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Thursday, January 11, 2024

Why Established Brands Often Struggle with Marketing

When marketing, companies must recognize that consumer interests, tastes, and preferences take precedence over the interests of the firm.

Image Credit: Sean Loyless - Flickr | CC BY 2.0 DEED

Unlike startups that are expected to take risks, get messy, and challenge the status quo, larger established firms inherit what could be considered golden handcuffs, given that success can make change a challenge. Indeed, care must be taken not to rock the boat for stockholders or tarnish the brand equity that has been established among a loyal customer base.

Much like the construction of a home, once a company is built, updates and improvements are only given consideration if changes will strengthen the existing model and its equity. The location, foundation, and general structure, however, are rarely tampered with by proud homeowners. And although additions can occur, it will cost not only materials but also permit approvals, and design changes may generate remorse for earlier sunk costs.

The same is true for beloved brands with dedicated customers. Even minor adjustments can face friction, and redesigns have the potential to generate an uproar. Tropicana learned this lesson the hard way in 2009, losing roughly $30 million in sales after having spent $35 million on new packaging for its Pure Premium orange juice.

Customers did not approve of the updated modern imagery and were frustrated when they couldn’t easily identify their favorite brand while scanning grocery store shelves. The picture of an orange was a valuable asset in the minds of consumers since it was synonymous to the brand and easy to spot.

Recently, in 2023, Tropicana’s rival, Minute Maid, underwent a brand refresh for the launch of its first global marketing campaign. Changes were kept to a minimum, and so far the look of the simplified logo has been well received.

Whenever a business determines that change is necessary, it is important to remember that consumer interests, tastes, and preferences take precedence over the interests of the firm. Marketers should heed the words of Adam Smith and embrace the understanding that:

Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.

Although Tropicana wanted to modernize its brand, it was clear that consumers had other thoughts on the matter.

Knowing what changes consumers want or will respond favorably to, however, can also be a conundrum. The parent firms for Tropicana (PepsiCo, Inc.) and Minute Maid (The Coca-Cola Company) also have a troubled history when it comes to catering to consumer interests.

In 1975, the Pepsi Challenge was launched as a marketing campaign and, by means of a blind taste test, seemingly proved that people preferred the taste of Pepsi over Coca-Cola.

Coca-Cola, in response, assumed that it should give the people what they want. In 1985, it launched a new recipe to be more like Pepsi. New Coke was introduced, and backlash ensued.

Loyal fans of Coca-Cola did not appreciate the flavor adjustment, and, in retrospect, the Pepsi Challenge was a flawed assessment of consumer preferences.

Taking a swig of soda is different from drinking a full glass, so although Pepsi won the taste test for its sweet, crisp flavor, many still preferred Coca-Cola as their drink of choice. And, although Pepsi’s marketing campaign garnered more attention for the brand, it did little to convert existing Coca-Cola customers to becoming true Pepsi fans.

Marketers at both PepsiCo and The Coca-Cola Company should have embraced a Hayekian view for appreciating how purchases are based on established preferences and the Misesian framework of consumer purchases as being self-guided and purposeful.

Ludwig von Mises, Friedrich Hayek’s predecessor, aptly declared that although there is a beneficial relationship between producers and consumers, it is the consumer who is in charge.

The capitalists, the enterprisers, and the farmers are instrumental in the conduct of economic affairs. They are at the helm and steer the ship. But they are not free to shape its course. They are not supreme, they are steersmen only, bound to obey unconditionally the captain’s orders. The captain is the consumer. Neither the capitalists nor the entrepreneurs nor the farmers determine what has to be produced. The consumers do that.

Coca-Cola seems to have learned this timeless lesson. Coca-Cola’s original recipe was reintroduced as Coca-Cola Classic, and, by 2002, New Coke was discontinued.

So, what is the main takeaway from these drink industry debacles? Exposure, interest, and experience will always direct consumer choice more than promotional ploys, and even the greatest marketing experts still serve at the will of their customer base. People can’t be easily coaxed away from their favorite brands or drink of choice, and this takeaway is one that public officials should take to heart. If companies with industry expertise and vested interests and investments can’t always get it right when catering to their own customers, then a fortiori politicians are highly unlikely to be able to influence consumer behavior effectively, as much as they may try.

As long as people are able to consume and have a desire for what they consume, as postulated by Hayek, then they will. It is up to marketers and producers to satisfy those desires both in terms of what they sell and how they sell it.