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- [00:01]
Host
Death and taxes and the picture of George Washington on the dollar bill. Those are among the few constants in a changing world. But now another of those constants may be changing. Coca Cola is about to announce what it calls the most significant development in its history.
- [00:15]
Phil Graves
This development was rather surprising. Back in the 1980s, Coca Cola had the dominant market share. It was leading the soda industry in sales and its overall sales were growing. And yet despite all of this, Coca Cola changed its flavor.
- [00:32]
Host
There's never been a better Coke introducing the greatest taste discovery in a hundred years.
- [00:39]
Phil Graves
But why? Why change the taste of one of the world's best selling products?
- [00:44]
Consumer Psychologist
So new Coke was born out of what I guess you could call the Coke wars of the 70s and 80s.
- [00:51]
Phil Graves
That is Phil Graves, my guest on today's episode of Nudge.
- [00:54]
Consumer Psychologist
I'm a consumer psychologist, author of the book Consumerology and founder of SHIFT consultancy.
- [01:01]
Phil Graves
Phil explained that the Coke wars started after an infamous ad by its main competitor Pepsi.
- [01:07]
Consumer Psychologist
In the US Coca Cola had the dominant share. I think they were about 65% of the market. And Pepsi was very much a number two. And what Pepsi came up with was the Pepsi Challenge where they went round giving people a sip taste test of blind test of two liquids to see which one they prefer.
- [01:26]
Host
Coca Cola says it's the real thing. But Pepsi Cola believes that when it comes to colas, the only real thing is taste. That's why the Pepsi Challenge has been asking thousands of people across the country to let their own taste decide through.
- [01:40]
Consumer Psychologist
Their taste test results. They came up with the suggestion that actually more people preferred Pepsi over Coke.
- [01:47]
Host
And the fact is nationwide, more people prefer the taste of Pepsi over Coca Cola.
- [01:52]
Consumer Psychologist
I think it was something like 57% preferred Pepsi, Pepsi, Pepsi, Pepsi.
- [01:57]
Host
I like Pepsi a lot better.
- [01:59]
Consumer Psychologist
And the rational consequences of this weren't lost on the bigwigs at Coke who started to panic.
- [02:08]
Host
Pepsi Challenge and let your taste decide.
- [02:11]
Phil Graves
But this story isn't really about what soda tastes better. It's a much more complex story about the effects of branding, the problems with market research, and ultimately our inability to truly understand what goes on inside our heads. All of that coming up in today's episode of Nudge. HubSpot makes impossible growth seem easy for some of their customers. And there is a perfect example. It is Morehouse College. This is a college in Atlanta in America. And like most organizations that have been around for, you know, decades, they had a huge amount of content on their website. 900 different pages and even the tiniest of updates took 30 minutes for them to Publish. And yet they needed to reach new students with fresh, engaging content. So they used Breeze, HubSpot's collection of AI tools. This helped them write new content, optimize their content in a fraction of time, and essentially create results that really worked. They got 30% more page views and their visitors now spend 27% more time on their site because they are creating content that people really care about. So if you feel like growth is impossible, it might be worth reaching out to HubSpot. Go to HubSpot.com Back in the 1980s, Pepsi were creating punchy ads that were gaining a lot of attention. Ads like this from 1981.
- [03:35]
Host
You're about to take the Pepsi Challenge. You know, I have two bottles of cola back here and you don't know which is which? No, I don't. We have never met before. That's correct. Okay, now I'm gonna pick this up and tell me which one you chose. Pepsi. You know, in tests like these nationwide, more people prefer to taste the Pepsi over Coca Cola. Pepsi is much better. It's delicious. Sit down. Nice and smooth. The taste is good. It's great. Take the Pepsi Challenge. Let your taste decide. Right guys? Right.
- [04:01]
Phil Graves
These ads convinced Coca Cola to do something drastic. Something they had not done in their entire 99 year history.
- [04:08]
Consumer Psychologist
The people at Coke decided, oh no, this is terrible. We don't taste nice enough, so we need to reformulate. They then did a whole load of work reformulating Coke and came up with a reformulation, a recipe that was preferred by 7 percentage points to Pepsi in their blind taste tests.
- [04:25]
Phil Graves
This product change was a very big deal.
- [04:28]
Host
This has got to be the boldest consumer product move of any kind, of.
- [04:33]
Consumer Psychologist
Any stripe since Eve started to hand out apples.
- [04:37]
Phil Graves
That was Jesse Myers, the publicist at Beverage Digest.
- [04:42]
Host
Coca Cola is ready to launch a nationwide advertising blitz. And the company already has sent its bottlers a video pep rally in the war of the callers. So let's let her rip. Let's land on the beaches and go all the way.
- [04:55]
Phil Graves
And that was Coke's American president with some inspiring words. But did his Churchill esque motivational speech work?
- [05:04]
Consumer Psychologist
And so they duly launched New Coke. And consumers went nuts. But not in a good way. There was this massive backlash against it. Campaign groups who were sprung up to say, we want old Coke brought back.
- [05:17]
Phil Graves
Would you like to sign a petition?
- [05:19]
Host
Get back the old Coke. Karen Wilson's a die hard. For the past week, she's been standing on street corners in Palo Alto, California asking people to taste new Coke.
- [05:28]
Phil Graves
No, I like the old company and.
- [05:30]
Host
Collecting signatures, trying to convince Coca Cola that the new Coke is not just.
- [05:36]
Phil Graves
Goes down your stomach like a dead glass of water. Whereas the old Coke just bites.
- [05:42]
Consumer Psychologist
Including entertainingly led by one guy who I think worked in pr, who then was asked to do the blind test himself, chose Pepsi as being preferable, but still would say, I don't care. I still want Coke back.
- [05:57]
Host
And in Seattle, the Old Cola drinkers of America have set up a hotline, hoping to get enough support to file a class action lawsuit against Coke, charging without old Coke, they're distressed and injured. After 99 years, it's a national institution and it's a part of the fabric of the United States. And when they don't make it and then prohibit me from getting it by keeping the secret formula, then that's not American.
- [06:24]
Phil Graves
The backlash to Coke's new flavor was rather surprising. Because Coca Cola had spent a lot of time and money creating this better product. They also spent $35 million on advertising it. That's $88 million today. And they spent that in just over two months. They created ads that directly called out the Pepsi Challenge.
- [06:45]
Host
Recently, an independent research firm ran a taste test between Coke and pe. And the taste more people chose was the taste of Coca Cola. Yes. More people all across the country, when comparing Coke to Pepsi, chose the taste of Coke as the better taste. Let's look at it this way. We gave America a choice, and more people said, coke is it.
- [07:08]
Phil Graves
It's a hit. It's a Coke.
- [07:12]
Host
Coke is it.
- [07:13]
Phil Graves
But New Coke really wasn't it. In fact, the thing people really wanted was old Coke.
- [07:19]
Host
At a wine boutique in Beverly Hills, Old Coke has been shishified. It goes for $30 a case right next to the Beaujolais and Chablis. And in Arlington, Virginia, John Hayden is hoarding old Coke. He's got 25 cases so far.
- [07:33]
Consumer Psychologist
And within three months, after all of that development, all of that research, all of that asking consumers what they thought in blind tests, New Coke was withdrawn from the market.
- [07:44]
Host
Coca Cola is bringing back the real thing, its original formula. Too many cola drinkers had complained the new Coke wasn't it.
- [07:54]
Phil Graves
So what went wrong? Well, in Phil's book, he writes, how many assumed that the problem was with New Coke's market research? For example, tasting a sip of a soda is nothing like drinking a full can. That first hit of sweetness might be pleasant, but if you're drinking a full can, it can become cloying. Just as the first chocolate in a box feels indulgent, while the 10th in quick succession can leave you feeling a bit queasy. Removing the drink from its packaging only compounded this issue with without the can you strip away the branding, the influence of that branding, and you leave nothing but this anonymous brown fizzy liquid. This is all true. But Phil says there's a point that most analysts missed, and that was that the problem wasn't just with Coke's research process. It was that no research of this type could have ever delivered a reliable, accurate answer. Even if the tests had been redesigned, say, giving participants full branded cans or asking them to drink a month's worth at home, the results might have been different, but there's no guarantee that they would have matched what would have happened in the real world. Because rather than asking people what they think, Phil says you should just observe how they behave.
- [09:12]
Consumer Psychologist
Behavior is truth. So what were people doing? Well, you already had a 65% market share. And okay, you can say, well, is there a massive difference in distribution and could this distribution change that? But people were exhibiting a behavioral preference in lots of stores around the US and it wasn't that. Well, when Pepsi was present, 60% of people were choosing it over Coke. Coke was winning everywhere that both brands were. So you've got that going on. So you've got to say, well, hang on a second, what's this taste test actually telling us? But more fundamentally than that, if you spend probably five minutes watching people go and buy soda, to use the American parlance, or fizzy drinks, as we would call it, you will see them spending almost no time on the decision. It will happen in a fraction of a second. As soon as they see Coke, they'll pick it up and they're gone. So in that situation, that's a very good example that the unconscious mind is what's driving that. It's habit. It's a repeated behaviour. It's probably underpinned by a belief. But that belief is a rationalization. Because I keep doing the same thing. I will tell myself, I must believe this is better. And then you contrast that with what research is doing. Research is this sort of implicit relationship to make things conscious. And so I'm about to ask you to one, do an a B test that you could do yourself easily for the price of two cans of drink. Consumers never do or virtually never do. That's not the way they make purchase decisions. When you are making that decision, you are using your brain in a completely different way. You're asking yourselves, question yourself a question, or you're being asked questions. And that not surprisingly triggers completely different processes in the mind to the one when you're floating through life making an incidental decision with minimal thought about what is going to satisfy your thirst or give you a caffeine, sugar, sugar buzz. You know, what you're doing is so artificial, it's like you're asking the wrong people. Well, actually, what you're doing is you're asking the wrong part of their brain. And you're asking, and you shouldn't be, you know, you should be observing.
- [11:33]
Host
Please don't change the taste of Coke.
- [11:40]
Phil Graves
The real lesson from the New Coke debacle isn't just that a major brand can make a mistake. It's it's that Coca Cola relied on a rational model of consumer behavior that doesn't reflect how people actually think or act. And that's a mistake that companies continue to repeat, wasting money, backing flawed ideas and killing off promising new ideas. The story reveals a lot. Branding shapes perception. A sip isn't the same as drinking a full can. People resist losing what they love? And we're all influenced by first impressions and social proof. No market research could have fully captured these unconscious forces. Yet research remains a default in big companies, not because it always works, but because it feels like a safeguard. But to truly explain why so much market research is flawed, we need to look beyond Atlanta, beyond New Coke, and beyond this 80s backlash, and instead look inside our heads. So after the break, Phil will explain the psychology behind misattribution and why all of us are so bad at describing what we really think. The podcast I'd like to recommend today is Creators Are Brands. It is hosted by Tom Boyd and is brought to you by the HubSpot Podcast Network, the audio destination for business professionals. Creators are Brands explores how storytellers are building brands online. From the mindsets to the tactics to the business side. They break down what's working so you can apply that to your own work. One of the recent episodes I listened to tackled how some creators are being paid hundreds of thousands of pounds to promote brands, which I think is a kind of incredible thing that happens in this day and age. So if you want to listen to that episode or any of the brilliant Creators Are Brands episodes, go and listen to Creators Are Brands wherever you get your podcasts. Hello, welcome back. You're listening to Nudge with me, Phil Agnew. New Coke was an abject failure. Within 79 days, Coke had pulled the new flavor and wasted $80 million worth of advertising spend. But why was their market research so wrong? Well, Phil says it's because they didn't really consider what actually happens when someone buys a Coke.
- [13:56]
Consumer Psychologist
So maybe to start off, it's worth just being aware of what the brain is doing fundamentally. And this comes down to the fact that we're able to process massive amounts of information through our sensors. You know, visually, what we hear, what we're feeling, all the rest of it. Something like 10 million bits of information per second, it's been suggested and estimated consciously. We can process about 40 bits per second. So there's this massive discrepancy. But what the unconscious mind is doing is, you know, in order to protect us, in order to aid our survival, it's processing all of that and trying to work out, well, is, does this need to be passed into conscious attention or not? But in the course of processing, can still affect how we feel and what we think. So we get this phenomenon of misattribution where because something is present in the broader environment but isn't necessary, isn't related to the focus of our attention, we will misassign it and think, well, I must be feeling that way because of what I'm looking at.
- [15:02]
Phil Graves
We might think we prefer Coke because of its taste. That might be what we say in market research questionnaires when we're looking at the can. But there could be a whole host of unconscious reasons influencing the branding, the history, the mere exposure, the social proof. And this affects all types of products, not just Coca Cola.
- [15:21]
Consumer Psychologist
And that can happen with, you know, putting scents into retail environments, playing music when people are shopping, all these things because we're consciously so limited in our ability to process it. What we do is we get the feeling, we assume it's entirely down to the focus of our attention. And then, and this is the really scary part for research, if we're asked about it, we will tell these absolutely convincing stories that rationalize and justify what we found ourselves doing. But that everything we see in behavioural science, where we do these AB experiments, shows that's not the reason that the people purchase ultimately happened. We know there was something else there that wasn't talked about.
- [16:02]
Phil Graves
Phil has a great study to explain just this. Now, it is a study I have recently shared on the show. It's one that I took from Phil's book. And honestly, Phil's much better at explaining it than I am, so I thought I'd keep it in and let him explain this great study.
- [16:15]
Consumer Psychologist
Timothy Wilson, who's a psychologist in America, set up a study where he had four pairs of tights, A to D, got shoppers in a store to come in and just evaluate them, touch them, feel them say which ones they thought were best. And as it happened, D1 got 40%. So statistically clearly the best performing pair of tights. And when he asked people what it was they liked about them, it was their sheerness, the elasticity, the knit, you know, very tangible qualities that these tights had, all well and good, apart from the fact they were all the same. So a lot of people would look at that and say, well, that's fine because we randomize the order when we do testing and we can negate that. And they would all come out the same if we randomize the order. But that's missing the point. The point is people make up reasons and those reasons are not driven by what really drove their preference, because the only thing that could have driven a preference was the order effect in which they experience them, or, you know, maybe something to do with their own pressure in touching them or something, but the fact, the reality is, what they then do is make up what seem like highly plausible justifications for the preferences, but those justifications cannot be true because they were the same thing. So again, you've got this problem that exists where we are brilliant post rationalisers, we're brilliant storytellers, but we've got no connection to, and this is why technically it's right to call it the unconscious mind, we've got no connection to the parts of our brain that can be hugely significant in determining how we're making decisions and what we're ultimately doing.
- [17:59]
Phil Graves
Timothy Wilson went on to run a second study on misattribution. In this study, college students were asked to watch a film while someone outside the room intermittently operated a power saw. Partway through the experiment, the worker outside was asked to toadvertently stop making that noise, thereby bringing it to the conscious attention of everyone present that there was a horrible noise taking place outside. The students then rated their enjoyment of the film, as did a totally different group who had watched the same film without any outside noise. It would be reasonable to suppose that the group who had watched the film with the loud power saw going off outside would have enjoyed the film much less. Indeed, that's what those taking part claimed would be the case when they were asked before, if you were watching a film with a loud noise outside, would you enjoy it less than a normal film? They all said yes. However, their actual ratings of the enjoyment of the film were no different from those who experienced the film without any outside noise. People predicted that the noise would change their enjoyment. They said that is what would happen. But their ratings were no different from those who didn't hear the power saw. In other words, people's predictions were totally wrong.
- [19:13]
Consumer Psychologist
The founding principle of the work that I do in Consumer Insight is not to believe anything that consumers say and to avoid asking them questions wherever possible.
- [19:23]
Phil Graves
Phil realised this during some market research he conducted in an electronics store.
- [19:28]
Consumer Psychologist
In this instance, I was observing people in an electrical department of a store and there was an ipod, it was a few years ago, an ipod speaker system that. This was before the days of Bluetooth that was blaring out music in the store and impossible not to have your attention drawn to it. Lots of people then went up and started engaging with it. It seemed very clear to me that these people had been attracted by the sound and not for any other reason. But then when I was talking to them, I was saying to them, you know, is this something that you planned to buy? As people were picking one up and taking it to the till, and they were all saying, oh, yeah, yeah, absolutely. This was on my list of things to get mentally. And then I changed the subject and we talked about some other things and eventually I said, well, when was the first time you saw this ipod speaker system? Because I knew it was pretty much brand new. I hadn't seen a lot of coverage of it in the magazines or advertisements or anything. And people said, oh, yeah, I'd seen it for the first time that day.
- [20:35]
Phil Graves
All of us do this. We make up reasons why we bought something. We imagine that it's due to some rational reasons, when in reality it might just be because the loudspeaker is playing a song we like or just because it was in our eye line while we were queuing.
- [20:50]
Consumer Psychologist
And similarly with lottery tickets, behaviourally, I could see this difference in terms of whether. Whether or not people bought a lottery scratch card seemed to me to be, from what I was observing, very dependent on whether or not they were in a queue at the counter or whether or not they went straight to the front of the desk. And I realized that when they went straight to the front of the desk, they were much less likely to buy a lottery scratch card because the Perspex housing that promoted the cards was orientated to kind of past you. If you were looking from the side, all you saw was the spools of the tickets. It wasn't kind of showing you the prizes and the silver and the gold and all the things that would draw you in. So although people said they were deciding because they were feeling lucky or they wanted a treat or you know, this was an impulsive decision of theirs. In reality, it was driven by whether or not they had their attention drawn to lottery cards. And it needed that trigger before that impulse associative response could be elicited.
- [21:54]
Phil Graves
In his book, Phil quotes Daniel Wenger, who writes, much of what we do seems to surface from unconscious causes. And such causation provides a major challenge to our ideal of conscious agency. When life creates all the inevitable situations in which we find ourselves acting without appropriate prior conscious thoughts, we must protect the illusion of conscious will by trying to make sense of our actions.
- [22:20]
Consumer Psychologist
People simply don't have the capacity to be accurate about what it is that's driven their decision making. And in fact, my favourite academic study on this is what's known as the Love on the Bridge study, where they used an attractive female researcher to interview male students. And ostensibly this was about creativity and the environment and they were doing it out in this country park. They set it up so that the female researcher gave all the people who were being interviewed her phone number, because, you know, if you've got any more thoughts on this, then let me know. But what they really wanted to track was how many people asked her out on a date. And the answer to that was either 60% or 30%, the difference being where people had had the interview conducted on a bridge that was somewhat unstable, they were much more likely to ask her out on a date. And so what they surmised from this was that people standing on that shaky platform were feeling a sense of, you know, they got the adrenaline in their system, they're feeling a little bit on edge, but they're not assigning those giddy feelings to what they're standing on, they're ascribing it to the attractive person in front of them and therefore thinking, well, I must be very attracted to you because I can feel it in my body. So again, a great example. Even with something as fundamental as human attraction, where misattribution can play a massive part in what people ultimately do.
- [23:50]
Phil Graves
But misattribution isn't just a problem for Coca Cola's market researchers or blokes looking for a date on a bridge, it is a far more serious problem that could ultimately determine whether or not someone goes to prison.
- [24:03]
Consumer Psychologist
So in the us, where they looked at miscarriage of justice cases which had been overturned by DNA evidence, so, you know, you've got clear evidence that this person who's been convicted was not the person responsible, in 75% of cases, there was eyewitness testimony that had been a key factor in the prosecution, which, you know, self evidently could not have been right. But, you know, we are so used to telling ourselves these stories and believing our feelings that, whether it's the fact that, you know, sort of an element of suggestion from the police during the interview, whether it's just as, you know, our own biases and our own prejudices, a whole raft of different things that can be going on, misattribution, the setting that we find ourselves in, you know, people end up saying things which simply are not true.
- [24:58]
Phil Graves
One study set out to test this in a. In a really fairly incredible way. Psychologists at Iowa University faked a crime that took place in front of participants of students. The students, who weren't expecting to see any crime taking place, suddenly saw a thief run up to a fellow student and, and steal their bag. This happened right in front of the participants and the thief's face was clearly visible. When the researchers asked the participant to identify the perpetrator from five suspects, none of whom were the actual thief, 84% of the participants were willing to point the finger at one of the innocent suspects. Our memories are fallible and our ability to recall our behaviour accurately is just as bad. We come up with purely rational reasons for behaviours that are largely unconscious, whether that's picking Coke over Pepsi, rating a film or picking out a criminal from a line of suspects. And yet our actual behaviour is often driven by the unconscious mind, especially when it comes to Coke. See, Coca Cola made a massive mistake with New Coke. The mistake was to assume that customers only picked soda based on the flavour. They were told by customers that flavour was the most important element of the drink. And they were told that people preferred the taste of Pepsi. But taste isn't the most important thing. The colour, the branding, the iconography and the look of the can is arguably far more important than the taste. And there's evidence to prove it. In 2003, a group of researchers repeated the Pepsi challenge, except this time they showed the participant the actual Coke and Pepsi cans they were drinking from.
- [26:39]
Consumer Psychologist
Well, yeah, when they, when they revealed the brand, then they got a completely different response and they were looking at using FMRI to look at which areas of the brain were active when the branding was shown, so they could see how the packaging was activating what I think they called cultural influences and emotions.
- [27:00]
Phil Graves
When subjects were shown the familiar design of a Coke can before they tasted the Coke, a different area of the brain became involved and the results changed significantly. More people preferred Coke when they'd seen the brand more than both Pepsi and an unlabelled sample, even though in that unlabelled sample they were serving Coke as well. You're probably quite familiar with the New Coke story. It is one of the most shared case studies on a failed new product launch out there. And yet I wanted to talk about it today because what New Coke teaches us isn't that market research can sometimes backfire. No, it reveals that all of us apply rational reasoning to irrational decisions. I think I like a certain soda because of firm, solid, rational reasons, but that is not the case. My likes and dislikes are largely driven by unconscious factors, and if I'm ever asked to explain these unconscious reasons, the reason why I prefer a Coke over a Pepsi, I I'll probably give a totally unreliable answer. That is all for today folks. Thank you so much for listening and a massive, massive thank you to the brilliant Phil Graves for joining me on today's show. His book Contumerology is an absolutely fantastic read. I have no idea how I missed it all this year as a It's been out for over a decade, but it's still a cracking read. It still really holds up. The examples are very relevant. I learnt a hell of a lot reading that book. If you would like a copy, and if you like the books I tend to suggest on this show, then I really think you'll like Contumerology. Well, if you would like a copy, go and click the link in the show notes and you'll find a link to buy the book there or just search for Consumerology. Wherever you get your books. I think you'll be happy to hear that I've invited Phil back on the show. We are creating another episode on how our unconscious mind dictates exactly what we buy. A few more tactics that marketers listening can apply there as well. To make sure you don't miss that episode, do go sign up for my Nudge newsletter. If you do, you get a email reminder as soon as the new episodes go live. You get all of my bonus episodes straight to your inbox and you get the best behavioral science tip I have found over the course of that week in my Friday Roundup newsletter. To subscribe, just go to nudgepodcast.com and click Newsletter in the menu. It is totally free and do not worry, I will not ask you for any rational reasons as to why you subscribe to that newsletter because I know I won't get any. Alright folks, that is all for this week. Thank you for listening. I'll be back next Monday with another episode of Nudge. Cheers.
- [29:41]
Host
Please don't change the taste of coke the thought of it just makes me want to croak each time I taste a real thing I want to teach the world to sing Please don't change the taste of cocoa.