Strategic Recommendations for Red Bull

Strategic Recommendations for Red Bull Keeping the Red Bull Flying - Strategic Recommendations to Build  the Brand and Drive Revenue Growth Since its launch in 1995 in Austria, Red Bull has, in essence, created the hip and fashionable category of â€Å"functional energy drinks†. Its marketing program has been the epitome of â€Å"buzz† marketing in which pull strategies are utilized to expand product distribution methodically on a global scale. The promotion of Red Bull has been pure and focused on the elements of the product: the distinctive silver and blue 250mL can, the singular marketplace offering, the unique logo and underlying mantra â€Å"Energy Drink† followed by a campaign of selective introduction to the particularly â€Å"cool† consumers via sampling and endorsement by personalities synonymous with the brand personality of the product. Judging by results alone, the remarkably consistent (albeit with the notable inconsistency of the United Kingdom product introduction) marketing plan has been a tremendous success as evidenced by the entrance of so many â€Å"me-too† products. Despite the entry of the â€Å"big dogs† (i.e., Coca-Cola, Pepsi, et al), Red Bull had managed to achieve sales of near $1billion by the end of 2001. The success of the bran is also evident by the exorbitant price premium that consumer are willing to pay ($1.99 $3.00) for just 8.3 fluid ounces of product that was until recently, only available in a single serving (initial offering of 4- packs retained the pricing per ounce of the single serving size). The targeted audience for this product is, â€Å"anyone†¦ who is fatigued [mentally or physically].† Despite this shotgun approach, penetration is far deeper in younger demographics, especially the 14-19 groups (65% in Austria, 28% in the UK). A large part of the product’s continuing success is the uniform consistency of the brand image as it is positioned in each market. Competing on the basis of a premium product consumable by anyone with the universal need to reduce fatigue, the product has taken first-mover advantage and remained on top by the maintenance of a premium product that fulfills a ‘commoditized-niche’ need of the consumer. In terms of the Red Bull’s competitive position, the emergence of the category and the success of Red Bull has created a highly competitive field of me-too and novel products. Despite this competition, Red Bull remains a large but niche product that has become a powerful â€Å"original† brand. Threats to their market position include the wake of new and existing products from companies with deep pockets, extensive distribution networks and substantial marketing prowess – some of the 75% (in the UK) market share will be lost (Choeke 2005, p.3; Clark 2005; Euromonitor 2005, p. 3). The opportunities that Red Bull has are a direct result of their weaknesses: a single product made in a single location. This is the epitome of the clichà © that warns against putting all one’s eggs into a single basket. As a consequence, Red Bull places a strong emphasis on conservative inventory strategies by having 45 – 60 days of products at distribution centers (in the US) (Modern Materials Handling 2005), p. 11). While the emphasis on being at the shelf is admirable, this represents a significant (up to almost 17%) of ones annual volume sitting around – 17% of one’s annual revenue tied up in accounts receivables. To continue to build upon this success, it is recommended that Red Bull consider a two-fold strategy. First, there is considerable equity in the brand and the beverage that can be leveraged significantly in a brand extension of a product such as an ‘energy bar’. The key risk of this strategy is that the pure, singular product offering of today will be diluted. Despite this risk, the extension of what Red Bull actually represents does not necessarily dilute but can likely reinforce the idea that the brand of Red Bull represents, â€Å"what you consume [not just drink] when you are fatigued† versus the more restricted â€Å"drink† cateogory. By redefining the frame-of-reference, the category can be effectively extended and a like-branded product such as â€Å"Red Bull Solid Fuel† can effectively capture money left on the table while presenting minimal risks for damaging the current substantial brand equity of the beverage product alone. This brand exte nsion is compatible with the spirit of the current product, a key factor in the likelihood of consumers accepting and even embracing an additional product (Yeung Wyer 2005, p. 495). An alternative to â€Å"SolidFuel† is an additional beverage such as a sports drink. While this is a legitimate possibility, the risk of brand dilution is greater as both products are beverages though intended for different consumers. SolidFuel is a different but related category that seeks to gain a larger share of wallet though not necessarily expanding the existing customer base. This product will complement rather than potentially compete with the original Red Bull product and utilize the paradigm of a â€Å"branded house† rather than a house of [potentially competing] brands (Aaker Joachimsthaler 2000, p. 9), In addition to efforts to grow revenues through brand extensions, an additional recommendation alluded to earlier, it that Red Bull should expand production from solely Austrailia to a site in Europe and North America. By having a single facility to product product for a globe, unnecessary costs are being built into the supply chain. In addition to being forced to produce, manage, move and store massive quantities of material, there is the presence of a great deal of risk if something should happen. With but a few additional sites, risk can be virtually eliminated and distribution and holding costs significantly reduced. To address the concern of the fact that Red Bull is perceived to be a niche’ product, it is recommended that a action be taken to build brand awareness and specifically to penetrate both deeper and in additional demographic segments, it is recommended that Red Bull develop mass media advertisements such as television spots. These clips should feature a key â€Å"fatigue driver†. By this, it is meant that activities besides extreme physical exertion should be utilized such as: A long road-trip – This should feature a middle-aged, yet well-groomed commercial truck driver that focuses on a route map. This map should prominently feature a long line which traverses several states. Further, this individual should eschew coffee, instead, he should be shown enthusiastically consuming a Red Bull . A series of ‘relentless’ meetings – This clip should show a clock indicating an early hour and a business meeting ‘in progress’ that, according to the clock, keeps going. Similar to the above example, the shot should demonstrate that Red Bull is an attractive alternive or substitute for coffee and could also play upon the feature s of consistent quality of Red Bull (versus the variance of a secretary’s coffee making skill). A grueling school assignment – The obvious shot would include a study group at a late hour†¦ just beginning to study for a major test of solve a lengthy problem. Of course, Red Bull is there. Each of the above scenarios are representative of mental or physical fatigue and the â€Å"break-through† that can be attained by the key benefits and attribute of the Red Bull product. These also particularly lend themselves both to brand extension and extensions of the current ‘most likely to use’ demographic segment. In summary, Red Bull has seen seemingly indefatigable success of a single product. By taking steps to simultaneously launch â€Å"SolidFuel†, the result will be the success that is achieved simply by meeting the already expressed needs and desires of the marketing with a product that is positioned to leverage the current awareness, recognition, and image of the current product. As this strategy entails the creation of a category-extension, there is minimal risk of the dilution of the powerful core brand value and the image that is currently held. Further, to maintain and even build the markets for these products, Red Bull should move away from the successful cartoon-type advertisements and focus on the â€Å"next thing† for a fickle consumer mass. This advertising should be of an experiential nature that focuses on situation in which Red Bull [products] can be utilized for a key benefit while each advertisement â€Å"closes† with a central brand reinforcing image such as the Red Bull logo. Works Consulted Aaker, D., and Joachimsthaler, E. (2000, Summer). â€Å"The Brand Relationship Spectrum: The Key to the Brand Architecture Challenge†. California Management Review, (42)4, pp. 8-23. Choeke, M. (2005, October 11). â€Å"Coke Eyes Red Bull with Launch of Still Energy Drink†. Marketing Week. October 11, 2005 edition. Clark, N. (2005, December). â€Å"Coca-Cola adds Taurine to Product†. Marketing, December 14, 2005 edition. Euromonitor. (2005, December). â€Å"UK Market for Functional Drinks†. Euromonitor – Market Research Monitor. Accessed online March 9, 2006. Modern Materials Handling. (2005, December). â€Å"How Red Bull Puts a Charge in It’s Supply Chain†. Modern Materials Handling, p. 11. Yeung, C., and Wyers, R. (2005, November). â€Å"Does Loving a Product Mean Loving Its Products? The Role of Brand-Elicited Affect in Brand Extension Evaluations†. Journal of Marketing Research (42), pp. 495-506.