COCA COLA’S NEW VENDING MACHINE

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.

THANKS….