The Coke V/s Pepsi Competition

The Coca-Cola Company had successfully spent several years in making the American consumers believe that Coke was an integral part of their lives. People had wrapped their identities around their favorite drink. In coke's case consumers felt very strongly and it was clear that they shared an emotional bond with the product.

The Coke v/s Pepsi competition

o In the early 1980s, Coke was steadily losing its market share to Pepsi-Cola.

o Coke's lead had dropped from a better than two to one margin to a mere 4.9 percent lead against Pepsi by 1984.

o Coke was outspending Pepsi in advertisements but it turned out that Pepsi's advertising was simply more effective. The Pepsi Challenge which had been fabulously successful tried to show that in blind tests people preferred the taste of Pepsi to that of coke.

o Pepsi was sweeter than coke in taste.

All these problems led Coke officials to wrongly conclude that the drop in sales was related to coke's flavor or taste. They felt that consumers preferred Pepsi over coke due to its higher sugar content. Therefore they decided to change their 99 year old coke formula in order to regain market share.

The Coca Cola Company carried out extensive market research before they changed the original formula but there were many flaws in their market research process and final interpretation of the gathered information.

Also the then CEO Roberto Goizueta's aggressive intentions to take measures to help coke grow even if that meant that there would no longer be any sacred cows in how the company did its business, including how it formulated its drinks, heavily influenced the decisions taken regarding the launch of New Coke.

The market research flaws:

Their market research included taste tests, focus groups and surveys.

1. TASTE TESTS

Taste tests were carried out on 2,00,000 odd people. However, there were some inbuilt flaws in these tests.

o They carried out sip tests in which the respondent were asked to try a sip of all the samples and then decide accordingly as to which appealed more to their taste buds. Many consumers liked the taste of new coke in the sip tests but disliked drinking the same in large can sized portions because it was perceived as too sweet.

o The taste tests were carried out secretly i.e. the respondents were not informed what they were tasting. They did not know that their opinions would be used to ‘altogether replace' their original coke.

o Had they been informed, perhaps they would vote for the old classic version of coke considering their brand loyalty.

o Thus