As someone who owns Coca-Cola stock because it controls 3.5% of the world’s liquid beverage supply and earns obscenely high profit margins of 29%, I follow the beverage maker’s marketing efforts over the years. In particular, I paid attention to My Coke Rewards, which was launched in February 2006 before being discounted on June 30, 2017.
The purpose of Coca-Cola’s reward program, like any other, is to try and convince its customers to be more loyal to its brand or consume more of its product than would otherwise be if the case due to an incentive. Maybe this means forsaking the occasional Dr. Pepper, or hitting up the vending machine for soda when tap water would do.
What is interesting to me is this. When Coca-Cola first launched a reward program in 1992, it would simply give customers a peelable entry that would tell them whether or not they won a reward such as a free soda. The simplicity of the business model was wonderful. From 1992 to 1993, soda consumption in the United States, where the program originated, grew by 8%. According to a data regression analysis by the American Beverage Association, about a fifth of this growth could be attributed to the program. I suspect the program succeeded because the gratification was instantaneous, anyone could clearly figure out whether or not they won, and the terms of the rewards were clear. Those factors make for a successful marketing campaign gimmick.
Under Coke Rewards, the instant knowledge of success or failure was not apparent. Because Coca-Cola wanted to obtain your basic demographic information to better understand their customer base, a user had to create an online account through coke.com, enroll in their “Sip and Scan” program, and then scan your code to determine what reward awaits you. Compared to the prior instant knowledge option, this proved to be an example of technology not improving the user experience.
The program still could have been successful if the rewards were frequent and it channeled the spirit of video games that get people to play for hours on end by staggering the rewards to make the typical customer think that the next Coke would lead to some type of freebie.
But that type of clarity was never present within the program. Coca-Cola customers using the rewards program were subject to constantly fluctuating points for their typical purchase and even fluctuating costs of the reward to be obtained.
For example, when the program was initially launched, it required 24 points to get a free 20 oz. Coke. Once customers got used to this, Coca-Cola would change it to 40 points, and then a few months later, change it back to 24 points. The object of this consumer wasn’t static.
And then, in the event you were cleaning up after a party or something and had the ability to enter significant Coke rewards codes to rack up points, Coca-Cola would place limits on the amount of entry so you could never really get more than a free Coke per day.
I understand that Coca-Cola is a billion-dollar company operating everywhere and it needs to create restrictions in order to prevent people from gaming the system to the point where it would be unprofitable. But it could have easily fixed this rule by having a policy like “Purchase three Cokes on different days, scan it in, and get a free coupon for a Coca-Cola that is honored anywhere.”
That could have fulfilled their objective of keeping users connected online with a user profile while the daily requirement would prevent against the abuse of rapid freebie accumulation due to some type of event ending, and Coca-Cola sells for 5x the cost so someone gaming the system would still be profitable overall.
I have always found it bizarre how companies can be so ruthlessly sophisticated and analytical in some respects, but then completely miss the mark in others. Maybe it is a net plus for the civilization that My Coke Rewards failed, as an addictive rewards program would be terrible for America’s waistline and our country’s diabetes situation. But from a pure business marketing perspective, this program was needlessly complicated and poorly run.
And the numbers support this. From 2006 through 2017, Coca-Cola volumes declined in the United States by about 0.3% annually, or about 3% cumulatively. No regression analysis has been performed that calculates the failure of the Coke Rewards program in explaining this stagnation, but the program did not appear to help.
In my view, Coca-Cola’s program to give free drinks to customers failed because the process required multiple steps and had unclear terms. Simplicity, clarity, and good rewards are the key to a successful marketing program. For a company that is able to tell you how many people in Atlanta, Georgia were served Coca-Cola Raspberry on a given day, to the given ounce, I am surprised that such a sophisticated management team botched its rewards program. It was an obvious mechanism for growth and improving Coca-Cola’s customer loyalty, but the old-fashioned basic principles were not followed, and the stock price stagnated accordingly. I remain surprised that Coca-Cola hasn’t gotten it right with a rewards program since then.