The Power of Narrative

How a battle between two soft-drink titans was decided by storytelling

New Coke is back in the news. Earlier this year, The Coca-Cola Co. announced a limited re-release of New Coke as a promotional tie-in with the third season of the Netflix show “Stranger Things.” The science fiction series’ third season is set in 1985, the year that New Coke replaced the original Coke formula, which was reintroduced and rebranded “Coca-Cola Classic” less than three months later.

There’s no shortage of books or videos on New Coke, one of the most scrutinized product introductions ever. Only Ford Motor Company’s Edsel model rivals it for Monday morning quarterbacks replaying what should have been done instead. New Coke’s hold on popular imagination is evidenced by the fact that, despite all that has been written and said, a limited run of 50,000 cans still commands big headlines.

The truth about New Coke has been lost in the fog of legend and lore. But when you sort through it, New Coke teaches an important and oft-forgotten lesson about the power of narrative.

In 1975, in an effort to jump-start retail sales in the South where Coke had a commanding lead, PepsiCo experimented with local ads in the Dallas market that showed a blind taste test in which Coke drinkers chose Pepsi, dubbed the Pepsi Challenge. The spot was an instant hit that Pepsi rolled out nationally. Pepsi is a sweeter cola, and sweeter beverages tend to win in so-called sip tests. This made for great advertising—and it got under The Coca-Cola Co.’s skin.

Other events surrounding the lead-up to New Coke set the stage for the Pepsi Challenge to leave an indelible impression. PepsiCo had already shaken things up with its Pepsi Generation lifestyle campaign launched in 1963. In turn, Coke modernized its image with its 1971 ad, “Buy the World a Coke.” In 1982, The Coca-Cola Co. introduced Diet Coke in a break with its long-standing policy against using the brand name for any product other than Coke. Pepsi upped the ante in 1983 when it signed Michael Jackson to a record-setting contract as the celebrity endorser for its “Choice of a New Generation” campaign.

The cola wars during this era were about change, mirroring the social upheaval of the times. Both brands were taking chances by throwing out the rule book—and every chance taken was rewarded. Breaking the rules looked to be the safest bet.

Underlying what The Coca-Cola Co. and PepsiCo were doing, though, was a divergence of perspectives not fully appreciated at the time. Simply put, PepsiCo was trying for a better narrative while The Coca-Cola Co. was trying for a better product. While PepsiCo was pioneering lifestyle advertising about its consumers, The Coca-Cola Co. was introducing Diet Coke with the product-oriented tagline, “Just for the Taste of It.”

It would be unfair to say that The Coca-Cola Co. did not appreciate narrative. In fact, it’s not much of an exaggeration to say that it invented brand narrative. Long before the cola wars, the Coke brand had established itself as an icon of American life. But Coke became so dominant that The Coca-Cola Co. field of view contained little besides the fabled product itself. When Coke rolled out “It’s the Real Thing” as its tagline in 1969, the message was about the product—the thing itself.

This is why the Pepsi Challenge was so annoying for The Coca-Cola Co. It was an affront to the Coke product that could not go unanswered. With rule-breaking in ascendance as the new norm, The Coca-Cola Co. embarked on a multiyear journey to beat back this product challenge by breaking its biggest rule of all: The company decided to change the hundred-year-old Coke formula that was supposedly hidden away in an underground bank vault. But the power of narrative got lost in the mix.

The head of research for The Coca-Cola Co. at the time was an industry legend himself. Trained as an econometrician, Roy Stout was a stickler for data. In the company’s quest for a better Coke product, Stout designed and oversaw a sophisticated, years-long research program to identify a data-proven improvement to the formula.

This research was conducted in the strictest secrecy, and blind testing prevailed. Stout didn’t want the brand to influence the results, nor did he want respondents telling their friends that the Coke formula was being tested. Eventually, this research led to a superior formula. The taste-test data made it overwhelmingly clear that New Coke was a better-tasting product. Without any doubt, the data showed that New Coke was preferred to both Pepsi and the original Coke.

On April 23, 1985, at a press conference in New York City, New Coke was unveiled. Although The Coca-Cola Co. had tried to keep this under wraps, word leaked out. PepsiCo stole a march on The Coca-Cola Co. with a full-page ad in The New York Times that same day, reprinting PepsiCo CEO Roger Enrico’s all-staff letter proclaiming that “the other guy just blinked.” On the very day that The Coca-Cola Co. rolled out an incontestably better product, Pepsi rolled out an ad that shifted the narrative against New Coke.

An outcry ensued. The vocal protests of a few were amplified quickly by media outlets caught up in the drama. Resistance to New Coke soon became a bandwagon that everybody jumped on. On July 11, 1985, a mere 80 days after taking the original formula off the market, The Coca-Cola Co. held another press conference to announce that it was bringing it back.

The Coca-Cola Co.’s initial response to the clamor over New Coke was to insist that the product would win people over eventually, just as the taste-test data had shown. But the data was incomplete. Stout always made clear that identified testing was conducted, but in an effort to maintain secrecy, Stout missed an ambiguity in the protocol. When people were shown New Coke side-by-side with the original, they were never told explicitly that the original was going to be replaced and taken off the market. Given the iconic status of the brand, it was only natural that respondents would assume New Coke would be in addition to—not instead of—the original.

This is where The Coca-Cola Co. overlooked the power of narrative and where PepsiCo understood it better. The person who created the Pepsi Challenge said it was designed as a blind comparison because “[w]e were convinced people were drinking the trademark.” Indeed, they were.

The clamor over New Coke had the unintended consequence of reminding everyone why they liked Coke so much. It reminded The Coca-Cola Co., too. As Stout said to The New York Times the day after the original formula was brought back, people “fell in love with the memory of old Coke.” People had been given a better product when what they really wanted was the better narrative about their lives that Coke symbolized.

As it always does, narrative trumped data. A demonstrably worse-tasting product was preferred because it was associated with a better story. After the original formula was brought under the name Classic Coke, sales shot up. Narrative, not taste, was the bigger driver of sales.

Stories motivate people. The power of narrative is the real lesson of “The Real Thing,” and one that matters to brands more than ever.