Market Customization: Market Segmentation, Targeting, and Positioning
“Coca-Cola has never disclosed how much it lost in the new Coke fiasco, though bottlers told Mr. Meyers of Beverage Digest that they took a hit of $30 million on unwanted concentrate for new Coke. The company also spent $4 million on market testing and taste comparisons with 200,000 consumers.”
Question: Can the failure of “New” Coke be attributed to shortcomings of Robert Goizueta’s Market Customization strategy.
From 60% in 1950, Coca-cola’s market share had dropped to 24% in 1983. The market share was mainly lost to Pepsi-Cola. Coca-cola thus, in 1985, decided to introduce a new formula (unpopularly called New Coke) in-order to drive up sales. This led to such a decline in sales for Coke and a subsequent increase in sales for Pepsi that Pepsi celebrated the 10th year anniversary of “New” Coke in 1995.
Let us do a retrospective analysis of what Market Segmentation research may have been done that led Coca-cola to implement the “New” Coke.
Analysis of Segmentation Strategy:
What actually happened: A major segment of Coke was Baby Boomers. Coca-cola believed that as this segment aged, it would move on to healthier diet drinks and hence they needed to look into the “full-calorie” young segment. Figure 1 below graphically depicts this understanding. At that time the youth favored Pepsi’s high calorie content by even more overwhelming margins than the market as a whole. Thus Coca-cola zeroed-in on this segment and launched the “New” Coke (of course they substantiated their strategy with surveys and focus groups, the unbiased nature of these efforts is now being questioned)
What went wrong: The purpose of segmentation is to break mass markets into submarkets of consumers who have common needs. The “common need” was defined by Coca-cola based on...