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What Went Wrong with New Coke Essay

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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.
The Background:
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)

Fig 1

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...

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