Sergio Zyman
01/01/2005
Most people lack the audacity to call one of the biggest marketing mistakes in history a worthwhile experience. I don’t. But let me explain. I was chief marketing officer for Coca-Cola in the mid-1980s. Pepsi was running the “Pepsi Challenge,” and we were getting hammered. Soft-drinkers preferred Pepsi’s sweeter taste, so we changed the formula we had been using for 100 years to give our customers what we thought they wanted: New Coke.
We orchestrated a huge launch, received abundant media coverage and were delighted with ourselves ... until the sales figures rolled in. Within weeks, we realized that we had blundered. Sales tanked and the media turned against us. Seventy-seven days after New Coke was born, we made the second-hardest decision in company history: We pulled the plug. What went wrong? The answer was embarrassingly simple: We did not know enough about our customers. We did not even know what motivated them to buy Coke in the first place. Based on that, we fell into the trap of imagining that innovation—abandoning our existing product for a new one—would cure our ills.
After the debacle, we reached out to consumers, and found that they wanted more than taste when they made their purchase. Drinking Coke enabled them to tap into the Coca-Cola experience, to be part of Coke’s history and to feel the continuity and stability of the brand. Instead of innovating, we should have renovated. Instead of making a product and hoping people would buy it, we should have asked customers what they wanted and given it to them. As soon as we started listening to them, consumers responded, increasing our sales from 9 billion to 15 billion cases a year.
New Coke taught me the value of renovation. It is the best way to drive profitable, organic growth. A successful renovation involves six steps:
- Renovate your thinking.
- Renovate your business destination. Clearly define how you want the consumer to think, feel and act in relation to your company and brand.
- Renovate your thinking about who your competitors are.
- Renovate your brand positioning.
- Renovate your customer segmentation. Tailor marketing to why your customers buy what they buy, what they are doing when they buy, why they choose one brand over another and what would make customers buy more of your products.
- Renovate consumers’ experience.
We first applied a market research approach to identify segments of hypertensive patients that represented the greatest market opportunity. We used those findings to define a strategy to market the brand directly to patients, targeting consumers representing the best opportunity to generate incremental sales. This was a departure from what our client’s competitors were doing: marketing only to physicians. We established a foundation for impressive growth and watched as sales dramatically increased.
Renovation can also be used in entrepreneurial ventures. In marketing The Passion of the Christ, Mel Gibson understood his potential consumers, and found a unique way to communicate with them: through their churches. Gibson saved millions of marketing dollars by conducting advance screenings at churches, distributing 250,000 promotional DVDs and conducting 300 church “summit meetings.” By understanding consumers and communicating to them unconventionally, Gibson motivated churches to reserve almost $10 million worth of seats before the movie was released.
Think back about what made your company great. Where are you now? No matter what you do, you can use renovation to generate growth. I guarantee you that if Ore-Ida had been renovating instead of innovating, they never would have released chocolate french fries.
Sergio Zyman is the author of Renovate Before You Innovate: Why Doing the New Thing Might Not Be the Right Thing.