coca cola new vending machine
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COCA COLA’S NEW VENDING MACHINE
A case analysis by,Abhijit Kumar Sah -302
Abhishek Singh -303
Antima Tiwari -365
Bikash Pandey -315
Ravi Tiwary - 335
About Coke
Vending Machine
Benefits of VM
Media Reaction
Mechanics of
Coke
The Number
Game
Problems in VM
Recommendation
Objectives of The Case
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
Coke’s 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 there’s 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 COKE’S STRATEGY
Price DiscriminationSelling the same product to different
groups of buyers at different prices.“Hot” day v.s. “Cold” day prices
Economic RationaleHigher price (hot) higher profitLower price (cold) induces sales higher
profit
THE NUMBER GAME
Normal Vending Machines
Þ Expected price is 70 cents per can.
Þ Expected profit is 5,000 cents per machine.
“Smart” Vending Machines
Þ Price on a HOT day is 85 cents per can
Þ Price on a COLD day is 55 cents per can
Þ Expected profit is 5,450 cents per machine.
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 COKE’S 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
o Emphasis that coke will be cheaper in cold weather
Highly profitable strategy if: Executed with extreme caution If increase perceived value of product.
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