Keurig Inc Paper Case Study

Question 1) How should Keurig respond to GMCR's request for a single K-Cup approach? Highlight the reasons for your decision (25 points)

GMCR Concerns – They believed that Kuerig’s proposal of a 2-cup system was complicated. It resulted in doubling the number of portion pack products that they would have to manufacture and warehouse. GMCR had concerns that there could be potential customer dissatisfaction resulting from using a portion pack in the wrong brewer. GMCR preferred the 1-cup model based on long term simplicity and the desire to move quickly because of the competitive systems coming to market.

Office Managers – Keurig had a concern that the office managers and staff would steal K-cups for use in the home brewer. This would bypass the KAD’s.

Keurig 2-cup system – One reason why Kuerig wants a 2-cup system is because they want to protect the KAD’s. At first this does not make sense. If the managers and staff bypass the KAD’s Kuerig could make .24 $ per K-cup verse .04$ per K-cup. That equals an additional 30 mill profit for Kuerig. So why protect the KAD’s because the KAD’s have direct influence on the customers. Plus there is a benefit to managers. If the brewer breaks the manager would have to fix it himself. The manager would also have to order coffee himself. Managers brought in the KAD’s so that they would not have to worry about this stuff. The KAD’s provide customer service and value. The KAD’s keep everything running. Profit is not free and Kuerig understands that and that’s why they want a 2-cup system. If I was Kuerig I would take not GMCR’s suggestions, I would work the 2-cup system so that you did not disturb the channel. “KAD’s and Customers”

What should the brewer be priced at and why? (25 points)

The at-home use test showed that the acceptable price range for a brewer was determined to be in the $129-$199 range, with a price exceeding $200 triggered a reaction that the item would become a luxury purchase....