TEI 159: Don’t make the customer feel anxious. The failure of Crystal Pepsi — with Kyle Murray, PhD
Summary: What product managers at Pepsi got wrong but you won’t after listening to this.<br> No one and no organization has a perfect record when it comes to releasing new products into the market. Failures are frequent — around 40% or so depending on the industry — and they happen at small companies, big companies, and experienced companies, including Pepsi.<br> In this episode, you’ll learn a simple and profound concept that every product manager and product marketer must understand. And, this is an easy one to get wrong. Even Pepsi got this wrong when they created a new product called Crystal Pepsi.<br> The simple part of the concept — don’t confuse your customer.<br> The profound part — when introducing something new or making a change, give your customer a reason.<br> My guest to explain this concept is Kyle B. Murray, the Vice Dean and Professor of Marketing at the Alberta School of Business. Kyle studies human judgment and decision making. His research uses the tools of experimental psychology and behavioral economics to better understand the choices that consumers make.<br> He is a co-author of an article explaining the mistake Pepsi made with Crystal Pepsi. When I read the article I recognized how important the concept is to product managers and contacted with Kyle to tell us about it himself.<br> In the discussion you will learn the:<br> <br> * Reason people didn’t purchase Crystal Pepsi.<br> * Solution to the issue so you don’t make the same mistake.<br> * Examples demonstrating the solution.<br> <br> Summary of some concepts discussed for product managers<br> <br> * [2:30] You recently examined different types of innovations, such as sustaining vs. radical innovations. What caused you to research this? It all comes down to the consumer. We can describe it however we’d like when we are creating the products, but in the end, the consumer decides whether something is radical or something they already know.<br> <br> <br> <br> * [3:31] For listeners unfamiliar with consumer packaged-goods, can you describe the business and the rate of product introduction? Essentially, this industry represents anything you find in the grocery store that comes in a package and is aimed at consumers. It’s a broad category that employs some of the best marketers in the world who develop some great products. One industry group estimates that there are about 33,000 new products created each month. Innovation happens very quickly ranges from incremental changes like adjusting a color or adding a new option, to things that are truly radical. Many of those products fail, and some are only indented to be around for a few months to build a buzz and then disappear. Segments like potato chips and soft drinks allow you to innovate fairly quickly and put a new flavor or new version of a product out and see what the market thinks.<br> <br> <br> <br> * [8:25] Tell us about Crystal Pepsi and what makes it a useful example to learn from. Pepsi launched a new version of the product it had always made — the same Pepsi, just without any coloring. This seemed reasonable, given that products like 7Up and Sprite were successful and people were starting question what value the dye for color brought to the product. This was not intended to be a short-time product or new flavor; Pepsi had a plan for turning it into a billion-dollar brand. The reaction was people questioning why they would want a clear Pepsi and what was wrong with the dye in regular Pepsi.<br> <br> <br> <br> * [11:40] Why didn’t consumers purchase Crystal Pepsi? It was perceived to be really radical by the market, but it was really a superficial change to the product. This is a classic example of what drives product acceptance. If we see a new product being too different from what we expect to see, we go from being curious about them to feeling anxious about them.
