Coca Cola’s New Vending Machine

1) Pros for Coca Cola Co. Technology Availability: Electronic components are becoming more and more versatile and cheaper. All that is required in order to adjust the price with the changes of the weather is a temperature sensor and a computer chip. Therefore, it can reduce the implementation costs. Increase competitiveness through price discrimination: Price discrimination is used in order to increase the economic efficiency. In principle, the temperature sensitive vending machine is no different from any other form of price discrimination. For example, airlines pair daily and hourly fluctuations in demand with fluctuations in price. Moreover, in Japan some vending machines already adjust their prices based on the temperature outside. Increase profitability: vending machines are an extremely profitable resource and channel and have the opportunity to be more profitable for Coca Cola. More profitability could be achieved through: * Having the ability to lower the price to customers who would usually not buy the product but all the same with charging a higher price to those who would. Lowering the price at off-peak buying time in order to increase the overall sales. * Providing information when a machine is out of stock. Facilitate the micro marketing: information about which drinks are selling and, at what rates in a particular location is relayed by internet, helps salespeople to figure out which drinks will sell best in which locations. Cons for Coca Cola Co. Damaging the brand image: it causes to interpret that Coca C ola is not customer-friendly Risk of price war: automatic price adjustments will provide the capability to ignite the price war e. . over a holiday weekend. Pros for consumers * Interactive experience when purchasing a soft drink could produce added value as micro marketing can be used to satisfy the demand of consumers more easily. * Enjoy more promotion and pay less when the product is less demanded. Cons for consumers * Product is more expensive when it is more needed. This might seem unfair to a thirsty person. Considering that, the purpose of a coke is always to quench the thirst, people should not pay different prices for the same good. Exploit the consumers who live in warm climates. * Exploit the faithful customers who are loyal to Coca Cola brand. 2) Where? * In hot climates: the value of coke to customers is higher because a cold drink is needed more to quench their thirst. Therefore, this technology will increase the price of coke in warm climates and destroy the value of coke to brand switchers who will find an alternative. * In colder climates: the value of coke to customers is lower because they do not desire cold drinks. Therefore, the price will be lower and this will make coke have a higher value for customers in colder climates. Who? * Brand switchers: this type of consumers will not have loyalty to Coca Cola and therefore switch brands based on the related price. Therefore, it may create value to brand switchers in colder climates and decrease value in hotter climates, as they find a cheaper alternative. Overall, brand switchers will benefit the most from this technology. * Habitual buyers: this type of consumers does not prefer the brand but switching costs are too high. Therefore, they stay with the same brand and if the price of coke becomes lower than competing brands it will add value of coke to these consumers. * Brand loyal consumers: these customers will suffer the most because they will want to buy Coca Cola whether the weather is cold or hot. Therefore, it will only add value to this product for them when it is cold. 3) Price Wars: the ability to discount prices so easily could cause competitors to lower prices, specifically on holidays. Price discrimination: those consumers that drink on hot days will be worse off since they must pay a higher price, while some consumers that drink Coke on cold days will be better off since they receive a lower price. Consequently, sales in warmer countries could decrease as a result of charging high prices. It will only be a success if the difference between prices is not explicitly known. Otherwise, price discrimination could harm Coca Cola’s brand image. In addition, setting the price lower in cold climates might cause some profit losses and change the reference point, and destroy the brand image either. ) * Coca Cola should not have publicized the new technology while it was still being researched. Instead, they should have waited until they knew exactly what they wanted to achieve through this technology. Furthermore, they should not have publicized new technology in a way that vending machines would change prices according to the weather temperature. Because, this create s controversy that made them look not customer-friendly but profit hungry. This might damage the brand image. * Their response to the announcement of New York Times was the right action. Because, it cleared the intention of Coca Cola that was to improve product availability and promotion activity rather than to raise prices of soft drinks in hot weather. * Another point they did right is that they carried out thorough product testing of this new technology to enable them to identify how successfully it could increase their vending machine profitability. * I would recommend that if Coca Cola decided to use the technology they might first implement it in colder countries and promote the new technology as a way for consumers to save money and increase their utilities. After the adoption of this new technology, they should introduce it into warmer countries but without the emphasizing on the price, with more emphasizing on the attributes of the vending machine such as refrigerated display case, cooler, the ability of accepting credit cards and debit cards, better availability of products through better stock control. 5) I think the comments of Mr. Ivester were naive and not well planned. He should not say that it is fair to raise prices in a championship event in a hot summer day. Therefore, according to the passage the Ivester’s answer created the flap, seeming to cast the company as one that was not customer-friendly. Instead, he should say that Coca Cola is not introducing vending machines that raise the price of soft drinks in hot weather, just exploring innovative technology that can improve product availability, promotion activity. Just like the comments of Pepsi spokesman, Jeff Brown, â€Å"At Pepsi we are focused on innovations that make it easier for consumers to buy a soft drink, not harder. † Based on Ivester’s comments, the image of Coca Cola’s brand eroded.