Founded in 1886, The Coca-Cola Company is today the world’s largest soft drink manufacturer. Demonstrating its power is the 45% share of the US carbonated drink market compared to the 26% share enjoyed by Pepsi. In 2021, The Coca-Cola Company generated revenue of US$38.66 billion, and still higher revenues are predicted in 2022. Highlighting the returns generated by this powerhouse are its largest shareholder – Berkshire Hathaway (the investment business chaired by Warren Buffet) and Blackrock Inc. (the world’s largest investment house).
Despite this success, and perhaps reflecting its insecurity, The Coca Cola Company undertake regular taste tests where its core product – Coke – is compared to Pepsi. Over the years, the outcomes of these taste tests have not looked good for Coke. One series of studies found that consumers found it difficult to differentiate these cola drinks in a blind taste test. One significant study found that:
- 41% of consumers successfully identified Coke
- 38% of consumers successfully identified Pepsi
In most blind taste tests, however, subjects preferred Pepsi over Coke. Some studies suggest that 90% of people in a double-blind test prefer Pepsi. It has been suggested that Pepsi is preferred because it is sweeter than Coke.
In response to findings like these, 100 years after its foundation, on July 23, 1985, the Coca Cola Company launched NEW COKE, a version of the original product that was closer in taste (sweeter) to Pepsi. NEW COKE was supposed to have a taste closer to the original Coke and Pepsi in blind taste tests. Alas, as many will recall, NEW COKE failed and was withdrawn from the market on July 10, 2022, after the business burned millions trying to advertise their way to success with the new product. This failure went well beyond the failure of consumers to buy the product. It was also a huge failure for the Coca Cola Company in terms of:
- Creating the perception that Pepsi had won the cola wars.
- Damaging the image of success enjoyed for so long by Coke.
More importantly, the failure of NEW COKE demonstrates four critical issues:
- Even the biggest businesses get it wrong.
- The dangers of relying on intuition.
- The power of branding.
- The power of co-creation.
Despite 100 years of operation, the stunning successes of Coke and so many other products, some of the best minds in marketing, and enormous resources, the Coca-Cola Company got it wrong when it placed so much importance on blind taste tests. All businesses make mistakes.
The mistake of launching NEW COKE was partly the result of relying on intuition, with the proposition being that – if people prefer the taste of Pepsi to Coke – making NEW COKE taste more like Pepsi sales would be increased. An intuitive assessment was made that taste is the primary reason for buying a soft drink brand. In the end, this intuitive thinking was found to be wrong.
Subsequent research suggested NEW COKE failed because, in essence – cola preferences are not based on taste and that, in fact, taste is not the most important driver of purchases. Research found that purchasers of the original Coke were not buying a soft drink but rather – the Coke brand and everything it represented. Certainly, it needed to taste good – but it also had to be a brand that reflected values the consumer believed were important – one of which was authenticity. NEW COKE failed because it was not COKE – it was not the authentic product consumers had grown up with. Research found that purchasers of original Coke bought into all aspects of the Coke brand – none of which they saw in NEW COKE. It was a bit like trying to replace a Harley with a Honda. The Hinda may well be a better product – but it is not a Harley.
Finally, the failure of NEW COKE indirectly demonstrates the power of co-creation – developing products in conjunction with the target market. If the Coca Cola Company had moved beyond taste tests to look at what consumers were looking for in a soft drink, what they were buying when they purchased a bottle of the original Coke and what values were important to them, it would never have launched NEW COKE.
Over recent years, businesses and marketers have talked a lot about being ‘customer-centric.’ For many, the term ‘customer-centric’ is little more than a catch-phrase. While many highly successful brands like Apple, Amazon, Microsoft, and Google have got where they are today by being customer-centric – few businesses in Australia that I have come across could be accurately described as customer-centric. Further, most of these businesses would be a whole lot more successful if they were customer-centric.
Central to a truly customer-centric approach to marketing is ‘co-creation.’ If the Coca Cola Company had used co-creation to manage its product portfolio in 1985, they would almost certainly not have launched NEW COKE. If the businesses that talk about being customer-centric (and I know of very few who are customer-centric) used co-creation in their marketing strategy – most would have lower marketing costs and higher revenue.
‘Co-creation, in the context of a business, refers to a product or service design process in which input from consumers plays a central role from beginning to end. Less specifically, the term is also used for how a business allows consumers to submit ideas, designs or content. This way, the firm will not run out of ideas regarding the design to be created, and at the same time, it will further strengthen the business relationship between the firm and its customers.’ Wikipedia
Most discussions about co-creation in marketing focus on the co-creation of the product and content. While this is of critical importance, a co-creation strategy can and almost certainly should address the following:
- Customer experience.
- Pricing strategy.
- Distribution strategy.
- Lifetime value strategy.
- Communication strategy. (Including content)
The best starting point for maximising sales is developing a product that the target market will buy. Co-creation techniques can offer a powerful tool for moving beyond target market problems, wants and needs – to focus on what the target market will actually buy and what configuration of the product is required to maximise the frequency and size of purchase.
The next step in maximising sales often involves developing the optimum customer experience. The customer experience is central to maximising sales and even more central to maximising the lifetime value of each customer. Many businesses consider the customer experience part of the product, and for many (including food outlets), it is part of the product. The optimum customer experience will bring customers back again and again.
The pricing and distribution strategies should also be considered in a co-creation approach to marketing. While consumers will generally seek to pay as little as they can, co-creation helps define value, identify what consumers will pay a premium for, what they will not pay a premium for, and the overall approach to pricing that works best for the business and the consumers. The same is so for distribution. How important are offline and online sales, pick-up and delivery services, delivery costs, presentation, etc.? Co-creation can address all of this.
Maximising the lifetime value of a customer involves maximising conversion rates, margins, the average sale, repeat business rates and referral rates. This, in turn, requires an understanding of the customer journey and the critical touchpoints in that journey. Co-creation represents a powerful tool for understanding the customer journey, identifying touchpoints, and determining how best to address each touchpoint.
Co-creation is often used to determine the subjects consumers are interested in and the content of social media campaigns. Co-creation can, however, also be used to inform the communication strategy more broadly. It can give rise to a better understanding of how the target market uses various media, the information they are interested in and the best approach the leveraging media opportunities. Co-creation establishes relationships that can be leveraged through digital communication.
Moreover, co-creation eliminates guesswork and helps to identify the optimal approach – maximising sales and minimising costs. It is much more than research – or asking consumers questions. It involves leveraging the potential for open and ongoing cooperative communication between the business and members of its target market. It offers the added value of establishing a relationship between the business and its target market that can be leveraged to maximise the lifetime value of each customer. Many business people view co-creation as a partnership between the business and the customer – a partnership that facilitates long term brand loyalty.
Co-creation can and often does involve market research, including:
- Focus Groups.
Focus groups and individual interviews are suitable for identifying issues, concerns, and opportunities, while surveys effectively quantify (therefore measuring the importance of) the issues, concerns, and opportunities. Observational research is a less used but often more effective tool for understanding the customer journey, product utilisation, and general behaviour.
Central to effective market research, as used in co-creation, are:
- Identifying the optimum method, given the issues.
- Asking the optimum questions.
- Addressing the optimum market to research.
Errors in terms of these three factors are very common. The last issue is especially problematic.
While research is important and can be a lot more cost-effective than many think. It generally involves the one-way flow of information – that is, members of the target market responding to questions. The co-creation process is best served by a conversation between the business and target market members, that is:
The parties need to trust each other enough to be open, frank, and honest. The discussions should continue over the longest possible period allowing for changes in the market and the business. Concerns about image need to be stripped away – allowing for all issues to be discussed honestly and creatively. Two approaches that facilitate this are:
Regarding a brand community, consider:
- 86% of businesses report brand communities provide insights into customer needs.
- 66% of companies say they turn to brand communities for product development.
- 64% of companies state that the brand community has improved their decision-making.
Providing a forum for discussing all marketing issues, brand communities work well in both the B2C and B2B environments.
A marketing panel is a small version of a brand community rather than being open to all customers and potential customers. It is open to a representative sample. However, the number and individual participants can vary over time. As with a brand community – a marketing panel works for B2B and B2C, although it tends to be more common in B2B.
Both the brand community and the marketing panel can be online or offline – but they will work best when they are both. Online discussions are less expensive to facilitate and easier to make ongoing. Offline discussions can be more personal and better encourage trust and authenticity. The benefits of an online community or panel include the capacity to use digital data. In addition to monitoring discussions, it is possible to monitor what community members are most interested in.
Co-creation should lie at the heart of every innovation strategy. Co-creation has a great deal to offer in identifying when it is time to innovate, and what types of innovations will add the greatest value and drive sales while minimising costs. One area in which co-creation can be most helpful is innovation.
One opportunity that needs to be highlighted is the monitoring and leveraging of social media. Social media forums can provide a quasi or proxy brand community. While less insightful than a brand community, social media forums can nonetheless provide valuable insights into consumer thinking. Social media needs to be closely monitored.
- Great marketers in 2022 avoid a reliance on intuition.
- Great marketers in 2022 embrace co-creation in marketing.
- Great marketers in 2022 establish a brand community.
- Are too smart to rely on intuition or common sense to make marketing decisions.
- Embrace the potential of co-creation to reduce costs and increase revenue.
- Utilise co-creation to develop the optimum product and customer experience.
- Establish a brand community or marketing panel to facilitate co-creation.
- Use co-creation and a brand community to drive innovation.
- In launching NEW COKE, the Coca-Cola Company relied too heavily on intuition regarding the importance of taste to consumers. How heavily do you rely on intuition?
- Successful international businesses routinely use co-creation to develop their product, customer experience, pricing, and distribution strategies. Why don’t you?
- Pricing and distribution strategies. Successful international businesses routinely use a brand community to reduce costs and increase revenue. Why don’t you?
- Successful international businesses routinely use a brand community to drive profitable innovation. Why don’t you?
- Social media can be a free mine of information critical to developing the optimum marketing strategy. How do you incorporate social media into your strategic planning process?