PRODUCT MANAGEMENT CASE

STUDY ON LAUNCH OF NEW COKE

Case FactsIn 1895 Coke was made available in all parts of the world and was repositioned as a refreshment drinkBy 1965 soft drinks market rose to 200 drinks per capita and Coca Cola market’s share was 41% against 24% of Pepsi’s market shareIn 1970 Coca Cola faced tough competition from Pepsi’s rising salesIn 1978 Pepsi was found to overtake Coca Cola in supermarket sales.

In 1980 Roberto Goizueta became the new CEO of Coca Cola

Reformulation of CokeDeclining market share of Coca Cola from 24.3% in 1980 to 21.8% in 1984 – loss of about $200 million for each percentage pointGoizueta reformulated 99 year old Coke’s formula Market research and focus group research was conducted The results of both the surveys were dissatisfactionOn the basis of blind tests “New Coke” was launched

Failure of “New Coke”

New Coke was launched in April 1985It was promoted extensively through television and newspapersIt could not meet consumer expectationsIt was perceived as a “me-too” product(tastes like two day old Pepsi)Launch of “Coke Classic” in July 1985

Reasons for new product failure

I. No PIC used to give proper direction for a new product strategy’Identifying opportunities- Pepsi’s sales exceeded Coca-Cola in 1984Background- Was there a need for a new productThe product should not have been a “me-too” productThe results of survey and market research showed dissatisfaction among customersFocus- Coke had a wide distribution network.Goals/Objectives- To be the market leader in soft drinks market and increase its market share

Guidelines- Customers were not willing to accept changes except for a few as per the survey and market research results.Emotional attachment with old CokeWhether it would be new-to-market , new-to-world or new-to-company productTime to marketThe product will increase the market share of Coca-Cola

New product development

Concept generation/idea generation- Open innovation-collaborate with other companiesIdea screening and concept evaluation- Growth screen-will the new product help to increase its market share?Category screening- whether the market is fragmented?Strategy screening- The launch of the new product should help the company achieve its objective which in this case is to increase market shareDevelopment- Test marketing and market testLaunch the new product

Marketing ImplicationsAfter launch of New Coke , Coca Cola received 1000 calls per week to inform that the customers were not satisfied.Market share declined from 15% at the time of launch to 1.4% after launch.New Coke had to be pulled out of the market.The combined share of New Coke and Classic Coke was less than Pepsi’s market share.Using taste tests was not sufficient to launch a new product

Was the launch of New Coke a deliberate failure? After sufficient evidence from survey and focus group research of chances of product failure , “New Coke” was launchedThe launch of “Classic Coke” sales went up by 10 times recovering all losses due to “New Coke”Stock price increased by 35%.Goizueta was rewarded with $1.7 million in salary.

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