One thing I’ve found interesting to know is that Japanese vending machines attract some foreign tourists. They are amazed to discover that both cold and hot drinks are available in one machine. The varietal types of product also please them, ranging from water, coffee, tea, juice, energy drink, hot soup, to even sake and beer. Vending machines are extremely convenient because you can find one literally on every block in the major cities. As Japan is one of the safest countries in the world, they are seldom broken or stolen, despite having cash inside and being frequently housed in dark or uncrowded streets. The market size is approximately $20 billion (¥2,100 billion.) While all soft drink producers are struggling with the shrinking revenue streams due to the pandemic, it is still quite large business in the Japanese industry.
Now let me introduce Coca-Cola Japan’s Coke ON, a unique idea of utilizing vending machines as a digital platform. I hate to admit it as one of the competitors, but it has been a huge success with 25 million downloads of the app, implying that one in five Japanese people enjoy.
As you can see in the short video above, the primary idea is to offer one free drink when users collect 15 stamps. Although it seems a simple digital loyalty program, the app also features gamification aspect with numerous stamps of limited editions such as 47 prefectures and Tokyo 2020 Olympics designs, which you can trade with your friends. From the way I see it, however, this is not a mere digital marketing promotion that has happened to be one of the latest fads, but more fundamental shift of business structure. The key is making the existing assets to a digital platform through IoT where Coca-Cola can connect with its consumers and build up any ideas ON.
Coke ON Pay
Coke ON has multiple features but the basic one to start is cashless payment. I know this is nothing special to you, but I’d say it is a nice try to encourage people to tap, swipe and buy a product in the country where cash is still the king.
Coke ON Walk
The feature of walking app has been added, providing you with stamps when you achieve targets or accumulate steps. Walking and drinking are relevant in that you become thirsty after taking a walk, but the more profound insight is that Coca-Cola promotes everyday drink by making Coke ON a daily-used app, aiming to broaden customer base. In 2019, it also launched a seasonal “cherry blossom” promotion supported by geographic information technology. You could collect stamps when you went to the designated cherry blossom viewing spots.
Coke ON Pass
The newest service is a vending machine subscription through Coke ON app, which will be launched just this week. For $25 (¥2,700) a month, subscribers will be able to grab one drink per day from the 340,000 vending machines scattered across Japan. You can enjoy not only classic Coke but various drinks such as bottle of water, green tea, canned coffee, orange juice, sports drink and so on. It is a tactful way for Coca-Cola to jump on the bandwagon of subscription business model, although the price might not look reasonable especially when we compare it to $8.99 of Panera’s coffee subscription (but there is no such service in Japan yet.)
Vending Machine as Digital Platform
Given that vending machines are everywhere in Japan, this is an excellent example for a traditional company to implement digital transformation through existing customer touchpoints. Coca-Cola leverages its dominant coverage of vending machines to generate new customer experience and data-driven services. Here are three business impacts I’ve analyzed:
- Interactive Data: Obtaining real-time and interactive data can allow Coca-Cola to grab deeper consumer insights. It reveals not only demographic profile but also detailed consumer preference (e.g., which products they buy) and consumer journey (e.g., they buy coffee first in the morning, drink green tea for lunch, and refresh with coke in the office etc.)
- Operational Efficiency: While it requires initial costs for built-in sensors, Bluetooth and other technical equipment, there are no additional labor costs since it is a usual vending machine after all. Moreover, Coca-Cola takes advantage of this platform to promote product sampling. As sampling tickets can be distributed through the app, it does not require any support from retailers or salesforce to hand products to consumers.
- Brand Communication: Not to mention the app realizes various campaigns way more quickly than the conventional physical promotions, it enables more accurate targeting for brand activities on a personal level. In addition, Coke ON per se can deliver a message that Coca-Cola keeps trying to provide something new and fun experiences, reinforcing its positive brand image.
While the idea itself is unique to Japan thanks to availability of vending machines, it has been developed based on Coca-Cola’s global initiatives of digital transformation. Aiming to transforming from a legacy company to a digital-first enterprise, Coca-Cola has set four strategic areas to approach: Experience transformation, Operational transformation, Business transformation and Culture transformation. “Digital transformation is 50% strategy and 50% culture,” said Harish Kundargi, the Head of Digital Platforms of ASEAN & South Pacific Operating Unit. He mentioned “brands must think of how to remain relevant today, while growing tomorrow in the turbulent disruptive economy. At the end of the day, this boils down to the organization’s culture and cultural transformation is a big component of strategy.” You can also see the perfect alignment with what we’ve learned in the class from the remarks of David Allard, Canada’s VP of Integrated Marketing Communications – “The larger opportunity of digital transformation is how we look at solving problems for our customers and our consumers. In real terms, that means looking at historically siloed aspects of the business and working in a truly collaborative fashion to break those down.” He continued in his interview with emphasizing the importance of learning agility.
To exist for that long [130 years] and for our brands to have the stature that they do, change is part of our DNA, but it is more about agility. What has become very apparent globally is our increased emphasis on becoming a learning organization.
If you have any examples of Coca-Cola’s digital transformation in your country, I would love to hear that! And remember, when you visit Japan in the future, try not only Coca-Cola’s vending machines but enjoy KIRIN’s cold/hot drinks as well!