Coca-Cola's New Vending Machine - Case Study Example

I would recommend Coca-Cola to follow "price discrimination" strategy in such cases as (1) different customer groups (lower prices for students and higher prices for business organizations); and (2) when a customer buys high quantities of a product. Pricing is a sensitive and complex decision area affecting sales, costs, and profits for both industrial and consumer goods. For consumers, price reductions and increases have symbolic meanings. A customer may associate a price reduction with a reduction in quality, the anticipation of new models, or even lower prices or poor market acceptance.

Higher prices may indicate better quality, a good image, and good value (Das Narayandas 2000). Price discrimination is an effective tool when it is applied to each individual consumer. For instance, if a buyer is willing to pay more for a product and receive exceptional quality, he/she should pay more. The second situation when Coca-Cola can follow price discrimination is when a customer buys products in large quantities. For instance, price reductions can be proposed to repeat customers and loyal customers.

The third case when "price discrimination" is justified is when the company serves different customer groups. For instance, it is possible to set a low price for students and workers, but propose a high price for white-collar workers and companies located in prestigious business regions. Whereas pricing is usually perceived as a short-run action, its implications can be long-run, even to the point of shaping industry structures. Markets that may be viewed as systems of information on cost and demand determine the appropriateness of prices.