Question: Product Development Strategy for New Coke
In 1985, Coca-Cola reformulate their flagship Coke product and relaunched it - but was that the right decision? Now it's your turn to determine what would be the best product mix for the Coke brand. Here is a recap of the competitive marketing environment in the soft drink market of 1985.
• Overall Coke's market share was steadily declining (down from 24.3% in 1980 to 21.7% in 1984)
• Coke had increased their advertising and promotional spending from $50m to $200m in recent years. Their $200m promotional budget was 1/3 more than Pepsi's spend of $150m), but failing to stop Pepsi's gains in market share,
• Coke was having to resort to conducting aggressive sales promotions and discounting in stores (to reduce the impact of the Pepsi Challenge advertising),
• Coke's own market research was indicating that "taste" was the main reason for their erosion of market share,
• Pepsi's "new generation" advertising campaign was designed to position Coke as old and tired and boring,
• Pepsi now had Michael Jackson at the height of his career,
• Coke's R&D area has developed a new cola formula that was preferred over both Pepsi and existing Coke in blind taste tests,
• Plus the new Coke formula was cheaper to manufacture, which would add up to a $50m pa increase to the bottom line.
The New Coke Strategy: Coca-Cola's management believed that the introduction of New Coke would completely destroy Pepsi's competitive strategy. In fact, Pepsi's own management initially believed that this was a masterstroke by Coke.
Firstly, the New Coke product was to be positioned as new, exciting, modern and young; directly confronting the "Pepsi Generation" campaign and stealing Pepsi's market positioning.
Secondly, the New Coke product tasted better which would stop the Pepsi Challenge taste-test advertising. In fact, Coke had plans to run their own taste-tests and run their own TV commercials in order to win back lost customers.
Review video clips below and consider whether if and how Coca-Cola should launch a new product or whether there are better non-product solutions to their competitive battle with Pepsi. Your post should be made by Friday and then review the posts and make comments on at least two others before the due date.
1. Develop a NEW product
2. Launch the new product as a replacement for Coke (as they did first) or
3. Launch the new product under Coke brand in addition to Coke (as they did later) or
4. Launch the new product under a new brand name (as a multi-brand strategy) or
5. Slowly change the Coke formula over time to become New Coke (without consumers noticing) or
6. Undertake market testing of the new product first (before a full launch)
B. Do NOT develop a new product
1. Increase promotional activity and spend
2. Increase in-store promotions and discounting
3. Increase retailer penetration
4. Reposition the Coke brand
5. Attempt to reposition Pepsi
6. Try something else (your own ideas)
C. Do nothing different
Videos - 1. The 1985 Launch of New Coke (by Karma Looming)
2. All About New Coke - from The Excellence Files (by EnterpriseMediaVideo)