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7/24/2019 Coca Cola New Vending Machines
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Coca colas New VendingMachines (A):
Prof. Prem P. DewaniFellow: IIM Ahmedabad
Assistant Prof. IIM Lucknow
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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
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How firms can leverage the internet to gather
more information about customers, customie
product for individual tastes, create uni!ue "and
,
e#tract higher prices using dynamic pricing models
that permit prices to vary across purchase
occasions and customer
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$s selling coke through interactive vending
machines a good idea ? Why?
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)ewer 'tock out, availability of the productto those who value more
$ncreased social welfare from interactive
Argument in Favor
technology? $t gets a limited supply of theproduct to customers that value is most
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Dynamic pricing would be norm in most
markets. Coca cola would be better off if it
were ahead of others on this front
Argument in Favor
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$f it can be done for the other product and
service categories i.e. airlines, then why not
for soda
Argument in Favor
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*lthough the price on a hot day might be
higher but average price across multiplepurchases occasions might not change "or
Argument in Favor
Average customer is able to
understand that?
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Different prices at different places arealready we pay?
Argument in Favor
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%his goes against customer e#pectations. $t is
against the very core of what Coke stands for+
alue, ubi!uity and affordability.
Argument Against
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-reaks and e#ploits the relationships with thecustomers the coke has made.
Argument Against
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Consumer will feel betrayed by suchopportunistic behavior and stop buying Coke
Argument Against
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Price (nfairness
Argument Against
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Consumer market is not ready for dynamic
pricing of routinely purchased products suchas Coke
Argument Against
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ot advisable to change the most profitable
channel with this paradigm shift. )ailure mayerode Coke/s profitability significantly
Argument Against
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Changing price if cost goes up is 0ustifiable,
but changing price if temperature goes up isnot. $t has hard to believe that cost of the
Argument Against
Further, temperature is exogenousvariable and can not be used as a
reason for raising prices
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Competitors view is negative in this regard sothere are chances that Coke would lose out
Argument Against
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What is Coke? What does Coke mean
to the average consumer?
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For God Country and Coca cola: The unauthorized history of thegreat American soft drink and the company that makes it
What is a brand?
'ecret )ormula+ How -rilliant 1arketing and 2elentless 'alesmanship
1a e Coca Co a t e -est nown pro uct n t e wor
$/d like the world to buy a coke+ 3ife and 3eadership of 2oberto
4oiueta by David 4reising
Classic Cooking with Coca Cola
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ariegated iew on Coke?
Customer loyalty with culture5region
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Where, how, and for whom does this
technology create 5 destroy value? for
e#amp e, oya o e cus omers,switchers among Coke products, loyal Pepsi
customers etc?
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$dentifying that whether the interactive
vending machines are about creating greater
customer value , or selectively e#tracting agreater part of the value "for consumer
surplus6 created, or a combination of the two
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Customiing Price
Customiing Product? how this would lead to
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*re there any pricing related issues that canadversely affect the firm?
Price )airness? 3oyal Customers?
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What did Coca Cola do right? What did it dowrong? How would you have done it?
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%he firm has not yet launched the product.
%he hue and cry is more about what $vester
did or said than about what the company has
Done right
one
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%he focus is enhancing the consumes
consumption e#perience, not on changing
prices. Changing temperature is only the
Done right
beginning. Coca Cola can easily e#tend itstechnology to customie other attributes to
individual consumers. $t is the essence of
relationship marketing
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%he firm has spent a lot of time perfecting the
technology before its introduction
Done right
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$nteractivity is the wave of the future andCoke is clearly trying to be a leader in this
area of marketin
Done right
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$f coca cola is all about the Coke brand andimage, the current actions could significantly
erode its brand e uit
Done Wrong
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$vesters 7by the numbers/ approach to talkingabout the laws of supply and demand revel
little understandin of the com an /s business
Done Wrong
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%he 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. )raming
Done Wrong
the issue would have gone a long waytowards toning down the negative reactions
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%he press release posted by the firm was notsufficient to undo the negative publicity
enerated b $vester/s comments
Done Wrong
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What is price discrimination and when does
it work?
)irst Degree Price Discrimination
'econd Degree Price Discrimination
%hird Degree Price Discrimination
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How does the internet affect the ability of
firms to price discriminate acrossconsumers?
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What do you think of $vester and hiscomments?
Thanks
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Thanks