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Coca-Cola delivered stronger-than-expected results on Tuesday’s Q3 earnings-call and raised its guidance for the year. Anyone paying attention to the comings and goings of the brand’s chief marketer will have seen it coming, though.
Manolo Arroyo was on stage at Possible in April, Brandweek in September and the ANA conference last week, talking up Coca-Cola’s new strategy, and marketers tend not to do that when they know the numbers are bad.
Be glad, then, that Coke’s doing well because it allows us a glimpse inside of one of the largest and most sophisticated marketing machines on the planet. And the big takeaway from Arroyo’s recent talks is that Coca-Cola has changed its mind about brand love.
Between 2000 and 2020, brand love was Coca-Cola’s guiding marketing metric. This was not quite as whimsical or demented as it first sounds because — from what I understand — love was determined by combining a variety of more prosaic customer metrics, like brand attitudes, memory and willingness to advocate. But when things got choppy for Coca-Cola, it became apparent that brand love could go up even while the performance of the business declined.
According to Arroyo, the primacy of brand love within Coca-Cola led the company’s sales and marketing teams to blame each other for the failure to convert customers’ warm feelings into hard numbers. Whereas, in reality, the problem was just that people often say one thing while doing another.
So, shortly after becoming CMO in 2020, Arroyo changed Coca-Cola’s North Star from one that measured customers’ attitudes to one that tracked their behaviours. The new metric is called total consumer base and it prioritises how many people buy a Coca-Cola product within a given time period, usually per week.
Coca-Cola made other big changes, too. The company has shrunk considerably its portfolio of brands, from 400 to 170. And over time it has increased the proportion of its marketing budget that it spends on digital media from 30% to almost 70%. But the effect of the new strategy, which began with putting behaviours ahead of beliefs, has been to reverse two-decades of stagnation in the size of Coca-Cola’s already massive customer base, which increased 11% (or by 160 million people) between 2022 and today.
The notion that brands should prioritise customer behaviours over attitudes because the former have a larger and more direct influence on business outcomes is logical and already well supported by marketing science. Multiple studies have, for example, found that brand loyalty programmes are more effective at changing people’s habits than their feelings. Admittedly, most of these schemes are specifically designed to change behaviours, not attitudes, but the findings also chime with Andrew Ehrenberg’s double jeopardy law, that people buy more often from bigger brands.
Fortunately for marketers, changing behaviours is probably easier than changing attitudes, too, because there are more ways for brands to go about it — by being more memorable or more convenient to buy or cheaper, for example. What’s more, people just as often — if not more so — derive their attitudes from their behaviours and not the other way around. Psychologist Robert Cialdini, in his 1984 book, identified commitment and consistency as one of the six key principles of persuasion. According to Cialdini, once people have behaved a certain way — even if they did so without giving it much thought — they feel compelled to express beliefs consistent with that behaviour, and also to behave that way again in the future. There are probably good evolutionary reasons for that. Unpredictable people weren’t trusted by their tribes, or something. But it’s relevant to marketers today because it means that people have an inner desire to retroactively justify purchase decisions they made while on autopilot, and a lot of purchase decisions are made on autopilot.
This does not mean, however, that marketers should forget about customer attitudes altogether. Coca-Cola still keeps a close eye on its brand equity metrics, and rightly so. Just because people’s feelings about a brand can be misleading when given prominence over their behaviours, it doesn’t mean they serve no purpose whatsoever. On the contrary, being liked is a valuable competitive moat.
As Mark Ritson points out, brands that somehow manage to change behaviours by increasing the reach of their communications while doing nothing to earn people’s affection are liable to lose customers to the first rival that comes along with a bigger media budget.
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