I had breakfast with a group of friends this morning and we were discussing the popular Keurig coffee maker. Coincidently I read an interesting article about Keurig this afternoon. Wish I had known all this at breakfast. Here's a summary.
In the business world there are several ways companies approach profitability. One successful plan is to make a basic product that requires continuous purchases to accompany the original item. One example is a man's razor that uses a special blade. The razor might be sold at a loss to ensure the ongoing purchase of the blades where the real profit lays.
A really popular item that falls in that category is the Keurig coffee maker. The real profit for the company is in the k-cups, single serving coffee pods that push the price of a pound of coffee into the range of $50.00. Frugal Keurig owners have been able to get around this by buying reusable cups designed to be filled with one's own coffee. Removing a small part of the original Keurig allowed the home coffee brewer to have the best of both worlds, the high tech coffee machine and the economical grocery store pound of coffee.
But Keurig looked at the loss of k-cup sales to all those tightwads filling their own little containers as unacceptable. So in August 2014 the coffee machine was redesigned so new models would no longer accept refillable cups. Customer response was swift and angry. Sales tanked and the stock price fell ten percent in one day. Inventory stockpiled on store shelves. In a company quarterly meeting the president admitted trying to convince the public that the changes were part of their quality control process was a bad idea. Keurig capitulated and new machines can again use the self-fillable cups.
It's a good thing the old design is back. When the time came to replace our machine Dear Husband would never have gone for the convenient, but expensive, disposable k-cup approach. But I bet this is not the end of the story. The company knows we stingy baristas are out there and, no doubt, they'll be looking for another way to bring us into the fold.
In the business world there are several ways companies approach profitability. One successful plan is to make a basic product that requires continuous purchases to accompany the original item. One example is a man's razor that uses a special blade. The razor might be sold at a loss to ensure the ongoing purchase of the blades where the real profit lays.
A really popular item that falls in that category is the Keurig coffee maker. The real profit for the company is in the k-cups, single serving coffee pods that push the price of a pound of coffee into the range of $50.00. Frugal Keurig owners have been able to get around this by buying reusable cups designed to be filled with one's own coffee. Removing a small part of the original Keurig allowed the home coffee brewer to have the best of both worlds, the high tech coffee machine and the economical grocery store pound of coffee.
But Keurig looked at the loss of k-cup sales to all those tightwads filling their own little containers as unacceptable. So in August 2014 the coffee machine was redesigned so new models would no longer accept refillable cups. Customer response was swift and angry. Sales tanked and the stock price fell ten percent in one day. Inventory stockpiled on store shelves. In a company quarterly meeting the president admitted trying to convince the public that the changes were part of their quality control process was a bad idea. Keurig capitulated and new machines can again use the self-fillable cups.
It's a good thing the old design is back. When the time came to replace our machine Dear Husband would never have gone for the convenient, but expensive, disposable k-cup approach. But I bet this is not the end of the story. The company knows we stingy baristas are out there and, no doubt, they'll be looking for another way to bring us into the fold.
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