Reference no: EM133216619

One of the best ways to illustrate the value of good market research and the importance of applying the results of market research to your marketing strategy is to look at a corporate failure!

Pepsi and Coke have struggled for many years in what is called the Cola Wars. The Cola Wars are, for the most part, a re- flection of how individuals chose to express themselves by the soft drink they like. Coca-Cola from its early beginnings and more recently Pepsi-Cola have used brands on a variety of lifestyle items (clothing, glassware, retro-signs, etc.) to help individuals promote their own preference through items used in their everyday life. Coca-Cola spent many years with this technique and millions of dollars building a brand image and a loyal customer base on a global basis.

In an effort to stop its eroding market share, Pepsi introduced the Pepsi Challenge in the mid-1980s. The resulting "research" from these simple taste tests showed that people really did prefer the taste of Pepsi to Coke. And, Coke knew it. Although there was no substantive research done by Coca-Cola and no significant change in its market share, in response to the Pepsi Challenge Coke changed the taste of Coke and re-branded it as New Coke. New Coke tasted a lot more like Pepsi than Coke and actually beat both Coke and Pepsi in blind taste tests.

Coca-Cola also conducted extensive qualitative and quantitative research on New Coke. The qualitative questions included determining how consumers felt about New Coke and why. Quantitative research was strictly by the numbers: How many people preferred the taste of New Coke? The numbers looked good. The quantitative analysis indicated that New Coke would

be the "trendiest soft drink ever." The qualitative research was less definitive although it did indicate that some people were deeply unhappy with the change.

Coke executives ignored the qualitative research, focused on the quantitative research, and forged ahead with the plan to win the Cola Wars with New Coke. In 1990, Coca-Cola abandoned Coke for New Coke. There was a massive public back- lash from loyal Coke folks and, within a few months of being dropped from the product line, Coke was back into the soft drink market as Coca-Cola Classic. New Coke or Coke II remained available in limited markets for several years but only managed to attract, at best, a 3% market share. It wasn't until 2009 that Coca-Cola finally conceded defeat and dropped the "classic" from Coke's name.

1. What information would have been important before introducing New Coke?

2. Does it appear that Coca-Cola was more interested in attracting new customers or keeping existing customers? Explain.

3. Do you think Coca-Cola adequately researched the potential risks of the change? Explain.

4. What variables did Coca-Cola neglect to take into consideration?

5. For marketers, what do you think is the most important function of market research?