Coke Provides a Marketing Lesson

Proponents of vouchers and choice systems never tire of touting the benefits of the free market. For them, the free market is like a colosseum in which gladiator products battle to become better, until the crown goes to those who are Most Excellent of All. It's a touchingly childlike belief; the free market will deliver excellence to customers just like Santa will deliver presents to good boys and girls.

But in our American free-ish market capitalism-lite system, the path to victory often has nothing to do with the pursuit of excellence.

Sometimes the market place just doesn't want excellence enough to pay for it; analysts have suggested that's why the airline travel experience is lousy and getting lousier. Or consider cable television, which promised a cornucopia of varied and quality channels and instead delivered 500 versions of the same bland culture-mulch.

Yesterday, Coca-Cola delivered another lesson in how the free market really works. Coke has been having troubles financially, and it's worth noting that many of these troubles have absolutely nothing to do with the product at all, but with the financial machinations of international exchange rates. Apparently when those aren't tilted in the proper direction, you can magically turn your money into less money. Additionally, Coke has suffered some loss of market share because it has occurred to many people that they could put more healthful substances into their bodies.

So how did Coke handle this? Did they find a way to make their product better? Did they pursue excellence so that they could be rewarded by the free market? Of course not. As reported by the AP, they did this:

To make up for weak volume gains at home, the company has been using a variety of tactics including a focus on "mini-cans" and smaller bottles that are positioned as premium offerings and help push up revenue.

That's right. They looked for a better way to trick the customers into giving them more money. Specifically, they put their flavored fizzy water in smaller cans, essentially raising their price-per-unit and then marketing the increased cost as a Good Thing. They put less of the same old product in new cans. That's it.

This is the free market at its worst. The customer is your adversary-- they have your money and somehow, some way, you have to get it away from them. It's not that you need a product that actually has better quality-- you need a product that can more easily be sold.

I've written this many times. If I'm ever important enough to have a law named after me, this might be my best shot:

The free market does not foster superior quality; the free market fosters superior marketing.

The notion that unleashing these sorts of market forces in education would somehow lead to better schools would be funny if it weren't so destructive in practice. It is particularly problematic because under school choice, the school can't raise the price because that voucher payment is set by the state (I know we rarely call these vouchers any more, but that's only because the term has become a political liability-- school choice programs are still essentially voucher programs). So the only option for schools in a free market system is to cut services, to put less education in a smaller, shinier can.

When a school's guiding principle, its business plan, is to ask, "How much less can we give these students and still keep market share," that school is broken. A system that rewards better marketing of a poorer product is not a system that creates excellence, and we do not need to put education in smaller cans.

Originally posted at View from the Cheap Seats