The Pepsi Challenge – Lessons Learned & How It Relates to Your Business

coke-vs-pepsi There is an excellent article in the most recent issue of Colloquy titled The Neuromancers.  It attempts to answer the question “Is there a buy button inside the human mind?”  The article looks at the Pepsi Challenge from 1975, where consumers showed a definite preference for Pepsi over Coke in the blind taste test.  Almost a decade later and with declining market share Coke launched New Coke in 1983, which is was an utter failure.  But if market share was declining, and New Coke’s taste was closer to the preferred Pepsi, why did it end in disaster for Coke?

Lesson Learned for Coke

According the Colloquy article, Coke underestimated the power of their decades of marketing.  What mattered to Coke loyalists was “their emotional connection to Coke as a quintisential American brand.”  Coke consumers attached more than just the taste of the Coke to their buying decision.  They attached the powerful images and memories associated with Coke campaigns over the years.

… subjects who knowingly preferred Coke were recalling, perhaps subconsciously, positive memories and impressions from Coke’s advertising campaigns. Most subjects said they preferred Coke; but given a blind choice, many of them actually preferred Pepsi.  Cultural influences have a strong influence on expressed behavioral preferences…”

According to Sergio Zyman, Coke’s CMO at the time, as detailed in Guerilla Marketing Research:

What went wrong?  The answer was embarassingly simple.  We did not know enough about our consumers.  We did not even know what motivated them to buy Coke in the first place… After the debacle, we reached out to consumers and found that they wanted more than taste when they made their purchase decision.  Drinking Coke enabled them to tap into the Coca-Cola experience, to be part of Coke’s history and to feel the continuity and stability of the brand…  As soon as we stared listening to them, consumers responded, increasing our sales from 9 billion to 15 billion a year.”

What is the lesson for your business?

Most business can’t afford the marketing budget of a Coke to build emotional attachements over generations.  What you should learn here is that your customers don’t buy for just one reason. There are many factors that go into the purchasing decision.  Price may be most important, or it may not.  Features, customer support, convenience, quality, and the overall customer experience also weigh in on the decision.  It will be different factors for different types of customers.

How do you know what is most important to customers?  Do what Sergio Zyman did and start listening to customers, watch their behavior, and don’t always rely on a blind, single-feature test.

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19 Responses

  1. Excellent points, Paul.

    I think there’s another lesson here: The success of a marketing tactic varies by where any individual customer (or prospect) is in the purchase (or customer) cycle.

    For consumers who don’t currently have a strong connection to any brand, a tactic like a taste test might increase brand awareness or consideration. But it’s unlikely to cause switching behavior.

    Therefore, marketers must really decide what their marketing objectives are in order to deploy the right tactic.

  2. @Ron – Thanks for the additional insight Ron. Impacting switching behavior requires more than a taste test. If a brand/company can continue to stay top-of-mind and be relevant, maybe they will be in position when a consumer has “had enough” with their current brand/company.

  3. Excellent insights Paul. Interestingly history repeated itself when Burger King tried a similar taste test with the “Whopper Virgin” campaign. If only they had read this post before launching the campaign.

  4. Just passing by.Btw, your website have great content!

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  5. Great post…was digging up on this story after hearing an audio on this.

    What’s I see is a case of in-ward looking research designed to obtain the result that “beats” Pepsi. A more informed research design should have asked what influences purchase decision, so that taste should have been identified and measured (to measure influence on purchase decision).

    The results would have shown that it has low significance in the overall decision, and Coke shouldn’t have wasted time and effort creating a matching taste to Pepsi…

    Out of curiosity, is this how they made diet coke, and who thought of Coke zero (am a regular coke fun).

  6. Travis you raise a key point; that there is more to the purchase decision than just taste. This is often the case in most buying decisions – that there are multiple drivers. Often it is a combination of price, features (taste, convenience, support, capabilities, etc), and brand. Each consumer usually has a primary trigger in one of these areas, and then considers the other areas as secondary. Perhaps the new Coke formulas were designed to reach a different audience with different needs and tastes. Notice they still fall under the Coke brand to tap into the emotional connection and huge investment Coke has made toward it’s “brand.”

  7. The question is, however, do you believe Pepsi’s claims? I believe the “Challenge” was a clever scam, which sort of undermines any conclusions drawn.

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  9. [...] rivalry between Coca-Cola and Pepsi is legendary. Although the feud really heated up with the Pepsi Challenge in 1975 —which prompted Coca-Cola’s horrific New Coke [...]

  10. [...] rivalry between Coca-Cola and Pepsi is legendary. Although the feud really heated up with the Pepsi Challenge in 1975 —which prompted Coca-Cola’s horrific New Coke [...]

  11. [...] rivalry between Coca-Cola and Pepsi is legendary. Although the feud really heated up with the Pepsi Challenge in 1975 —which prompted Coca-Cola's horrific New Coke [...]

  12. [...] rivalry between Coca-Cola and Pepsi is legendary. Although the feud really heated up with the Pepsi Challenge in 1975 —which prompted Coca-Cola’s horrific New Coke debacle — the brands have been [...]

  13. [...] absolute online macht en eeuwige roem. Microsoft’s nieuwe wapen: een campagne gebaseerd op de Pepsi Challenge in [...]

  14. […] battled to dominate the market share, the rivalry intensified in 1975 due to the uproar caused by The Pepsi Challenge, where a blind taste-test showed consumer’s preference for the blue. Since then, the two […]

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  16. […] and Pepsi has raged for decades, but the most widely-known marketing skirmish between the two was the Pepsi Challenge in […]

  17. […] battled to dominate the market share, the rivalry intensified in 1975 due to the uproar caused by The Pepsi Challenge, where a blind taste-test showed consumer’s preference for the blue. Since then, the two […]

  18. […] absolute online macht en eeuwige roem. Microsoft’s nieuwe wapen: een campagne gebaseerd op de Pepsi Challenge in […]

  19. […] with the conflict largely coming to a head in 1975 when Pepsi was victorious over Coca-Cola in the Pepsi Challenge, something Pepsi used as ammo against Coke throughout the Cola Wars of the ‘80s and ‘90s and […]

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