Coke’s New Subscription Signals the End of Advertising

By Tien Tzuo December 20, 2019

Any self-respecting professional the advertising industry should know the answer to the following question: What is the most popular and successful TV ad of all time? You might think there would be some debate about this, but there isn’t. There is only one correct answer. Hint – it’s all about hilltops, happiness and a certain carbonated beverage.

In 1971, the Coca Cola company made an ad called “I’d Like to Buy the World a Coke” depicting a diverse group of young adults on a hilltop singing about love and harmony and Coke. If you were born before 1980, you might be humming its ridiculously catchy jingle right now. If not, you might know it as the advertisement that a blissed-out Don Draper dreams up on the last episode of  Mad Men.

It was an instant, massive hit. According to Coca-Cola, the company received over 100,000 fan letters about it. What made it so popular? According to its creator Bill Backer: “I worked very hard, and I always thought I was talking directly to the public. To the consumer. A lot of people were just trying to please the client. I never did that. I always imagined I was sitting and talking to you directly.” This was the heyday of mass television advertising.

Let’s flash forward to forty-eight years later. Last week, Coca-Cola launched a new subscription box service called “The Insiders Club” that includes swag, surprises, and three new “test beverages” for $10 a month. The company joins several other mainstream food and drink brands, including Dairy Queen and Arby’s, that are experimenting with subscription box services aimed at hard-core fans.

And guess what? Coke has another hit on its hands. Their new subscription service sold out in three hours. There’s a waitlist to join. If you needed any more proof that the Subscription Economy has arrived, the biggest consumer brand in the world just launched a subscription service.

But wait.  It turns out that this isn’t a story of a great consumer brand coming out with yet another hit. This is actually a story of a consumer brand that’s chained to an old way of advertising, and struggling for relevance as a result.

As I noted in my post “How Brands Succeed or Fail,”  Coca-Cola suffered a 4% decline in brand value on Interbrand’s Best Global Brands list this year. In fact, Coke’s brand value has been declining on the list from 5% to 7% every year for the last five years. What’s going on?

Coke is a brand that is still largely stuck in the past. They still spend billions of dollars on feel-good messages that they hope you will associate with buying a Coke, from smiling Polar Bears to touchy-feely Super Bowl ads. Coke still longs for the good old days of 1971, but meanwhile, the world has passed it by.

The old world was about pushing products. The problem was that lots of these products were very similar: soda, soap, cereal, etc.  So companies worked hard to associate their brands with clever or flattering or positive messages, in the hopes that you’d pick up their brand in the grocery store instead of the competitor.

But that’s not how things work anymore. Today’s imperative is to meet the needs of consumers by providing meaningful outcomes. People don’t decide what to buy based on some jingle or subliminal message that they remember in a grocery aisle. They don’t make decisions in stores anymore, they make decisions on their phones.

Today, the most successful brands are the ones who are building direct relationships that help their customers solve problems and make their life easier. What do Amazon, Google, and Apple have that Coke doesn’t? Ongoing services, not static products.

That’s why Coke needs to change. Today, Coke can’t give you a Coke where and when you want it. It can’t make recommendations or suggest new experiences. It can’t even make sure I have enough Coke in my fridge. I know what my Lyft app does. I know what my Spotify app does. What does my Coke app do?

Will this new subscription service become truly transformational for Coke? It’s still too early to tell. They might see the monthly box as yet another way to sell more soda, or as a way to start building real, outcomes-based relationships with their customers.

All I know is that “advertising as we know it” no longer works, and companies that depend on simplistic and out-dated consumer psychology are only going to see their brand values decline.

 

For more insights from Zuora CEO Tien Tzuo, sign up to receive the Subscribed Weekly here. The opinions expressed in the Subscribed Weekly are his own, not those of the company. The companies mentioned in this newsletter are not necessarily Zuora customers.

And check out his book SUBSCRIBED: Why the Subscription Model Will be Your Company’s Future – and What to Do About It.