In 1985, Coca-Cola embarked on what is since viewed as one of the worst marketing blunders in history. The customer response as well as how Coca-Cola decided to reformat how it dealt with customers, informed how the beverage company would modify its processes for decades to come.
When Coca-Cola discontinued its original formula and introduced New Coke in 1985, it was not prepared for how loyal to the original millions of customers were. The organization was not equipped to handle the thousands of calls it received a day or the public refusal to accept the New Coke. Embracing DMAIC and actually listening to what the company’s customers really wanted helped to make sure that the problem for Coca-Cola was a relatively short one.
Coca-Cola Had a Problem
Coca-Cola has long been the world’s best-selling soft drink, but executives were getting nervous about Pepsi gaining a foothold in the market throughout the 70s and into the 80s. Pepsi had launched an aggressive new marketing campaign that showed in blind taste tests that consumers preferred the taste of its brand as well as following up with advertisements that called their beverage “the choice of a new generation.” The point hit home by having their commercials featuring the most iconic young entertainers of the day, including Michael Jackson, Madonna, and Michael J. Fox.
Coca-Cola ran its own blind taste tests as well, and it was confirmed, people really did prefer the sweeter taste of Pepsi. Coca-Cola predated Pepsi by several decades, with Pepsi being introduced in 1963, while Coca-Cola dates back to 1886. In the nearly 100 years between 1886 and 1985, Coca-Cola tweaked its recipe a bit to accommodate changes in sweeteners in order to keep the taste of the beverage consistent. Despite this, these tweaks were always in service of keeping the core flavor the same. After 190,000 taste tests throughout the United States and Canada, where Coca-Cola tried out a new sweeter version that testers preferred over not only Pepsi but the original Coke itself, a decision was made.
Coca-Cola would change the recipe of its flagship beverage.
The announcement was made to the press that gathered at Lincoln Center in New York. Coca-Cola president Donald Keough and CEO Roberto Goizueta even toasted each other with cans of the New Coke, having the recipe to 7x (the regular Coke formula) sealed in a bank vault in Atlanta, with the plan to phase original Coke out of the marketplace. The heads of the company were confident that this move was the right one for their organization.
Unfortunately, during all of these taste tests, not enough focus went to how they would feel about Coca-Cola changing its formula.
It did not take long for the executives, as well as the entire world, to find out just how consumers felt about Coca-Cola changing its product.
Shares of Coca-Cola immediately dropped on the New York Stock Exchange. Grassroots organizations began pouring New Coke into sewer drains. Original Coke loyalists hoarded any of the discontinued version that they could find while taking their anger to the press. One Seattle customer even filed suit against the corporation.
The executives were not prepared for this response from the public.
They were also not prepared for the deluge that hit their customer service department. Upon the announcement, Coca-Cola headquarters began receiving 5,000 calls a day. This rose to 8,000 phone calls a day within months, leading the company to hire many more call center operators.
Through the experience of the launch of New Coke, Coca-Cola realized they had some serious issues with understanding what their customers actually wanted as well as not having the proper infrastructure set up that allowed it to properly hear feedback.
Coca-Cola Decided To Use DMAIC and Listen to Its Customers
After realizing that they were unprepared for the kind of customer service necessary during this crisis, Coca-Cola got to work revamping their call centers utilizing the DMAIC process.
The D in DMAIC stands for Define. Coca-Cola was able to define its major problems due to the complaints of its customers. Customers were frustrated not only about New Coke, but also about the major delay in responding to their questions and the lack of consistency in the answers they received.
M stands for Measure in DMAIC. During this period, Coca-Cola measured the reasons why there was such a delay in response to customers as well as the lack of consistency. Customer care centers and hotlines were inspected, along with machines and related technology. These were all looked at thoroughly to see what factored into the delay.
In DMAIC, A stands for Analyze. During this phase, the data compiled was presented mathematically through graphs and charts. These were used to look at why some hotlines did better than others. Also carefully examined were the possible reasons for the massive delay between customer service and the customers.
I stands for Improvement in DMAIC. To improve its processes, Coca-Cola had its employees that showed better call center performance train the other employees so that everyone in the call centers was at the same level. Common question/answer lists were shared among the entire customer care department to make sure that answers would now be consistent.
Coca-Cola also set up a message for callers that briefed them on updates regarding the most common issues and concerns. Only unusual queries would be directed to a live person at the call centers. This cut down significantly on the queue of customers that needed handling and ensure that those with issues outside of what Coca-Cola was already working to address could get through to someone with less delay.
C in DMAIC is in reference to the Control phase, which means to make sure that the improvements made are controlled so that the same issues do not arise again. At Coca-Cola, the improvements made to their customer service were kept in check by weekly submissions sent from the customer care department to management.
It was also important for the company to look at not just the ability of the call centers to handle all the complaints from the blunder but also how it occurred in the first place.
During the taste tests and focus groups that ultimately led to Coca-Cola launching New Coke and discontinuing its original formula, executives chose not to look holistically at all the information given to them. While many in the groups did say that they preferred the taste of what was to become New Coke, a vocal minority of 11% let it be known that they would stop drinking Coke entirely should this new formula be presented as Coca-Cola. This vocal minority was persuasive enough to influence others in the focus groups, but the executives chose to ignore this information as having little to do with the taste tests.
The information taken from the focus groups turned out to be the wrong part to focus on, and Coca-Cola’s launch of New Coke was a fiasco. That 11% minority in the focus groups translated into millions of customers that were unhappy with Coca-Cola.
Along with fixing its call centers, Coca-Cola felt like it had no choice but to reintroduce the original Coca-Cola 77 days after its discontinuation. For a while, both varieties were available, but New Coke was eventually phased out. Coca-Cola played into the nostalgic and passionate feelings of its customer base with ad campaigns over the next few years like “America’s Real Choice” and “When Coca-Cola is a Part of Your Life, You Can’t Beat the Feeling.”
The Outcome Was Phenomenal
The revamping of the customer call centers turned out to be very successful for Coca-Cola and influenced how it would address issues in its processes for decades. Also, by listening to its customers and bringing back the original formula of Coca-Cola, the company’s sales doubled the rate of Pepsi’s that year.
As an example of how Coca-Cola has continued to utilize Six Sigma methodology for its continued success in the decades since, Ellen Bovarnick, the company’s Vice President of Corporate Business Excellence explained the organization’s approach in a 2005 interview.
In the interview, Bovarnick states that Coca-Cola now implements a complete Six Sigma program to run the business. This program is under the heading “Business Process Excellence.” While other companies may implement Six Sigma in a limited manner in order to address the improvement of an operation or process, Coca-Cola is using Six Sigma to connect all aspects of the business with one another.
3 Best Practices When Considering Your Customers in Major Decisions for Your Organization
1. Look at all the information you receive from your customers
With all of the focus groups and taste tests that Coca-Cola conducted, the decision was made to change a product, one beloved by a large section of the population for over a hundred years. The feedback from the focus groups told them that by discontinuing the original formula, there would be a significant and influential percentage of its customer base that would be upset and would stop drinking Coke altogether. The executives chose to ignore this information and instead focus on how a large percentage of taste testers preferred the taste of the new formula.
If the executives had taken into account the emotional connection of a percentage of the focus groups to the original Coca-Cola, they might have opted to look at a different way to boost sales or handle the roll-out in an alternate manner.
When presented with feedback from your customer base, it is important that all of it is looked at carefully before making a decision.
2. Have the appropriate infrastructure set up to handle customer feedback
When the crisis occurred, Coca-Cola found that it did not have the ability to properly field complaints from all of the angry customers. It had to revamp its customer call centers in order to make sure that such an issue did not arise in the future.
From this, we can learn that it is necessary to make sure that your customer service processes are set up properly so that when issues arise, feedback from your customers can be heard.
3. Do not leave your customers waiting for a response
Coca-Cola learned the importance of being able to address customer issues in a timely manner. Emotions ran high during the 77 days that it took for Coca-Cola to reintroduce its original formula. It is possible that if Coca-Cola were able to get back to customers in a timely manner, the organization might not have lost so much money and goodwill from the public during those 77 days.
Coca-Cola Stays Customer-Centric
Since reintroducing the original Coca-Cola formula, the company has managed to stay more or less on top of the market. There have been some ebbs and flows, questionable marketing decisions, and some products that have not turned out to be hits. Through it all, Coca-Cola has continued to embrace Six Sigma and all of its innovations and new products have been in service of what the public actually wants. One example would be the success of Coke Zero, a zero-calorie soda that manages to taste much more like Coca-Cola than Diet Coke. Of course, if this were 1985, Coca-Cola might have opted to pull Diet Coke out of circulation when introducing Coke Zero. The company, however, learned from its mistake. Coca-Cola Classic, Diet Coke, and Coke Zero all have their fans, and Coca-Cola takes all that it has learned in the decades since the New Coke snafu and directs it toward keeping its customers happy.