The recent dustup over at Netflix regardng the ill-fated Quikster venture has been compared by some to the Coke/New Coke debacle over 25 years ago. Although the situation may appear that way, in reality these are two entirely different corporate screwups.
When the Coca-Cola Company reformulated its primary soft drink to have a sweeter taste, with less ‘bite’, the marketing gurus on North Avenue announced this in typical Coke fashion: full page magazine ads, television commercials, public tastings and billboards trumpeting the new flavor. The outcry from the public was immediate and vocal and the product’s failure has gone into history as one of the most famous corporate blunders of all time. The entire episode has become fodder for countless discussions and is studied in business schools across the country.
I would suggest that the public’s rejection of New Coke was not a failure of the product per se, but rather a failure of the company’s lauded marketing department. Remember the four “P”s of the classic Marketing Mix: Product, Price, Promotion, and Packaging ? In this case, the new Product and Price were fine, but the Promotion and Packaging strategies failed miserably.
There are many suggestions (post mortem, of course) regarding what Coke should have done but there’s little question in my mind that the product could have succeeded if handled differently from a marketing perspective. Even if the newly formulated, sweeter Coke met public resistance, the company could have quietly pulled back after issuing a statement about ‘tweaking our formula to meet changing tastes' or some other bland comment.
In contrast, the Netflix/Quikster disaster can’t even be called a marketing mess. The way the company handled this was so inept from a management perspective that this too will likely become part of future business school curriculums. Netflix, which spearheaded the ‘DVD by mail’ category and had become the de facto go-to company in this space had also created a new distribution outlet (and income stream) in the form of streaming these videos over the internet to its customers’ homes. Obviously the broad adoption of this new service would result in significant cost savings to Netflix in the form of reduced mailing fees, labor, inventory, warehouse space and other carrying costs. However, instead of offering this new distribution model to its customers as another choice for its customers, the company instead announced that it would eventually cease the DVD business and its customers would (one day) be required to watch their movies via the internet only. Although no timeframe was given - the point was clear. Netflix wanted out of the DVD business as soon as possible and its customers would have to adapt to the new business model.
In addition, Netflix announced a new pricing structure in which customers would have to pay separately for the DVD only service and the new web-streaming service. if customers wanted the option for both, they would have to effectively pay double the price they had been paying. After a large initial outcry and ridicule on social media outlets, Netflix announced that the DVD only service would be split off into a new company called ‘Quikster’. Laughably, the bright lights at Netflix failed to secure Twittter account for this name leading to even more ridicule on online news outlets and social media once they learned who currently had this account name. Eventually, to its credit, Netflix admitted that it had made a series of missteps, quickly closed the door on the ill fated Quikster, and announced that at least for now, its customers would still be able to rent DVDs by mail as well as through internet streaming (although the dual-pricing model will remain).
So even though some observers today may equate the Netflix problems of 2011 with the New Coke rollout of 1985, they have little in common except for a lot of corporate ‘woulda-shoulda-coulda’s that are even clearer in hindsight.
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