New Coke: the taste test was right, and the customers owned the value

By the early 1980s Coca-Cola had a problem it could measure. Pepsi had spent years running the Pepsi Challenge, blind tastings in which more people picked Pepsi, and Coca-Cola’s own share of the cola market had been slipping for a long time. The company developed a sweeter formula and tested it at enormous scale, with figures of around 200,000 tasters commonly cited. In blind tests the new drink beat both Pepsi and the original Coke.

On 23 April 1985 Coca-Cola announced the change and stopped making the original. The reaction surprised everyone, the company included. Consumers flooded its phone lines with complaints, letters piled up, protest groups formed, and the story became a national event. On 11 July 1985, after 79 days, the company announced that the original formula would return as Coca-Cola Classic. New Coke stayed on sale for years under smaller and smaller billing, and the episode became the most quoted product mistake in marketing history.

Research answered the question it was asked

The taste tests measured something real. People did prefer the sweeter drink in a sip test, and Coca-Cola had a real problem with Pepsi. The research measured one thing, taste in a blind sip, and the company treated that measurement as the value of the product. Our books make the same point about Coca-Cola from the other side: the brand can lose a blind test and still win in reality, because people buy how it makes them feel far more than the flavor itself.

A blind test removes exactly the thing customers were paying for. The can, the name, the memories, the sense that this drink had always been there: all of it is taken away by design, so that only taste remains. The method was sound, and it answered a question that had little to do with why people bought Coke.

Whose values were they

In our method you start from core values, the levers a company decides to invest in, extracted from the assets it owns. New Coke shows that some of those values end up owned by the customer. Over a century Coca-Cola had built a value around continuity: the same drink, the same bottle, the same place in family rituals and national memory. The company held the formula, and the public had long since taken ownership of what the formula meant.

Changing the formula was a legitimate product decision on paper. In practice it broke a promise the company had never written down and the customers considered signed. The anger of 1985 was about loss: people felt that something of theirs had been taken without asking. Research that asks which liquid tastes better cannot detect that, because nobody thinks of a value they own until it is gone.

The return made the value visible

The recovery is as instructive as the error. Bringing the original back as “Classic” turned an invisible value into a stated one. For decades continuity had been assumed; now it had a name on the can and a story around it. Sales of the returning drink were strong, and some commentators suspected a plan. Donald Keough, then the company’s president, answered with a line that has been quoted ever since: “we are not that dumb, and we are not that smart.”

Products can and should change. Before you touch the asset that carries a value, find out which values your customers have taken ownership of. A useful test is to ask what would happen if you announced the change tomorrow with no improvement attached. If the answer is indifference, you are free to optimize. If the answer is a sense of loss, you are dealing with a value the market holds, and every change has to be designed around it.

If your team is about to improve something customers might consider theirs, train your team to map which values you own and which ones your customers do.