Brand “Hex?”

I don’t drink as much cola now as I did in my youth – I’ve never been able to tolerate the aftertaste of the diet sodas (yes, even the new and “improved” versions), and the older I get, the less excited I am about the caloric content of the “regular” sodas. Still, I’ll “treat” myself most family pizza nights to a “coke” – and if I’m dining out, I’m as likely to order a cola as anything else.

However, when I was growing up, colas were always readily available at home – and I gladly took advantage. I never really developed a strong preference for one cola over another – and once I was the one stocking the pantry, I would generally go with whatever was on sale. Still, when asked in a restaurant whether I would prefer Pepsi or Coke (yes, I can remember a time when you could still get both in the same place), I’d always order Coke – but asked if I minded Pepsi, the answer, inevitably, was no. While I know there are others who feel differently (including the folks who have worked so zealously to build those cola brands), for me, coke was coke – even if the coke was Pepsi.

My brand ambivalence changed in 1985 with the introduction of “New Coke” (yes, it was 11 years ago today). You can argue about whether or not that decision was a marketing misstep of historic proportions, or whether it was a brilliant counterstroke by Coca-Cola to shore up its eroding market share – but, for this consumer anyway, it worked. To this day, I’m still relatively ambivalent about the cola a restaurant puts in front of me, but we don’t stock Pepsi in our house (Mountain Dew, a Pepsi product, but not a traditional cola, is also a favorite, however).

The thing I remember most about that “New Coke” introduction is how swift – and how widespread – and how virulent – the response was. Here was a world-class company that had conducted goodness knows how many tests and focus groups – that had developed a formula that purportedly appealed to the broad spectrum of potential consumers. A product that, no doubt, like the Pepsi in all those Pepsi Challenge blind taste tests, was viewed as a better product in blind taste tests.

Ironically, the problem for Coke – one of the world’s most storied and valued brands – was that it forgot the power of the brand. For many, “New Coke” wasn’t an exciting new development – it was the betrayal of a principle. To its credit, IMHO, the folks at Coca-Cola didn’t dig in their heels and force the new offering down people’s throats (so to speak) – nor did they, immediately anyway, dump the new offering down the drain. For a time at least, you could get either – and eventually the market “spoke.” Now, I can’t tell you to this day that I actually liked “Classic Coke” better than “New Coke” – but I can tell you that it was a decision made without actively consulting my taste buds.

Those of us in the financial services industry know, respect, and frequently benefit from the power of brands. Whether it is the firm you represent, or the investment offerings you support, we see time and again that participants (and, yes, plan sponsors) have a propensity to favor names they recognize over other, potentially more rational, criteria. There’s a reason for that, of course. It’s easier to choose a name you recognize than to take the time to do a more complete analysis. That approach may work fine when choosing soft drinks – but it can be dangerous when applied to politics – and retirement plan menus.

- Nevin Adams editors@plansponsor.com


Random Thoughts

How Many is Many?

A headline from a recent article by Kathy Kristof about 401(k) fees counseled readers in its headline that “There are lots of ways around 401(k) fees.” The article proceeds to outline precisely two; “You can talk to your employer about offering more low-cost choices; and you can pay attention to the fees when you are making investment selections.”

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