Market research

One of Coke's ads to promote the flavor change.

Coca-Cola's most senior executives commissioned a secret effort named "Project Kansas,"
headed by marketing vice president Sergio Zyman and Brian Dyson, president of Coca-Cola
USA, to test and perfect the new flavor for Coke itself. It took its name from a famous photo of
that state's renowned journalist William Allen White drinking a Coke that had been used
extensively in its advertising and hung on several executives' walls.[4] The company's marketing
department again went out into the field, this time armed with samples of the possible new drink
for taste tests, surveys, and focus groups.

The results of the taste tests were strong — the sweeter mixture overwhelmingly beat both
regular Coke and Pepsi. Then tasters were asked if they would buy and drink it if it were Coca-
Cola. Most said yes, they would, although it would take some getting used to. A small minority,
about 10-12%, felt angry and alienated at the very thought, saying that they might stop drinking
Coke altogether. Their presence in focus groups tended to skew results in a more negative
direction as they exerted indirect peer pressure on other participants.[5]

The surveys, which were given more significance by standard marketing procedures of the era,
were less negative and were key in convincing management to move forward with a change in
the formula for 1985, to coincide with the drink's centenary. But the focus groups had provided a
clue as to how the change would play out in a public context, a data point that the company
downplayed but which was to prove important later.[6]

Management also considered, but quickly rejected, an idea to simply make and sell the new
flavor as yet another Coke variety. The company's bottlers were already complaining about
absorbing other recent additions into the product line in the wake of Diet Coke. Many of them
had sued over the company's syrup pricing policies. A new variety of Coke in competition with
the main variety could, if successful, also dilute Coke’s existing sales and increase the proportion
of Pepsi drinkers relative to Coke drinkers.
Early in his career with Coca-Cola, Goizueta had been in charge of the company's Bahamian
subsidiary. In that capacity, he had improved sales by tweaking the drink's flavor slightly, so he
was receptive to the idea that changes to the taste of Coke could lead to increased profits. He
believed it would be "New Coke or no Coke",[7] and the change must take place openly.[5] He
insisted that the containers carry the "NEW!" label, which gave the drink its popular name.[8]

Goizueta also made a visit to his mentor and predecessor as the company's chief executive, the
ailing Robert W. Woodruff, who had built Coke into an international brand following World War
II. He claimed he had secured Woodruff's blessing for the reformulation, but even many of
Goizueta's closest friends within the company doubt that Woodruff truly understood what
Goizueta intended.[9][10] Goizueta always said he had.

Taste-test issues

In talks, and his book Blink, author Malcolm Gladwell relates his conversations with market
researchers in the food industry who put most of the blame for the failure of New Coke on the
flawed nature of taste tests. They claim most are subject to systematic biases.

Tests such as the Pepsi Challenge were what are called in the industry "sip tests", meaning that
drinkers were given small samples (less than a can or bottle's worth) to try out. Gladwell
contends that what people say they like in these tests may not reflect what they will actually buy
to sit at home and drink over a week or so.[55] Carol Dollard, who once worked in new product
development for Pepsi, told Gladwell, "I've seen many times where the sip test will give you one
result and the home-use test will give you the exact opposite."[56] For example, although many
consumers react positively to the sweeter taste of Pepsi when drinking it in small volumes, it
may become unattractively sweet when drunk in quantity. Coke, on the other hand, may be more
attractive for drinking in volume, precisely because it is less sweet. A more comprehensive
testing regimen could possibly have revealed this, Gladwell's sources believe.[55]

Gladwell reports that other market researchers have criticized Coke for not realizing that much of
its success as a brand came from what they call sensation transference, a phenomenon first
described by marketer Louis Cheskin in the late 1940s: tasters unconsciously add their reactions
to the drink's packaging into their assessment of the taste.[57] For example, one of the researchers
told Gladwell that his firm's research had found 7-Up drinkers offered a sample from a bottle
with a distinctly more yellowish label believe the flavor to be more lemony, although it wasn't.[58]

In Coke's case, it is alleged that buyers, subject to sensation transference, were "tasting" the red
color of the container and distinctive Coca-Cola script as much as the drink itself. It was thus, in
their opinion, a mistake to focus solely on the product and its taste. "The mistake Coke made,"
said Darrel Rhea, an executive with the firm Cheskin founded, "was in attributing their loss in
share entirely to the product".[58] He points to Pepsi's work in establishing a youth-oriented brand
identity from the 1960s onward[59] as having more bearing on its success.

Coke considered but rejected gradually changing the drink's flavor incrementally, without
announcing that they were doing so. Executives feared that the public would notice and
exaggerate slight differences in taste. In 1998, Joel Dubow, a professor of food marketing at St.
Joseph's University, tested this "flavor balance hypothesis" and argued that it was not true. He
and fellow researcher Nancy Childs tested mixtures of classic Coke and Coca-Cola II and found
that the gradual changes of taste were not noticed by a significant number of tasters. Coke, he
said, would have succeeded had it chosen this strategy.[60]

The Coca-Cola Center for Marketing Studies, established in 1986, seeks to advance professional
marketing research education and to identify and develop new programs and methods which will
better serve the marketing community's needs for education and information. The Master of
Marketing Research Program, an internationally recognized graduate program within the Terry
College of Business, is administered by the center. The center also works to maintain and
strengthen relations with the business community.

The Center is funded by endowment grants from the Coca-Cola Company, The Coca-Cola
Foundation, AC Nielsen, M/A/R/C/ Inc., Audits and Surveys, MRCA, and the membership
donations of an extensive list of leading firms on the MMR Board of Advisors. These funds
support assistantships for the MMR students, faculty research grants, teaching materials, and
seminars by industrial leaders. The faculty of the Marketing Department appreciates this support
by these firms and invites the participation of other firms.