Greatest Hits: The Psychological Failure of New Coke

This episode explores the infamous launch of New Coke, focusing on the psychological and business factors that contributed to its failure.

1. New Coke was initially a response to competitive pressures from Pepsi, leading Coca-Cola to innovate hastily.
2. Psychological biases like action bias and loss aversion played significant roles in the product's failure.
3. Consumer attachment to Coca-Cola was underestimated, showing that emotional connections can outweigh product improvements.
4. The episode highlights the importance of considering long-term brand identity and consumer relationships in product changes.
5. Behavioral science can provide critical insights into marketing and product development strategies.

1: Introduction

Host Jennifer L. Clinehens introduces the topic of New Coke’s failure. Jennifer L. Clinehens: "New Coke, intended as a bold step, ended up as one of the biggest fails in business history."

2: The Context of New Coke

Explains the competitive environment and the reasons behind the creation of New Coke. Jennifer L. Clinehens: "In an attempt to outdo Pepsi, Coca-Cola underestimated the sentimental attachment to their original formula."

3: Psychological Insights

Discusses the psychological biases that led to the decision to launch New Coke. Jennifer L. Clinehens: "Action bias and loss aversion heavily influenced the decision-making processes at Coca-Cola."

4: Public Reaction and Outcome

Overview of the public's response to New Coke and its consequences for Coca-Cola. Jennifer L. Clinehens: "The backlash was swift and severe, emphasizing the deep-rooted love for the original Coke."

1. Always consider consumer attachment to your brand before making significant changes.
2. Use comprehensive testing that mimics real-world consumption, not just taste tests.
3. Be wary of action bias; sometimes inaction is a better strategy during uncertain times.
4. Employ loss aversion strategies by introducing new products without removing beloved ones.
5. Regularly engage with your consumer base to gauge their attachment to your products.

Thank you so much for listening to the Choice Hacking podcast. Today's episode was brought to you by my newest Choice Hacking Academy course, "How to Win More Clients (with Science)."

People

Roberto Guizueta

Companies

Coca-Cola, Pepsi

Books

None

Guest Name(s):

None

Content Warnings:

None

Jennifer Kleindhens

This week on choice hacking.

Quiet. Oh, sorry.

How do you even drink that? Because it's delicious. What? It's like Carpenter's the thing. The original is the classic, no question about it.

But the remake?

Sweeter, bolder, better. You're insane. So you prefer the original thing? What? No, I'm not talking about the thing.

I'm talking about new coke. It's the same concept, dude. Uh, actually, it's not the same concept. It is the same concept. No, it's not.

Yes it is. Hey, sorry, sorry. There's been a resurgence in interest in New Coke since its inclusion in season. Four of Stranger Things, which is where. Our introduction clip was from.

Jennifer Kleindhens

But theres no question that its one of the biggest fails in business history. You probably know the story. In 1984, the classic brand replaced its classic product and customers said no thank you. Well thats underplaying it a little bit. It was more like the entire world took one sip, spit it out and said f u Coke.

But contrary to popular belief, new coke. Was a great idea and a great product. Even if it was a huge marketing. Disaster, its failures down to some common psychology traps that Koch and their leadership fell into. And you could too.

Jennifer Kleindhens

Im Jennifer Kleindhens and youre listening to Choice hacking, a podcast about applying behavioral science and psychology to business marketing experience, design, and more. Join me today as we examine the psychological side of new Kochs failure, what. We can learn, what we can avoid. And how we can be wary of the thinking traps that led to this legendary marketing disaster. But first, I want to give a shout out to the sponsor of this podcast, Choice Hacking Academy's newest course, how to win more clients with science.

If you work in an agency or consultancy, you're a freelancer or a service industry entrepreneur. I don't have to tell you that winning new clients is the lifeblood of your business, but it kind of sucks. Selling your services can feel scummy, fake, and honestly mysterious when you don't understand the psychology behind why clients buy one person or agency services over another. Luckily for us, behavioral science and psychology can also help us grow our businesses too. This course took me hundreds of hours to research and thousands of hours of sometimes painful real world experience to put together.

So I hope you'll join me. We'll have live office hours, Q and A's, and you'll even get a blockchain registered certificate to show off on LinkedIn or your resume. To learn more and decide if it's right for you, visit choicehacking.com clients. That's choicehacking.com client s now onto the show.

Jennifer Kleindhens

In the 1980s, Coca Cola was at war with their biggest rival, Pepsi, who at the time were winning. And not by a little. After World War two, Coca Cola owned 60% of the Cola market. But by 1983, it had less than 24%, all because of competitive pressure from Pepsi. There's a reason why the rivalry between Coke and Pepsi was called the Cola wars.

In particular Pepsi. Its tactics were vicious. They launched a nationwide taste test called the Pepsi challenge, where people were blindfolded, served both Coke and Pepsi, then asked which one they liked better, and unfortunately for Coke, people overwhelmingly preferred the taste of Pepsi. So Coke did something that any brand that was losing market share and under lots of competitive pressure would do. It created a new product.

They launched a secret plan, codenamed Project Kansas, to create a sweeter version of its classic Coca Cola flavor that could compete with Pepsi's taste appeal. But they didn't introduce it as a new drink. Instead, they replaced their most important product, Coca Cola, with a newer, sweeter version, unofficially called New Coke. All because they fell into a common psychological trap called action bias. It's a cognitive bias or error in thinking that basically says that when we're stuck, our brains prefer for us to do something, anything, rather than just sit back and see how things unfold.

Jennifer Kleindhens

Because the Pepsi challenge was putting direct pressure on Coke's flagship product, the brand. Felt like it had to take action. To change that product. Koch fell victim to action bias and took a legendary wrong turn.

By 1984, Coke's project Kansas had their prototype for sweeter Coke. But they didn't just throw it on the shelves. They did what any big, responsible company would do. They tested it with customers. But that would turn out to be the biggest mistake of all.

Coca Cola spent the equivalent of $12 million in today's money to get 200,000. People to try new Coke. And new Coke overwhelmingly beat both Pepsi and Coke classic. The results of the sampling surveys were so positive that one of Coke's bottling partners actually threatened to sue them if they didn't release new Coke. It seemed like a no brainer to release a product hundreds of thousands of people preferred.

Jennifer Kleindhens

But there was a big flaw in. The way the surveys and focus groups were performed. They only gave out a small amount of new Coke. These little samples didn't reflect how people drank Coke in real life. The new formula was really sweet, which tasted great for a little while after more than a few sips.

It was so sweet that it wasn't really drinkable. And critically, these focus groups didn't account for the psychological impact the changing Koch classic would have on people. Koch's executives ignored something called loss aversion, a psychological principle that says people hate to lose. In fact, losing something is twice as painful as the happiness of gaining the same thing. Coca Cola was a part of people's lives.

Jennifer Kleindhens

The brand and the product stood for more than just quenching people's thirst. And when new Coke suddenly replaced old Coke, it angered millions of people who felt like something they loved had been taken away.

To understand the story of new Coke, we have to go back a few decades and learn more about CEO Roberto Guzuera. Born in Cuba before the rise of Fidel Castro, Guesueta's family had made their money in sugar, in real estate. Eventually, they were forced to flee to the United States, where Roberto began working as a chemical engineer for Coke, first in Miami, then in the Bahamas. When Guizuera immigrated to the US, Coca Cola was a powerhouse brand. But by the time Guizueta became the president of Coca Cola in 1979, the brand was in serious trouble.

Jennifer Kleindhens

He did successfully lead Coke through one. Of its most turbulent times. He even championed classic ad campaigns like always Coca Cola. The stars will always shine the birds will always sing as long as they're a starch there's always the real thing Coca Cola is always the one whenever there is fun there's always Coca Cola yeah, Coca Cola, always Coca Cola Guizuetta. Was clearly a brilliant guy.

So how did he make such a serious mistake? Early in his career, Guizueta was in charge of Coca Cola in the Bahamas, and he had improved sales by tweaking the flavor of coke in that market. Because of that past success, he mistakenly believed he could do the same thing in Coke's core market, the US. Guisueta's mind was already made up before new Koch even went into testing. In his words, it was, quote, new.

Jennifer Kleindhens

Coke or no coke. So Guizuetta became the victim of confirmation bias. He believed that new coke had to work. So he ignored any information that might have contradicted that belief and ignored the psychological impact that killing old Coke would have on customers. Huizueta had sold himself on the idea of new coke.

He'd spent millions in research and development, and he wasn't going to let anything stand in his way now. When Pepsi found out that new coke was going to be launched, their pr. Machine went into overdrive. During the press conference to launch new Coke on what would later become known. As Black Tuesday, reporters were asking really tough questions like this one.

I mean, are you 100% certain that. This won't bomb this new formula? I think, as I said, I think this is the surest move ever because the consumer made it. We didn't. It's because in the days leading up to the press conference, Pepsi had called and secretly prepped more than 200 reporters with tough questions and lines of attack.

Pepsi even created tons of marketing that declared that they had won the Cola wars just as new Coke launched. And after years of the Cola wars raging, the media needed a new hook. So they grabbed onto this narrative that. Koch had taken a massive misstep. They played up the failure and began spinning the facts to rile up Koch's most loyal fans.

Jennifer Kleindhens

And whether it was true or not. It was a great story. And the media jumped on every quote from every angry customer they could find that turned into demonstrations and letter writing campaigns. In just a few months, there were more than 8000 angry calls to Coke's Atlanta headquarters every single day.

It wasn't the taste of new Coke that failed as much as the idea of new Coke. In fact, lots of people preferred the taste of new Coke. Roberto Go Izueta himself drank new Coke every single day for the rest of his life. And Coke hasn't shied away from this mistake its own website calls new Coke, quote, one of the most memorable marketing blunders ever. Coke made some miscalculations, sure, but the biggest one not accounting for the psychological effect that taking away Coke classic would have on Koch's most vocal fans.

A former Coca Cola executive summed it up when he said, quote, we did not know what we were selling. We were not selling a soft drink. We were selling a little tiny piece of people's lives. Thank you for listening to the Choice hacking podcast. If you enjoy this episode, please share it on social media.

It takes me 20 plus hours to put together every episode, and it is a huge help when you share an episode with your LinkedIn, Twitter, even your TikTok followers. And don't forget, you can learn more about behavioral science and psychology applied to business. When you subscribe to the free choice hacking email list, you'll join more than 7000 brilliant UXCX and marketing folks from companies like Google, Coke and Disney who get my newsletter. To sign up, just visit choicehacking.com subscribe. That's Choicehacking.com subscribe until next time.

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These cars and planes I'm always boarding just out touring down in Charlotte like I play for hornets.