Marketing

Management

R e d PBSB
B u l812
l

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
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.

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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

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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

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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

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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

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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.

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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

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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 Economy in a growth Confidence still declining Potential factory Going green = Brand
democratic society phase, growth forecast in the last 6 months installation within SA, equity over the long run
below 5% in the short to specialised imports very
medium term plausible
Seasonal unrest, labour Inflation risks remain. Black middle class have Technology experts Consider regional
strikes and disruptions Administration costs increase in size. Rich locally and logistics, distribution
do exist (electricity) on the becomes richer, the internationally available drivers and target
increase, toll tax poor remain poor markets when building a
implementations and plant in SA
increases
Unemployment remain a Rand remain volatile Consumer spending Financial backing on Recycling efforts will
concern, impacts on rising over the short to manufacturing plant produce tangible and
social issues medium term, subject to should be fairly easily intangible benefits over
other indicators obtained from SA banks medium to long terms
remaining positive

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

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 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;

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 • 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: Weaknesses:
• Strong Brand Equity • High logistics costs
• Substantial Market Share • Profits linked to Exchange
• Loyal Customer base rates
• Trendy Image • High sunk cost (Marketing,
Advertising)
• Higher price than
competitors
External Opportunities: 1. Increase market share 1.Overcome higher prices
than competitors with
factors • Product diversification with increased opportunities in
product expansion and
emerging markets through
• Product expansion diversification.
being trendy.
• Growth opportunities in 2.Sunk cost can provide
2.Extend brand equity through
emerging markets future growth in
product diversification.
• International emerging markets due to
3.Expand product with a loyal
manufacturing a trendy image.
customer base.
opportunities 3.Manufacturing
4.Keep substantial market share
internationally can
with international operations.
decrease exchange rate
risks.
4.High logistics costs can
be decreased with
decentralized production
in emerging markets.

Threats: 1.A largely competitive market 1.There are large

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 • Large competitors market can be managed with strong competitors in the
• Market entry easy for brand equity. market and logistics
sports drinks competitors 2.Loyal customers buy even costs are high.

• Sugar price spikes when sugar prices spike. 2.Profits are linked to

• Reputational scams on 3. Reputational scams can exchange rates with

product ingredients occasional spikes in

be overthrown with a trendy
sugar prices.
image.
3.Reputational scams
4.Due to substantial market
have a adverse effect on
share Red Bull can prevent
sunk costs.
competitors from taking
4.It’s easy for competitors
advantage over the market.
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

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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

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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.

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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

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 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
PICTURE 3: Mateschitz, co-founder of Red Bull
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

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

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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 • Medium to high income
• Any family size • Middle or upper class
• Male or female • Vocation- High school, students,
• Married or unmarried 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 • Open to try new products/ideas
drinks. • Interested in sports, working, active and
• Marketed worldwide dynamic as well as interested in extreme
• Mostly urban users sports.
• Hobbies like bungee-jumping, paragliding,
parachuting etc.
• Quench thirst or give boost

PRODUCT-RELATED APPROACHES
User types
• 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
Price sensitivity
• Normally priced according to competition.
• People are more concerned with product
benefit and product image, although the
product should not be too expensive.

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 dynamic image.
• First-time users must like the energetic and
dynamic image associated with the brand
to motivate brand loyalty.
Consumption patterns/usage frequency
• 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.
Brand loyalty
• Satisfied users- those users who feel
revitalised after drinking Red Bull and will
buy the product regularly.
• Experimenters- young individuals open to
new ideas.
Purchase occasion
At sports and extreme sports events, at the
gym, on the way to work or at the local food
store or take-away outlet.
Perceived benefits
• 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.
Media exposure
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.
Application
• 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 Young to Middle aged- Thirsty for a soft
e.g. factory workers more dynamic drink
Opportunity (10) 6 8 4
Environment (10) 5 7 6
Reach and response (10) 7 7 5
Internal considerations 5 4 7
(10)
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).

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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

Marketing Management PBSB 812 Page 20

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
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.

Marketing Management PBSB 812 Page 21

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.

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

Marketing Management PBSB 812 Page 22

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).

Marketing Management PBSB 812 Page 23

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.

Marketing Management PBSB 812 Page 24

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

Marketing Management PBSB 812 Page 25

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.
Marketing Management PBSB 812 Page 26
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

Marketing Management PBSB 812 Page 27

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

Marketing Management PBSB 812 Page 28

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.

Marketing Management PBSB 812 Page 29

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.

Marketing Management PBSB 812 Page 30

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