Once upon a time, Coca-Cola was testing out a new model of Coke vending machines that price discriminated. I first learned about it in an old case study from some Marketing class I took at Wash U.
For non-buffs: Price discrimination “exists when sales of identical goods or services are transacted at different prices from the same provider.” (Thanks, Wikipedia)
In essence:
- Coke’s consumer research department figures out that people are thirstier when it’s hot out.
- Coke’s Marketing Department decide that thirstier people should be willing to spend more for a Coke.
- Coke’s product development team create a thermometer to tell the vending machine to raise prices whenever it gets really hot out.
That Times article is from 1999, and I bet you haven’t seen a vending machine like this yet. Why?
Probably because it’s a terrible idea. Consumers hated it. After I told you about it, you probably hated the idea of Coke trying to gouge you for a few extra cents when you’re especially thirsty. I don’t blame you.
Except it wasn’t a terrible idea. It was just executed incorrectly.
Imagine, on the other hand, a Coke machine with a thermometer that checked for cold weather. Whenever the temperature got low enough, the price of a Coke goes down—sales will be low anyway, and Coke’s just trying to drive revenue by creating a sale.
Sounds a lot better, no? In the latter case, Coke is doing consumers a favor. In the former, Coke is unfairly taking advantage of its sweatiest consumers.
Obviously, this is the same exact machine—it’s just framed differently. Your brain does funny things like that.
Almost every bar in the universe price discriminates. Ever hear of something called “Happy Hour?” Yup. That’s just bars’ way of charging you more money for your beer during prime hours.
I bring this all up because it’s snowing out today and I just ordered Domino’s, and I’m not planning on going anywhere. Why don’t pizza delivery places offer a price “discount” on deliveries when the weather’s nice?