Dynamic Marketing Communiqué

Sergio Zyman’s “New Coke”: How can you take the biggest blunder and turn it into a cash cow? Monday Marketing Marvels

January 22, 2020

DYNAMIC MARKETING COMMUNIQUÉ
Monday Marketing Marvels

Eleven days after the “New Coke” was introduced, Zyman was already working on bringing the old Coke back in its place.

He called his whole team to Monte Carlo, where he was giving a speech at an event, to work on a “reversal” campaign. This is so he wouldn’t be caught working on it in the United States.

Did Sergio Zyman doom the company for all eternity? Or was this indirectly one of the greatest moves in marketing history?

Let’s take a look…

Sergio Zyman, Coca-Cola’s former Chief Marketing Officer and former Pepsi marketer, has painted himself a long and colorful career.

He is very well-known for his time in Coca-Cola, and how he was responsible for some of the company’s hits and misses.

He was so successful in introducing Diet Coke to the market that he thought “New Coke” would have an equal amount of favor—if not more.

Sad to say, this didn’t go as he imagined it would.

He argued that the best strategy to compete against Pepsi was to replace the 98-year-old Coke recipe with a “better” tasting one that he called the “New Coke.”

People were NOT happy. And in 1995, the New Coke campaign was labeled the biggest marketing blunder.

How did Zyman deal with this?

He bounced back and gave the consumers what they wanted: CLASSIC COKE.

As it was in the past, Classic Coke was again a success, as well as the marketing campaign that was built around it. Coca-Cola recovered pretty well after the New Coke debacle.

Afterward, when Zyman had speaking engagements and he was asked to give a comment on the topic, he said,

“…the totality of the action ended up being positive.”

How could Zyman say that, after causing major losses for Coke?

Well… the return of Classic Coke made the company stronger.

Tom Pirko, the President of Bevmark Drinks Consultancy in New York, said that the company was given a very painful lesson that was ultimately a wake-up call “…to do things differently and take risks in a way it had not done before.”

Roberto Goizueta, late Chairman and Chief Executive of Coca-Cola commented on the matter, “Judge the results. We get paid to produce results. We don’t get paid to be right.”

Different situations apply to different companies and marketing strategies. In Coke’s case, a misstep paved the way to better results and efforts.

Coca-Cola’s Earning Power: Our research vs. As-reported numbers

One of the reasons Coca-Cola makes for a great case study that we come back to regularly is that the firm truly has proved to be a phenomenal earning power generator.

Those are the true blue bars that are well over 30% for more than 20 years.

If you relied on their as-reported financial information, you wouldn’t know this—you’d just see the 7% orange bar when you look at the as-reported ROA (return on assets, measure of earning power).

That’s what you’ll see in Yahoo Finance, Google Finance, and most other databases.

So, how is Coca-Cola actually doing now, and has marketing been an effective tool in their business?

Our research and results don’t lie. Earning power (the blue bars) has been up and continues to show results much higher than what traditional databases show.

The stock price performed better than the rest of the stock market (the blue line), with returns above 1.0x the market.

Zyman’s marketing blunder turned into profit.

(Phew! That was a close call.)

Despite all that fuss, Coca-Cola proved that their marketing (including the bad ones) was effective.

Just look at the true (blue) numbers!

About The Dynamic Marketing Communiqué’s
“Monday Marketing Marvels”

Too often, industry experts and the marketing press sing the praises of some company’s marketing strategy.

…Only for the audience to later find out that their product was a flop, or worse, that the company went bankrupt.

What good is a marketing case study if one can’t prove that it actually paid off?

The true ROI in marketing, the real return on investment, can’t be separated from the business as a whole. What good is a “successful campaign” if the firm goes belly up?

At the end of the day, either the entire business is successful or it isn’t. And the role of marketing is always paramount to that success.

Every Monday, we publish a case study that highlights the world’s greatest marketing strategies.

However, the difference between our case studies and the numerous ones out there, is that we will always make certain that the firm really did generate and demonstrate earning power worthy of study in the first place.

That’s what the blue bars show: the true blue earning power of the firm (compliments of Valens Research’s finance group).

By looking at the true earnings of a company, we can now rely on those successful businesses to get tips and insights on what they did right.

We’ll also study the greatest marketing fails and analyze what they did wrong, or what they needed to improve on. We all make our mistakes, but better we learn from others’ mistakes—and earlier, rather than later.

Hope you found this week’s marketing marvel interesting and helpful.

Stay tuned for next week’s Monday Marketing Marvels!

Cheers,

Kyle Yu & Joel Litman
Head of Marketing & President and CEO
Valens Dynamic Marketing Capabilities
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