Why Brand Loyalty is about More than Taste

Could Diet Pepsi have a New Coke problem?

During August, Pepsi switched Diet Pepsi’s artificial sweetener. After using aspartame for decades they changed to sucralose (aka Splenda) and stirred up an emotional response. One self-proclaimed Diet Pepsi guzzler said, “It has a nasty aftertaste, and it’s sickly sweet. You have to wash it out with water…”

Responding to the avalanche of negative social media comments, Pepsi’s CEO said the initial response was actually a bit better than they expected. Their approach now is to wait and see consumer buying behavior and social media comments during a longer time period.

Where are we going? To our status quo bias.

The Classic Story From Coke

When Robert Goizueta became Coke’s CEO in 1981, the Pepsi Challenge was growing. Whereas in 1955 Coca-Cola sales were double those of Pepsi, by 1984 Pepsi was behind by only 4.9 percent. Coke responded with Project Kansas. Charged with developing a new taste for Coke, Project Kansas had a tricky task because no one could actually disclose that the goal was a replacement for Coca-Cola. But even with field testing that was somewhat oblique, the results were conclusive. People liked the new flavor and Pepsi drinkers even said they might switch.

Coke announced its new formula at Lincoln Center in front of an audience of 700 people. All appeared to go well until the questions began. Asked one reporter, “Are you one hundred percent certain that this won’t bomb?” Another said, “… if we wanted Pepsi, we’d buy Pepsi.” And that was only the beginning as the protests multiplied. During a sports event at the Houston Astrodome, people booed the commercials for New Coke.

It did not take long for CEO Goizueta to know he made a monumental mistake. Saying that after the decision he slept like a baby because “I wake up crying every hour,” he brought old Coke back as Coke Classic.

Our Bottom Line: Brand Loyalty

During taste tests, Project Kansas participants were not told their preference involved changing from the Coke to which they had been loyal. That loyalty turned out to be more important than flavor. The reason is status quo bias.

Ideas from behavioral economics explain why we like to stick with what we are used to. Called the endowment effect, when we have enjoyed a brand or taste for years, we tend to inflate its value. Consequently, the alternative is not quite as good. In addition, many of us engage in regret avoidance. Switching could make us feel that we had initially made the wrong choice for something that was inferior. The result? We remain with what we have.

So, when consumers express anger that Diet Pepsi has a new artificial sweetener, even if the new taste is inferior, they are probably demonstrating some status quo bias.