In 1985, the Coca-Cola Company made a classic marketing blunder. After 99 successful years, it set asides its long-standing rule---don't mess with Mother Coke---and dropped its original formula Coke in favor of a new formula called 'New Coke' with a sweeter, smoother taste.

When New Coke was first introduced in 1985 with heavy promotional campaigns, it was sold well. However, sales soon went flat, as a stunned public reacted. Coke began receiving sacks of mail and more than 1,500 phone calls each day from angry consumers. A group called "Old Cola Drinkers" staged protesters, handed out T-shirts, and threatened a class-action suit unless Coca-Cola brought back the old formula. After only three months, the Coca-Cola Company brought old Coke back. Now, called "Coke Classic," it was sold side-by-side with New Coke on supermarket shelves. The company said that New Coke would remain its "flagship" brand, but consumers had a different idea. By the end of 1985, Classic was outselling New Coke in supermarkets by two to one.

Why was New Coke introduced in the first place? What went wrong?

In the early 1980s, although Coke was still the leading soft drink, it was slowly losing market share to Pepsi. For years, Pepsi had successfully mounted the "Pepsi Challenge," a series of televised taste tests showing that consumers preferred the sweeter taste of Pepsi. By early 1985, although Coke led in the overall market, Pepsi led in share of supermarket sales by 2%. (That doesn't sound like much, but 2% of the huge soft-drink market amounts to $960 million in retail sales.) Coca-Cola had to do something to stop the loss of its market share, and the solution appeared to be a change in Coke's taste.

Cola began the largest new product research project in the company's history. It spent more than two years and $4 million on research before setting on a new formula. It conducted numerous blind-taste tests, in which participants were offered Pepsi and New Coke but without knowing the names of the brands being tested. Such tests, help in removing the effect of the brand name in influencing opinions on product performance. Accordingly, Coca-Cola conducted a series of blind-taste tests on 200,000 American consumers to assess the final formula vs. that of Pepsi. In blind-taste tests, 54% of the consumers chose it over Pepsi. Research showed that New Coke (the new formula) would be winner, and as a result of that, the company stopped producing the old Coke (the old formula), and introduced New Coke with confidence.

1. What was the actual research problem that was facing Coca-Cola?
2. If you were a marketing manager hired by Coca-Cola, which research design would you use? Which data collection methods would you use?
3. What were the technical mistakes in the way that Coca-Cola conducted the research project?
4. One of the research findings was that "54% of the consumers chose it -the new formula- over Pepsi". If you were a marketing, how would you interpret such a result?
5. Based on your answer of the fourth question, what strategic action(s) would you take?