Explain the case of Coca-Cola's pricing discrimination scheme that occurred in the past and had a problem with. | Homework.Study.com (2024)

FAQs

What is the pricing scheme of Coca-Cola? ›

Coca-Cola employs value-based pricing by setting prices based on the perceived value and preferences of its customers, as well as the cost of production. Pricing Coca-Cola Classic higher than store-brand sodas due to its strong brand reputation and unique taste.

Examples of Price Discrimination

One example of price discrimination can be seen in the airline industry. Consumers buying airline tickets several months in advance typically pay less than consumers purchasing at the last minute. When demand for a particular flight is high, airlines raise ticket prices in response.

Coca-Cola is rich in sugar, especially sucrose, which causes dental caries when consumed regularly. Besides this, the high caloric value contributes to obesity. Both are major health issues in the developed world. According to the Harvard School of Public Health in 2015, "...

Price discrimination is when companies offer different prices to different groups of consumers, in order to maximize their revenue. For example, a company might charge a high price for a certain product, but offer the same product at a discount to students or lower-income customers.

On January 10, 2023 Politico reported that the Federal Trade Commission (“FTC”) has launched antitrust investigations into Pepsi and Coca Cola. According to the article, the “companies' pricing strategies are being scrutinized” for “potential price discrimination in the soft drink market.”

Another key reason Coca-cola uses the pricing strategy is to meet the competitive pricing. 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.

Penetration pricing is a pricing strategy that is used to quickly gain market share by setting an initially low price to entice customers to purchase. This pricing strategy is generally used by new entrants into a market. An extreme form of penetration pricing is called predatory pricing.

Three different forms of price discrimination are discounted airline fares, manufacturers' rebate offers, and senior citizen or student discounts.

Price discrimination can benefit consumers by reducing prices for some and by increasing the number of consumers that are served. However, it can also have an adverse impact on consumers.

On a call with analysts, he listed issues like labor shortages, spiking gas costs in Europe and a plastic plant in Brazil that burst into flames. Shares of co*ke were up 2% in afternoon trading after the company's earnings and revenue topped Wall Street's estimates and it raised its forecast for fiscal 2021.

What problem is Coca-Cola trying to solve? ›

Creating a world without waste is possible.

In 2018, The Coca-Cola Company set a bold and ambitious path forward by launching our World Without Waste initiative. It's a recognition that the world has a packaging waste problem and we want to be a part of the solution.

Companies benefit from price discrimination because it can entice consumers to purchase larger quantities of their products or it can motivate otherwise uninterested consumer groups to purchase products or services.

Price discrimination means charging different prices to different customers for the same product. If a firm has to charge the same price to all customers, P_M and Q_M will maximize profits. But if it can price discriminate, it can make even more profits.

Explore an example of a wine producer who practices price discrimination by selling the same wine with different labels at different prices. This strategy allows the producer to capture more consumer surplus and increase their economic profit.

The price adjustment strategies they use for their products are: Discount and Allowance Pricing; Psychological Pricing and Geographical Pricing. Coca Cola use the Discount Pricing, which means a straight reduction in price on purchases during a stated period of time or of larger quantities.

While overall global unit case volume growth has been modest, up only 2% in 2023 after 5% growth in 2022, what the company has shown is a lot of pricing power. Price and mix accounted for 10% growth in 2023 and 11% in 2022. As a result, Coca-Cola has seen strong organic revenue growth the past two years of 16% and 12%.

The 3 Most Common Pricing Strategies

Cost-based or cost-plus pricing. Market-based pricing. Value-based pricing.

Skim pricing, also known as price skimming, is a pricing strategy that sets new product prices high and subsequently lowers them as competitors enter the market. Skim pricing is the opposite of penetration pricing, which prices newly launched products low to build a big customer base at the outset.