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  • Coca Cola New Vending Machine Strategy

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    Jaideep Vasant Solanki
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    Coca-Cola is testing smart vending machines that can change drink prices based on weather conditions. On hot days, prices would be higher to boost profits, while prices would be lower on cold days to increase sales. This price discrimination drew criticism from the media and consumers. However, Coca-Cola estimates the strategy could increase annual profits by $328.5 million by inducing more sales on cold days that offset slightly lower prices. Critics argue the strategy exploits thirsty customers and undermines the brand's emotional connection. Recommendations include promoting the strategy carefully and emphasizing lower cold weather prices to increase perceived value.

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    Price up when its hot and price less when its cold. The new vending machine was able to do this. Case on Price discrimination

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    Coca-Cola is testing smart vending machines that can change drink prices based on weather conditions. On hot days, prices would be higher to boost profits, while prices would be lower on cold days to increase sales. This price discrimination drew criticism from the media and consumers. However, Coca-Cola estimates the strategy could increase annual profits by $328.5 million by inducing more sales on cold days that offset slightly lower prices. Critics argue the strategy exploits thirsty customers and undermines the brand's emotional connection. Recommendations include promoting the strategy carefully and emphasizing lower cold weather prices to increase perceived value.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    789 views13 pages

    Coca Cola New Vending Machine Strategy

    Uploaded by

    Jaideep Vasant Solanki
    Coca-Cola is testing smart vending machines that can change drink prices based on weather conditions. On hot days, prices would be higher to boost profits, while prices would be lower on cold days to increase sales. This price discrimination drew criticism from the media and consumers. However, Coca-Cola estimates the strategy could increase annual profits by $328.5 million by inducing more sales on cold days that offset slightly lower prices. Critics argue the strategy exploits thirsty customers and undermines the brand's emotional connection. Recommendations include promoting the strategy carefully and emphasizing lower cold weather prices to increase perceived value.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 13

    COCA COLAS NEW VENDING MACHINE

    Objectives of The Case


    About Coke Vending Machine Benefits of VM

    Media Reaction
    Mechanics of Coke The Number Game Problems in VM Recommendation

    ABOUT COCA-COLA COMPANY

    The Coca-Cola Company is an American multinational

    beverage corporation.

    The company is best known for its flagship product Coca-Cola, invented in 1886 by pharmacist John Stith Pemberton in Columbus, Georgia. Coca-Cola currently offers more than 500 brands in over 200 countries or territories and serves over 1.7 billion servings each day

    The company is headquartered on Atlanta, Georgia,


    United States.

    VENDING MACHINE

    Cokes testing of vending machines that could change price according to the weather. The smart Vending machine could automatically adjust prices.

    If the temperature is high then price will be high If the temperature is low then price will be low.

    BENEFIT OF VENDING MACHINE


    Boost sales by providing discount in off season or when theres less traffic. Facilitates Micro- Marketing and understanding the local customers. Help companies in managing logistics and capture real time data for analysis. Increase profit as it has been untouched by discount war. Improve product availability, promotional activity and even offer consumers an interactive experience when they purchase a soft drink from a vending machine.

    MEDIA REACTION

    A cynical ploy to exploit the thirst of faithful customers (San Francisco Chronicle) Lunk-headed idea (Honolulu Star-Bulletin) Soda jerks (Miami Herald) Latest evidence that the world is going to hell in a handbasket (Philadelphia Inquirer) Ticks me off (Edmonton Sun)

    MECHANICS OF COKES STRATEGY


    Price

    Discrimination

    Selling the same product to different groups of buyers at different prices. Hot day v.s. Cold day prices

    Economic

    Rationale

    Higher price (hot) higher profit Lower price (cold) induces sales higher profit

    THE NUMBER GAME


    Normal Vending Machines
    Expected
    Expected

    price is 70 cents per can.


    profit is 5,000 cents per machine.

    Smart Vending Machines


    Price Price

    on a HOT day is 85 cents per can on a COLD day is 55 cents per can profit is 5,450 cents per machine.

    Expected

    THE NUMBER GAME..

    Incremental profit per day per machine = 5,450 5,000 = 450 cents Assuming 200,000 smart vending machines, Annual incremental profit = 450 * 200,000 * 365 days = $328.5 million

    PROBLEM IN COKES VENDING MACHINE


    The new vending machine concept might seem unfair to a thirsty person. The main problems are:

    Price discrimination- The company segmented group of buyers by the outside temperature. Communication:- Coke based its strategy purely on demand and supply.

    PROBLEM CONT

    Perceived price :- For product like coke people have an idea about its price Emotional Bonding:- Iconic brand has a very strong emotional attachment. Competition:- Speech form Pepsi.. we believe that machines that raise prices in hot weather exploit consumer who live in warm climates

    RECOMMENDATIONS

    Promotion Strategy is not good by sudden public announcement. Strategic placement of machines
    High traffic areas with few repeat customers Examples: Rest areas, tourist traps, theaters etc

    Emphasis that coke will be cheaper in cold weather

    Highly profitable strategy if:


    Executed with extreme caution If increase perceived value of product.

    THANKS.

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