Description
Explain a situation you have observed (or read about) in which a firm made a decision considering irrelevant costs or did not consider relevant costs. What was the outcome of the decision, and what could have been done differently?
Anneka Christensen
Aug 18, 2023, 11:28 PM
A marketing blunder I found quite interesting after doing some research was the “New Coke” debacle by The Coca-Cola Company in 1985. April 23, 1985, was a day that will live in marketing infamy (The Coca-Cola Company, 2023). In an attempt to combat declining market share and competition from Pepsi, Coca-Cola decided to reformulate its flagship product, Coca-Cola, and introduced a sweeter version known as “New Coke.” The decision was largely based on taste tests that indicated consumers preferred the flavor of New Coke over the original formula. However, what Coca-Cola failed to consider were the irrelevant costs associated with brand loyalty, emotional attachment, and the historical significance of the original formula. The strong emotional connection consumers had with the traditional Coca-Cola was not adequately accounted for in the decision-making process.
The launch of New Coke was met with immediate and widespread backlash. Consumers expressed outrage and disappointment over the change, and many even started stockpiling the original Coca-Cola. The public’s negative reaction led to a significant decline in sales and a wave of protests and boycotts. In response to the intense backlash, Coca-Cola reintroduced the original formula as “Coca-Cola Classic” within just a few months. Coca-Cola could have taken a more comprehensive approach to decision-making, considering not only the taste preferences revealed in the tests but also the intangible factors that contribute to a brand’s value. Conducting additional research to understand the emotional and psychological attachment consumers had to the original formula could have provided insights into the potential negative consequences of changing the product. Furthermore, involving marketing and brand experts who understand the cultural significance and history of the product could have helped identify potential risks. By taking a more holistic view of the decision, Coca-Cola might have realized that the irrelevant costs related to brand loyalty and emotional connection far outweighed any potential short-term gains from a new formula.
Reference
New Coke: The Most Memorable Marketing Blunder Ever? (2023). www.coca-colacompany.com. https://www.coca-colacompany.com/about-us/history/new-coke-the-most-memorable-marketing-blunder-ever
