A look forward into the future for Drinkworks: Home Bar by Keurig. The strategy that worked during Covid-19 and how to move into post- Covid times.
Drinkworks’ value proposition is tapping on the existing market of the Keurig customer segment while using its well settled perception of launching coffee machines. It’s extending the image of convenience at your doorstep for ready-made & customizable cocktails and beers.
They are offering the pods in different flavors of cocktails and beers with a mixer onto which user could add their own preferred alcohol as per taste.
It is a Joint Venture with AB InBev who has the market capability, financing, R&D capability, innovation undertaking and distribution channels to market and undertake new endeavors such as Drinkworks which are rather unexplored and aimed at a niche market.
I think it will rather become a product which only the affluents and the luxurious could afford. The maintenance and the incremental cost associated with the product make it affordable for people with above average income levels. It is more of a hosting and party tool rather than a necessity. With the recession coming in the US next year, I specially predict that the sales are going to take a hint whereas that being said it is a good commodity to have if you are not a outgoing person and want to avoid paying $8-15 for a drink for the same cocktail in the bar.
Whereas for post-Covid times, this makes for a great product. If another lockdown forth comes, it is only logical to have such a product in your homes. I think the positioning of the product in the market would determine its success.
The company tried to follow a reverse auction system to gauge the best pricing, which I personally think is not an exhaustive approach. Looking at competition and similar custom machines historical data in the market would be crucial in determining the pricing.
For such a product, dynamic pricing while also adding coupons and a subscription model for pods (Discounts on bulk buys) could be a good strategy. The first chosen segment should be early adopters as I mentioned earlier who are people who could initially afford these cocktail machines. As economies of scale improve, this product could be rolled out to the masses. Looking at customer surveys as mentioned in the text and scaling customer preferences for the $199, $249, and $299 prices is a good agile strategy and sustainable in the long term.
The $4 price for pods is not bad but with the spending power of people about to go down and the impending inflation, the pricing model might have to improvise given customer’s ability to pay. Also, the customer acquisition cost of $100 has to be included in the pricing strategy going forward.
All these above-mentioned data points would help us better lay out the pricing for such an unconventional and creative product which people do not fully comprehend and hence are indecisive about pricing.
One personal recommendation would be starting a loyalty program, customers could use credits to make subsequent purchases. This could be run alongside the subscription model I suggested earlier.
In addition, the partnership with liquor, retail and e-commerce already suggested in the case. It is only logical to partner with local stores and doorstep salespeople to market such a physical product. Not everybody understands such a product and mouth of word marketing would go a long way in establishing legacy relationships.
Marketing these products through local stalls and vendor partners would go a long way in increasing outreach and depicting value propositions. Following Alexa’s model of promoting through malls and a few giveaways through fun contests and sales such as Black Friday is another marketing avenue which should be explored.
Modular parts should be easily available and any stop in manufacturing operations should be clearly communicated to the consumers so that they can decide on the viability of the device in the long term.
Promoting these machines through corporate parties, social events, and gala events by removing the serving effort would go a long way for advising the convenience of this product. A social media promotion with people sharing photos/ videos of them having a great time by using this product is another marketing strategy.
As for operational costs, storage should be prioritized as per demand. Store only as much as needed and distribute as per request. The end goal should be to clear on the market size because this product will only catch the lifestyle of drinkers and hosters specifically
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