The year was 1985. In a three-month flash, the New Coke episode shook the foundations of the marketing trade and scarred it forever. How could the Coca-Cola Company, a premier marketer, so widely miss the mark with its flagship brand? It was not for lack of research: Coke had spent $4 million and interviewed 200,000 consumers to make this decision. Is nobody immune from mistakes of that magnitude? To this day, the ghost of New Coke haunts major brand repositioning decisions.
Prof. Robert M. Schindler of Rutgers University provides a compelling and intriguing hypothesis for why New Coke failed.1 He found that New Coke overwhelmingly beat old Coke, 63 percent to 37 percent, in large-scale taste tests. Only 10 percent to 12 percent of the consumers tested appeared upset by the reformulation. While most focus groups were positive as well, they indicated a higher proportion of consumers would be upset by the Coke reformulation. As many of us would have done, trained marketers attributed the discrepancy to a negligible minority and went ahead with the introduction.
The results are well known. As reformulated Coca-Cola entered the market, a vocal minority of old Coca-Cola lovers took to the airwaves to condemn the move - with the fervor of an antiwar demonstration! The media found an interesting angle and amplified the story to no end. Reformulated Coke began to lose ground, and the company responded by splitting the flagship between Coca-Cola Classic and New Coke. By 1990, New Coke was all but extinct. Gone with it were $48 million in marketing costs and some of Coca-Cola's credibility with its core consumers. In hindsight, Coke failed to realize the powerful influence that a small subset of discontented consumers could have on the opinions of others.
The New Coke experience provides a glimpse into the strong emotional undercurrents of powerful brands. Be it with Coca-Cola, Nike or Harley-Davidson, some loyal consumers experience a relationship that goes well beyond the fulfillment of a functional need. They are militant in their commitment to their brand: creating positive word of mouth for the brand, experiencing the product to its fullest and, if defrauded, launching frontal attacks on the company. In many ways, brand managers act as chaperones of these relationships, trying to strike a difficult balance between commitment to the core of the franchise and the desire to reach out to new segments.
Companies spend billions of dollars creating positive feelings toward brands, both in the form of advertising and in skillfully designed products and services. In fact, most brands have emotionally loyal consumers at their core. Are companies getting enough value from these investments? Today, most marketing practitioners treat these consumers as part of the loyal customer base, without further distinction. In our view, this approach underleverages the massive investment that created emotional loyalty: These brand zealots have the potential to become the brand's biggest allies or, at the other extreme, a renegade army.
DEFINING EMOTIONAL LOYALTY
Consider Nike, a well-known brand with a loyal following. Phil Knight and Bill Bowerman, runner and running coach, started the company in 1971 with a strong product and a specific target customer: the distance runner. On the strength of the product and the insight that advantaged credibility could be achieved by focusing on the athlete's needs (unlike entrenched competitors, which targeted athletic organizations instead), the Nike brand began to grow. First, it captured a loyal segment of very demanding athlete customers. Later, Nike made a jump into the general population by leveraging its position with athletes to create a pantheon of heroes (Michael Jordan, Bo Jackson, Tiger Woods) to embody the brand, taking shoe purchases to a wholly different emotional plane. Ultimately, the Nike brand has become more than a "good shoe" or Air Jordan. The evidence includes Nike Town, which became the single most popular tourist attraction in Chicago upon opening in 1992; the fan mail Nike gets daily from kids who send in new shoe designs, and the brand's prominence in the media.