Coca-Cola Japan’s DX: Coke ON

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.

Coke ON

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.

Organizational culture

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!

Sources

Coke ON: https://c.cocacola.co.jp/app/index.html

The news of Coke ON Pass: https://japantoday.com/category/features/lifestyle/coca-cola%E2%80%99s-new-coke-on-subscription-service-makes-japanese-vending-machines-more-fun-to-use

Interview Article: https://www.marketing-interactive.com/coca-cola-digital-transformation-is-50-strategy-and-50-culture

Interview Article: https://www.linkedin.com/pulse/digital-transformation-culture-coca-cola-canada-story-hilton-barbour/

10 comments

  1. ritellryan · ·

    Having never been to Japan, this was very cool to read about. While you may think a $25 subscriptions seems like a lot for a vending machine, a regular Coke at BC in the vending machine is $2.25 ($2.35 for card) so if you get 2-3 drinks/week it is totally worth it, especially since there are more options than just carbonated soft drinks. The app is an interesting concept, as I have found more recently that if there are items I am going to purchase anyways (like a Coke), if I can get free stuff with it as well it certainly makes me feel better about my purchase since it is almost a “free” add-on to me.

  2. therealerindee · ·

    Awesome post Sayo! This is a really interesting way Coke is trying to connect with consumers where they are using existing infrastructure. I would be curious to see the difference in sales between Coke On and an older vending machine that may not have the app pairing. The company obviously believes this approach will make or is already making a difference which is why the subscription has been tacked onto it. You are absolutely correct that it is having some pretty heavy business impacts while continuing to establish that brand loyalty that consumer goods companies are constantly chasing. Can’t wait to go to Japan and try out the vending machines!

  3. Great Post Sayo! Having been to Japan two years ago. I think that having this vending machine/step counter subscription is interesting but I agree with Ryan that this is definitely more expensive for your casual soft drinker. I think that if they expanded that to some of their food products then it would be more advantageous to purchase.

  4. This was a very interesting post I would have never found out about this despite Coke being such a large and important company here in the U.S. I would never have thought that Coke, a company that sells physical products, would find a way to become so digitally connected. I wonder if the company would have the same success in the U.S. because it seems like people consume their products here differently. Instead of vending machines we have convenience stores where people buy their individual beverages. I could see Coke having partnerships within those stores to bring their vending machines to the consumer.

  5. conoreiremba · ·

    Thank you for another fantastic insight into life in Japan Sayo, and I wish I had some cool ideas like this from Ireland to share with the class, although the thought of a Guinness vending machine could be worth looking into. Very interesting to see the different digital initiatives that Coke is pursuing to reach customers, and it definitely seems like a way of positioning themselves to be more agile in responding to the constantly changing needs of consumers. I thought Coke ON Walk was particularly cool though and I wonder if it ties in with a strategy by the company to try and reframe the public perception of Coke as more than just an unhealthy soft drink, as the world becomes increasingly health-conscious.
    It would be interesting to see how Coke would be able to replicate this strategy in other countries, especially with vending machines. As you mentioned, Japan’s safety seems to be a significant success factor and unfortunately, I don’t think there are too many other countries with the same levels of public trust. Great post!

  6. Jie Zhao · ·

    Awesome blog, Sayo! Coincidentally, I was just watching a video this morning about all the cool (and weird) things you can buy from a Japanese vending machine. When I went to China ~ 2 years ago, I saw a vending machine where not only it had contactless payment, it had the option to pay by scanning your face (definitely on the creepy side)! I think the subscription program by Coke is so smart considering how many people I know are addicted to drinking Coke, and subscribing to the program will allow customers to try their other less popular products and potentially become addicted to those as well. Coke ON walk is ironic to me considering how unhealthy and addictive coke is, but perhaps it is a way to rebrand.

  7. olivia_levy8 · ·

    Great post! The first thing that I thought about when reading this is how Coca-Cola is a good example of embodying the strategies we are reading about in the Technology Fallacy. They are no doubt thinking into the future and trying to avoid complacency in these changing times, which can be especially easy when you are one of the most notorious brands in the world. I know a ton of people who treat Diet Coke as their morning coffee and this would be a great subscription for them. I would be curious to see what the margins for the subscription program look like. Cool to see vending machines, one of the last things I would peg to be digitally transformed undergoing this innovation and change. Thanks for sharing!

  8. Great post Sayo. It’s interesting to learn how Coke is implementing digital transformation into their company. I think the gamification is a great way for them to accomplish this is class. I know that I have drank significantly more Starbucks than I would have otherwise due to their apps gamification. I miss the vending machines in Japan, my favorite drink from when I was the Japanese vending machine was Coffee Max. By far the best vending machines I have used. As you pointed out it is so convenient that both hot and cold beverages are distributed by the machine.

  9. Chuyong Liu · ·

    Great job Sayo! I was really amazed by the number of vending machines I saw when traveling in Japan and the variety of products the vending machines carry.

    About Coke-on, I think it is very smart for them to be the first of an unavoidable trend toward cashless payment and better data collection. Starbucks has been doing a great job in app development and training customers to pay with their phone to collect points for future redeem of a free drink/food. I found this highly increase customer loyalty and engagement since the app can share much brand-related news and information with customers.

    It would be hard for brands like Coca-cola to do the same as Starbucks since it is usually selling in grocery markets all over the world, but vending machines give them this great opportunity. (I think Kirin would also benefit from an app that engages consumers and rewards them!)

  10. alexcarey94 · ·

    Cool post! This makes me think of the Starbucks app that has many aspects of gamification as well (trying to get all the stars to get free coffees or rewards). The vending machine is something I never thought of as a subscription service and at first was something I was thinking I would not use but after reading this I think this would work really well on college campuses or in office buildings in the US. While many people do not typically walk to vending machines like they do in Japan, people may often buy a drink every day in their lunch cafeteria in which this app would become very handy. It would also ensure that people are consuming coke over other products that are available for purchase- i.e Pepsi products. It seems like a lot of brands are pushing toward the subscription service model as it builds brand loyalty, I am interested to see other brands that transition this way as well.

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