Coca Cola New Vending Machines

Coca cola’s New Vending
Machines (A):
Pricing to Capture Value or
not?
Prof. Prem P. Dewani
Prof. IIM Lucknow
Coca cola’s New Vending
Machines (A):
Pricing to Capture Value or
not?
Prof. Prem P. Dewani
Prof. IIM Lucknow
Total Eco Value
Ref. Price1
10000
Ref. Price1
Motivation to Buy
Max Retail Price
Max Retail Price 2000
Demotivation to Buy
Ref. Price 2
1000
500
COGS
Price 10000 Offer price 5000

Price 10000 Offer price 5000
1: Identification
2. Expansion
3. Stationary
4. Commitment
4 5. Termination
3
5
2
Price Unfairness
1
1: Identification
2. Expansion
3. Stationary
4. Commitment
4 5. Termination
3
5
2
Price Unfairness
1
Agenda of the Case
How firms can leverage power of internet to

translate better information of customers
needs into greater customer 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, customize
product for individual tastes, create unique (and
enhanced customer value, and subsequently
extract higher prices using dynamic pricing models
that permit prices to vary across purchase
occasions and customer
Is selling coke through interactive vending
machines a good idea ? Why?
Argument in Favor
There is nothing new here. Interactive

machines are very common in countries like
Japan. So why not in US?
Argument in Favor
Fewer Stock out, availability of the product

to those who value more
Increased social welfare from interactive
technology? It 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
If it can be done for the other product and

service categories i.e. airlines, then why not
for soda
Argument in Favor
Although the price on a hot day might be

higher but average price across multiple
purchases occasions might not change (or
could even go down
Average customer is able to

understand that?
Argument in Favor
Different prices at different places are

already we pay?
Argument in Favor
There is always a negative reaction to any

radical change. It is a question of customers
getting used to new way of doing business
Argument Against
This goes against customer expectations. It is

against the very core of what Coke stands for:
Value, ubiquity and affordability.
Argument Against
Breaks and exploits 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 Unfairness
Argument Against
Consumer market is not ready for dynamic

pricing of routinely purchased products such
as Coke
Argument Against
Not advisable to change the most profitable

channel with this paradigm shift. Failure may
erode Coke’s profitability significantly
Argument Against
Changing price if cost goes up is justifiable,

but changing price if temperature goes up is
not. It has hard to believe that cost of the
product goes up because of the temperature
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
Secret Formula: How Brilliant Marketing and Relentless Salesmanship

Made Coca Cola the Best known product in the world
I’d like the world to buy a coke: Life and Leadership of Roberto
Goizueta by David Greising
Classic Cooking with Coca Cola

Variegated View on Coke?
Customer loyalty with culture/region

Where, how, and for whom does this
technology create / destroy value? for
example, loyal Coke customers,
switchers among Coke products, loyal Pepsi
customers etc?
Identifying that whether the interactive
vending machines are about creating greater
customer value , or selectively extracting a
greater part of the value (for consumer
surplus) created, or a combination of the two
Customizing Price
Customizing Product? how this would lead to

Are there any pricing related issues that can
adversely affect the firm?
Price Fairness? Loyal Customers?

What did Coca Cola do right? What did it do
wrong? How would you have done it?
Done right
The firm has not yet launched the product.

The hue and cry is more about what Ivester
did or said than about what the company has
done
Done right
The focus is enhancing the consumes

consumption experience, not on changing
prices. Changing temperature is only the
beginning. Coca Cola can easily extend its
technology to customize other attributes to
individual consumers. It is the essence of
relationship marketing
Done right
The firm has spent a lot of time perfecting the

technology before its introduction
Done right
Interactivity is the wave of the future and

Coke is clearly trying to be a leader in
this area of marketing
Done Wrong
If coca cola is all about the Coke brand and

image, the current actions could significantly
erode its brand equity
Done Wrong
Ivesters ‘by the numbers’ approach to talking

about the laws of supply and demand revel
little understanding of the company’s business
Done Wrong
The 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. Framing
the issue would have gone a long way
towards toning down the negative reactions
Done Wrong
The press release posted by the firm was not

sufficient to undo the negative publicity
generated by Ivester’s comments
What is price discrimination and when does
it work?
First Degree Price Discrimination
Second Degree Price Discrimination
Third Degree Price Discrimination

How does the internet affect the ability of
firms to price discriminate across
consumers?
What do you think of Ivester and his
comments?
Thanks

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Coca cola’s New Vending

Price 10000 Offer price 5000

How firms can leverage power of internet to

Price Discrimination and Dynamic Pricing

There is nothing new here. Interactive

Fewer Stock out, availability of the product

Dynamic pricing would be norm in most

If it can be done for the other product and

Although the price on a hot day might be

Average customer is able to

Different prices at different places are

There is always a negative reaction to any

This goes against customer expectations. It is

Breaks and exploits the relationships with the

Consumer will feel betrayed by such

Consumer market is not ready for dynamic

Not advisable to change the most profitable

Changing price if cost goes up is justifiable,

Competitors view is negative in this regard so

Secret Formula: How Brilliant Marketing and Relentless Salesmanship

Classic Cooking with Coca Cola

Customer loyalty with culture/region

Customizing Product? how this would lead to

Price Fairness? Loyal Customers?

The firm has not yet launched the product.

The focus is enhancing the consumes

The firm has spent a lot of time perfecting the

Interactivity is the wave of the future and

If coca cola is all about the Coke brand and

Ivesters ‘by the numbers’ approach to talking

The company should have clarified the prices

The press release posted by the firm was not

First Degree Price Discrimination

Second Degree Price Discrimination

Third Degree Price Discrimination

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