Raise your hands Diet coke gluggers – How many of you will not buy Diet coke if it was priced 5% higher vs Coke Classic ( will mean 1.7p more for a 330ml can at current UK prices) .
Here are the facts:
- Coke is the No. 1 brand in the world.
- Colas have one of the lowest penetration of private label amongst FMCG goods ( another one is cigarettes).
- It is rare for consumers to consume both Diet Coke and Coke Classic regularly.
- Coke has a dominant market and in-store presence in over 60 countries ( compared to Pepsi). UK being one of them. Thus diet Pepsi is not a strong substitute product for Diet coke in these markets.
So why is Diet coke not at a slight premium to Coke Classic in these 60 countries ?What is the down side ? If strong brands and unique products confer pricing power , why has Coke been timid with Diet coke pricing ( and most recently with Coke Zero , which is a great concept and seems to be working if I go by the number of people in office I see with it ).
I think they should price up Diet Coke and use the extra profits to crank up their Innovation pipeline and also invest in non-carbonated beverages segment.
The Coke example illustrates a bigger point :
Why are very few companies putting much intelligent thought into pricing ? We live in a data rich retail environment . Using analytics and tools like profit parabola ( maximising profit for both manufacturer and retailer) companies can discover the pricing sweet spot . For a change , its actually much easier than it sounds and costs much less than a 30″ tv spot or a new innovation project .
Marketing ROI , anyone ?