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Coca Cola's New Vending Machine

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Submitted By srs3252
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This case is about Coke’s new vending machines or smart vending machines that are able to automatically change prices according to ambient temperature.

How it works: ▪ If the temperature is high then price will be high. ▪ If the temperature is low then price will be low.
Coca Cola tried to maximize profit from these smart vending machines, after facing war price 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.
Benefits of Smart Vending machine: o Increasing sales by providing discounts in off season or when there is less traffic. o Facilitates micro-marketing and understanding the local consumer. o Help the company to manage logistics and capture real time data for analysis. o Increase profit as it remains untouched by discount war. o Improve product availability, promotional activity and even offer consumers an interactive experience when they purchase a soft drink from a vending machine
Rationale behind the move: ▪ Price Discrimination: selling the same product to different group 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.
Problems with coke’s new vending machine strategy: ➢ Price Discrimination: The company segmented group of buyers by the outside temperature. ➢ Communication: Coke based its strategy purely on demand and supply. ➢ Perceived Price: For a staple product like coke people have an intuitive idea about its price so any upward movement without any justification has negative effect. ➢ Emotional Bonding: coke has been an

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