In the case study presented by King and Naryhama (2000) in the Harvard Business Review (HBR), “Coca-Cola’s New Vending Machine (A): Pricing to Capture Value, or Not?” the problem that Coca-Cola faces is an avalanche of bad public relations (PR). The fundamental problem is that the press took a derogatory perspective on testing the Coca-Cola was performing on machines that detected consumer activity and adjusted the prices accordingly. Although there could have been many consumer advantages to this type of pricing scale, such as discounts, it is only the prospect of this machine hyping prices in the heat that the press relates to the public. The press misconstrues the intentions of Coca-Cola in their testing of these surge-pricing machines and focuses only on the negative potential to exploit their consumers. Unfortunately, for Coke, Pepsi takes advantage of this bad PR and is able to improve their brand image as philanthropic. Coke must find a way to reverse the bad PR and to regain their consumer loyalty.
Major issues that must be addressed. The major issue that needs to be addressed is the idea that Coke is trying to exploit their consumers rather than to benefit their consumers. Pepsi adds to the bad PR by stating that they try to make it easier, not harder, for the consumer to get their hands on one of their products (King and Naryhama). Coke needs to address this slant on their reputation as being greedy. Another major issue that must be addressed is the idea that flexible pricing is meant to hurt the consumer. Coke needs to convince their consumers that they are testing, not implementing, new possibilities to enhance the consumer experience. Coke needs to address the potential for a long-lasting negative image that becomes a part of the public’s memory. For a company that has been around for as long as Coke has been around, the future depends on the past. Coke has relied on its image as an American iconic original drink. However, there is competition for this consumer perception, and the fact that Pepsi is able to capitalize on this erroneous report is cause for Coke to take action to save its reputation.
Relevant alternative courses of action. Coke could press charges for defamation against the reporters for falsely reporting facts, i.e., that Coke is implementing the technology in order to capitalize on consumers when they are at their most vulnerable in the heat. Coke could ignore the bad PR and continue with their testing because they can rely on their established reputation. Coke could release many public statements over the course of a month in order to keep their good PR in the press. The bad PR, though erroneous, becomes fact as evidenced in a 2015 Wall Street Journal article which lists Coke as a company that tried out dynamic pricing with their vending machines on hot days, but retracted due to “customer backlash” (Nicas). Therefore, correcting the public record is important for Coke to maintain customer loyalty.
Evaluation of alternative courses of action. In this writer’s opinion, the course of action involving legal retaliation against the press is not recommended because the litigation could further damage Coke’s PR. This type of action is reactionary, and Coke needs take action, not react. It is a good idea to release multiple public statements in order to better explain the truth and correct the public record. The only set back for this course of action is that it will take a long time to set the record straight, and Coke’s consumers may not read public statements. Neither of these courses of action are the best course for repairing the damaging PR of the erroneous news reports. Consumers will remember Pepsi’s reassurance that they put their consumers first, while Coke only tries to exploit their consumers.
Recommendation for a specific course of action. Coke needs to launch a campaign that proves their commitment to their customers and that they are only testing new technology that might benefit the consumer experience. In order to achieve this, there needs to be a new marketing campaign that the R&D targets at the consumers most offended by Coke’s poor publicity. This campaign needs to be heartwarming and remind people, just as the statement of the CEO reminds people, of the fact that Coke has been in existence for 113 years on 200 countries (King and Naryhama). A good example of this course of action being advantageous is the way that Uber recently deflected the bad PR of their surge pricing during the hostage situation in Sydney, Australia: They reimbursed their customers and apologized (Weiner). Coke needs to make its loyal customers feel appreciated.
The above specific course of action is justified because it is aimed directly at the consumer. Campaigns are able to recreate perceptions and Coke needs to focus on rebranding themselves for their philanthropic objectives rather than remaining known as the company who considered exploiting vulnerable loyal customers. Coke cannot ride on the laurels of past reputation and must take action to assure the future of Coke’s reputation. Advertising campaigns are influential psychological tools that Coke should use in order to realign the consumers’ perspectives of Coke from being greedy to being generous. Consumers who feel exploited by Coke may have no problem switching their brand loyalty over to Pepsi. Coke must react by recreating their image in their consumers’ minds.
- King, Charles and Das Naryandas. “Coca-Cola’s New Vending Machine (A): Pricing to Capture Value, or Not?” HBR, 2000, hbr.org/product/coca-colas-new-vending-machine-a-pricing-to-capture-value-or-not/500068-PDF-ENG. Accessed 7 June 2018.
- Nicas, Jack. “Now Prices Can Change from Minute to Minute.” The Wall Street Journal, 2015, www.wsj.com/articles/now-prices-can-change-from-minute-to-minute-1450057990. Accessed 7 June 2018.
- Weiner, Joann. “Is Uber’s Surge Pricing Fair?” The Washington Post, 2014, www.washingtonpost.com/blogs/she-the-people/wp/2014/12/22/is-ubers-surge-pricing-fair/?noredirect=on&utm_term=.3766d17aea6e. Accessed 7 June 2018.