Coca Cola New Vending Machines

Coca cola’s New Vending Machines (A):

Prof. Prem P. Dewani Fellow: IIM Ahmedabad

Assistant Prof. IIM Lucknow

Agenda of the Case How firms can leverage power of internet to translate better information of customers needs into greater customer value? value?

Price Discrimination and Dynamic Pricing

Agenda of the Case How firms can leverage power of internet to translate better information of customers needs into greater customer value? value?

Price Discrimination and Dynamic Pricing

Whether it makes sense for Coca Cola to use interactive vending machines to sell Coke and how it should do so.

Were it to proceed with the plan?

How firms can leverage the internet to gather more information about customers, customie product for individual tastes, create uni!ue "and , e#tract e#t ract higher prices using dynamic pricing pr icing models that permit prices to vary across purchase occasions and custom customer er

$s selling coke through interactive vending machines a good idea ? Why?

Argument in Favor %here is nothing new here. $nteractive machines are very common in countries like &apan. 'o why not in ('?

Argument in Favor

)ewer 'tock out, availability of the product to those who value more $ncreased social welfare from interactive technology? $t gets a limited supply of the product to customers that value is most

Argument in Favor Dynamic pricing would be norm in most markets. Coca cola would be better off if it were ahead of others on this front

Argument in Favor $f it can be done for the other product and service categories i.e. airlines, then why not for soda

Argument in Favor *lthough the price on a hot day might be higher but average price across multiple purchases occasions might not change "or

Average customer is able to understand that?

Argument in Favor

Different prices at different places are already we pay?

Argument in Favor %here is always a negative reaction to any radical change. $t is a !uestion of customers getting used to new way of doing business

Argument Against %his goes against customer e#pectations. $t is against the very core of what Coke stands for+ alue, ubi!uity and affordability.

Argument Against

-reaks and e#ploits the relationships with the customers the coke has made.

Argument Against

Consumer will feel betrayed by such opportunistic behavior and stop buying Coke

Argument Against

Price (nfairness

Argument Against Consumer market is not ready for dynamic pricing of routinely purchased products such as Coke

Argument Against ot advisable to change the most profitable channel with this paradigm shift. )ailure may erode Coke/s profitability significantly

Argument Against Changing price if cost goes up is 0ustifiable, but changing price if temperature goes up is not. $t has hard to believe that cost of the

Further, temperature is exogenous variable and can not be used as a reason for raising prices

Argument Against

Competitors view is negative in this regard so there are chances that Coke would lose out

What is Coke? What does Coke mean to the average consumer?

What is a brand? For God Country and Coca cola: The unauthorized history of the great American soft drink and the company that makes it

'ecret )ormula+ How -rilliant 1arketing and 2elentless 'alesmanship 1a e Coca Co a t e -est nown pro uct n t e wor $/d like the world to buy a coke+ 3ife and 3eadership of 2oberto 4oiueta by David 4reising

Classic Cooking with Coca Cola

ariegated iew on Coke? Customer loyalty with culture5region

Where, how, and for whom does this technology create 5 destroy value? for e#amp e, oya o e cus omers, switchers among Coke products, loyal Pepsi customers etc?

$dentifying that whether the interactive vending machines are about creating greater customer value , or selectively e#tracting a greater part of the value "for consumer surplus6 created, or a combination of the two

Customiing Price

Customiing Product? how this would lead to

*re there any pricing related issues that can adversely affect the firm?

Price )airness? 3oyal Customers?

What did Coca Cola do right? What did it do wrong? How would you have done it?

Done right %he firm has not yet launched the product. %he hue and cry is more about what $vester did or said than about what the company has one

Done right %he focus is enhancing the consumes consumption e#perience, not on changing prices. Changing temperature is only the beginning. Coca Cola can easily e#tend its technology to customie other attributes to individual consumers. $t is the essence of relationship marketing

Done right

%he firm has spent a lot of time perfecting the technology before its introduction

Done right

$nteractivity is the wave of the future and Coke is clearly trying to be a leader in this area of marketin

Done Wrong

$f coca cola is all about the Coke brand and image, the current actions could significantly erode its brand e uit

Done Wrong

$vesters 7by the numbers/ approach to talking about the laws of supply and demand revel little understandin of the com an /s business

Done Wrong %he company should have clarified the prices will not only go up on warm or hot days but also go down on cool or cold days. )raming the issue would have gone a long way towards toning down the negative reactions

Done Wrong

%he press release posted by the firm was not sufficient to undo the negative publicity enerated b $vester/s comments

What is price discrimination and when does it work?

)irst Degree Price Discrimination 'econd Degree Price Discrimination %hird Degree Price Discrimination

How does the internet affect the ability of firms to price discriminate across consumers?

What do you think of $vester and his comments?