Market Research: The Customer Is Not Always Right
There are many ways in which businesses can learn about customer satisfaction. Of course, sales are probably the best indicator of how well products and services are meeting market needs and wants. But they don’t tell the entire story. After all, companies with few competitors might have high sales figures even as customers complain about quality. (Certain cable providers come to mind.)
In more competitive industries, where substitute products abound, customer satisfaction is often measured in more qualitative ways. Companies might conduct surveys or host focus groups in order to better understand consumer purchase motivations and design products that tap into them. But do customers truly understand the why behind what they buy?
Coca-Cola refers to April 23, 1985, as a day that will live in marketing infamy. That was the day the soft drink giant released New Coke. For nearly a century prior, Coca-Cola reaped the rewards of its simple, sugary formula to sales of nearly $6 billion dollars. However, throughout the 1970s and into the early 80s, competitors like Pepsi were aggressively acquiring market share. Coke executives knew they had to do something to stay on top — they turned to their customers.
In late 1984, Coke product teams developed a new formula for Coca-Cola. Marketers took to the streets, conducting some 200,000 taste tests, a sample size that should satisfy even the most discerning statistician. Armed with a vision, a new product and overwhelmingly positive customer reviews, Coca-Cola released New Coke. It was an immediate disaster.
Customer backlash came pouring in via the Coke hotline. Between April and June of 1985, the company received about four times the usual phone center traffic; nearly all complaints about the new taste. After just 79 days, New Coke was being removed from shelves and replaced with a newly-branded reversion to the original recipe, called Coke Classic. (Fun fact: In 2011, 26 years after the debacle, Coke finally removed the word “Classic” from its marketing. It goes to show the lasting consequences of marketing missteps.)
So, what went wrong? Coke speculates that even though customers did indeed like the taste of New Coke, they failed to take into account the emotional ties to the original brand. In those moments of testing, they were solely focused on the taste of the new product. It wasn’t until customers had to make actual choices while shopping that they realized they no longer felt connected with the brand.
Coke went about product development in the “right” way. They used their expertise to develop a new formula, they tested the new formula on the consumer and they released what the customer said they wanted. Unfortunately, the customer was wrong. What else could Coke have done in order to ensure a more successful launch?
While Coke was on the right track with testing, they conducted their tests in unrealistic settings. When purchasing beverages at the grocery store, most consumers go in knowing what they want, though packaging, pricing and spur-of-the-moment preference changes can affect the final decision. Coke tested its new product in a blind A/B format against its original flavor. This hardly mimics the multisensory environment in which true purchase decisions are made. So, unless Coke was planning to sell its new product to crowds of blindfolded customers in laboratories, with no other choices at hand, there was an immediate problem.
That testing problem could have been solved by conducting a limited rollout of New Coke in select markets. Today, many food and beverage companies do exactly that. Pringles tests dozens of new, even avant garde (mmm...bacon caesar salad), flavors in various markets before deciding on a nationwide rollout.
In the end, even in highly competitive industries, companies are better off testing actual sales of products in a natural setting (e.g., a grocery store), than basing product choices on statistically sound clinical tests. Consumers are a fickle bunch. Motivations, preferences and brand loyalties can shift quickly — and without clear rationale. That is why smart brands meet customers where they are — without disrupting the normal purchase process — to test new products and assess likely success or failure on the only thing that matters to their companies: sales.