COKE'S BRAND-LOYALTY LESSON Brand loyalty? Everyone knows Americans don't have much anymore. Or do they? Ask the folks at Coca-Cola who tampered with a 99-year-old national institution. Their marketing goof provides clues to what brand loyalty is -- and how not to lose it.
By Anne B. Fisher RESEARCH ASSOCIATE Wilton Woods and Robert Steyer

(FORTUNE Magazine) – MARKETERS battling to keep competitors from grabbing off customers complain that there just doesn't seem to be as much brand loyalty around as there used to be. Yet when Coca-Cola Co. dared to tamper with a 99-year-old formula to bring out a ''new'' Coke, outraged U.S. consumers quickly forced the red-faced company to bring back the old brand. Coke's abrupt about-face, front-paged and prime-timed, raises questions about brand loyalty that every marketer has to ponder: how companies get it, how they keep it, and which products inspire such fierce loyalty that they're best left old and unimproved. Brand loyalty -- that certain something that makes a consumer keep buying over and over again -- is an elusive quality. It begins with the customer's preference for a product on the basis of objective reasons -- the drink is sweeter, the paper towel more absorbent. The brand name is the customer's guarantee that he will get what he expects. But when a branded product has been around a long time and is heavily advertised, it can pick up emotional freight: it can become a part of a person's self-image or summon fond memories of days gone by. The sense of emotional attachment was palpable among consumers who for years had agreed with Coca-Cola that ''Coke Is It.'' They wanted the Real Thing they had grown up with and in some cases grown old with. They inundated Coca- Cola's Atlanta headquarters with protests (''Dear Chief Dodo: What ignoramus decided to change the formula of Coke?''). In Seattle strident loyalists calling themselves Old Coke Drinkers of America laid plans to file a class action suit against Coca-Cola. They searched out shop owners, vending- machine owners, and others willing to claim that the company's formula change had cost them business. When June sales didn't pick up as the company had expected, bottlers too demanded old Coke's return -- fast. ; Coke thought it had moved cautiously in deciding to retire the old formula. The company spent about $4 million to taste-test the new soda pop on nearly 200,000 consumers. The tests took many forms. Some were blind tests without the emotion-laden brand name attached to them. Others posed such questions as, What if this were a new Coke taste? But Coca-Cola never disclosed that the product it was testing would replace the old favorite entirely. So while it learned that more people liked the new, sweeter formula than the old, it failed to gauge how people would react once they learned that old Coke was being replaced. Dennis Rosen, who teaches marketing at Indiana University's Graduate School of Business, thinks Coca-Cola unwittingly ran afoul of too many fond memories. ''Taste tests,'' he says, ''don't take into account the emotional tie-in with the old brand, which is all wrapped up with people's childhoods. Now that consumers are drinking out of cans labeled new Coke, naturally there is an emotional backlash.'' When the new Coke hit the shelves in the U.S. in April, consumers felt that the company had broken the first promise of branding: that what you get today will be what you got yesterday. ''All of the time and money and skill poured into consumer research on the new Coca-Cola could not measure or reveal the deep and abiding emotional attachment to original Coca-Cola,'' says Donald R. Keough, Coke's president and chief operating officer. He adds, ''Some critic will say Coca-Cola made a marketing mistake. Some cynic will say that we planned the whole thing (for the publicity value). The truth is we are not that dumb and we are not that smart.'' Many marketing experts are sympathetic with Coke's giant misstep. ''All research on brand loyalty is flawed,'' says John O'Toole, chairman of the Chicago-based advertising agency Foote Cone & Belding, ''because you can't get at people's private motivations. In any kind of interview or questionnaire, they want to seem sensible and prudent. They aren't going to tell you how they feel.'' In Coca-Cola's case, consumers' feelings were not only unfathomable but fickle too. The company's research after the new formula hit supermarket shelves showed a curious turnaround. Before May 30, 53% of shoppers said they liked the new Coke, the rest said they didn't. In June the vote began to change, with more than half of all the people surveyed saying they didn't care for the new Coke. Says a Coke spokesman: ''We had taken away more than the product Coca-Cola. We had taken away a little part of them and their past. They said, 'You had no right to do that. Bring it back.' '' By the time the company decided it had erred in changing the formula, only 30% of the 900 consumers surveyed every week answered that they liked the new Coke.

With the old formula reintroduced as Coca-Cola Classic, complete with old- fashioned script logo, shoppers will now find six kinds of Coke on U.S. supermarket shelves -- new, classic, caffeine-free, diet, diet caffeine-free, and cherry. (One more variety, the New York Daily News noted, and Coca-Cola ''will have seven up.'') Soft-drink experts believe that the welter of Cokes will give the company a tough time keeping a clear identity in shoppers' minds. Some Coke executives are said to share that fear, though Chief Executive Roberto C. Goizueta called the lineup a ''megabrand'' and a marketing plus. HE MAY BE right. Other products come in a variety of forms with no evident consumer befuddlement; Marlboro comes to mind, with its king-size and longs and low-tar lights in boxes and soft packs. Goizueta believes his megabrand gives the company an edge in supermarkets, where he who grabs the most shelf space wins. Wall Street seemed to share his confidence: in the week that the reintroduction of old Coke was announced, Coke's stock price jumped $5.50, closing at $73.75 a share. Some consumers are quite capable of a kind of purchasing polygamy: they can be, and often are, faithful to more than one brand at a time. The phenomenon, known as brand-cluster loyalty, has long been common in the soft drink aisle, and Coke in all its multiple guises is in the same brand cluster with Pepsi and all its variations. ''In lots of stores, Coke and Pepsi are on special during alternate weeks,'' says Allen Rosenshine, president of the ad agency BBDO International. ''So a lot of people switch back and forth regularly -- even though they buy only Coke and Pepsi, and wouldn't buy any other colas.'' Pepsi executives, who have been crowing over Coke's embarrassment -- Pepsi-Cola USA President Roger Enrico calls the new Coke ''the Edsel of the 1980s'' -- might pause to consider that Coca-Cola now has more entries in that cola cluster. For companies intent on changing a product without stirring up the natives, brand-loyalty pundits offer some advice. First, some products are safer to change than others. Brand loyalties seem to be most intense with products that are ingested or close to the skin; a study by the Ogilvy & Mather ad agency found that men care more about the brand name on their underwear than on their ties. The more closely a brand is bound to a person's image of himself, the more likely he will be to resist any change in it. This might be called the ''I use this, this is me'' principle, and it applies to things like cigarettes, perfume, and beer, all personal items that their users associate with particular ideas about status or even personality. It's not for nothing that Marlboro is the U.S. market leader in the high-loyalty cigarette category: the macho image of the Marlboro Man speaks volumes about how certain smokers see themselves. Another high-loyalty market leader is Budweiser. ''Anheuser-Busch would drop dead before they'd put 'new and improved' on that product,'' says Charlotte Beers, chief executive of the Chicago ad agency Tatham-Laird & Kudner. ''Tradition is a big part of its appeal.'' Having the biggest market share, as Marlboro and Bud do, is helpful in establishing brand loyalty, simply because many people are most comfortable buying something that a lot of other people buy. But less ubiquitous products still attract ferocious loyalty. Asks Beers, ''Can you imagine a new and improved Chanel No. 5?'' In their quest to make sense of the emotional side of brand loyalty, some marketers have devised quasi-scientific systems for measuring it. One of these is a model, in the form of a grid, that Foote Cone & Belding uses to pinpoint how emotionally involved a customer is likely to be with a given purchase. The higher the level of involvement, the stronger the brand loyalty -- and the more hazardous it is to trumpet a big change in the product. At one end of the scale are products like hair coloring, where involvement is high partly because of the element of risk: you'd best get it right the first time, or buy lots of hats. According to John O'Toole of Foote Cone & Belding, consumers' loyalty to Clairol, a Foote Cone client, is ''amazingly high.'' At the other extreme, in this model, are products like cat litter, paper towels, and clothes pins, which are designed to get boring tasks done as inexpensively as possible. With these humdrum products, most consumers switch back and forth between brands with abandon, picking up whatever's on sale -- although some will pay for quality when they come across a brand that they believe does the job better than any other. In any research designed to measure loyalty, cautions Morgan Hunter, vice chairman of Marketing Corp. of America, a Westport, Connecticut, marketing firm, it is important not to confuse a stated preference with what consumers actually do when they're in the store. They may not actually buy the brand they say they prefer if it costs too much more. Marketers agree that food products, especially those that have been around a long time, are among the riskiest to ''improve,'' as Coca-Cola has discovered the hard way. ''You can make small improvements, but watch out,'' says Charlotte Beers. ''Velveeta cheese, for example, has a distinct taste, but more than that, it is a part of childhood for a lot of people -- the way it stirs and mixes and melts. It would be very risky to change any of that.'' If you must alter a product that reminds consumers of their salad days, brand- loyalty experts say, change it without a lot of hoopla. WHETHER COCA-COLA could have gotten away with changing quietly is unknown. It might have succeeded had the change been less noticeable, as it was in Canada. Coke there was already sweeter than the U.S. version. When new Coke was introduced in Canada, shipments of concentrate reportedly jumped 42% in the first seven weeks over the year-earlier period. A Coke spokesman also notes that Canadians have less emotional attachment to Coke. Much of Coca- Cola's U.S. advertising has been steeped in Americana. Over the past few years, marketers have worried that generic and other bargain products were making brand loyalty a thing of the past among increasingly savvy and recession-weary consumers. An annual study by the ad agency Needham Harper & Steers asks 4,000 heads of households, half of them men and half women, whether they agree with the statement: ''I try to stick to well-known brand names.'' The percentage who answer ''yes'' has dropped from 77% in 1975 to 61% this year. Coke's debacle has shown decisively that, for some products at least, consumers would still rather fight than switch. BOX: WHO CAN BE LOYAL TO A TRASH BAG? When generic products were coming on strong a few years ago, J. Walter Thompson, the New York-based ad agency, gauged consumers' loyalty to brands in 80 product categories. It found that the leader in market share was not necessarily the brand-loyalty leader. At that time, Bayer aspirin was the market share leader among headache remedies, but Tylenol had the most loyal following. Thompson measured the degree of loyalty by asking people whether they'd switch for a 50% discount. Cigarette smokers most often said no, making them the most brand-loyal of consumers (see table). Film is the only one of the top five products that the user doesn't put in his mouth -- so why such loyalty? According to Edith Gilson, Thompson's senior vice president of research, 35-mm film is used by photography buffs, who are not your average snapshooter: ''It's for long-lasting, emotionally valued pictures, taken by someone who has invested a lot of money in his camera.'' Plenty of shoppers will try a different cola for 50% off, and most consumers think one plastic garbage bag or facial tissue is much like another. HIGH-LOYALTY MEDIUM-LOYALTY LOW-LOYALTY PRODUCTS PRODUCTS PRODUCTS cigarettes cola drinks paper towels laxatives margarine crackers cold remedies shampoo scouring powder 35-mm film hand lotion plastic trash bags toothpaste furniture polish facial tissues Brand names matter more in some products than in others, researchers find.