Coca-Cola is not only a brand that’s overcome longevity, it’s also managed to become one of the most iconic and ubiquitous names in the world. This is due to their unique pricing and ability to navigate price acceptance. We previously covered the interesting history of co*ke and price increase policy – and found that although they are one of the most powerful brands – they actually grew by keeping reasonably flat pricing for many years. Today, we’ll be discussing Coca-Cola’s tactics for pricing acceptance. We’ll also be going over their pricing strategies and promotional methods that make them so iconic and well recognized all over the world.
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How Coca-Cola Shrinking Their Cans Affects Price Acceptance
According to the NZ Herald newspaper:
“Coca-Cola has confirmed plans to shrink the size of its cans – but says the price will also be coming down accordingly.”
“The can size has been reduced by 7 per cent, from 355ml to 330ml.”
“Coca-Cola Oceania spokesman Keith Mason said the move was made following research showing people preferred a smaller size.”
“Research and consumption trends showed that 330ml was a more convenient and enjoyable amount for individual consumption while at home, Mason said.”
Why price acceptance is vital for consumer brands
This article highlights a number of themes that those working on their pricing career will immediately understand. By reducing the size of the can, co*ke is basically expecting to sell more.
This tactic could also be expected to appeal to a more health-conscious demographic which has been avoiding soft drinks. It could be seen as making the product more prestigious since smaller serving could be perceived as more socially acceptable. Social acceptance and signalling is vital in today’s marketplace.
The other (more important) aspect is ensuring price acceptance from loyal consumers and ensuring that people do not feel the goalposts are being moved – i.e. paying the same for a smaller or inferior product.
In reality – the cost of production for a can of co*ke will change very little. We can assume a few cents difference at most. However, the retail price will likely have to decrease noticeably to ensure it does not look like a cheap cash grab.
In this case – as in many areas, perception is the most important thing. Particularly, when you have a multi-billion dollar brand to protect. This example shows how important it is to be customer-centric.
Coca-Cola’s Pricing Strategy For Price Acceptance
Coca-cola has been using a meet-the-competition pricing strategy for as long as they have been around – and it works. This means that prices are set at the same level as competitor soda companies.
They do this because they understand that consumers need their product to be affordable, even though they are a powerful brand. This displays their understanding of consumers price acceptance. What makes them successful is that they work to meet and expand these standards.
Their lower price points allow them to penetrate new and sensitive markets. But at the same time, they have powerful promotional strategies that drive their message that they are a premium product. What you get is an affordable premium item that makes its brand stand out from the rest.
co*ke uses three main pricing strategies depending on what they see fit to a particular situation:
Price Skimming
Price skimming is when a company enters a market with higher than usual prices to maximise profits and strong desires of customers to purchase the product – basically to capitalise on the hype. Afterwards, they gradually lower prices to market standards.
Market Price
Setting products at market prices means prices are on par with the going rate of competitors. This happens in high competition markets to prevent price wars. There’s usually little room to increase margins, however, Coca-cola has been successfully using this strategy throughout its long history.
Market Penetration
Market penetration involves setting low prices when entering a new market to attract the highest possible number of sales and new customers. This is more common for areas with high competition or little awareness of the product to begin with.
Innovative Promotional Strategies To Promote Price Acceptance
Coca-Cola boats a portfolio of award-winning industry campaigns. They are strong at maximising promos to enhance their image and market shares. Proper utilisation of promotional material can even help brands boost their value and margins of what customers are willing to pay.
Beyond The Product
The company has incredible control over their image due to its creative and innovative marketing schemes. Beyond their well-produced and positioned advertisem*nts, they also sponsor major sporting events like the Olympics and National Football League. They also bring in more people by giving away other desirable things like free or discounted hotel vouchers or peel and win stickers.
Product Distribution
Besides Coca-Cola’s incredible pricing and promotional strategies, they have incredible reach. According to co*ke’s website, if you stacked all 2.8 million of their vending machines you would hit the height of four empire state buildings stacked on top of each other.
They also have more than 250 bottling partners all over the world. This makes it much easier for them to get their products places without having to compromise on quality. Bottling partners also have the ability to work closely with local distributors such as restaurants, supermarkets, theatres, etcetera. This gives them unique insight and the ability to create localized promotions and strategies.
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Bottom line
In conclusion, Coca-Cola isn’t a powerhouse brand for no reason. They combine innovative pricing strategies to maximise price acceptance and drive their messaging and positioning by creating promotional materials.
They have also managed to maximise their reach but setting up hundreds of bottling partners. This enables localised distribution and promotional campaigns that are tailor-fit to a certain area or demographic. They even go so far as to change their can sizes based on their audience’s preferences, which shows their consumer-centric values.
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FAQs
Coca-Cola's Pricing Strategy For Price Acceptance
This means that prices are set at the same level as competitor soda companies. They do this because they understand that consumers need their product to be affordable, even though they are a powerful brand.
What can you learn from pricing strategy? ›
Pricing strategies account for many of your business factors, like revenue goals, marketing objectives, target audience, brand positioning, and product attributes. They're also influenced by external factors like consumer demand, competitor pricing, and overall market and economic trends.
What do you think is the most effective pricing strategy justify your answer? ›
Value pricing is perhaps the most important pricing strategy of all. This takes into account how beneficial, high-quality, and important your customers believe your products or services to be.
What are 3 pricing strategies explain specifically? ›
Cost-Based Pricing. Value-Based Pricing. Competition-Based Pricing.
What are the 3 key strategies of Coca-Cola? ›
Strategic goals of the Coca-Cola Company
- Gain more consumers.
- Gain market share, especially in hot drinks.
- Strengthen stakeholder impact.
- Equip the organisation to win.
Cost-Plus Pricing Strategy Example
In “cost-plus pricing,” businesses can charge a higher price for their goods or services than they pay to create or deliver them. Profit margins can vary from company to company based on production cost.
Why is it important to understand the purpose of pricing strategy? ›
Benefits of a good pricing strategy
Symbolises value: Consumers tend to associate less expensive products with cheap, sometimes shoddy, production values. Products of a higher price tend to be associated with higher value. Attract buyers: If a price is too high, the customer may not be able to afford it.
Why is it important to have a pricing strategy? ›
The importance of pricing
Pricing is important since it defines the value that your product are worth for you to make and for your customers to use. It is the tangible price point to let customers know whether it is worth their time and investment.
What do you think is the important of learning proper pricing strategy explain your answer? ›
Pricing can affect everything about how your product is received by the market. That is why it's critical to understand the importance of pricing strategy. A price that is too low may not generate enough interest or have enough of a margin for profit. Set the price too high and you may also lose customer's interest.
How do you measure the success of a pricing strategy? ›
There are three key metrics to assess the effectiveness of your pricing tactics: price index, margins and conversions. These metrics function as excellent KPIs to determine if changes in your strategy are delivering the expected results.
The answer is that it must be right for the customer. The right price is based on the value the customer expects, and thus the "profit" they make from your product. But they have plenty of products and services to choose from and will choose what gives them most profit -- on their own terms.
What is the most common pricing strategy? ›
The three most common pricing strategies are:
- Value based pricing - Price based on it's perceived worth.
- Competitor based pricing - Price based on competitors pricing.
- Cost plus pricing - Price based on cost of goods or services plus a markup.
Pricing strategies to attract customers to your business
- Price skimming. ...
- Market penetration pricing. ...
- Premium pricing. ...
- Economy pricing. ...
- Bundle pricing. ...
- Value-based pricing. ...
- Dynamic pricing.
A company will often use a price skimming or penetration pricing strategy for new products. Companies that use a price skimming strategy will typically set prices relatively high versus competitive products.
What strategies are used to promote Coca-Cola products? ›
Promotion. co*ke aggressively markets its product lines through advertising across multiple mediums and channels, including TV, online ads, sponsorships, etc. Coca-Cola's sponsorships include NASCAR, NBA, the Olympics, American Idol, etc.
What process strategy does Coca-Cola use? ›
Continuous flow is called a continuous process or a continuous production process. Coca-Cola uses this process for optimization of throughput using minimum inventory. The production flow of Coca Cola involves passing sub-assemblies/parts from one stage of production to another in a regular flow.
What is the strategy statement of Coca-Cola? ›
Our vision is to craft the brands and choice of drinks that people love, to refresh them in body & spirit. And done in ways that create a more sustainable business and better shared future that makes a difference in people's lives, communities and our planet.
What is pricing strategies explain? ›
A pricing strategy takes into account segments, ability to pay, market conditions, competitor actions, trade margins and input costs, amongst others. It is targeted at the defined customers and against competitors.
What is a pricing decision explain with an example? ›
Pricing decisions can be simple or complex. Simple pricing involves charging what competitors charge for similar goods and services. This strategy is often used by retailers and wholesalers selling commodities.
What are the 5 reasons why pricing is very important? ›
Importance of Pricing – Helps in Determining Return, Determines Demand, Sales Volume and Market Share, Countering Competition, Builds Product Image and A Tool of Sales Promotion. Pricing is an important decision making aspect after the product is manufactured.
Pricing strategy is one of the crucial aspects that determine a business' success. Putting in the right price on a company's products will allow them to make a profit. However, if they give the wrong price, their business may suffer losses and even go bankrupt.
Why is selecting the best pricing strategy important in a business? ›
Choosing an effective pricing strategy helps you reach your business goals and builds trust with your customers. The price of a product or service speaks volumes to a potential customer. It can tell them that the product or service is premium, a great value, cheap, or not worth it.
What is the most important objective of pricing? ›
Survival- The objective of pricing for any company is to fix a price that is reasonable for the consumers and also for the producer to survive in the market. Every company is in danger of getting ruled out from the market because of rigorous competition, change in customer's preferences and taste.
What are the 3 important factors in pricing? ›
Three important factors are whether the buyers perceive the product offers value, how many buyers there are, and how sensitive they are to changes in price. In addition to gathering data on the size of markets, companies must try to determine how price sensitive customers are.
Why is it important to learn the connection of consumer behavior and pricing strategy? ›
By understanding how buyers think, feel and decide, businesses can determine how best to market their products and services. This helps marketers predict how their customers will act, which aids in marketing existing products and services.
What is the best price strategy for your product? ›
Cost-plus approach is one of the best pricing strategies for retail companies. Based on the products that are offered, they can charge different markups. However, this is not ideal for example software service companies and music producers as the product price is significantly higher than the product cost.
What is the best pricing strategy for your business? ›
Pricing strategies for small businesses to try include value-based, cost-plus, and competitive pricing. Small businesses can avoid a price war by building their brands, offering niche products or services, and conducting diligent market research to understand customer needs and price sensitivity.
What are four important factors you would consider to determine a pricing strategy? ›
Here's a breakdown of the most important factors to consider when setting prices for your goods:
- Market research. ...
- Value. ...
- Cost of goods. ...
- Labor. ...
- Distribution. ...
- Economies of scale.
The most important element of your pricing strategy is that it needs to sustain your business. Your selling price needs to be able to keep you in business. If products are set at a high price and potential customers don't buy, you'll lose market share.
What strategies will you use to attract customers? ›
The following six strategies will help you attract and keep customers.
- Offer quality products. Good quality is the most important reason cited by consumers for buying directly from farmers. ...
- Cultivate good people skills. ...
- Know your customers. ...
- Use attractive packaging. ...
- Let customers try samples. ...
- Be willing to change.
Conclusion. Customer based pricing or value based pricing is the pricing strategy based on establishing prices for products and services based on the perceived value. While measuring such value can be problematic, companies often get customer feedback to develop a value- based foundation for setting a price.
What is the strategy of Coca-Cola company? ›
At The Coca-Cola Company, we strive to use our leadership to be part of the solution to achieve positive change in the world and to build a more sustainable future for our planet. We act in ways to create a more sustainable and better shared future.
Does Coca-Cola use psychological pricing? ›
1) Psychological Pricing
For example, the cost of a 2-liter jug of Original co*ke was $2.49. They set the cost to end in 9, since this influences clients to think the cost is under $2.50, to speak to the client.
What type of pricing strategy does PepsiCo use? ›
Most of PepsiCo's products are priced based on the market-oriented pricing strategy. The company's objective in using this strategy is to ensure that its prices are competitive, based on other firms' prices and prevailing market conditions.
Why does Coca-Cola have a brand strategy? ›
Brand over product
Instead of going for a complicated marketing plan that focuses on products, Coca-Cola sells the lifestyle, the emotion, and the association of the brand that people can relate to. This ensures that the brand is universal and understood across all cultures and languages.
Why is Coca-Cola marketing so successful? ›
Throughout the decades and multitudes of marketing campaigns, Coca-Cola has consistently communicated one strong and compelling message: pleasure. Enduring, simple slogans such as “Enjoy” and “Happiness” never go out of style and translate easily across the globe.
What is the main message of Coca-Cola? ›
The Coca-Cola Company purpose remains clear: To refresh the world and make a difference. This purpose is uniquely us. It's why we exist, and it's needed now, more than ever.
How does Coca-Cola use price discrimination? ›
Coca-Cola was one of the firms which had effectively used the price discrimination strategy in the market. Coca-Cola mainly used three kinds of pricing strategies name price skimming, market price, and market penetration.
Is Coca-Cola price sensitive? ›
Answer and Explanation: Coca-cola is one of the many products available in the soft drinks industry. If the price of coca-cola rises people have many other options to look at. This means that the demand for coca-cola is sensitive to price, giving it a higher price elasticity of demand.
What is Coca-Cola differential pricing? ›
1000% Price Bandwidths
Coca Cola's price is not fixed. You can purchase it for 50 cents a can, but it can also be purchased for $4.95 or $5.00 a can--and at price points in between, from $1.49, to $1.99, $2.50, $3.75, $4.50 and then $4.95. That's up to a 1000%, or 10x, differential. Ten times from 50 cents to $5.00.
Coca-cola effectively uses a low pricing strategy a lot to penetrate new markets that are very price-conscious. They set the prices around the same level as the competitors to enable Coca-cola to be distinct but affordable. They do this to beat the competition on price and raise the awareness of the Coca-Cola brand.
What is the best pricing strategy for a food product? ›
Penetration Pricing Strategy – Penetration pricing is a pricing strategy that is often used by new companies to gain a significant market share quickly by setting an introductory low price to entice customers to buy their food and beverage products.
What are the strategies of Pepsi Global that made them more successful than Coca-Cola? ›
Unlike the Coca-Cola company, Pepsi manages to equally focus on each of their products with the help of its unique branding, which leads the customers to purchase a second product of Pepsi as soon as they buy the first one owned by the brand.
