Marketing Essays Red Bull

Marketing Essays Red Bull Table of Contents Introduction Red Bull and Marketing Theory Introduction Market Entry Market Strategy Marketing Communications Company Analysis Analytical Methods Company Sales and Diversification Strengths Weaknesses Opportunities Threats Conclusions Future of Red Bull and Recommendations References Introduction Red Bull has created a strong brand image, using colourful icon with two bulls in opposition and a memorable tag line; ‘Red Bull gives you wings’. Through creative marketing and sponsorship it has linked itself with extreme sports, innovative music and art, all aimed squarely at the youth market (Dahlen, Lange and Smith, 2010). This brief examines brand development, which strategies have helped it to success and where the brand goes from here as it faces the prospect of losing its cutting-edge image while continuing largely with only one product. Red Bull is a European success story. The product was launched in 1987 in Austria. It faced opposition from the Food and Drink Administration (FDA), who refused to clear it for distribution but despite this it became an underground success through clubbers and snowboarders. This anti-establishment stance found synergy with consumers, even after it was cleared for sale. It quickly spread into neighbouring countries and into the US market (Franzen and Moriarty, 2009). Dahlen, Lange and Smith (2010) note that by 2004, it had gained 40% share of its market sector and 70% in Europe. However, the brand still faced problems; it was banned in Denmark and France following unsubstantiated rumours that people had died from drinking the product in Sweden and Ireland (Mail Online, 2001). The European market was stagnating, and it faced distribution problems from companies supporting their own-brand products. The ever-present competition from Pepsi and Coca-Cola limited the scope for expansion. With these pressures, the company developed a marketing strategy that avoided mainstream advertising, instead focusing on grass-roots promotion. The product was sold in trendy nightclubs and bars, and the credibility of those held in high regard by the young target audience, such as DJs (Boswijk, Thijssen and Peelen, 2007). Brand education was provided by high-profile visits to places where the company felt people ‘might need a lift’. Examples include offices, building sites and garages. Self-styled Red Bull distributors exploited their local knowledge to help sell the brand and its products. It terms of higher profile marketing, Red Bull has primarily focused on maintaining its links with extreme sports. It sponsors two Formula One teams (Red Bull and Toro Rosso), as well as snowboarding, kite-boarding, surfing and aircraft racing. All of these underline its commitment to its youthful, energetic target audience. The next part of the brief examines how its marketing strategy fits into contemporary marketing theory. Red Bull and Marketing Theory Introduction Red Bull is essentially a one-product brand, offered at a premium price in its market sector. Having started in Austria, it quickly spread to other markets including the USA and has become the market leader in its sector. It uses a novel approach to marketing, which is discussed later in this section. In terms of the traditional 4Ps of marketing, therefore, the company is easy to categorise. However, the 4P method has received criticism as being somewhat limited (Lee, 2001), and therefore the company is examined from a number of perspectives in this section, starting with market entry. Market Entry Any new company has to determine how they intend to enter a new market. This will be predicated by a number of factors such as the available resources, the sales objectives, product offered and existing competition (Fifield, 1998). In the case of Red Bull, the launch of the new product established a new category of product; that of energy drinks. Derived from a concept found by Dietrich Mateschitz in the Far East, the formula developed included large amounts of caffeine, sugars (glucose and sucrose) and taurine (Red Bull, 2014). Taurine is a ‘conditional amino acid’, which means it cannot be created by the body but needs to be provided in the diet. It is found in meat and fish (WebMD, 2014). It is used medically in the treatment of congestive heart failure, high blood pressure, high cholesterol and diabetes, among other conditions, and it is present in infant formulas. Taken together with the other ingredients, Red Bull claims that it provides an energy boost (Red Bull, 2014). Since no similar type of product existed on the market, there was no direct competitor. As an innovator, the company had to educate its target audience on the product’s benefits. If a mass market entry approach is used, this can be extremely expensive (Hill and Jones, 2012), since customers have to be convinced that the new product is safe, has unique benefits and is socially acceptable. Rather than attempting to do this on a large scale, Red Bull adopted a novel method based on introducing the product at a grass roots level. It is promoted as a trendy drink at events where its main target audience gathers; nightclubs, extreme sports events and even parties. In the latter, it encourages students to set up Red Bull parties and provides them with free cans to distribute to their friends. The company also uses cars in the corporate colour scheme – together with a gigantic can – which give out promotional samples (Onkvisit and Shaw, 2009). Initially, distribution is set up using small distributors. In some cases, the company has hired warehouses and set up young people to aggressively sell the product (Pride and O’Ferrell, 2006). As far as can be determined from the available literature, this approach is likely to continue to be used in addressing new markets in future. Market Strategy Its chosen strategy has led to strong word-of-mouth sales in new markets, and this provides a springboard for further success in those markets. As it grows, it invests further in creating events such as the Flugtag, in which competitors attempt to fly from a pier using homemade, unpowered aircraft – most of which are incapable of flight, and soapbox racing (Red Bull, 2014a). This draws both competitors and audiences. Most of the events the company sponsors are more professional in nature and cover an increasing range of activities, from spectacular air racing using stunt planes, to cliff diving, wingsuit racing, motorsports and adventures. The company has even moved into computer gaming and e-sports. The features that are common to all of these activities are their attraction to their target audience and their physical and mental requirements. Having identified this approach, the company appears to be keen to continue to exploit it. When considering the market positioning of the Red Bull energy drink, it almost appears that it has arisen organically from the properties of the product; it supports physical and mental exertion and therefore the market position supports this. However, this belies is underpinned by clever physical and psychological positioning. The physical positioning refers to the product’s unique characteristics (it provides energy from its unique formula) and the psychological positioning derives from its brand image as being youthful and energetic, and socially desirable to its twenty-something core audience (Lantos, 2011). From its original product offering (one product), the company has added a little to its portfolio through the introduction of Red Bull sugar-free, Red Bull zero-calories, Red Bull editions (in flavours of cranberry, lime and blueberry) and Red Bull cola. The cola is promoted as being the only cola drink made from 100% natural ingredients and makes the case that, unlike other brands that might be mentioned, it has no secret formula. The company follows the same basic branding approach for these additional products, presumably on the grounds that they will appeal to subsets of their existing target audience. Marketing Communications However impressive a brand is, it has no value unless it can communicate its unique characteristics to the consumer. On this basis, Red Bull has a highly effective marketing communications approach, it is currently recognised as the 74th most valuable brand in the world, with a value of $7.5 billion USD (Forbes, 2014). From grass roots marketing, these days the brand is more recognised through its sponsorship initiatives. This is backed up with a strong online presence that strongly reflects the brand image and provides a form of Integrated Marketing Communications (IMC). The company sees modern communications media as being critical to their success (Kotler and Keller, 2012). The reason Red Bull has achieved such success has been that it has successfully aligned its brand identity with that of its target audience in a way not achieved by its competitors (Urbany and Davis, 2010). Even when it uses traditional marketing media such as TV, it does so in a quirky ways that does not take itself too seriously. In doing so it maintains the image that appeals to its customers. It is this consistancy of message that is so important to IMC. Whatever channel is used to get the message across, it must be the same as those used on alternative channels. Digital media provides an increasingly important method of communicating with consumers, and Red Bull has identified this. As well as having a strong website that focuses on the sponsorship activities it is involved with, it also provides links to social media websites such as Facebook, Twitter, Google+ and You Tube. These sites provide consumers with a means of communicating with the company and with like-minded individuals across the world. This fosters a club-like experience that enhances the company’s alignment with its customers. The use of social media to build on relationship marketing is now well recognised, and Red Bull has been in the forefront of exploiting this (Lamb, Hair and McDaniel, 2011). The company has also been active in the field of mobile marketing, launching its own app to allow subscribers to keep in touch with the company when on the move. Overall, Red Bull is one of the most effective marketing communications companies in the world, and it does so by offering interesting content to its customers. The actual advertising of the products forms a small part of this. However, the brand is intimately linked with its products and thus the message gets across clearly. The continually changing content prompts users to visit its sites frequently, and in doing so keeps the brand close to the user’s attention. Few companies have been so successful in doing so. The next section looks at the current state of the company in the market. Company Analysis Analytical Methods There are a variety of methods available for the analysis of a company. These include analyses on the external environment in which the company operates, such as PESTLE (Political, Economic, Social, Technical, Legal and Environment), and those that examine the internal context such as SWOT (Strengths, Weaknesses, Opportunities and Threats) (Allen, 2001; Murray-Webster, 2010). Other techniques include VRIO (Value, Rarity, Imitability and Organisation), used to determine the level of competitive advantage a company has and how long it is likely to be retained (Peng, 2011). In this case, a PESTLE analysis would provide results indicative of the energy drinks market rather than being specific to Red Bull. A VRIO analysis lacks the depth of SWOT analysis in terms of a general assessment of the internal and external situation, and therefore a SWOT analysis was chosen for analysis of the company. This is shown later in the next section. Company Sales and Diversification Apart from its energy drinks, the company has diversified into other businesses that have synergy with its brand image. These include football clubs, youth academies, online clothing sales and even a construction company. It has moved into media ownership, with print magazines and the mobile phone service industry. Red Bull is privately owned and therefore does not need to report its performance publicly. However, it reported net sales of 4.9 billion Euros in 2012, with 5.2 billion cans of its primary product sold. This represented considerable growth on the previous year (15.9% on sales; 12.8% on number of cans). The company showed very strong net sales growth in South Africa (52%), Japan (51%), Saudi Arabia (38%) and strong continued growth in France (21%), the US (17%) and Germany (14%) (Euromonitor, 2012). The company attributed this to ongoing brand investment and efficient cost management (Euromonitor, 2012). Strengths The main strength of Red Bull is its brand, which is very valuable and has allowed it to grow a strong set of customers. It is synonymous with its energy drink, which is a positive factor (Park et al, 2013). The company has successfully developed new markets internationally using the same brand image. It can therefore be considered as a global company. This is important in that many of its current markets are at or near market saturation. Its use of social media to help to build its brand by relationship marketing is also a strength (Segrave, Carson and Merhout, 2011). Weaknesses The main weakness of the brand is its limited product portfolio. It primary relies on its single main product. This product is at risk of political or legal controls owing to the high levels of caffeine used, or it could just lose its appeal to the market (Aaker and McLoughlin, 2010). This could adversely affect the ability of the company to maintain its position in various markets. Opportunities The company has been effective in developing emerging markets, and if this continues it could largely offset poorer sales developments in the mature markets. Its global marketing message appears to be universally appealing to its target audience, despite cultural differences. It has also invested in new production facilities in Brazil to support domestic sales in the South American continent management (Euromonitor, 2012). This model could easily be extended to local production in Asia and other developing markets. This would both reduce cost of sales and provide a greater sense of community belonging. Threats A range of similar drinks have emerged following its success, increasing the level of competition within its market sector. Some of these competitors use natural ingredients, which may be seen as more desirable to its target audience. This includes the Monster product, which is pressuring sales particularly in North America management (Euromonitor, 2012). The company also faces competition from entrenched market leaders in the wider drinks market such as Coca Cola and Pepsi. These companies work continuously to reduce the threat level posed to themselves from Red Bull. With their huge marketing budgets and ability to develop new products, this could eventually prove decisive and reduce the success of Red Bull. The company also faces the law of diminishing returns in marketing in its mature market, in that the cost to reach the relatively small number of potential customers remaining in these markets becomes prohibitively high (Mike, 2004). The company invests considerable resources in its relationship marketing, and this ongoing cost may also become more onerous, should sales in its target market fall for any reason. Therefore the company faces the potential of having high marketing costs leading to smaller sales despite its dominant position in many markets. Conclusions Red Bull has demonstrated a novel approach to marketing and has introduced a new product to the market that has spawned an entire new category of product. Through its actions, the company has become very successful and has become the market leader in its sector. Its use of a marketing message that is light on selling the product but heavy on building the brand image and associating it with extreme sports and other activities of interest to its target audience has possibly shown the future direction of much marketing effort. The current position of Red Bull remains strong in its market sector. However, as it is now the leading brand in many markets, it will find it difficult to maintain its position due to increased competition from other brands that have seen the opportunities offered by the sector. The growing age of its original target audience may also prove a factor; the company has deliberately addressed a youthful market and as these original customers grow older, it remains to be seen whether the product will continue to appeal to newer generations. However, the company can n develop new markets, and it can potentially reduce costs by focusing on domestic production. These new markets may allow the development of complimentary new products. . It is possible that these could then be sold in its mature markets, widening its product portfolio. Whether the company remains successful will depend on a number of factors. Primarily, there is a question of whether the brand can continue to be trendy now that it is well established in the market. It faces increasing competition in its sector, and this will affect sales unless the company can successfully fend it off. However, it can still expand into new markets and streamline its production facilities to allow the business to continue to grow. Future of Red Bull and Recommendations In order to protect its position and continue to grow, the company should embrace the opportunities offered in emerging markets. It should also work to streamline its distribution to reduce costs. This could be through domestic production or through setting up alliances with existing distributors in those regions. The competition to Red Bull is only likely to increase as more manufacturers seek to exploit its market sector. Emerging products may replace the Red Bull brand image of being cutting edge and anti-establishment; one company cannot keep this mantle forever. The company should therefore consider adapting its message to existing consumers as they mature. The company is well placed to make this transition. However, it cannot simply rely on existing customers, but must appeal to new consumer groups. This could be assisted by the launching of additional products aimed at different demographics. Red Bull is used as a mixer for spirits such as vodka. This offers an additional opportunity to target the more mature audience by launching pre-mixed alcoholic drinks. Red Bull has shown itself adept at social media. The company should develop this as far as possible, embracing new technologies as they arise. This is vital for it to maintain its relationship marketing and also allow the brand to continue to spread through word-of-mouth and sharing of information online. Since the company has so much news to share from the events and teams it sponsors, it has a readymade store of information. This could prove to be important in maintaining brand loyalty in the future. References Aaker, D. A. McLoughlin, D. (2010), Strategic Market Management: Global Perspectives, UK: John Wiley Sons Allen, M. (2001), Analysing the Organisational Environment, UK: Select Knowledge Boswijk, A., Thijssen, T. 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