta businessman, Asa G. Candler.

STRATEGIC BLUNDERS COCA COLA – NEW COLA

The Coca-Cola Company decided to terminate its most popular soft drink and replace it with a

formula it would market as New Coke.

The American public's reaction to the change was NEGATIVE and the New Coke was a major

marketing failure. 

Reintroduction of Coke’s original formula, re-branded as "Coca-Cola Classic" resulted in asignificant gain in sales and saved Coke’s sale

numbers

1987

1985

New Coke : Blunders

1. Reformulation of Coca-Cola by introduced a New Coke failed to take adequate account of psychological aspects of brand loyalty of customer to the original or old Coke.

Coca-cola has made serious methodological mistakes in constructing its taste tests of market research. From 200,000 consumers who took the test, only 30,000 or 40,000 actually tasted the new formula & they were not informed what they were tasting a new formula of coke.

Therefore most consumers had no idea of their preferences as loyal coke customer are loyal to the taste of old and original coke. They were not clearly advised that their responses might bring to the termination taste of the original and old Coke formula.

2. Coca Cola’s marketing research also failed to consider consumer-buying patterns.

According to a survey done by Pepsi soon after the introduction of new Coke, the Coke loyalists overwhelmingly favoured an unchanged original Coke formula.

The Coca-Cola Company focused more on Coke’s physical properties than its symbolic character. The company failed to realise that many consumers identified themselves closely with Coca-Cola Company.

3. Coca-Cola Company also made a mistake by failing to note that many U.S. consumers strongly favour continuity and tradition over novelty (Preferred original taste of old coke).

According to one well-known breakdown of the American population into consumer types the largest single group consists of those who like stability more than change.

For years, Coca-Cola Company had successfully gone after this group by appealing to its members’ traditional values.

Reformulating Coke was like a slap in the face to those for whom Coke represented familiarity and tradition.

4. Coke was outspending Pepsi on advertising ($100 million per year) however Pepsi’s advertising is more effective.

Coca-Cola advertising has historically focused on wholesomeness and nostalgia for childhood. Coca-Cola advertising is often characterized as "family-friendly" and often relies on "cute" characters (e.g., the Coca-Cola polar bear mascot and Santa Claus on Christmas.)Pepsi focus on celebrities choosing Pepsi over Coca-Cola, supporting Pepsi's position as "The Choice of a New Generation“.

IMPACT OF NEW COKE BLUNDER

• Coca Cola market share – 1980: 24.3%– 1984: 21.8%

• April, 1985 introduction of New Coke– PepsiCo recognized Coca Cola’s mistake and

responded with by the “They changed my Coke” advertisement

• May, 1985 Pepsi became No.1• Summary of 1985 soft drink market share:

– New Coke 15% – Coke Classic 5.9% – Pepsi 18.6%. 

1. Coca Cola Sales Dropped

2. Loyal Consumer Backlash

• Replacement of original coke was too upsetting for consumers

• Backlash: Angry letters and phone calls (60,000

calls/day)Stockpiling in the black market (USD$30/case) Addicts imported products from outside of USA

(Canada & Asia)Protest groups — such as the Society for the

Preservation of the Real Thing and Old Cola Drinkers of America established

3. The return of “Classic” Coke

• July 1985, “Old” Coke was sold alongside New Coke (after 79 days) and re-named as “Classic” Coke

• 1986:– New Coke collapsed to 2.3%, – Coke Classic surged to 18.9%– Pepsi held firm at 18.5%.

• 1987: Classic Coke became No. 1 soft drink – Consumers became even more loyal to

the brand after it was temporarily taken away from them.

• 1990, New Coke re-labelled to “Coke II” and taken off the shelves

• 2009, “Classic” Coke became Coca Cola

4. Coke was outspending Pepsi on advertising ($100 million per year) however Pepsi’s advertising is more effective.

Coca-Cola advertising has historically focused on wholesomeness and nostalgia for childhood. Coca-Cola advertising is often characterized as "family-friendly" and often relies on "cute" characters (e.g., the Coca-Cola polar bear mascot and Santa Claus on Christmas.)Pepsi focus on celebrities choosing Pepsi over Coca-Cola, supporting Pepsi's position as "The Choice of a New Generation“.

LESSON LEARNED

LESSON LEARNED WHAT HAS THE COMPANY LEARNT?

1. Market Research Has To Be Conducted Or Interpreted Correctly

• Coke’s extensive market research was unable to furnish the management with the proper guidance in the reformulation decision.

• a “wrong-question explanation”• did not make it apparent to the taste-test respondents

2. Marketing Is About Much More Than The Product Itself• The blind taste test cannot measure the love the consumers felt

for Coke and the originality of Coke could also not be seen

3. Go Back If There Is A Need– Coca-Cola executives announced the conclusion to go back to

their original recipe less than three months after New Coke's introduction.

– The company somehow ended up with a more profound bond between the product and the consumers.

4. Implementation Should Not Be In A Haste– The Pepsi Challenge test is called "sip tests", means that

drinkers were given small samples to try out. The flaw of this test was that sometimes what people say they like in these tests may not actually reflect what they will actually want or buy to sit at home and drink.

– Coke would have succeeded had it chosen to change the drink's flavor incrementally, without announcing that they were doing so.

1) Have courage to accept your mistake and correct it

2) Customers are loyal for a reason, we need to embrace that reason

3) Research is one of the most critical steps before any decisions are made

4) Branding is actually not an easy task 5) Sometimes it is only best to stay true with who

you are

WHAT HAVE WE LEARNT?

4. Coke was outspending Pepsi on advertising ($100 million per year) however Pepsi’s advertising is more effective.

Coca-Cola advertising has historically focused on wholesomeness and nostalgia for childhood. Coca-Cola advertising is often characterized as "family-friendly" and often relies on "cute" characters (e.g., the Coca-Cola polar bear mascot and Santa Claus on Christmas.)Pepsi focus on celebrities choosing Pepsi over Coca-Cola, supporting Pepsi's position as "The Choice of a New Generation“.

RECOMMENDATIONS

RECOMMENDATIONS

SWOT Analysis

Competitive Analysis

Decision Making

Marketing Strategy

Product Preferences

Analyze current situation whether they need to produce a new formula of New Cola as the best decision. By doing SWOT analysis, Coca Cola may know the strength, weaknesses, opportunity and threat of each alternative before considering them while making decision in inventing new formula of New Cola.

Coca Cola may conduct an adequate market research especially for the public perception of the original brand of Coca Cola.They also should take into account the symbolic value of coke towards their loyal customers. Coca Cola may run thousand of taste tests of New Coke but do not stop the old Coca Cola recipe.

SWOT ANALYSIS

DECISION MAKING

By doing competitive analysis, Coca Cola may establish a unique product of New Cola and therefore what attributes they may play up in order to attract their target market.Coca Cola may analyze the difference between their old recipe compared with Pepsi-Cola as their rival; analyze their main competitor and examine the factors that cause the major difference of their products before they invent their New Cola.

COMPETITIVE ANALYSIS

Coca Cola should considered the product preferences and put it into account to ensure the new formula (New Cola) will be successful compare to the previous strategy where the preferences for sweeter products diminish with use and was not taken into account.

PRODUCT PREFERENCES

While conducting the market research and taste survey for the new formula of Coca Cola, the marketing team should brief all participants about the new product.The Coca Cola team have to tell the participants that by picking one cola, they would lose the other one.

MARKETING STRATEGY

Coca Cola may apply the 5Ps marketing tool which includes Product, Price, People, Place and Promotion to boost up their sales of New Cola.By producing a creative and an interesting media advert of New Cola compared to the original ads, it may help to attract their customers and boost up the sales.

References• Anne B. Fisher. “Coke’s Brand Loyalty Lesson”, Fortune, August5, 1985 pp.44-

46.• Article base. (2008, December). Coca-Cola’s Big Mistake: New Coke 20 Years

Later. Retrieved From the Articlebase website: http://www.articlesbase.com/marketing-articles/cocacolas-big-mistake-new-coke-20-years-later-666921.html

• Cantwell. “The Invention of Coca-Cola”. Retrieved on December 28, 2014. from http://iml.jou.ufl.edu/projects/spring08/Cantwell/invention.html

• Conversation Staff (Coca Cola Company). The Real Story of New Coke. Retrieved from http://www.coca-colacompany.com/history/the-real-story-of-new-coke. Retrieved on 29th Dec 2014.

• “Coca-Cola History”. World of Coca-Cola. Retrieved on December 28, 2014. from http://www.worldofcoca-cola.com/about-us/coca-cola-history/

• Ellie. K. “New Coke: A Classic Brand Failure”. July 16, 2011. Retrieved on December 30, 2014 from http://www.reading.edu.my/web/FILES/inform/Coke_Case_Study_Workshop_Task_EK.pdf

Ellie. K. “New Coke: A Classic Brand Failure”. July 16, 2011. Retrieved on December 28, 2014 from http://www.reading.edu.my/web/FILES/inform/Coke_Case_Study_Workshop_Task_EK.pdfMatt Haig (2003). Brand Failures. London, UK: Kogan Page.Miguelangelherrera. New Coke : A “Classic” Marketing Research Blunder? .Retrieved on December 28, 2014 from http://miguelangelherrera.com/catedras/administracion-mercadotecnia/newcoke.pdf

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Ross, M. E. (2005). It seemed like a good idea at the time: New Coke, 20 years later, and other marketing fiascoes. Retrieved from http://www.nbcnews.com/id/7209828/ns/us_news/t/it-seemed-good-idea-time/ on 1 January 2015 Schindler, RM. (1992). The real lesson of New Coke: the value of focus groups for predicting the effects of social influence. Marketing Research, December, 22-27. Slideshare. (2013, August). Marketing failure #1 – New coke (Coca Cola). Retrieved From the Slideshare website: http://www.slideshare.net/TapishPanwar/marketing-failure-1-new-coke?related=1Thomas C. Kinnear & Kenneth L. Bernhardt. “Principles of Marketing”. 3rd Edtn. Pp.228-229. Wikipedia. (2014, November). New Coke. Retrieved From the Wikipedia website: http://en.wikipedia.org/wiki/New_CokeWilliams, L. (1985) The Talk of PepsiCo; At PepsiCo, Victory is Declared. Retrieved from http://www.nytimes.com/1985/05/12/nyregion/the-talk-of-pepsico-at-pepsico-victory-is-declared.html on 30 December 2014

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