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Value Innovation

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2. Why did Coke change its formula for the New Coke in the eighties? Why did it fail?
a. Cola wars begin, Pepsi become stronger. In1950, Pepsi targeted family consumption. In 1963, Pepsi launched “Pepsi Generation” marketing campaign, targeted the young and “young at heart”, this action helped Pepsi narrow Coke’s lead to a 2-to-1 margin. In 1960s, Coke focused on overseas markets, Pepsi battled Coke aggressively in U.S. doubled its U.S. share between 1950 to 1970.
b. The Pepsi challenge. In 1974, Pepsi launched the “Pepsi Challenge”, in blind taste tests, Pepsi tried to demonstrate that consumers prefer Pepsi to Coke, they prefer sweet one. Successfully eroded Coke’s market share.(video)
c. Coke’s New coke test. Coke found that consumers prefer New Coke than Pepsi.

In April 1985, Coke announced that it had changed the 99-year-old Coca-Cola formula. The product and the brand had a declining share in a shrinking segment of the market. The reformulation prompted an outcry from Coke’s most loyal customers, and bottlers joined the clamor. Three months later, the company brought back the original formula under the name Coca-Cola Classic, while retaining the new formula as its flagship brand under the name New Coke. Six months later, Coke announced that it would treat Coca-Cola Classic as its flagship brand.

a. Failure in taste tests. Coke put more attention on New Coke’s taste, ignore other factors, like brand image and customer loyalty.
b. Ignore brand core value. Coca-Cola Classic represents American culture, it means American value, it contains people’s emotion and memory.
c. Ignore the cost of consumer psychology switching, just consider the cost of economic

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