Hall of Fame

From Coke to Netflix: Consumers Drive Brands Into Retreat


Coca-Cola Chairman and CEO Roberto C. Goizueta, left, and COO Donald R. Keough toast the New Coke on April 23, 1985

Photograph by Marty Lederhandler/AP Photo

Coca-Cola Chairman and CEO Roberto C. Goizueta, left, and COO Donald R. Keough toast the New Coke on April 23, 1985

The Kentucky producers of Maker’s Mark bourbon were given a cruel reminder of that old adage: “If it ain’t broke, don’t fix it.” Last week the distillery announced it didn’t have enough supply to meet the demand, and its solution was to lower the bourbon’s alcohol content, from 45 percent (90 proof) to 42 percent (84 proof). Loyal customers rose up in a fury and took to Facebook (FB) and Twitter and voiced their outrage, many promising to boycott Maker’s Mark and buy their bourbon elsewhere.

The backlash worked. Over the weekend, Maker’s Mark course-corrected. “While we thought we were doing what’s right, this is your brand—and you told us in large numbers to change our decision,” Rob Samuels, the distillery’s chief operating officer, explained on the company’s website. “You spoke. We listened. And we’re sincerely sorry we let you down.”

Maker’s Mark isn’t the first company to try something different and backpedal when customers rebelled. Here are a few of the most memorable moments in marketing flip-flops.

Coca-Cola

Change: April 23, 1985, a day that will live in soda infamy. Coca-Cola (KO) introduced a new (and supposedly improved) formula for their century-old soft drink. Even today, the company stands by its decision, claiming it was an attempt to “re-energize [the] brand and the cola category in its largest market, the United States.”

Backlash: Public demonstrations, boycotts, ceremonial emptying of New Coke bottles in the street (mostly in the South), booing of New Coke scoreboard ads at the Houston Astrodome, and a class action calling for the old formula’s return, filed by the Old Cola Drinkers of America. (The case was dismissed by a Pepsi-drinking judge.) Even Cuban dictator Fidel Castro dismissed New Coke as a sign of American capitalist decadence.

Mea Culpa: The new formula was good for business—sales of Coca-Cola rose 8 percent after New Coke’s debut—but the company realized it was in the midst of a public relations nightmare. Three months later, Coke made with the original formula made a triumphant return, now called Coke Classic. Democratic Senator David Pryor of Arkansas called it “a meaningful moment in U.S. history.”

Bank of America

Change: Boldly going where no other bank had gone before, Charlotte’s Bank of America (BAC) decided in September 2011 to introduce a new fee, charging customers $5 per month for using their debit cards. Chief Executive Brian Moynihan explained that the fee was “meant to provide great service.” Customers who maintained a balance greater than $5,000 would be exempt.

Backlash: Fox Business Network’s Gerri Willis cut up her BoA debit card with scissors on the air, saying, “I’m going to show Bank of America what I think of their fees.” Molly Katchpole, a 22-year-old Washington (D.C.) BoA customer, started an online petition calling for a repeal of the debit fee, and in a month she had more than 300,000 signatures.

Mea Culpa: Less than two months later, it was all over. “We have listened to our customers very closely over the last few weeks,” David Darnell, co-chief operating officer, said in a statement. “As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so.”

J.C. Penney

Change: CEO Ron Johnson, the same mastermind behind Apple’s (AAPL) retail makeover in 2001, unveiled the “new J.C. Penney” in January 2012. His strategy for attracting younger, higher-income shoppers to the 110-year-old chain meant eliminating coupons. Such words as “sale” and “clearance” were verboten in their new “fair and square” advertising campaign. (“No coupon clipping,” one commercial promised. “Just great prices from the start.”)

Backlash: Customers left in droves. Sales were down 20.1 percent in the first quarter, and by October sales had plunged 26.6 percent, with an adjusted loss of $203 million. The culprit, as just about everyone with an opinion about Penney’s decline predicted, were the lack of coupons. “We did not realize how deep some of the customers were into this,” said Michael Kramer, Penney’s chief operating officer.

Mea Culpa: As a Black Friday promotion, J.C. Penney (JCP) mailed customers a $10 “gift” to use at the stores. They never came out and called it a coupon, but as Johnson admitted, “It’s similar, it’s very… it performs just like a coupon.”

Instagram

Change: The popular photo-sharing service posted changes to its terms of service last December, which gave Instagram the right to use member photos in “paid or sponsored content or promotions, without any compensation to you.” In other words, your family vacation could turn up in an Instagram ad.

Backlash: One disgruntled user described it as “Instagram’s suicide note.” Most of the Internet appeared to agree, with many vowing to cancel their Instagram accounts in protest. One member, Lucy Funes, even filed a class action against Instagram (FB) (though she curiously decided not to deactivate her Instagram account and continues to upload pictures).

Mea Culpa: “Legal documents are easy to misinterpret,” Instagram founder and CEO Kevin Systrom wrote in a blog post a few days later, managing to be both apologetic and condescending. Systrom promised to “remove” language that gave the company carte blanche to use member photos as their personal clip art archive. “I want to be really clear,” he wrote. “Instagram has no intention of selling your photos, and we never did. We don’t own your photos—you do.”

Netflix

Change: Netflix (NFLX) , the Internet movie-rental company, announced in July of 2011 that it was splitting, like corporate nuclear fission, into two different services. Netflix would focus on streaming video, and a new beast called Qwikster would be devoted to the DVD-by-mail service. Customers now had to sign up for two accounts, offering the same services that Netflix alone once provided, with a 60 percent price hike.

Backlash: Netflix stock plummeted, and more than 1 million subscribers cancelled their accounts. Netflix CEO Reed Hastings joked on Facebook that during a Wyoming ranch retreat with disgruntled investors, “I think I might need a food taster.”

Mea Culpa: By September, Hastings admitted he’d “messed up” but promised that “both the Qwikster and Netflix teams will work hard to regain your trust.” Just a month later, the stock still falling and members still disappearing, Hastings finally conceded defeat. “We are going to keep Netflix as one place to go for streaming and DVDs,” he wrote. “This means no change: one website, one account, one password… in other words, no Qwikster.”


Steve Ballmer, Power Forward
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Companies Mentioned

  • FB
    (Facebook Inc)
    • $75.95 USD
    • 3.32
    • 4.37%
  • KO
    (Coca-Cola Co/The)
    • $42.88 USD
    • 0.32
    • 0.75%
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