Cocacola New Vending Machine Decision Case Study

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New Vending Machine
Pricing to Capture Value, or Not?

Case Facts
 Coca Cola planned on introducing new vending machines that are able to automatically

change prices according to ambient temperature.
 How this works: the price of Coke goes up in hot weather where cold drinks are

regarded more valuable to satisfy thirst than in cold days.
 Coca Cola tried to maximize profit from these smart vending machines, after facing

price war in supermarkets.
 This practice is called price discrimination, where a company is charging different prices

for the same product to different consumer. In the Coke’s vending machine case, the differentiation is on how consumer values cold drinks in different weathers.

Case
Is price discrimination -in Coke’s case in particular- a “good” or “evil” practice?

Marketing is about customer value, from identifying, creating, delivering, communicating, maintaining to rediscovering. The same goes for price discrimination, it should bring value to customers although the word ‘discrimination’ have a negative tone. In short, value proposition is what the customer get for what the customer pays. There are three types of price discrimination which we see in our surrounding .  

- First is when a product is sold at different prices to each individual consumer. Price level is set according to consumer willingness to pay for the product. - Second type is when company charging lower price for consumer purchasing in higher quantities or in bulk.



- Third type is setting different price for different consumer groups, such as gender, senior citizen, or student.

PROS- Supporting - Ivester
Price=Max(Utility)

Utility Function

• Utility of Coca Cola varies from moment to moment •In summer the utility of Coca Cola is very high. Hence price it very high.

Price

Units Consumed

PROS- Supporting - Ivester
•11.9 % of soft drink sales, world wide, came from vending machines •In US 1.2 billion cases of soft...
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