Red Bull Final Rev for Printing

Marketing Management

PBSB 812

Bezuidenhout, P.J. 1224 6093

Botha, Desere 2250 2556

Buys, Johan 2049 8705

Kleynhans, Wessel 1251 7755

Schoeman, Willie 1032 6065

Van Wieringen, Anton 1231 8388

Wohlfahrt, Andre 2255 3533

Chicken Run Group Assignment

Due Date: 09 April 2011

R e d B u l l

EXECUTIVE SUMMARY

Red Bull is a utility drink to be taken against mental or physical weariness or

exhaustion with ingredients like caffeine and taurine. Dietrich Mateschitz’s (today’s

managing partner of Red Bull) from time spent in Asia came across a ‘tonic drink’

named Krating Daeng. The drink was mainly used by truck drivers, factory workers

and farmers to stay awake and concentrated during their shifts.

The heart of Red Bull’s strategy lies in upholding standards, a culture of sharing by

employees and a superior customer service. Red Bull specifically utilises the ‘power

of buyers’ in Michael Porter’s model, since many energy drink users can choose a

large variety Red Bull needs to overcome this with their corporate image and brand

strategy to selling to loyal clients. Many users buy products which are cheaper and

contain more content like Play. Red Bull however has a dinamic and energetic image

with which buyers identify with.

Methods to uphold the energetic image is the Red Bull air race and more recently

sponsoring the Grand Prix. Efforts to choose champions in the industry has been

extremely successful with Sebastian Vettel winning the Australian open Formula 1

and sponsoring a new type of power boat which was put to the test on Top Gear.

The typical Red Bull drinker is hence any dynamic and active person between the

ages ranging from 16-24’s. There market segments include students and young

individuals, party animals and at social events, commercial drivers that drive for long

periods, athletes and sportsmen, professionals with high workloads and extreme

sports (it gives you wings).

Marketing has specifically focussed on guerrilla marketing, cartoon adverts and

sponsoring major sports events. The product is not a price competitor, due to it being

more expensive. Consumers however buy Red Bull due to the consumer psychology

strategy applied by Red Bull. Red Bull therefore gives you a certain image as

mentioned above.

Future marketing opportunities lie in product diversification and keeping a loyal

customer base in international markets. Emerging markets also prove mighty

successful to utilise by the company.

Marketing Management PBSB 812

CONTENTS

EXECUTIVE SUMMARY

LIST OF PHOTOGRAPHS AND PICTURES

LIST OF GRAPHS

LIST OF ACRONYMS

1. INTRODUCTION

1.1 An introductory background to Red Bull

1.1.1 Red Bull’s mission statement

2. AN ANALYSIS OF THE CURRENT EXTERNAL AND INTERNAL

SITUATION

2.1 An outside-in analysis

2.1.1 The general environment

2.1.2 The industry environment

2.2 An inside-out analysis

2.2.1 Analysing Red Bull’s internal competitive potential

a) Resources

b) Capabilities

c) Core competencies

d) Strengths, Weaknesses, Opportunities and Threats

3. A LITERATURE STUDY ON RED BULL’S MARKETS AND

CUSTOMERS

3.1 Market share

3.2 Product demand

3.3 Consumer needs

3.4 Consumer perceptions and demographics

3.5 Buying patterns

3.6 Consumer satisfaction


4. SEGMENTATION, TARGETING AND POSITIONING

4.1 Segmentation

4.2 Targeting and positioning

5. MARKETING PLAN OBJECTIVES AND DIRECTION OF

RED BULL

6. MARKETING STRATEGIES, PROGRAMMES AND SUPPORT

6.1 Product offerings

6.2 Channel and logistics

6.3 Pricing decisions

6.4 Integrated Marketing Communication

7. MEASURING RED BULL’S PROGRESS AND PERFORMANCE

7.1 Applying PESTE to performance

LIST OF REFERENCES

LIST OF PHOTOGRAPHS AND PICTURES

PICTURE 1: The PESTE model layout for Red Bull

PICTURE 2: ACV Chain for Red Bull

PICTURE 3: Mateschitz, co-founder of Red Bull

PICTURE 4: Main industry competitors

PICTURE 5: Red Bull’s Current Market Share

LIST OF GRAPHS AND TABLES

TABLE 1: The PESTE model for Red Bull

TABLE 2: SWOT matrix for Red Bull

LIST OF ACRONYMS

BDM: Business Decision Makers

BPR: Business Process Reengineering

CRM: Customer Relationship Management

ERP: Enterprise Resource Planning


SA: South Africa

IMC: Integrated Marketing Communication

1. INTRODUCTION

1.1 An introductory background to Red Bull

According to Red Bull (2008:1) the product is a utility drink to be taken against

mental or physical weariness or exhaustion with ingredients like caffeine and taurine.

Red Bull’s origins lie in the owner, Dietrich Mateschitz’s (today’s managing partner of

Red Bull) from time spent in Asia. In Thailand, he came across a ‘tonic drink’ –

Krating Daeng – which was mainly used by truck drivers, factory workers and

farmers to stay awake and concentrated during their shifts. The recipe of Krating

Daeng, which means ‘red bull’, was based on Lipovitan, an earlier energy drink that

had been introduced to Thailand from Japan.

Mateschitz saw the opportunity to market a carbonated version of Krating Daeng

outside of Asia. He approached the manufacturers of Krating Daeng and bought the

foreign licensing rights in exchange for a 51% stake in his company, and formally

changed the name to ‘Red Bull’. In 1987 the ‘Red Bull’ energy drink was launched in

Austria, focussing mostly on the nature of the ingredients in the drink.

However, while exotic ingredients were acceptable in many Asian markets where

food regulations were not stringent, in Europe, the beverage faced difficulties in

getting approval from the authorities. For the past 40 years, however, the Red Bull

Energy Drink has a ‘clean’ track record, and is renowned for its superior quality. Red

Bull products are indeed rich with functional nutrients and have met the quality

standards set by British and US Pharmacopoeias, becoming exceptionally

successful in all the markets in which it was launched (IBLOG, 2008:1).

1.1.1 Red Bull’s mission statement

“We are dedicated to upholding Red Bull standards, while maintaining the leadership

position in the energy drinks category when delivering superior customer service in a

highly efficient and profitable manner. We create a culture where employees share


http://en.wikipedia.org/wiki/Pharmacopoeia

http://en.wikipedia.org/wiki/Lipovitan

best practices dedicated to coaching and developing our organisation as an

employer of choice.” (Matadorcarolina, 2008:1).

A critical analysis of this mission statement is given by:

Consumer focus

The typical Red Bull drinker is dynamic and active, but it is more likely that younger

people who really like to go out enjoy Red Bull. With characteristics like these and

supplying a niche market, Red Bull delivers superior customer service in a highly

efficient and profitable manner.

Value Creation

Red Bull falls into the category high-energy stimulation drinks. These drinks have

ingredients such as caffeine and taurine, which help to increase concentration,

endurance, alertness and reactions. Red Bull is dedicated to upholding standards,

while maintaining the leadership position in the energy drinks category. Younger

consumers are confident to try it, because any health concerns were cleared by

organisations like the ISME. At the moment Red Bull has a very trendy image and

gets sold in a lot of bars and clubs, where it is often mixed with Vodka. One could

also add that they want to be highly efficient and profitable to the benefit of their

shareholders.

Market scope

Red Bull markets mainly just one product namely, the Red Bull energy drink. They

state in their mission that they want to maintain the leadership position in the energy

drinks category. Red Bull is perceived as a premium / high margin brand product.

Price wise, Red Bull is in a position in which it can command a premium price,

because there is simply nothing to compare it with. It is a unique functional drink,

promising and delivering benefits that no other drink can offer. The positioning policy

of the company is: premium product, premium price and premium profitability. The

company also focuses on the media through which it reaches its primary target

market, younger people in countries in which Red Bull is accepted as legal. Red Bull

uses a humorous and witty cartoon campaign, transferring the message that this


energy drink helps you to escape by ‘giving you wings’ and also sponsors sports-

and event-sponsoring like the Red Bull Air race. These campaigns focus on the

athlete or extreme sports supporting their image. Recently they have also introduced

a trendy affordable cell phone exclusively sold by cell c. They have also included

Sebastian Vettel (a famous race car driver) as a celebrity appeal in their cell phone

advert to transfer their dynamic image.

Guiding values

Red Bull explains that they focus on mutually beneficial and trusting relationships

with their suppliers and customers. This is in the best interest of long term growth

and profitability. They live up to their agreements and deal honestly with each other,

as employees and as partners. The business as a whole, recognises the intrinsic

worth and contributions of its customers, employees and suppliers – all of whom are

an integral part of their business. Red Bull also strives to create a culture where

employees share best practices dedicated to coaching and developing

our organisation as an employer of choice. Red Bull stands for not

only a stimulation drink but also a product that revitalises body and

mind. Keeping the target market in mind Red Bull sticks to a trendy

and dynamic image for example their cartoon advertisements, extreme

sports sponsoring and even the product packaging. Red Bull has a trendy

packaging in the form of a 250ml tin or glass bottle that can be recycled.

Core competencies:

Firstly, a core competency is to uphold Red Bull standards mentioned. Secondly,

maintaining the leadership position in the energy drinks category. Thirdly, providing

a trendy packaging in the form of a 250ml tin or glass bottle that can be recycled.

Fourthly, sponsorship of action sports. Fifthly, providing a sugar-free variant which

boosts sales even more. Sixthly, providing a premium product with a premium price

with premium profitability. Finally, providing superior customer service and building a

motivating company culture where employees can share and develop; and build

beneficial and trusting relationships with their supplier and customers.


2. AN ANALYSIS OF THE CURRENT EXTERNAL AND INTERNAL

SITUATION

2.1 An outside-in analysis

2.1.1 The general environment

South Africa (SA) has been a free trading economy since 1994 (ITRISA, 2008).

According to the Global Competitive Report (2010:39-40) South Africa was ranked

54th out of the 139 countries rated. This was down from the previous years’ ranking

of 45th due to improvements in other countries. The report highlights the positive SA

ranking on the improved scale of the economy (25th), intellectual property protection

(27th) and property rights (29th), accountability of private institutions (3rd), good market

efficiencies (40th), financial market development (9th), business sophistication (38th)

and innovation (44th), benefiting from good scientific research institutions (29 th) and

strong collaboration between universities and the business sector in innovation

(24th).

South Africa remains the highest ranked sub-Saharan Africa country but needs to

improve on some of its weaknesses to improve on its overall score. Labour market

inefficiencies, hiring and firing practices and a lack of flexibility in wage determination

by companies remain weak.

The PESTE model has been well researched by the likes of Kerin et al. (2006:72),

Sheehan (2009:2) and Coyle (2004) and is better illustrated with the following

diagram:

PICTURE 1: The PESTE model layout for Red Bull


Each driver will now be analysed in more detail focusing on Red Bull as a company.

Referring to specific elements and to what extent they have an influencing

subsistence to change decision making strategies of the future marketing direction.

TABLE 1: The PESTE model for Red Bull

Political Economical Social Technology Environmental

South Africa is a

democratic society

Economy in a growth

phase, growth forecast

below 5% in the short to

medium term

Confidence still declining

in the last 6 months

Potential factory

installation within SA,

specialised imports very

plausible

Going green = Brand

equity over the long run

Seasonal unrest, labour

strikes and disruptions

do exist

Inflation risks remain.

Administration costs

(electricity) on the

increase, toll tax

implementations and

increases

Black middle class have

increase in size. Rich

becomes richer, the

poor remain poor

Technology experts

locally and

internationally available

Consider regional

logistics, distribution

drivers and target

markets when building a

plant in SA

Unemployment remain a

concern, impacts on

social issues

Rand remain volatile Consumer spending

rising over the short to

medium term, subject to

other indicators

remaining positive

Financial backing on

manufacturing plant

should be fairly easily

obtained from SA banks

Recycling efforts will

produce tangible and

intangible benefits over

medium to long terms

2.1.2 The industry environment

Moore et al. (2008:77) describes that an enterprise can be be affected directly even

more than the general environment through Porter’s competitive forces. These are

listed and analysed below in context to Red Bull:

New competitors: New and upcoming products such as NOS, 911 and Play

can affect sales with elements such as price and quantity competition as well

as buyer preferences.

Substitute products: Other type of products also exist including a more

natural solution to fatigue like vitamin water or energy slabs.

Rivalry amoungst existing competitors: Due to Red Bull being first with its

ingredients which are more effective and potent as well as the fact that they

were the first in the product category provides a competitive advantage and

monopolistic power.

Selling power of suppliers: It is neccessary for Red Bull to always keep

track of supplier risks, since they use specific ingredients. These ingredients


have however become more readily available as the product type and

category grew.

Bargaining power of buyers: Since many energy drink users can choose a

large variety Red Bull needs to overcome this with their corporate image and

brand strategy to selling to loyal clients. Many users buy products which are

cheaper and contain more content like Play. Red Bull however has a dinamic

and energetic image with which buyers identify with.

2.2 An inside-out analysis

2.2.1 Analysing Red Bull’s internal competitive potential

a) Resources

Existing plants, equipment, machinery and labour form part of the growing dynamic

of the company. These tangible elements are ever growing and quantifiable. The

intangible elements like the brand image is uphold through guerrilla marketing efforts

with Red Bull cars driving around giving out promo items and consumers riding a bull

to win a can.

b) Capabilities

Methods to uphold the energetic image is the Red Bull air race and more recently

sponsoring the Grand Prix. Efforts to choose champions in the industry has been

extremely successful with Sebastian Vettel winning the Australian open Formula 1

and sponsoring a power boat which was put to the test on Top Gear (Rapport,

2011:21).

c) Core competencies:

upholding Red Bull standards;

maintaining the leadership position in the energy drinks category;

trendy packaging in the form of a 250ml tin or glass bottle that can be

recycled;

sponsorship of action sports;

a sugar-free variant boosts sales even more;

premium product;

premium price;


premium profitability;

superior customer service;

motivating company culture where employees can share and develop; and

beneficial and trusting relationships with their supplier and customers.

d) Strengths, Weaknesses, Opportunities and Threats (integrating the internal

and external)

Steyn (2007:92) proposes that one conduct a SWOT by combining internal and

external factors by means of a matrix as shown below. The SWOT analysis is a key

component of strategic planning process, accessing the organisation’s internal

strengths and weaknesses against its environmental opportunities and threats

(Kreitner and Kinicki, 2008:540).

TABLE 2: SWOT matrix for Red Bull

Internal factors

Strengths:

Strong Brand Equity Substantial Market Share Loyal Customer base Trendy Image

Weaknesses:

High logistics costs Profits linked to Exchange

rates High sunk cost (Marketing,

Advertising) Higher price than

competitors

External

factors

Opportunities:

Product diversification

Product expansion

Growth opportunities in

emerging markets

International

manufacturing

opportunities

1.Increase market share with

increased opportunities in

emerging markets through

being trendy.

2.Extend brand equity through

product diversification.

3.Expand product with a loyal

customer base.

4.Keep substantial market share

with international operations.

1.Overcome higher prices

than competitors with

product expansion and

diversification.

2.Sunk cost can provide

future growth in

emerging markets due to

a trendy image.

3.Manufacturing

internationally can

decrease exchange rate

risks.

4.High logistics costs can

be decreased with

decentralized production

in emerging markets.


Threats:

Large competitors market

Market entry easy for

sports drinks competitors

Sugar price spikes

Reputational scams on

product ingredients

1.A largely competitive market

can be managed with strong

brand equity.

2.Loyal customers buy even

when sugar prices spike.

3.Reputational scams can be

overthrown with a trendy

image.

4.Due to substantial market

share Red Bull can prevent

competitors from taking

advantage over the market.

1.There are large

competitors in the

market and logistics

costs are high.

2.Profits are linked to

exchange rates with

occasional spikes in

sugar prices.

3.Reputational scams

have a adverse effect on

sunk costs.

4.It’s easy for competitors

to penetrate the market,

because Red Bull is

more expensive.

3. A LITERATURE STUDY ON RED BULL’S MARKETS AND

CUSTOMERS

3.1 Market share

Wood (2008:69) explains that the market definition includes the potential market and

part of this is the available market, qualified available market, the target market and

penetrated market. Each market is herewith discussed.

Potential market

Wood (2008:69) states that the potential market includes all the customers that may

be interested in Red Bull.

Available market

As Red Bull’s core market matures, the company needs to broaden its appeal to the

mid-20 to 30 year olds, whilst retaining its appeal amongst 16-24s. Therefore it is

more likely that young people, who like to go out, fall for Red Bull.

The typical Red Bull drinker is any dynamic and active person.

Qualified available market


Research has shown that 53% of the people who drink energy drinks are within the

age between 14 – 34 years. The use of Red Bull helps to cope with the challenges

of every day life, which includes work, leisure and sports. Researchers also found

out that the main reason for purchasing energy / sport drinks were to quench thirst

and give boost. The Target market which is part of the qualified available market

includes those customers that Red Bull decided to serve:

Consumers are male and females regardless of age, who are very sporty or hard

working. Young professionals, rather than factory workers, as this younger segment

of the population are more affluent and more appreciative of a trendy marketing

campaign. Three main stereotyped users can be identified as the:

athlete (Red Bull is a very good way to improve his endurance or speed);

the worker (anyone who wants a boost or would rather like to have a Red Bull

than a coffee); and

the clubber (in recent years people found out that Red Bull can be used as a

very good mixer with alcohol).

Penetrated market

Red Bull has been used in Australia for 9 years and in Asia even for 30 years.

In 2007 Red Bull sold 4.9 billion cans in more than 150 different countries. Red Bull

gets exclusively produced in Austria from where it is exported to the various

countries. One would want to advise that it would not be very useful to restrict their

target market to the geographic areas or even to psychographic segmentation, since

for a product like Red Bull, it would be far to narrow, as it cuts across lifestyles,

demographic and socio-economic boundaries (BLOGSPOT, 2011:1).

3.2 Product demand

Product demand is largely driven by the type of market that Red Bull caters for or the

target market. Typically the energy drink market is focused on the sportsman or

people that work long uninterrupted hours. But research has shown that there is a


third and not necessarily planned for market that also boosts demand for Red Bull.

The social aspects of Red Bull, for example where it is also used is as a mix for

spirits at social events. Obviously the last category is not necessarily part of the

target market but it definitely forms part of the demand curve for Red Bull. One can

also buy high dose small shots you can buy from everyday stores e.g. CNA.

In a summarised form, demand is driven by the following market segments

Students and young individuals

Party animals and at social events.

Commercial drivers that drive for long periods

Athletes and sportsmen

Professionals with high workloads

Extreme sports (it gives you wings)

The reality is that the characteristics of the product is what drives demand and

creates the target market segment, these are typically increases in concentration,

alertness, reactiveness and endurance. But as mentioned in recent times its use in

combination with alcohol has also become a major driver and is boosting demand.

3.3 Consumer needs

This can be viewed as “how a consumer uses or applies the product to fulfil his

consumer needs”, this can be applied to individuals, groups or organizations. This

behaviour is usually influenced related to the product and from research it has shown

that most of the Red Bull users are motivated by its energy boosting attributes.


PICTURE 2: ACV Chain for Red Bull

From the ACV analysis done that there are various needs of the customer that need

to be satisfied by the product. It would appear that for most young people there is a

status connotation as well and this boosts self-esteem and image. It is also

interesting to note that the association and mixing with alcohol has also become a

critical need for the consumer. The customer needs can be summarized in three

distinct groups.

Energy requirements for sportsmen

People working long hours or through the night like students and

commercial drivers.

The social arena where it is used as a “mix” with alcoholic spirits.

It is also interesting to note that the distribution for price sensitivity is also mixed and

that half of the target market will be prices sensitive whereas the remainder will not

be.

3.4 Consumer perceptions and demographics

Realising the continuum between perceptions and claims, provides valuable

information in the case of Red Bull. Does it really make any difference at all or is it

purely a psychological perception of alertness and well-being after drinking an

energy drink? Research tried to establish exactly what behavioural effects energy


drinks have on consumers, specifically, on

their mood, concentration, reaction time,

alertness, endurance, physical performance,

and risk taking. The cognitive and

physiological effects after the consumption

of an energy drink in comparison to a

placebo resulted in significantly improved

performance on both secondary memory

and speed of attention (Scholey and Kennedy, 2004:327). It can therefore be

concluded that energy drinks indeed have a positive effect on consumers and that

consumers will continue to buy energy drinks for the benefits thereof, even though it

may sometimes be over-rated.

Athletes initially were the primary consumers of energy drinks. However, as the

energy drink market grew and expanded into various niche markets, athletes are no

longer the primary target. Today, the majority of energy drink users are target

segments of teenagers and young adults 18 to 34 years old due to this generation's

on-the-go lifestyle and receptiveness to advertisements for these types of products

(Lal, 2007:25).

3.5 Buying patterns

Red Bull's prime focus on their marketing in the USA and Europe has been through

sponsorship of extreme sports, for example BMX, skateboarding, F-1 racing and

extreme aeroplane sport. This campaign has been fairly standardised as it

successfully creates a brand characteristic of an extreme, modern, cool product.

Nothing works better in marketing than being the first brand of a specific category in

the mind. If anyone thinks of energy drink, Red Bull is in all probability the first name

that comes up.

Arlidge (2004:1) describes how Mateschitz, co-founder of Red Bull, managed to

create a youth-oriented 'underground' feel for Red Bull by deliberately restricting

supply and refusing to advertise. He pioneered the now commonplace practice of

'viral' marketing - paying students, DJs and young opinion formers to host parties

where the drink was served. The young of Austria caught the bug and, by the time


PICTURE 3: Mateschitz, co-founder of Red Bull

the drink was launched in Germany in the early 1990s, it was so popular it sold out

within days. The need for the product was created before it was actually available on

the shelves, thereby not only manipulating and creating consumer buying patterns,

but also selecting a specific consumer segment.

Consumer buying patterns and interest also differs from continent to continent. When

Red Bull was launched in Europe, they used a small, thin can which worked very

well as it generated a perception of quality etc. However, when Red Bull set their

target on the United States, the American consumers did not initially like the small,

thin cans, because they preferred drinks in bigger cans. Coca Cola for example

marketed their energy drinks in 500 ml cans and consequently Red Bull adapted

their packaging to suit their consumers’ need of a larger can.

Austin (2011:1) also claims that a big reason for Red Bull’s popularity is because of

the mystery and potential dangers associated with it. College kids, clubbers, and

extreme sports enthusiasts dominate the energy drink market due to the fact that

most people in these demographics love the thrill of danger. Austin further states that

Red Bull panders to that emotion unabashedly by explicitly stating that consumers

should not drink more than three cans a day.

3.6 Consumer satisfaction

As a basic prerequisite for consumer satisfaction one would expect that a popular

energy drink such as Red Bull will be at least a palatable product. People’s reaction

was found to be quite the opposite of what was expected when they conveyed their

opinions on Red Bull’s taste. In her article, Scott (2011:1) describes the taste of Red

Bull as anything from "crushed up baby aspirin" to "bad Kool-Aid with fresh lime

juice." She concludes that Red Bull is a functional drink, not a palate pleaser. Its aim

is to energize and people talk of "using" Red Bull, rather than "drinking" it.

Austin (2011:1) describes the taste as distinctive and on trying Red Bull for the first

time; he thought he was drinking carbonated cough syrup. He is of opinion that

regardless of what you compare it to, the fact is, it takes some getting used to. His

conclusion is that you don't drink it for the flavour; you drink it for the buzz or the

energy.

The above two cases are but a few examples of consumers’ reaction to the taste of

Red Bull. Interestingly enough it quickly becomes evident that the taste is not of


primary importance. What is important though, are the benefits derived (i.e. added

energy) as well as the image of being a Red Bull consumer. Red Bull has carefully

crafted a certain image in the market and successfully managed to create a cult of

followers. In the end the product itself is not of real importance, but being part of the

whole Red Bull image gives rise to the ultimate in customer satisfaction.

4. SEGMENTATION, TARGETING AND POSITIONING

4.1 Market segmentation (determining the market)

CONSUMER CHARACTERISTICS

Demographic Socioeconomic

Between 14 – 34

Any family size

Male or female

Married or unmarried

Medium to high income

Middle or upper class

Vocation- High school, students,

sportsmen, clubbers etc.

Education- high school, students or busy

working individuals.

Any religion

Chinese culture, young people open to try

new ideas.

Geographic Lifestyle/Personality

Warm climate, but also cold for alcoholic

drinks.

Marketed worldwide

Mostly urban users

Open to try new products/ideas

Interested in sports, working, active and

dynamic as well as interested in extreme

sports.

Hobbies like bungee-jumping, paragliding,

parachuting etc.

Quench thirst or give boost

PRODUCT-RELATED APPROACHES

User types Price sensitivity

Regular- revitalise energy or mixed with

vodka.

Non-users are typically older individuals

sticking to what they know.

Potential users want to try something new,

something that has an energetic and

Normally priced according to competition.

People are more concerned with product

benefit and product image, although the

product should not be too expensive.


dynamic image.

First-time users must like the energetic and

dynamic image associated with the brand

to motivate brand loyalty.

Consumption patterns/usage frequency Perceived benefits

Medium- once or twice a week for working

people who are tired and need

revitalisation of body and mind.

Strong consumption- athletes who want to

improve their performance.

Image- being seen with the product makes

people think you are busy or active.

Quality- dynamic package and working

ingredients.

Drinking Red Bull revitalises body and

mind to go on further.

Brand loyalty Media exposure

Satisfied users- those users who feel

revitalised after drinking Red Bull and will

buy the product regularly.

Experimenters- young individuals open to

new ideas.

A humorous and witty cartoon campaign,

transferring the message that this energy drink

helps you to escape by ‘giving you wings’ and

also sponsors sports- and event-sponsoring like

the Red Bull Air race. These campaigns focus

on the athlete or extreme sports supporting their

image.

Purchase occasion Application

At sports and extreme sports events, at the

gym, on the way to work or at the local food

store or take-away outlet.

When you feel tired, out of energy or just

need a little boost to kick off the day or

improve your performance you can

quickly drink a Red Bull.

When you go out and buy a drink Red Bull

can be mixed with alcohol.

4.2 Targeting and positioning approach

Working individuals

e.g. factory workers

Young to Middle aged-

more dynamic

Thirsty for a soft

drink

Opportunity (10) 6 8 4

Environment (10) 5 7 6

Reach and response (10) 7 7 5

Internal considerations

(10)

5 4 7

Total score 23 26 22


Out of the above tables it becomes relevant that it is most profitable for Red Bull to

target a younger market which is active and are willing to try new things. Therefore

Red Bull is using concentrated marketing, targeting this segment with one marketing

mix. The idea of this marketing is to compete more effectively and more efficiently

by understanding one set of customers (Wood 2008:108).

With marketing strategies like these the product is immediately identified for its

purpose with an exclusive image for the relevant segment (young to middle aged-

more dynamic and active people).

Marketing the product for younger people must be alternative and trendy with an

extreme image, as can be applied by sponsoring extreme sports like motor sports or

even a trendy cartoon advertisement.

5. MARKETING PLAN OBJECTIVES AND DIRECTION OF

RED BULL

Red Bull needs to decide in its marketing plan direction whether it would like to grow,

maintain or retrench their market. If one looks at their mission statement and

marketing strategy it is clear that they are implementing a market maintenance

strategy.

Maintenance strategy (non-growth)

According to Wood (2008:124) maintenance strategies include three main

categories, namely sustain current revenues or market share, wring short term

profits for existing product markets and prepare for future growth.

Herewith follows the discussion of each strategy:

Maintain short term profits

Market extreme sports events to be able to retain new young, active or

interested consumers.

Advertise interactive witty cartoons to more clearly illustrate the purpose of Red

Bull and create further brand awareness.

Diversify the product by adding a sugar-free variant.


Writing short term profits

As a single product firm, Red Bull has to ensure that sales of the drink are

maintained through effective marketing or product extension strategies. Red Bull’s

marketing strategy, including the sponsorship of such action sports, must be

working. The brand hasn’t needed to change direction in either its formula or

packaging.

Prepare for growth

As the only product change the brand has made since it launched, is the introduction

of a sugar-free variant, which did boost sales, one would like to give them the

following advice for future growth:

Expand Red Bull into new countries (Red Bull Mobile is a good example).

Sponsor bigger sporting events or even buy sports teams e.g. they recently bough

Jaguar’s F1 team.

Tailor the marketing for new uses, e.g. mix with alcoholic drinks.

6. MARKETING STRATEGIES, PROGRAMMES AND SUPPORT

6.1 Product offerings

According to Anon (2011:1), within marketing, product differentiation is process of

distinguishing a product or offering from others, to make it more attractive to a

particular target market. This involves differentiating it from competitors’ products as

well as a firm's own product offerings.

Differentiation can be a source of competitive advantage. Marketing or product

differentiation is the process of describing the differences between products or

services, or the resulting list of differences. This is done in order to demonstrate the

unique aspects of a firm's product and create a sense of value. The term unique

selling proposition refers to advertising to communicate a product's differentiation.

In economics, successful product differentiation leads to monopolistic competition

and is inconsistent with the conditions for perfect competition, which include the


http://en.wikipedia.org/wiki/Perfect_competition

http://en.wikipedia.org/wiki/Monopolistic_competition

http://en.wikipedia.org/wiki/Economics

http://en.wikipedia.org/wiki/Unique_selling_proposition

http://en.wikipedia.org/wiki/Unique_selling_proposition

http://en.wikipedia.org/wiki/Competition

http://en.wikipedia.org/wiki/Target_market

http://en.wikipedia.org/wiki/Product_(business)

requirement that the products of competing firms should be perfect substitutes. The

brand differences are usually minor, they can be merely a difference in packaging or

an advertising theme. The physical product need not change, but it could.

Differentiation is due to buyers perceiving a difference, hence causes of

differentiation.

Red Bull is a sweet, caffeinated drink to give customer the high energy. Red Bull

built up cognized brand, a different product that competitors cannot offer and Red

Bull became new category of soft drinks. All soft drinks is solving hungry but Red

Bull is the first soft drink that is very progressive because Red Bull are innovative

and creative product for new generation and Red Bull is a New Age Product, it does

not only provide basic usefulness but also increased capacity to body.

Furthermore Red Bull is only one product of the world that is not provide only fresh to

body and mind but also energy, detoxification, stimulating digestion and increased

remembrance. Nowadays Red Bull was produced to sell average 900-1,000 million

cans around the world and Red Bull is very popular energy drink and energy drink

market leader of the world. (Anon, 2011:1)

Many marketers believe that a larger product equal greater value and many people

will buy it. In contrast Red Bull is maintaining product size, but creating multi packs

instead. Also Red Bull's opposing argument is more strong business decision rather

than a marketing construction and they are strongly leveraging positive brand equity

and asking customers "if you want more, buy more". So this is red Bull’s multi-pack

strategy. (Anon, 2011:1).

6.2 Channel and logistics

According to Abram (2001:1) Red Bull has chosen to stick with its one product

beverage line, avoiding branching out into similar areas such as energy bars or other

sports-related products. In addition to conventional advertising (TV, radio), the

company also maintains its liquid-adrenaline image by sponsoring 138 athletes in

such X-Game disciplines as BMX, motocross, hang-gliding, skateboarding,

wakeboarding and bungee jumping.


http://en.wikipedia.org/wiki/Advertising

http://en.wikipedia.org/wiki/Packaging

http://en.wikipedia.org/wiki/Substitute_good

Red Bull has also made sponsorship forays into the rave scene, where it is the

dominant brand in the market for what are known as well drinks. Due to its growing

association with alcohol and partying, Red Bull has acquired the reputation as an

over-the-counter liquid narcotic. While this association produces sales, it also draws

the attention of those who make a mission of lambasting such mind-altering

substances. Officials in both Ireland and the US have, on occasion, banned energy

drinks, including Red Bull by name, following several accidents in which energy

drinks were suspected. However, the more Red Bull is associated with danger, the

more its popularity grows. (Abram, 2001:2)

Red Bull knows the corporate drill. At its website (redbull.com), an enormous amount

of content is dedicated to dispelling (unpleasant) myths and criticisms associated

with its product. Red Bull even includes a comic segue addressing the popular urban

myth that its product is made from bull testicles. For now, Red Bull’s market

dominance seems assured. No other competitors have either the distribution

channels or, more importantly, the posture of rebellious infamy to be considered real

threats. However, it would only take one or two public catastrophes such as the

publicly-lamented deaths of the teenagers who used the health supplement creatine

to send Red Bull’s legitimacy into a downward spiral. Then again, alcoholic mixers,

regardless of the dangers involved, never really go out of style until they are

forcefully removed from store shelves (Abram, 2001:3).

According to Kenneth (2001:1) The company’s constant battle plan has been to

"open up" a market by securing unusual distribution. Typically distributors will deliver

a number of brands; a Pepsi house will handle Pepsi, Diet Pepsi and Mountain Dew,

and may even pick up a non-competing rival like Dr Pepper. But as the drink caught

on, the company began taking a more narrow approach.

While Red Bull relies heavily on bars and night clubs for its sampling events,

alternative sports have also proven to be a successful product-trial arena. The

company underwrites a number of extreme sports competitions and sponsors.

The brand is to achieve an effective channel of direct distribution to its most

important customers – young people and athletes. To do that, Red Bull relies on two


different approaches. First, it organizes and manages events in cities, where the

company distributes the drink to skaters, ice skaters and so forth. There are always

brochures that explain the product and a person who answers questions. Second,

Red Bull dispatches promotional teams in cars, specially painted with the company

logo to beaches, public squares, exhibitions, and meetings where young people

congregate. The teams then give away free samples of Red Bull (Anon, 2004:1).

6.3 Pricing decisions

In Red bull’s case the price of is more than R 2.00 than the other competitors (V and

Mother). This tells us what they think about their target market specifically. The price

tells us that the target market has characterised the product as one that signifies

prominence and status i.e. the market has characterised the product to their degree

of prestige sensitivity.

They are an example of non-price competition. A major advantage of non-price

competition is that Red bull builds customer loyalty, again catering the needs of their

target market that will purchase the product again for the benefits. This method

ensures that the product has a superior quality compared to its competitors and

hence will act on the consumer’s thought process as they use the price quality

association.

6.4 Integrated Marketing Communication

Duncan (2002:8) explains Integrated Marketing Communication (IMC) as a process

for managing the customer relationships that drive brand value. More specifically, it

is a cross-functional process for creating and nourishing profitable relationships with

customers and other stakeholders by strategically controlling or influencing al

messages sent to these groups and encouraging data-driven, purposeful dialogue

with them.

IMC is an important element in any marketing strategy. Marketing communication is

the interactive dialogue between customers and the company. Red Bull uses various

marketing communication mix elements to push it through the market. Some of the

major modes of communication that is used are advertising, sales promotions, public

relations and personal selling. Having a good distribution system with well-trained

sales people who have good customer relation skills is a must.


Red Bull’s marketers have a good integrated marketing strategy because they have

a good product, presented to the right market at the right time using the right

procedures. For instance they had a clear audience in mind because they had

produced an energy drink, the target audience was a group of people who used a lot

of energy and hence needed more. This is why they decided to target youth and

people in their late teens.

7. MEASURING RED BULL’S PROGRESS AND PERFORMANCE

Red Bull follows a global marketing standardisation philosophy in selling its main

product, and this has increased Red Bull’s global brand recognition. Red Bull has

conquered and currently owns the energy drink market in Europe and the United

States of America (Red Bull BlogSpot, 2011).

The global energy drink market is worth $6bn (5 billion litres sold in 2008) and is

growing (Imrie, 2009). The industry has trebled in size since 2001. Red Bull

dominates with market share of close to two thirds in South Africa.

When Dietrich Mateschitz launched Red Bull in Austria in 1987, he wrote a new

chapter in marketing history. He did not only create a beverage category, but a

global cult drink. Sales equalled $ 1.3 billion during 2001 (Euro 1.4 billion). 35% of

turnover (Euro 400 million in 2001) is ploughed into marketing, sponsoring extreme

sports events that fit the Red Bull image, from soapbox races to Formula One motor

racing. (ANON, 2002:88).


PICTURE 4: Main industry competitors

From a sales perspective, sales have doubled in Austria - the birth town of Red Bull,

from year to year. The biggest sales volume boost is via international expansion.

With Dietrich’s passion for snowboarding and motocross he is an unusual figure.

Nurturing the Red Bull brand image is the key to remain the market leader in the

energy drinks business. During 2001, Coca-Cola, PepsiCo and Annheuser-Busch

each launched an energy drink, attempting to get a slice of the market, in which Red

Bull had a 70% - 90% market share. Mr. Mateschitz is not worried – “The market is

not generic – it does not exist if we do not create it. It is a branded market” he says

(ANON, 2002:88).

7.1 Applying PESTE to performance

a) Political environment

Lamp-posts are being bombarded with posters of elected candidates and the verbal

jousts and point-scoring between parties are well underway as everyone prepares

municipal elections in May (News Update, 2011). South African political environment

is fairly stable in the last year with declining strikes on service delivery unhappiness.

PICTURE 5: Major service delivery protests 2011

(Source: Municipal statistics)

Earlier in the year, the nation was addressed by the President and he explicitly

promised that unemployment will be reduced substantially in the coming years, but


asked both public and private sectors to assist in this target by investing in South

Africa (therefore, potentially Red Bull). At the moment the playing field in Africa is

level, in the sense that countries participate under World Trade Organisations rules

(Kruger, 2010).

b) Economic environment

Expanding current markets and increasing market share within new ones is complex

to plan, outcomes are difficult to predict and risk taking is part of the process. One

should see the opportunities in volatile markets and be innovative in uncertain times.

Within the SA economy it is growing at a better than expected pace (4.4%)

annualised GDP rate was reported in the last quarter of 2010. Inflation remains

within the target range of 3-6% set by the Reserve Bank (Marcus, 2011). Global

inflation risks have also increased; particularly in the emerging market economies

with a number of them tighten their monetary policies in recent months.

The Rand has seen its volatility (R6.91 on Friday, 18 March, compared to R7.20 on

Tuesday, 22 March) in the past few weeks with uncertainties over political violence in

Libya, the recent natural disaster earthquakes in Japan and oil prices hitting the

$115 philological level in the past week relating to political risk within international

trade with developing countries (ITRISA, 2008).

South Africa has been a free trade country since 1994 and encourages international

corporations to invest and expand operations within its borders. Internationally large

corporations (like Wall-Mart) have invested time and money to understand the SA

market. South Africa is the gateway to Africa and it is fare to speculate that these

companies are testing the waters within South Africa to expand into Africa.

Uncertainty however in global markets does make investors more vigilant on risk

taking.


PICTURE 5: Red Bull’s Current Market Share

Red Bull, which accounts for 38,3 percent of market (with a decline of market share,

yet sales increased significantly) of the category’s sales, rebounded from the

previous year by growing sales 7.8% to $2.1 billion for the year ending 13 June

2010. In 2009 the category was flat versus the prior year, due to decline in foot

traffic in the convenience channel, the heartland of the energy category, as well as a

decline in discretionary spending in the grocery channel. 2010 has seen the

category return to growth and the trend is improving too. Red Bull’s market share

was somewhat lost to Monster and Rockstar which have used value pricing and

partnerships with Coca-Cola and PepsiCo, respectively to improve marketing and

distribution (ANON, 2010:3).

c) Social environment

Consumer confidence is at its lowest level since 2004, according to an

index released on Thursday (Citizen, 2011). This is the fifth consecutive decline in

consumer confidence since January 2009 and is the lowest score recorded since the

survey was first conducted in 2004, according to MasterCard Worldwide (2011) on

the release of its Index of Consumer Confidence.

Released twice a year, it is based on a survey which measures consumer

confidence on expectations in the market for the next six months based on five


indicators: economy, employment, stock market, regular income and quality of life.

The latest score is 54.7 (above 50 and still in the optimistic range), with is down from

58.6 six months ago.

This measurement is a good indication of overall perceptions of general consumers

and the public at large on the short term economic and the social environment

people are living in.

The combination of an economic downturn and aggressive pricing, promotion and

marketing strategies (which isn’t always accepted by consumers) by beverage

companies in other categories, such as carbonated soft drinks, has been a recipe for

slowing growth rate for energy drinks, says Tom Mahike (president of Crunk Energy

Drinks, Roswell, GA).

d) Technology environment

i) Packages

A major trend has been the proliferation of package sizes, including large packs and

multipacks. In April 2010, Red Bull launched its largest package to date, a 19.2

ounce Red Bull Racing Team Special Edition can that retails for $4.49 per unit. Red

Bull now offers its product in 8.4-, 12-, 16- and 19.2 – ounce cans. (ANON, 2010:3)

ii) Guerrilla marketing with technology and by other means

Red Bull has also extended its digital marketing strategy by becoming the first

advertiser on PlayStation Home, the new virtual world for Sony PS3 (PlayStation 3)

gamers. This allows PS3 gamers to interact, communicate and share gaming

experiences. The initiative marks the latest phase in Red Bull’s digital strategy,

which has seen it launch a series of innovative online advertising campaigns during

2008. Red Bull is set to boost its digital spend during 2009; having invested less than

£ 50 000 of its total £7, 6 million media budget online ever the past 12 months (Anon,

2009:1).

iii) Trend innovation

It takes lots of marketing to sustain the illusion of a non-marketed brand. Currently,

Red Bull is sponsoring the F1 Show car event at the Killarney Race Track in Table

View, Cape Town on the 27th of March 2011. What Red Bull proved was that mass


marketing was not the most effective way to reach and keep customers (Anon,

2002:88). For this reason, Red Bull has initially used Guerrilla Marketing to best

effect. Hit if you can win, but run if you can’t. By using Guerrilla Marketing, Red Bull

established a brand through sponsoring sports events and building brand

communities. However initially, as a small start up, Red Bull could not afford to

sponsor mainstream events. Red Bull started off by sponsoring events like Squad

Driving and Base Jumping. Red Bull produced its own film material and offered it to

the media channels. Broadcasters welcomed the free material. Today, Red Bull

creates sport events, air races, extreme windsurfing and so forth (Baltes and Leibing,

2008:9).

Broadcasters welcomed the free material, and Red Bull got what it wanted – media

presence in prime time – that which it could not otherwise afford. Today, Red Bull

creates sport events, air races, extreme windsurfing and so forth (Baltes and Leibing,

2008:9). Currently, Red Bull is sponsoring the F1 Show car event at the Killarney

Race Track in Table View, Cape Town on the 27th of March 2011.

e) Environmental environment

The environment has become a hot topic at international conferences. Everyone is

going green in different shapes and sizes. Companies are considering and even

implementing new ways of doing business, reducing their carbon footprint by

optimising processes and following a recycle, re-use, recycle philosophy. The

manufacturing industry has been a large contributor of carbon emissions and can do

so much more to right the wrongs of the past by making small changes.

The challenge remains in that Red Bull’s first generation of users is growing older.

The future marketing strategy of Red Bull incorporates to get a new generation of 16

year olds on board every year (Anon, 2002:88). Red Bull's success as an energy

drink company is that it has mastered the art of understanding its targeted

consumers' behaviour and decision making and establishing a consumer profile.

This segment is increasingly aware and question everything (Generation Y and Z),

which when taking ‘going green’ initiatives into account, makes the strategy

extremely effective as described by (Schiffman and Kanuk, 2009:48) for age as a

demographic segmentation.


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