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Coca cola new vending machine

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Case Study CokeSmart Machine
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Coca cola new vending machine

  1. 1. 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
  2. 2. Objectives of The Case About Coke Vending Machine Benefits of VM Media Reaction Mechanics of Coke The Number Game Problems in VM Recommendation
  3. 3. 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.
  4. 4. 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.
  5. 5. 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.
  6. 6. 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)
  7. 7. MECHANICS OF COKE’S 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
  8. 8. THE NUMBER GAME Normal Vending Machines Expected price is 70 cents per can. Expected profit is 5,000 cents per machine. “Smart” Vending Machines Price on a HOT day is 85 cents per can Price on a COLD day is 55 cents per can Expected profit is 5,450 cents per machine.
  9. 9. 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
  10. 10. 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.
  11. 11. 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”
  12. 12. 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.

Editor's Notes

  • Economists use the term "price discrimination" to describe the practice of selling the same product to different groups of buyers at different prices in recognition of the fact that consumers assign a different value to the same product based on varying degrees of need. If possible, a company would prefer to charge a high price to those who place a high value on the good, while charging less to those that do not.  In the case of Coke, its consumers were segmented based on their buying habits during hot & cold days. Based on these buying habits, Coke would adjust its prices accordingly.   When it was hot outside, Coke earned a higher profit by selling its products at a higher price. Similarly, Coke could generate higher profits even when it was cold outside by sufficiently lowering its prices to induce customers to buy more of its products (See Appendix I for detailed calculations). 
  • hence any upward movement without any proper justification has created negative effect.

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