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

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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