Case Study 1

Coca-Cola’s Branding Lesson

One of the classic marketing mistakes occurred in April 1985 when Coca-Cola
replaced its flagship cola brand with a new formula. The motivation behind the
change was primarily a competitive one. Pepsi-Cola’s “Pepsi Challenge”
promotion had posed a strong challenge to Coke’s supremacy over the cola
market. Starting initially just in Texas, the promotion involved advertising and
in-store sampling showcasing consumer blind taste tests between Coca-Cola
and Pepsi-Cola. Invariably, Pepsi won these tests. Fearful that the promotion, if
expanded nationally, could take a big bite out of Coca-Cola’s sales, especially
among younger cola drinkers, Coca-Cola felt compelled to act.

Coca-Cola’s strategy was to change the formulation of Coke to more closely

match the slightly sweeter taste of Pepsi. To arrive at a new formulation, Coke
conducted taste tests with an astounding number of consumers190,000! The
findings from this research clearly indicated that consumers “overwhelmingly”
preferred the taste of the new formulation to the old one. Brimming with
confidence, Coca-Cola announced the formulation change with much fanfare.

Consumer reaction was swift but, unfortunately for Coca-Cola, negative. In

Seattle, retired real estate investor Gay Mullins founded the “Old Cola Drinkers
of America” and set up a hotline for angry consumers. A Beverly Hills wine

1
merchant bought 500 cases of “Vintage Coke” and sold them at a premium.
Meanwhile, back at Coca-Cola headquarters, roughly 1,500 calls a day and
literally truckloads of mail poured in, virtually all condemning the company’s
actions. Finally, after several months of slumping sales, Coca-Cola announced
that the old formulation would return as “Coca-Cola Classic” and join “New”
Coke in the marketplace (see the accompanying photo).
The New Coke debacle taught Coca-Cola a very important, albeit painful and
public, lesson about its brand. Coke clearly is not just seen as a beverage or
thirst-quenching refreshment by consumers. Rather, it seems to be viewed as
more of an Ameri-can icon, and much of its appeal lies not only in its
ingredients but also in what it represents in terms of Americana, nostalgia, and
its heritage and relationship with consumers. Coke’s brand image certainly has
emotional components, and consumers have a great deal of strong feelings for
the brand.
The epic failure of New Coke taught Coca-Cola a valuable lesson about
branding.
Although Coca-Cola made a number of other mistakes in introducing New Coke
(both its advertising and its packaging probably failed to clearly differentiate
the brand and communicate its sweeter quality), its biggest slip was losing
sight of what the brand meant to consumers in its totality. The psychological
response to a brand can be as important as the physiological response to the
product. At the same time, American consumers also learned a lesson—just
how much the Coke brand really meant to them. As a result of Coke’s
marketing fiasco, it is doubt-ful that either side will take the other for granted
from now on.

2
Case Study 2
Branding Commodities
A commodity is a product so basic that it cannot be physically differentiated
from competitors in the minds of consumers. Over the years, a number of
products that at one time were seen as essentially commodities have become
highly differentiated as strong brands have emerged in the category. Some
notable examples are coffee (Maxwell House), bath soap (Ivory), flour (Gold
Medal), beer (Budweiser), salt (Morton), oat-meal (Quaker), pickles (Vlasic),
bananas (Chiquita), chickens (Perdue), pineapples (Dole), and even water
(Perrier).
These products became branded in various ways. The key success factor in
each case, however, was that consumers became convinced that all the product
offerings in the category were not the same and that meaningful differences
existed. In some instances, such as with produce, marketers convinced
consumers that a product was not a commodity and could actually vary
appreciably in quality. In these cases, the brand was seen as ensuring
uniformly high quality in the product category on which consumers could
depend. In other cases, like Perrier bottled mineral water, because product
differences were virtually nonexistent, brands have been created by image or
other non-product-related considerations.
One of the best examples of branding a commodity in this fashion is diamonds.
De Beers Group added the phrase.
“A Diamond Is Forever” as the tagline in its ongoing ad campaign in 1948. The
diamond supplier, which was founded in 1888 and sells about 60 percent of
the world’s rough diamonds, wanted to attach more emotion and symbolic
meaning to the purchase of diamond jewellery. “A Diamond Is Forever” became
one of the most recognized slogans in advertising and helped fuel a diamond
jewellery industry that’s now worth nearly $25 billion per year in the United
States alone.
After years of successful campaigns that helped generate buzz for the overall
diamond industry, De Beers began to focus on its proprietary brands. Its 2009
3
campaign highlighted its new Everlon line. Partly in reaction to the recession,
De Beers’s marketing also began to focus on the long-term value and staying
power of diamonds; new campaigns included the slogans “Fewer Better Things”
and “Here Today, Here Tomorrow.”

4
Case Study 3
Growing the McDonald’s Brand
Over the last decade, McDonald’s has faced a challenging environment. Market
saturation, global health concerns, and a slumping economy have presented
significant obstacles to its growth. To overcome these, the company has
employed a number of different growth strategies that we can classify us-ing
the Ansoff growth share matrix. As a result of these strat-egies, the company’s
financial fortunes have rebounded, and McDonald’s has outperformed many of
its peers in revenue growth. The brand has even been credited with producing
a “halo effect” that is “driving growth for the entire quick-service restaurant
category.”
Market Penetration
For a long time, McDonald’s increased its market penetration just by
introducing hundreds of new outlets each year. But by 2002, markets had
become saturated and sales had slumped. On becoming CEO in 2004, James
Skinner adopted a new cor-porate motto, “Better, not bigger.” Rather than
trying to grow by adding new restaurants, McDonald’s would grow by gener-
ating greater returns from the ones it had.
Thus, instead of investing in new real estate, the firm made huge investments
in upgrading the facilities and op-erations of existing stores. One important
way McDonald’s made it easier for its customers to spend more money was by
expanding to 24-hour service at many stores. To better accommodate these
longer hours, the menu has been con-stantly fine-tuned so there are offerings
to suit any meal or snack opportunity.
Breakfast has become an essential part of the McDonald’s revenue equation. A
quarter of its domestic revenue—over $6 billion—and half its profits come from
breakfast, which includes the highly successful McMuffin and McGriddle
break-fast sandwiches. Snack Wraps and smoothies entice customers between
meals. Snack Wraps are ideal for drive-thru customers who need to have one
hand on the steering wheel; 60 percent of sales are drive-thru generated.

5
McDonald’s decade-long “I’m Lovin’ It” global advertis-ing campaign has served
as the perfect vehicle to support new product launches and enhance loyalty.
Translated into a number of languages worldwide, it replaced some 20 different
ad platforms that had been running in different regions.
One way McDonald’s grows its brand is through market development and
expanding in overseas markets such as Japan.
Market Development
McDonald’s has made concerted efforts to expand globally through the years,
and its progress has been astounding. There are over 33,000 restaurants
worldwide in 119 different coun-tries today, and 1.7 million employees serve 64
million customers
daily in the United States, Europe, the Middle East, the Asia-Pacific region,
Africa, Canada, and Latin America.
One key to its global success has been McDonald’s will-ingness to adapt its
menu to different cultural preferences and regional tastes. The chain offers
specialized menu items, such as the Teriyaki Burger in Japan and Vegetable
McNuggets in England. In India—where beef is not consumed because cows are
sacred—it introduced the Maharaja Mac, made from mutton. The company also
developed spicy sauces, such as McMasala and McImli.
McDonald’s targets different demographic and psycho-graphic market
segments as well. The product offerings in Happy Meals have been tweaked
through the years to appeal to both children and their parents. More recently,
McDonald’s sought to develop a new U.S. market by attracting twenty- and
thirty-something females with premium salads served with Newman’s Own
dressing, and other lighter menu options. McDonald’s rapidly became the
number-one salad brand in the United States.
Product Development
McDonald’s found its popularity in its core markets under threat as
international concern grew about the role of fast food in poor health and
obesity, highlighted by the 2001 book Fast Food Nation and the 2004 movie
Super Size Me, among other critiques. The company posted its first quarterly
6
loss in 2002, and as a consequence, it “needed to look at why its customers
weren’t buying and recognize that they wanted better choices and healthier
options.”
McDonald’s responded by overhauling its menu, remov-ing “Super Size”
options and adding healthier options such as a number of fresh salads,
healthier versions of kids’ Happy Meals, and adult versions that included
salad, bottled water, and a pedometer to encourage exercise. Other health
initiatives the firm undertook included its Balanced Lifestyles platform for
children, which promoted healthy food choices, education, and physical
activity; and its Go Active! campaign to promote active lifestyles. Both were
endorsed by Bob Greene, Oprah Winfrey’s personal trainer.
The shift in focus toward healthy eating and physical activity was emphasized
by McDonald’s recasting of Ronald McDonald
as its “Chief Happiness Officer,” a sports enthusiast who donned a more
athletic version of his traditional yellow-and-red clown suit and snowboarded,
skateboarded, and jug-gled fruit in a new TV spot.
The company also tapped into the growing premium-coffee trend in the United
States by launching McDonald’s Premium Roast coffee, which retails for about
35 percent less than a cup of Starbucks coffee. McDonald’s also introduced a
new line of premium hamburgers—one-third-of-a-pound Angus Burgers. The
20-piece Chicken McNuggets allowed the company to en-ter the shared-meals
segment dominated by KFC.
Diversification
Although McDonald’s has largely focused on expansion through market
penetration, market development, and prod-uct development, it has done some
diversification to target new customers with new service offerings. It extended
its brand in 2001 with the opening of its first domestic McCafé, a gourmet
coffee shop inspired by the success of Starbucks that had debuted in Portugal
and Austria. Another extension is McTreat, an ice cream and dessert shop.
While several Golden Arch Hotels in Switzerland failed to make it and were sold
off, experimentation continues. In Hong Kong, three McDonald’s locations offer
7
wedding packages for loyal couples. The basic Warm and Sweet Wedding
Package for 50 guests goes for under $1,300. An additional $165 covers a
rented “gown” of pearly white balloons.