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PBM Research

Solving Business Problems

Posted by Courtney N. Thabet, Strategic Insights Manager on

The goal of marketing research is to solve business problems and make business decisions.

When I start a research project, the very first question I ask is “What is the problem?” This question is important, obviously, when trying to solve the problem. However, identifying the correct problem is vital.

Say, for instance, sales are down in the first quarter for CNT Company – is that the problem? The answer is no, that’s the symptom. Sales being down are a symptom of the problem. The real question is, “Why (when, how, etc.) are sales down?” – is it because of a new competitor, bad public relations, lower quality product, etc.

As a real-life example, let’s look at Coke’s disastrous decision of new Coke in the mid-80s. As most of us remember, in April of 1985, Coke took a huge risk by changing the formula of Coke, and chaos and protests ensued. My own grandmother wrote a letter to the CEO lambasting him for the change.

At the time, consumer preference for Coke was plunging, and Pepsi was gaining market share largely in part to the “Pepsi Challenge” which involved blind taste tests filmed on the street with random people tasting Coke and Pepsi and choosing which one they liked best. Every single challenge concluded that more than 50% of people preferred the taste of Pepsi over Coke.

Coke was losing taste tests and market share to their rival. And, as the story goes, Coke had been doing some taste tests of their own, spending $4 million on market research comparing the old and new formulas. In nearly 200,000 blind taste tests, 62% of people preferred the new formula over the old formula.

And we all know what happened next. By May, Coke conceded the loss with Coke president Don Keough stating, “The passion for original Coca-Cola – and that is the word for it, passion – was something that caught us by surprise…. It is a wonderful American mystery, a lovely American enigma, and you cannot measure it any more than you can measure love, pride, or patriotism.”

So what went wrong? Their research showed that most people liked new Coke.

My opinion: Coke solved the wrong problem. They believed they were losing market share due to the taste of Coke, however, they did not consider a couple of important facts: 1) that the taste test was a sip test, of which the results differ widely from an at-home use test, and 2) the importance of Coke’s place in American culture and the long-standing relationship people had with the product. Taste is important, but the relationship was more important. Pepsi had taken a chunk of Coke’s market share, but it had more to do with their overall marketing as a youth product as well as how well they played the “sip test” Pepsi challenge.

Digging deeper into the problem of why market share was down and what was truly important to consumers would have led to better research.

In the end, it all worked out very well for Coke, and for my Grandma, who gratefully got her Coke Classic.