Risky Assumptions Lead To Product Failure

Lessons learnt from the failure of Crystal Pepsi.

Planning as though you know a particular outcome is risky business. This is especially true in the corporate world. Time and time again, we’ve seen leaders of major corporate initiatives make decisions believing that they are operating on facts, when in reality, they are operating with deeply held assumptions — statements that are accepted as facts but with no effort spent on the verification of accuracy.

This assumed causality is dangerous, and there are innumerable product failures that illustrate this, Crystal Pepsi being one of them.

What Is Crystal Pepsi ?

Slogan, “You’ve never seen a taste like this”

In the early 1990s, a marketing fad called the “Clear Craze” equated clarity with purity and health.

Following the trend of “light” drinks, Pepsi debuted Crystal Pepsi, a clear-colored soft drink, which tasted much like regular Pepsi.

The drink debuted in 1992. While beginning sales were good from the initial burst of curiosity (around $470 million in the first year), numbers quickly fell, and within just a short couple of years, Crystal Pepsi was completely pulled from the market.

Lessons Learned From Failure

In an interview with Business Insider, David Novak, creator of Crystal Pepsi, lamented his mistakes:

“I learned there that you have to recognize that when people are bringing up issues, they might be right!” Novak said. The next step is making the effort to find evidence that either proves or disproves these issues and make your decision accordingly. Then, the final and most important step is explaining why the decision was made.”
“The only way that the feedback loop works is if you start listening to the people who have something to say.” Neil Patel, co-founder of KISSmetrics

Product development should not occur within a vacuum! This is something Pepsi failed to understand, and this is the greatest lesson we can learn from Novak’s experience!

Rather than proceeding based on assumptions, external validations through research should test assumptions.

“If you show them (employees) that you’ve listened and addressed their concerns, then you’ve given them the input opportunity they need to get committed … [and] then they’re going to be more committed to the solution.”

The perspectives and opinions of consumers, sales and marketing staff, as well as any other key internal, external stakeholders should be incorporated throughout the product development process. After-all, periodically testing and validating preferences through research will help you identity and fix concerns early on (while also preventing devastating outcomes in the future).

Now let’s dive deeper and examine the assumptions that Pepsi ultimately failed to validate.

Crystal Pepsi — The Assumptions Made

We’ve been conditioned to think of Pepsi as a dark brown, sugar-filled soft drink.

In contradiction, Crystal Pepsi positioned the product as a colorless cola drink that would appear refreshing and “good” for you.

This leads us to Pepsi’s first assumption.

  1. Assuming how the consumers would feel about the product.

The market already had a long, successful list of colas drinks, and Pepsi assumed a clear cola product would be positively received.

But as it turned out, it was hard for consumers to think of cola as a clear liquid. Whereas other colorless sodas (Eg. 7UP and Sprite) had a citrus-y flavor, Crystal Pepsi was too similar and simultaneously inferior in taste to the original Pepsi. This led to confusion: Was Crystal Pepsi supposed to taste like Pepsi, or not? If Crystal Pepsi tasted like original Pepsi, why was it more expensive?

Customers who wanted the flavors of Pepsi but couldn’t get them felt betrayed, and consumers who didn't like the product simply felt disappointed.

2. Assuming the product had the right features

Crystal vs. Regular — insignificant difference in nutritional value

The clear color was to target health conscious consumers, however, Crystal Pepsi contained 130 calories versus 150 calories in regular Pepsi (in 12 fl oz), a fairly insignificant point of difference. And although the product did not have caffeine, it was still loaded with high fructose corn syrup. There was no purity of taste.

Reformulated 1994, “Crystal” drink.

Additionally, the connection with “Pepsi” in the naming hindered the healthy product positioning. Even when reformulated in 1994 with lemon flavor and renamed Crystal (minus the Pepsi in the name), the product remained unsuccessful.

This leads us to our next assumption.

3. Assuming there would be long-term market demand for the product and that people would pay for it

It was the early nineties, and purity was all the rage. Crystal Pepsi was created to position against bottled water, but when more and more consumers picked up Evian and Perrier instead of cola, the clear soda market proved to be just a fad.

The product simply had too little market attractiveness. Pepsi paid the price for their mistake, reportedly losing about $100 million in development and advertising costs.

4. Assuming there will be minimal disruption from competitors

Pepsi had failed to position the product correctly, had low market demand, and had low competitive strength.

At the time, Pepsi was farther away from Coca-Cola in the international market, and Coca-Cola wanted to keep it that way.

In December 1992, the Coca-Cola Company introduced a new clear diet cola called “Clear Tab” to counter the recent incursion by its arch-rival, Pepsi. Knowing full well that Clear Tab would be a failure (at the time, the market had rejected any diet cola), Coca-Cola purposefully positioned Clear Tab as a sugar free, calorie free ‘diet’ product. Their goal was to make people think that Crystal Pepsi was also a diet drink.

Crystal Pepsi had poor product positioning. The drink contained sugar, and therefore, failed to find the right fit in the diet category. Likewise, it also failed to fit into the health category.

Cola’s “suicidal kamikaze” strategy worked. Within just 6 months, both clear colas were off the market, which of course, was Coca-Cola’s intent all along.

Assumptions = Risky Business

As with Pepsi, companies oftentimes refuse or fail to acknowledge when new products serve no strongly identifiable customer need.

Related image

To avoid risky outcomes, companies need to adopt structured research processes to decision making. It all starts with humbleness — recognizing that you really don’t know what is going to happen. At least, not until you peel back all layers of uncertainty at minimal possible costs.


The things you think you know (about your product, about your users, and about your implementation) are assumptions you’re making without any evidence, and they translate directly into risks for your product— risks you don’t want to take.

References

  1. http://www.businessinsider.com/crystal-pepsi-creator-david-novak-its-failure-taught-important-lesson-2016-7
  2. http://www.nytimes.com/1992/12/15/business/company-news-coke-adds-a-clear-cola-to-its-new-age-stable.html
  3. http://www.chicagotribune.com/business/ct-crystal-pepsi-coming-back-20160630-story.html
  4. http://time.com/13549/the-10-worst-product-fails-of-all-time/

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