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Coca Cola Pricing Strategy
Coca-Cola does not have one price all over the world and the reason behind this pricing strategy can be encapsulated in two main arguments:
Not all countries in the world have a thriving economy
The currency exchange rate can make all the difference
Let us now understand what these arguments mean. If India ever followed the uniform pricing strategy all over the world, it would not only lose a large chunk of customers but also lose out seriously to its competitors in those local markets. Every country, regardless of its size and economy, does have local producers offering a vast or limited variety of refreshment drinks. These drinks are normally priced low since they are every-day drinks and need to be consumed often, sometimes more than once a day. If the local producers ignore the per capita income of the country, they would never be able to use a sensible pricing strategy and hence the income of its target market is highly important factor in deciding price for local drinks.
When Coca-Cola enters these markets, it has a very tough competition to reckon with. On the one hand, it must keep in mind the prices of similar drinks in the market, and on the other, it must not ignore other factors like per capita income, economic potential, recent market growth etc. Coca-Cola...
While the price might appear more or less the same in western countries because of their higher economic power, this change dramatically as Coca-Cola enters developing markets.
Take the case of India for example. The country has a huge market and no company in its right mind would want to lose out of the revenues that can come from a market as rapidly growing as India's. The market is not only growing in terms of economic power but also in terms of sheer number of people. When Coca-Cola sets a pricing strategy in this country, it cannot ignore the fact that more than 70% of its people still live in rural areas where even a 5 rupee drink is not always an affordable option. In such a market, when Coca-Cola comes out with a higher priced product, it becomes a luxury drink that cannot compete with local major competitors like Thumps-up or Limca.
For this reason, Coca=cola has to alter its pricing strategy and instead of changing the price of the regular bottle from Rs.10 to something lower, it came out with a smaller bottle that was available for Rs. 5. This allowed the company to compete not only with local competitors but also with local homemade refreshment drinks like Lassi and Limo-pani.
To be able…
Reference:
Coca Cola India. Tuck School of Business, Dartmouth. 2004
Draganska, M. Consumer Preferences and Product-line Pricing Strategies: An Empirical Analysis. 2003
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