Business

How Unilever, Coke and the Mini car got it so wrong

Even the biggest businesses can make big mistakes - and when they do, the result can be a commercial calamity.

Companies are constantly striving to improve their products and turn a profit.

But changing an existing product can go horribly wrong, leaving customers in revolt and companies in crisis.

Mishandled marketing and bungling public relations can make the slickest of businesses look incompetent.

And the costs both financially and to reputation can be enormous.

Persil, Coca-Cola and the British Motor Corporation have provided some of the most extreme examples as Evan Davis has been finding out for a new BBC Two series.

PERSIL'S POWER TRIP

Britain's washing powder market has always been a fiercely contested battlefield, with Unilever's Persil, Surf and Comfort brands vying against Procter and Gamble's Ariel, Daz, Bold and Fairy.

Up until the early 1990s, Ariel had always been marketed to highlight its scientific, stain-busting properties while Persil was presented as the first choice for devoted mothers who cared.

But Persil's dominance was waning and Unilever set about developing a new product to attack Ariel's tough-on-stains territory.

Persil Power contained a special manganese ingredient, called "the accelerator".

Image caption Soap wars - Ariel makers Procter and Gamble warned Unilever about new formula Persil

P&G warned Unilever the new formula was too powerful for general use and could harm clothes.

But Unilever went ahead. Persil Power was launched in 1994.

Within days the press were printing photos sent out by P&G, of boxer shorts and T-shirts riddled with holes.

Former consumer journalist Vikki Orvice recalled: "They used the phrase: 'if you use this product, your clothes will become shredded to the point of indecency'. I don't think the picture desk could believe their luck".

Persil's owners started to be bombarded with ragged garments sent in by outraged customers.

Unilever had to write off £57m worth of stock. Analysts estimate the debacle cost them as much as £250m.

But the company rushed to recover the situation by releasing a new softer formula, New Generation Persil, without the manganese accelerator.

Persil regained its position as market leader four years later with Persil Tablets.

COCA-COLA'S LOST FIZZ

Even though Coca-Cola was the world's best-selling soft drink, it was always nervous of rival Pepsi snapping at its heels.

When Pepsi introduced its famous Pepsi Challenge, a blind taste test which showed that more customers preferred the sweeter taste of Pepsi when sipping the drinks side by side, Coca-Cola was rattled.

Coke executives became convinced that the taste of their product had become a problem and so they set about developing a new cola flavour that would beat Pepsi hands down in a blind tasting.

New and supposedly improved Coke was launched at a lavish press event in New York in April 1985. Amazingly, not only was the taste of Coke being changed, but the original familiar best-selling Coke would no longer be produced and sold.

Image caption Coca-Cola decided to change the taste of Coke after pressure from the Pepsi Challenge

New York Times reporter Pamela Hollie, one of the journalists at the press launch recalled that she couldn't believe what she was hearing.

"It's like saying we've decided to change the American flag and put the stars someplace else," she said.

Loyal Coke drinkers were horrified and mounted noisy campaigns against the new drink. There were protests in the streets of American cities.

One militant Coke enthusiast said at the time: "My oldest daughter is 22. Her first word was Coke. Her second word was Mommy."

Ultimately Coke executives reviewed their market research and realised they had made a fundamental error. The blind taste test did not take account of all the brand associations and loyalty that attach to a product in a real world situation.

People didn't just love the old Coke for its taste - they loved what it stood for. And the market researchers had not asked how consumers would feel if their old Coke was to be replaced by a new product.

After just 79 days, Coca-Cola reversed its decision and announced that the original recipe would go back into production.

MINI'S MAJOR MISTAKE

The Mini was Britain's best-selling car ever, with more than five million purchased over the years. But its sales success disguises a surprising story - consumers got a much better deal on the Mini than they should have done.

When it was launched in 1959, the British Motor Corporation boss Sir Leonard Lord decided it should sell for £500 - in order to undercut its nearest competition, the Ford Anglia, which sold for £610.

Image caption Ford could not understand how the BMC were making the Mini so cheaply

The Mini's low price tag made it an instant hit and with celebrity endorsement from the likes of John Lennon, Peter Sellers and Spike Milligan, it became the car to be seen in.

Ford bosses were mystified at how it could be produced for such a bargain basement price, so they decided to take one apart to see how on earth it had been done.

Former Ford product pPlanner Bob Howe recalled: "We analysed the Mini, we dismantled the thing completely even to the point of breaking spotwelds and we costed every component.

"Based on our analysis, Ford would have incurred £35 of cost over and above the price they were advertising it at."

It looked as though every Mini was costing £535 to make and then being sold for £500.

Business Nightmares with Evan Davis - Doomed Designs will be on BBC Two at 20:00 BST on Monday 9 May 2011 and after on BBC iPlayer

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