One of the main questions that can be emphasized in respect of this case is the approach to the marketing strategy of Red Bull. Does the company still benefit from its non-traditional and “anti-brand” approach or Red Bull needs to change its marketing direction to a more common way? One of the root of this question lies in a statistics of market growth provided in the case study (p. 2) which shows its decline in volume for energy drinks from 44% in 2000 to 6. 5% in 2003.
Another reason is connected with the increasing competition in this segment of beverage industry where such giants as Coca-Cola and Pepsi began to promote their energy drinks. The problem with the second reason is that these companies have more traditional marketing approach and target wider market while Red Bull is focusing on a narrow segment like extreme sports alternative lifestyle and music, which may endanger Red Bull’s market share (Sherbin, 2012).
Also it is stated in the case that only in 2000 23 new energy drinks were introduced in the UK alone and in Finnish market the drink Battery managed to outsell better that Red Bull (p. 8). Moreover, these new competitors attempted to imitate several buzz marketing techniques. As a result now Red Bull have to compete both with giant as Coca-Cola and Pepsi, which cover wider audience by using more traditional marketing approaches, and a lot of new smaller energy drink companies which apply strategy that to some extent is similar to Red Bull’s.
Hence, the most critical issue is the risk of decreasing of brand loyalty among the customers because of appearing of copycats which are similar to Red Bull by their strategies and they also provide some advantages like cheaper prices for bigger volume of a drink. Thus, the main question is how Red Bull marketing strategy should be adjusted to the changing external environment or should this non-traditional buzz-marketing approach be maintained in order to increase market share in soft drinks and effectively compete with rivals.
Marketing strategy Concerning the allocated critical issue, the strategic direction should be focused on fostering of brand loyalty to Red Bull among potential and competitor customers and maintain current customers at the same time. The action plan that will help to achieve the aim of the strategy will be based on weaknesses of Red Bull that competitors began to exploit, because it is supposed that fixing of these disadvantages will strengthen the market dominancy of Red Bull and enhance the brand loyalty with other things being equal.
Analyzing the current position of Red Bull it is possible to highlight four main drawbacks: small product line, high price and small quantity compared to competitors, unhealthy, not as well liked by females (Gillander, 2011). Talking about the product line it is difficult to argue that Red Bull’s offer is narrow and concentrated only on the one drink, while Pepsi or Coca-Cola provide a lot of different products and flavors of their energy drinks also vary. That allows them to satisfy different taste preferences that their customers may have. Read also about heritage of operations management
That is why one of the way how Red Bulls strategy may be improved – is expending of its product line by introducing of new flavors in order to attract those people who for example do not like the taste of red bull. Furthermore, it is worth to note, that releasing of new non-energy drinks will entice new consumers who are adverse to the energy drinks concept (Walker, 2010). Another problem of red bull drink is that its price is relatively high, compared to the main competitors.
For example, can of Monster drink is almost twice cheaper than Red Bull in the same volumes, while the content of caffeine and other energy substances is even lower in red bull (Polis, 2013). At the same time, the factor of pricevolume ratio is very important for one of the focus audience of energy drinks producers – students (Gillander, 2011), what may have the negative impact on brand loyalty of customers. Hence, to compete better with Coca-Cola’s Monster and Burn, Pepsi’s Adrenaline Rush and others it is essential to release bigger cans.
Furthermore, it will allow decreasing the relative price due to the economy of scale. 1 The third aspect that threaten Red Bull’s brand loyalty is that public concern has been raised regarding the lack of information that is provided on energy drink labels as well as people become more concern about their health (Heckman, 2010). However, Red Bull standard can has more than double dose of caffeine than in Coke (Dolan, 2005) and 473mL can has 13 teaspoons of sugar (Webb, 2012), what looks unattractive for those people, who are take care of their health.
Thus, since Red Bull offer the 473mL can it should begin to provide sugar free option in this volume of drink like with standard 250ml cans. Besides the fact that energy drinks market is a growing industry (Heckman, 2010) it is essential for Red Bull to pay attention to the aspect of making their drink healthier by releasing new products with less harmful ingredients and conduct a campaign which will show that moderate consumption of the drink will not harm the health. This may be more clearly demonstrated by attracting athletes sponsored by Red Bull and showing that red bull helps them to achieve higher results.
According to Gillander (2011), Red Bull is not popular among females compared to males. As a result, there is a big customer niche that could be filled. Therefore, Red Bull could differentiate their product by releasing special “female” energy drink with different taste, color or ingredient content. In addition, it may be promoted by female sportsmen and by new special TV advertisement cartoons. This action is supposed to attract new female customers and foster their loyalty since other competitor brands do not have any specific energy drinks for females.
Another action plan that could enhance Red Bull’s brand loyalty is connected with the promotion of the product. Generally, it is possible to allocate two types of promotion: Above-the-line and Below-the-line (Manral, 2011). First type helps to cover the wider audience as it uses such media sources as TV, press or radio, but it is more difficult to deliver a memorable message that is tailored to a specific target market and cost of this type of promotion is high. The difference with Red Bull’s approach is that it is mainly concentrated on the “Below-the-line” promotion by organizing different sport, dancing and music events.
Red Bull can be called one of the leader in conducting the Below-the-line promotion as its events like Flugtag, Red Bull Air Race and others are famous all over the world. As these festivals create such a big “buzzing” effect, which generate word-of-mouth advertising and tend to bring people to the product, Red Bull should continue to organize them. In addition, these events is a good site for testing new products (for example red bull for females) using sampling and demonstrating the association between healthy life-style and red bull drink.
However, it would be useful to mix these two approaches and use Above-the-line advertising more intensively by creating new TV commercials apart from cartoons that will promote active life-style, attract female audience and ensure people that moderate consumption of red bull does not harm their health. Potential weaknesses The first problem that Red Bull may face by fulfilling the recommended action plan of the strategy is connected with expanding of product line. According to Walker (2008) “brand heritage is crucial in the beverages industry and companies need to be very astute when they start messing with the wires that make it work”.
The problem is that people used to associate Red Bull only with its energy drink and broadening of product line by entering new non-energy beverage segment may undermine the Red Bull’s brand essence. Consequently, besides the fact that releasing of new non-energy drink potentially may attract people who adverse red bull there is a risk of losing brand’s image what will not have a positive effect on brand loyalty of those customers who admire Red Bull for its special style. However, it is possible to test such drink by sampling on some of Red Bull’s events in order to understand is it going to be successful or not.
Another weakness of the strategy that is directed to enhance brand loyalty relates to the economic risk of releasing the bigger volume of can of red bull. Introducing new 473mL allows company to compete with rivals who try to exploit Red Bull’s volumeprice ratio of 250mL can (like Monster or Mother). However, the larger can likely provide lower margins since there is no big difference in the retail prices. Furthermore, there is a risk of “cannibalization” factor where more profitable 250mL cans will sell less than its bigger analogue (Bevwire, 2009).
Nevertheless, despite these risks, such innovation expands the customers’ choice and allows to satisfy needs of those who used to consume more than one can of and casual users that change from energy drink to energy drink depending on price or quantity per can. Moving to the next weakness it is worth to note that there is a strong belief among people that energy drinks are unhealthy and this point is difficult to be argued, because lot of researches prove this this statement.
For example, it is proven by Higgins (2010) that excess of caffeine have negative impact on health, while positive effects of other ingredients like taurine and glucuronolactone, remain unproven. Moreover, it is known that 473mL can has 13 teaspoons of sugar (Webb, 2012). As a result these factors endanger not only the brand loyalty of those customers who are concerned about their health, but also impugn the attraction of new customers. However, there are some points that allow to ignore this weakness. First, there is no clear justification of the fact of negative long-term effect of energy beverages on human body (Higgins, 2010).
Secondly, in Red Bull’s product line it offers sugar free drink that may entice those consumers who are concerned about moderate sugar consumption. In addition, current Red Bull’s marketing promotion is closely connected with sports what create positive image associating red bull with healthy life-style. The last weakness that format of the paper allows to consider is the unclear perspective of targeting the female audience. According to the statistics (Appendix 1) only 26% of female students used to drink energy beverages, while among males this percentage is about 54.
This statistics proves that females tend not to form the target market of Red Bull. However, 26% is still a big number and potential market niche of untouched 74% looks alluring. Moreover, there is no appropriate energy drink for females (except sugar free red bull) with special flavors, color and can design on the energy beverages market. That is why entering this segment might be profitable for Red Bull. Furthermore, it also can be tested on one of the events organized by Red Bull.
To sum up this paper it should be added that although suggested marketing strategy directed on enhancing of brand loyalty has some disadvantages, current market dominancy of Red Bull and brand heritage and image that it has created allows the company to fulfill proposed action plan with discounted risks. The main thing that should be taken into account is that accomplishing of this plan should be corresponded with specific company’s image, because it is supposed to be one of the main reason why Red Bull holds the leading position on energy beverages market.