Executive Summary
Since its inception into the market in 1984, Red Bull has remained a market leader in the energy drink sector a success the company attributes to aggressive, polemic and non conformist marketing and accountability management of the companies affairs.
Red Bull is categorized under soft non alcoholic drinks which are basically supposed to be energy boosting refreshment. Dietrich Mateschitz began small with the Austrian market then built the market loyalty one country at a time. It was initially consumed by Asian managers before they went into meetings to ensure that they stayed awake and that they concentrated. The distinct formula that essentially contains glucuronolaction caffeine vitamins, amino acids and carbohydrates was designed to give the customer a solution to fatigue and mental stress by revitalizing the body to enable mental and physical performance.
Undoubtedly the majority of consumers in the energy drink market have at least heard of Red Bull. The product mainly targets the young and middle age customer, student’s teenagers and young adults. It has made a trendy impression on the market making it what every other person wants to have (Foster’s News Release, 2000).
Situation Analysis
Situational analysis is an evaluation of the status quo as regards to current trends and alternative strategies with the intention of getting a firm grasp at the facts as they are and to develop a responsive solution for the future. It takes into consideration the customer the business and the competition with specific reference to the market segmentation, strengths and weaknesses of such a market.
Based on these parameters the analysis helps in the discovery and ascertainment of market questions such as where and how to enter the market. With this analysis the players plan for future prospects and ensure that the profit status of the product in the long run is secure and self sustaining. It is an essential evaluation mechanism that brings to harmony investors resources with the available opportunities (IBIS World, 2000).
The product has experienced difficulties with competitors who have not been as successful as it has but they continue to pose a challenge to its growth and expansion into new markets. Like them it still has to deal with the challenges of the market forces government policies and trade barriers. However it has made good of the opportunities that have come its way and has ensured that it keeps afloat (Kotler, 1998).
Not many marketers have been successful in achieving what Red Bull has achieved in such a short period of time. In fact most end up giving up the moment the product reaches the nationwide market. They then change tact to ensure that they maintain the existing market share with little intention of planning for a larger market. This however was not what the proprietors envisioned. They had projections of a worldwide market and did not stop to count their winnings until they achieved their objective. Once the world market was within their grasp they faced the challenge of maintaining and servicing the whole new window of opportunity (Lamb, 1998).
The persistent concern as to how the market is to be serviced raises financial and strategic concerns. Evidentially, new consumers only get to learn of the product by word of mouth in the absence of which they may choose a competitor’s product. This is a rather retrogressive tactic that has against the odds worked for red bull (Lloyd, 1999).
The big question is therefore one of strategy and objectiveness. The company requires a strategy that will successfully survive the changing trends of the dynamic world market. One that will keep abreast with the varying consumer tastes and preferences. Red Bull has taken an approach that aims at differentiation. The customer should be able to distinguish Red Bull from all other competitors’ products.
Market segmentation (Strengths)
The soft drink market has characteristically grown since the early years. It was said to have grown by an encouraging 5% in 1997 leaving the total demand at 10 billion liters with a market value of up to £7 billion. This figure has doubled with the increasing population and the growing economies around the world. Of this young market sports drinks took up to 64% in sales by 1992 (Todd, 2003).
A behavioral approach seems more appropriate in exposing the personalized relationship between the product and the consumer. Red Bull goes beyond the casual and formal relationship between the consumer and the product and establishes a relationship based on the utility derived from the product. This is because its consumption leads to reduced stress and improved endurance as well as attentiveness (Malinauskas, 2007).
Three stereotypes may be construed from this relationship.
- The sports man
- The labourer
- The reveller
The sportsman considers his game very important and therefore anything that goes to improve his performance in the support is a necessity. In effect Red Bull forms a fundamental part of his lifestyle. His objective is to increase alertness and endurance as well as speed. The laborer on the other hand needs concentration and keenness at the workplace. He needs to be alert and have a capacity to stay awake to ensure maximum performance (Penalty, 2009).
The reveler finds Red Bull a good supplement to alcohol for differing reasons such as the taste. Red Bull has varying applications hence it would be hard to get a firm grasp at the target market. However the young adult population is the most likely group to consume Red Bull alongside alcohol (Red Bull’s Marketing Plan, 2011)
The product has established over the years a good consumer goodwill that has allowed it to cut on its advertising costs and enhance proprietary know how. It has maintained a convenient way to access distribution network that can be greatly attributed to the strong brand name “Red Bull”.
Threats and weaknesses
The energy drink market is flooded with various brands of products bearing almost similar contents and packaged in similar quantifications. The number has grown to the hundreds in the last decade with most being used alongside alcohol. In other parts of the world there has been little development in the energy drink sector (Laermer, 2007)
Indirect competitors include glucose based drinks manufacturing companies which own up to 70 % of the market share. Lucozade happens to be the major owner in the glucose energy drink sector owning up to 90% of the market stake in the sports drinks market. Others such as Coca-Cola and Pepsi have joined the energy drink markets with new product additions in the likes of Mother, Powerade, Gatorade, V, and Battery. (IBIS World, 2000)
Market opportunities satisfied by Red Bull
Needs
There are three basic consumer wants that Red Bull seek to satisfy. It satisfies the consumer’s physical, social and individual needs. The consumers Human needs comprise felt deprivation which the product finds already in existence and cannot be invented by marketers. The physique when tired drivers human feeling and the urge to fall asleep due to exhaustion.
This apparently places their safety at risk. A pilot needs to stay awake and alert when flying to evade danger. Red bull satisfies this need and has become the in thing for drivers and pilots. Social needs are those related to the want for a sense of place and belonging. This want is satisfied by membership in a group where similar interests are shared. Red bull facilitates the creation of an appropriate environment that motivates the supply of these social needs.
The product has a great chance in executing this cause if it ventures into the alcoholic drink market. With the established current brand name it could use its popularity to create awareness of the product.
Wants
Wants on the other hand are the shape s taken by needs when they are integrated into culture. An athlete’s urging to re-vitalize his energy after a period of practice becomes a want when such urge is repeated and frequently re-occurring. It becomes a habit and then grows into a culture. Red bull satisfies this want by offering a solution that increases endurance, improved keenness and response to speed, an improved and stimulated metabolism. These wants apply across the drinks market and is even more intense in the alcoholic drink market. The product has a good chance at widening its clientele by venturing into this market.
Demands
Demands are a representation of purchasing power backed by the urge to satisfy human needs. It essentially is the willingness of a consumer to acquire the good backed by an ability to acquire through payment. The cost of red bull is distinctively high. In fact it is higher than all other soft drinks in the market. However consumers are willing to pay for the extra promise given by the red bull product. They are willing to trust the supplier to keep his promise in offering them a drink that will revitalize their body and restore ones strength. This satisfaction they do not find in the common refreshments.
The demand for alcoholic drinks bears an indefinite aspect due to the addictive aspect of the alcohol content. It is therefore important that the product ventures into venturing into this segment of the market.
The Marketing Management Philosophy
Red bull may be categorized into three main market philosophy categories, the selling concept phase philosophy, product concept philosophy and the marketing concept philosophy. Upon its inception the product suited the classification of selling concept phase as it was still at its growth stages. The words of its founder, there can be no market if the product doesn’t create it. After trying everything finally the company had to use buzz marketing option to promote red bull (Assael, 1995).
The product then found a footing into the market and therefore entered the product concept philosophy. At this stage the consumers consume the product only for its benefits in the form of better health status, well being and energy. The energy replenishment theme is embedded on the products packaging to ensure that the consumer is assured of the products purpose. The product then reaches the final category where red bull stands tall above the competitors in terms of service provision and gains a worldwide loyalty. The product gained immunity against the forces of competition and continues to create strategies to cope with changing trends.
Originally the market was restricted to Australia, however over the years it has spread to other continents and countries cutting across diverse trends cultures and practices. It therefore would be an exercise in futility to attempt to interrogate such market based on geographical or physiological grounds. Such a narrow approach would fail to capture the diverse interests, lifestyles demography’s and socio economic setups that face the products prominence.
Red Bull initiated the modern day energy drink market segment back in 1987at a time when it claimed only 8% of the soft drink market share valued at £14 million.Glucose based drinks took a larger share of the market claiming up to 70% valued at £126 million. Sports drinks took up 22% valued at £39 million.
Marketing Objectives
To put the discussion into perspective the objectives of the market plan include the following:
- To understand the contemporary market and the viability of venturing into the alchoholic drink market.
- To formulate a product plan that will sucessfuly deliver the new alchohol based brand Redsky that will be a whisky alternative to Red Bulls energy drink brand.
- To identify appropriate target markets and develop penetration strategies for the new brand
Sales Objectives
Sales objectives are objectives influencing the market and clientele base of the new product. They include among others the following.
- To ensure that the new product achieves the current position of Red bull in the market at all times. This may be implemented through ensuring that the product maintains a national and international presence in the world and local market.
- To adjust the approach adopted by the Red Bull energy drink brand that relies on an untraditional platform as opposed to restricted guidelines provided by the media to create a sustained market for the new product.
Marketing Strategies
Marketing strategies are an important tool in planning that is designed to identify surroundings the market requirements and fulfills its objectives. They are prepared on a term basis e.g. multi year with a schedule showing what is to be done when. Marketing strategies embrace interactiveness and dynamism.
They involve the assessment of the internal and external surroundings. The external market comprises of consumer review competitor status, target analysis and other social political and economic concerns. Internal factors are among other things the market mix strategic and performance constraints.
Types of strategies
Strategies adopted vary with the product in question and the market environment conditions.
Strategies may be generically categorized as follows
- Market dorminance
- Porter generic
- Innovation strategies
- Growth strategies
Strategies based on market dominance give specific features of market command. They may be categorized further based on the position held in the market structure i.e. leaders, challenger, follower and nicer. Porter strategies on the other hand give attention to aspects of scope and strength of the strategy adopted. The scope goes to the entry into the market and the strength the goes to the head start and competitive edge and advantage. (Ferrell, 2008)
.Innovative strategies concentrate on the frequency at which the product develops and or is reviewed. It basically invests in modernity trends and cutting edge technology and innovation. The strategies will therefore take the form of pioneers, close followers or late followers. Growth strategies on the other hand go to the manner in which the firm is to progress. There exists several ways in which a firm may improve, grow or expand. It could grow vertically horizontally or by diversification and or intensification (Gentle, 2000). Once an appropriate strategy has been developed a product marketing plan is then prepared to make use of all the available opportunities and reduce the opportunity costs involved in the decision making process.
Strategy 1- Product differentiation
The big question therefore is one of strategy and plan. The company needs a self sustaining plan that will operate to control the Redsky alcohol market share now and in the future. Red Bull energy drink took the product differentiation approach in which involved making it the objective of the company to make Red Bull distinct from all competitors’ products. There are several other whisky products already established in the market that will be competing with the new product.
The strategy has also attracted various consequences both in policy and financial implications the company for instance has had to be very particular with the type of employees it hires. The employee is required to meet certain conditions before they can be allowed to join the workforce. This approach will be engaged in the employment of employees in the Redsky product line.
The company will also take it a notch higher by scrutinizing its distribution modes. While competitor companies venture into mass distribution to target a wide clientele and increase awareness, Redsky will adopt a rather stringent and conservative approach to penetrate the market. This approach has successfully worked for the energy drink therefore it will not be hard to implement since the company already has the necessary infrastructure.
In effect Redsky will aim at a sustained market share and a competitive advantage. Employees from the lower level are rewarded by the company to motivate them and show them of their valuable input. This inspires a since of dedication and diminishes self interest. Since the company already has an established employee data system it will borrow the technical expertise from the energy drink product line to enrich the new product. The market structure analysis methods adopted in the delivery of Red bull into the market will be used in the promotion and establishment of this new product.
Strategy 2- Viral marketing
Historically the firm has avoided the mainstream brand marketing strategies and taken a revolutionary approach. It has adopted rather unconventional buzz marketing. This is marketing by word of mouth. The company constructed a market and allowed the market participants to embrace the product to a personalized level. The image of the brand was made to stick in the minds of the consumers. It was incorporated and married into the cultures, trends and practices of the youth and in adventure related engagements such as sports.
The same approach will be used to connect the brand prominence of Red Bull to the all new alcoholic product Redsky. The market approach will be one that used the existing market base to market the new product and make the brand name into the brand menus of the customers. The company will develop a slogan that will mark the beginning of the products market penetration.
The company will treat the consumer to an abundance of information on the availability and utility of the product through aggressive advertising on bill boards, trucks and wall paintings. The product will be offered at a discounted price to gain the confidence of the customer and to give them an opportunity to try the product and evaluate its quality.
Virtual marketing involves the recruitment marketing agents who act as information disseminators in the spreading of the product information in the various market segments. This mode of marketing was earlier regarded as buzz marketing due to its disregard of the traditional marketing strategies. Instead it utilized the energies if the youth to spread the information on the product and has proven both informative and persuasive to the target customer base.
Strategy 3- Brand positioning
This is a strategy adopted by the company in its objective of maintaining a trendy outlook for the product. Red Bull is therefore considered as being in its own category of high premium products. In terms of price, Red Bull commands a higher price due to its distinct outfit that leaves it as a silent monopoly. It makes its stand as an effective solution that almost falls under the category of medicine. The average price in the United Kingdom and Australia is higher than that of its competitors as a statement of its superiority. The positioning policy therefore allocates the product premium profits from a premium pricing.
Brand positioning will be used as a pilot strategy in the initial and consecutive stages of market plan. The price of Redsky will be set well above that of all other competitor prices. The initial stages will require a high level of sales therefore the product will be offered at discounted prices to leave room for the customers to try the product.
Strategy 4-Brand Extension
This is a marketing terminology that is used to refer to a marketing strategy that is motivated by the use of an existing brand name to promote the introduction of another brand in a different category. It manipulates the consumer confidence and the existing brands image to endorse the new product by allowing the new product to use this name in part or in whole as the circumstances may demand. This means to increase brand awareness as well as elevate the profit margins of the new product.
The strength of the consumer’s values and goals with specific respect to the brand determines the expendability of such a brand. Market research scientists dispose this strategy as one that seeks to expose the attitude and evaluation of the parent brand. It is on this basis that the fix of extension may be properly determined. They provide a three dimensional approach to this standard of evaluation.
- The complementary aspect
- The substitutive aspect
- The transfer aspect
The complementary dimension recommends that he product be of a nature that allows them to be used together. The red bull has been shown to be widely used alongside alcoholic drinks. The consumers find it desirable to use these products hand in hand. O’Brien (2008) published a study that sought to establish the connection if any between the consumption of energy drinks and the risk of bad drinking habits of 4000 college student who at the time were studying in ten of North Carolinas universities spread across the field of examination. He put the research to perspective by condensing the research to students who had consumed drinks with any amount of alcohol content within a period of 30 days of the examination.
In this way the sample size would be reduced by 32 % to a sample of 2720. Out of the remaining sample, up to 87 % of them were people between the ages of 18-22 years. The virtual majority of these were of the opinion that they had consumed the alcohol alongside energy drinks. It was apparent that those who combined these two ended up consuming more alcohol than their counterparts who stuck with a single product.
It is clear that there is a ready and willing market for an alcoholic drink brand to explore. The marketing plan will therefore seek to introduce a product that represents this complementarily by introducing a new brand Redsky which is a merger between whisky and red bull in equal amounts. Redsky will allow those consumers of alcohol who are loyal to one brand of drinks to explore the benefits of the same in both markets. It will give the customer the satisfaction and convenience of buying a wholesome product that will reduce the alternative costs that are likely to be incurred in the chase of two different products.
The supplementary aspect of the product means that the products in question serve the same purpose and therefore they will be seeking to increase the consumer’s variety in the same market segment. Brand extension will therefore play the role of endorsing the new product into the market and creating customer trust and confidence from the parent brands share of influence in this market. Since the products are quite similar the parent product could at one tome be replaced by the new brand. Product extension here applies as a mechanism of change and in refreshing the customer’s appetite.
The final approach regards the transfer relationship. Products that do not fall in any of the above two approaches fall in this category. In a strict sense, this category gives regard to the firm’s ability to maintain production of a certain product class. If a product s brand has been operating in the first class of the market then brand extension will be seeking to use the firms ability to maintain this market by introducing a product into the second class market. Unlike the first two approaches that are motivated by the demand of the customer, this approach concentrates on the firm’s ability.
There are many other methods of brand extension available to the company which looks to this strategy for a solution for expansion into the market such as brand franchise extension, brand alliance, as well as co-branding, all these methods rely on the association between the products which can either be product related or non product related. Others such as licensed brand extension allow for a brand owner to merge with a competitor on agreed terms to increase their market command.
Challenges
Inadvertently Redsky will be seeking to penetrate an already saturated market. This among other problems as presented below present huddles to the execution of the products marketing plan.
The elderly clientele base already has a secure brand loyalty to their favorite whisky brands. This poses a great problem for the execution of the market penetration plan since it will require allot of convincing and enticement. The product therefore requires a scheme that will not only focus on bringing aboard customers of the middle ages. It will incorporate ideas and concepts that cut across the age divide.
The product has also faces policy concerns since the law on alcoholic drinks is stricter and has much more standard requirements as compared to energy drinks. The company will therefore consider its distribution channels which even though closely associated with the mainstream energy drink brand will be treated with special regard. This means extra costs that will be incurred in the legal process of compliance with the specific policy requirements.
For a long time the company relied on only one brand of the product. This limits the consumer base probing the introduction of a sugar free brand in 2003. This however did little in the extension of the company’s variety. Even so the expansion brought its own financial and strategic challenges which are likely to recur in the new product Redsky.
The product will definitely receive resistance by the existing brands in the market. These companies have amassed capital over the period which they have been in operation and have acquired skill and experience in the ways around this market. The company does not necessarily have the expertise in the specifics of the alcohol product line and it will need to build this experience from scratch.
Implementation and Control of the Marketing Plan
Redsky will not just be a common whisky brand. It will be defined to the customer as solution to the need for a classy and expensive whisky that gives the customer the satisfaction of a distinctly blended and refined product. The most effective approach will entail a market mix comprising of non traditional methods of marketing, public relations marketing and promotion as well as event sponsoring. This mix will generate local media coverage without the need for promotional advertisements to be created by the company. (Red Bull’s Marketing Plan, 2011)
The price of the product will be set well above all other whisky brands in the market a price that will be maintained all along the marketing campaign. The campaign will begin with nationwide road shows using the company’s branded vehicles. The region will be divided into four quarters based on the population concentration and each quarter will be covered by a team of 100 persons. They will make stops at town’s cities and social joints such as trade centers and market squares as well as shopping malls.
The product will sell its name through the slogan “Redsky the symbol of greatness” that will be displayed on all the product packages and bottles as Australia’s finest. It will be imprinted on the troopers in bright conspicuous colors to ensure that the consumer recognizes the entry of the new option to their product menu as well as convince them to give it more than one thought. During the stops at the various towns and cities, the promoters will host events that will allow the attendants to win free Redsky products including Redsky t-shirts, gift hampers, shopping vouchers as well as other prices such as microwaves, fridges and TV sets.
The campaign will go for a maximum of one year during which the teams will have toured the whole market. Consent will be required well in advance from the various local authorities through letters and phone calls to allow the marketing teams to hold their events in the localities. The marketing agents will be given resources such as stickers and calendars that will be distributed to the client base to ensure that they are constantly reminded of the products existence.
Research indicates that the greater population that engages in considerable amounts of drinking is the people between the ages of 18 and 22 years especially in the colleges and universities (O’Brien, 2008). It will therefore be important to incorporate their interests in the product by sponsoring events within their universities and colleges. They so happen to form a considerable part of the market size and it will therefore be important to win their trust and confidence. They will play an essential role in especially in promotion through buzz marketing that will engage their services in spreading the news about the all new product Redsky.
The campaign teams will require permission from the respective strategic universities and colleges to hold these events during which the product will be offered at student friendly subsidized prices. The company will also engage in corporate social responsibility activities by sponsoring the brightest of disadvantaged students in at least seven colleges across the campaign region. The campaign will reach its climax during the annual inter university games during the summer and winter where more than 1000 athletes and sports men and women will be in attendance. The company will erect banners and offer uniforms to the participants there will also be performances by local favorites courtesy of Redsky these events are meant to provoke local media coverage both radio and television broadcasters.
Marketing plan budget and calendar
The 60 million dollar campaign will commence at the Red Bull headquarters on August 4th. It will be flagged off by the regional heads who will commission the four teams according to their mandates. The teams will engage the consumers through the local authorities in the planning and organizing of the events to ensure they feel part of the Red Bull community. A greater part of the budget will be used in the sponsorship of the summer games and in the purchase of give always. Below is the budgetary calendar
The campaign will invest heavily in information dissemination and sale of the brand image and gaining market confidence. The campaign is expected to deliver the new product brand into the market keenly taking precaution not to offend the market share and profile of the parent energy drink brand Red bull. It will also act as a research and information gathering experience on the level of information on the product and the level of awareness. (Miles, 2003)
Consumers will also get an opportunity to receive personalized consumer services such as testing of other brands. This information gathered will be used to determine the relevant investment decisions as to the chances of the products success period as well as the amount of capital that will need to be increased to serve this market effectively. The campaign teams will answer pertinent questions that the consumer rarely gets an opportunity to get answers to. These include issues such as health concerns, environmental concerns among others. The consumer will be able to bond with the product giving them the confidence to recommend the product to others. It will give the product an opportunity to make the first step towards growth in the face of the aggressive competition from rival whisky brands.
Conclusion
The red bull company has managed to survive the hard economic times and the recent economic down fall to maintain its status as a market leader. It still enjoys a hefty market command that is up to 70 % of the sales in the energy market. The product is identified for its potential to vitalize the body and mind which the basis of the consumer loyalty is.
On the other hand the alcoholic drinks market continues to bow to the social economical and political trends that influence its operation. This being an entirely different field of concern for the company it narrows down to goodwill and the expertise of the company in driving a successful entry into a different sector.
Like all other companies that are market leaders in their sectors, Red Bull faces the challenge of maintaining the market leadership and extending the market to accommodate the market opportunity that is still available. It is therefore important that the company maintains its current product quality since it has been accepted by the market as it is. Up to 60 % of the populations in Germany who are below the age of 30 acknowledge the brands existence. In such a market therefore it only needs to be strengthened. The same objectives should be made for the new product Redsky in as far as quality and class is concerned. The prices for the new product should remain higher than the competitor’s price to ensure that the product retains command of class in the market as a differentiated and posh product. It also acts as a hidden guarantee that the product is what it is advertised to be.
Only 20 % of the sales of Red Bull in 1998 were distributed through retail. Consumers bought the product occasionally and were therefore most likely purchase it from a gas station or off license retail shop. Redsky on the contrary will be accessing a 24 hour market whose demand depends on social factors such as seasons and holidays as well as political factors such as government policy. Redsky will form part of a long culture that has been built over the years with continued cooperation and loyalty from the investors, customers and employees of the company. It has a potential of expanding even into the rather dormant markets in Africa and South Asia only if proper market analysis and evaluation is done. The investors in the red bull company can confidently entrust their wealth to the management which has so far maintained a good track record.
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