Keurig, the coffee maker company, recently introduced version 2 of their coffee maker.
Among the various “upgrades” was the introduction of digital rights management systems that prevented the use of 3rd party cups and refillable cups.
Sales have cratered, and now have backtracked on their policies:
It’s been called the “razor blade business model.” A company sells a product like a battery-operated razor blade handle at a relatively low price in order to sell a complementary consumable product later, like the astoundingly costly Gillette Power Fusion Proglide cartridge, $18 for four blades, which then get thrown away.
But it could also be called the Keurig “K-Cup” business model. Once a consumer buys the coffee machine, the coffee drinker may spend as much as $50 to $60 per pound on the coffee contained in the K-Cups, considerably more than the cost of even Starbucks’s breakfast blend, which goes for about $11.95 per pound.
Some years back, thousands of Keurig single-serve machine fans found a cheaper alternative, however — refillable, non-disposable K-cups, little plastic coffee grounds holders, which the company graciously sold under the brand of “My K-Cup.”
Not only was it cheaper, but the coffee drinker had more choice, as “My K-Cup” could be filled with any brand of coffee off the shelf.
But in August 2014, when Keurig introduced its “2.0” line of coffeemakers, it stopped making “My K-Cup” for it and made the machine incompatible with any K-cups already in existence, as well as with any unlicensed disposable K-cups made by other companies.
It was $50 a pound and a trail of waste — or nothing.
That was two provocations, but two too much. The reaction was fast and furious, on sites such as Amazon, as well as on Keurig’s own social media sites.
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Keurig’s explanation was a model of what not to tell angry consumers. The company said the change was for the consumer’s own good.
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Clever competitors moved quickly to fill the void, with ways to, in effect, hack into the Keurig technology. The Rogers Family Company’s “Freedom Clip” was sold patriotically as “Our Gift To You and Everyone …. Freedom Of Choice!”
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Worse for Keurig, as executives acknowledged Wednesday during its quarterly earnings briefing, sales of Keurig machines tanked and they began to accumulate on the shelves across the country. Sales of brewers and accessories declined by 23 percent, the company reported. Its stock price fell 10 percent in after hours trading.
With that, Keurig’s CEO did what he had to do. He capitulated Wednesday in a call with market analysts.
“We heard loud and clear from consumers,” said Brian Kelley, “who really wanted the My K-Cup back. We want consumers to be able to bring any brand and bringing the My Cup back allows that.
I am kind of surprised that they didn’t stick to their guns, and file DMCA cease and desist actions against their competitors.
That does seem to be the normal way of doing business in America: Piss off your customers, and boost your profits through rent seeking behavior.
It’s a lot easier than making a better/cheaper product. Just look at how your local phone and cable companies treat you.