In this podcast by Planet money they discussed how Coca Cola's price of five cents per can lasted seventy years. From 1886 to the 1950's Coca Cola never changed in price because of a deal that was made to companies that bottled it. The deal was that Coca Cola would sell a certain amount of syrup to the bottling company whenever they needed it a certain price. The problem was that the contract had no expiration date so it never ended.
With Coca Cola stuck in this contract they had no
leverage over companies to change their prices. So Coca Cola took the jam
they were in and made it a profit through several strategies they put in
place. They started off by advertising everywhere, with the five cent per
bottle ad. Doing this in my eyes showed to the population that Coca Cola
was an affordable drink and that it was made for anyone to have. And the
consistency of the price showed to the customers that it was a stable product
that was worth investing in.
Coca Cola then began to use the vending machine to
sell their product where still the price was five cents. The company had
hundreds of thousands of vending machines dispensing their product. Coca
Cola then finally created new contracts with the bottling companies allowing
them to change the price of the syrup but they continued to stay at five cents
per bottle of coke. To me this was a smart move by the company because
not only did they gain control of the contract to price as they please but they
kept the price the same because it was working so well but gave them the
ability to increase the price if they needed when they needed to.
When it came to the point where Coca Cola needed to
raise the price because the price of the ingredients was increasing they found
themselves in a small predicament. All of their merchandise was
advertised everywhere for five cents so they didn't want to double it and make
it ten cents. So the company went to the president of the United States and
asked him for a coin that would be worth seven and a half cents because vending
machines were not capable of making change. The plan was shot down so the
company had to go back to drawing board. They came to the idea that for every
ten bottles they put in the vending machine, one of them would be empty. Doing
so would make that one unlucky person put in another five cents. This did not
last very long because of the obvious system they were using. Besides it
barely generated any profit by doing so, it increased the profit by not even a
single cent. Doing this was clever but not very rational because in a way
they were scamming people, which could have possibly been illegal. Like I
said previously this system lasted not very long. Soon after Coca Cola
had to increase the price of their product because they were losing money. The
price didn’t dramatically increase, it only went up to six or seven cents per
bottle. People thought the company would fold over. If you look at
where the company is now I would say it was just a small bump in the road
because Coca Cola is a product sold worldwide.
Thursday, November 15, 2012
In the podcast that we had to listen to called, “Manufacturing the Song of the Summer”, I learned how much money it really costs to produce a block buster song. Planet money broke down the expenses to the exact dollar. Just listening to the podcast I learned a lot about the work and preparation that goes into the work as well.
The podcast mainly focused on Rihanna’s song “Man Down” and how it was built to be a summer anthem sort of song. It turns out the song did not end up living up to its hype because from what Planet Money said they actually lost money. One of Rihanna’s coaches was interviewed and was asked how much it costs to produce a song by a big name artist who is planning to have this song be big itself. The coach of Rihanna responded by saying a song of decent hype as “Man Down” cost over one million dollars to make. From the camp costs, to the expenses for the coaches, to personal expenses for the artist so they are most comfortable when they are recording. A lot more then you actually would think goes into the cost for the production of music.
Another thing that Planet Money talked about was how producers will get their songs know by the listeners to potentially create a large amount of popularity for the song. Planet Money mentioned that in order for producers to get their artists songs out there to be heard by everyone is to actually bribe radio station DJ’s in order for them to put the song on the radio several times per hour. This is fairly common these days as you listen to the radio, hear a good song, then you start to hear it overplayed and suddenly the song is not pleasing to you anymore and you begin to dislike it. Today music has become more of a business and all about making money then it is to make music for the entertainment for the people. The money gets to peoples heads and once they build a big fan base then for some artists their music ratings start to decline because they will just make songs to put out to make a quick dollar. To me the best artists are the ones who start of underground and don’t reach mainstream until they have made a few albums.
Going back to the “Man Down” single created by Rihanna, I believe another reason that the song didn’t create a profit like it was suspected to is possibly because in today’s day and age people do not buy their songs. Instead people will go on the Internet and download them for free which in most cases is illegal. But it is so easy to do so that it is almost impossible to do anything about it because almost everyone does it. That would be a good explanation to why iTunes has boosted its songs by thirty cents for purchase. They had to do this because they aren’t getting the income that they used to get so the only way for them to still pull in a profit is to increase prices.