Target Market: Red Bull - Dissertation Example

Target Market: Red Bull 1.0 Situation Analysis This section describes the current situation of Red Bull, a global energy drink brand, in relation to current marketing strategy, target market characteristics, and the environment in which the brand currently operates. The location of proposed operations, Singapore, will also be discussed. 1.1 Current Marketing Mix Red Bull has a well developed 4P’s strategy related to product, pricing, place and promotion. 1.1.1 Current Product Red Bull energy drink provides a low calorie, low fat substitute for other marketed energy supplements that makes this product appealing to a wide variety of different demographics across the globe. In a convenient drink, consumers can satisfy their health-conscious attitudes and also achieve a boost of energy in the workplace, during sports activities, or simply as a refreshing non-alcoholic beverage. The product, referring to the original brand, offers only 12 calories per drink with zero fat content and only 3.1 grams of carbohydrates (drinksmixer.com 2010). Red Bull’s advantage is that it has no specific consumer group that purchases it, just those who have accepted the brand as rather cool and hip and need energy for their daily lifestyle needs. It is not a high involvement decision making process. The product’s packaging is unique at the aesthetic level, a “slinky 8-3-OZ can” for the light beverage consumer (Hein 2001, 1). This volume strategy has brought the brand a higher volume of drinkers who need light refreshment and appreciate the design parameters of the packaging. Red Bull’s brand strategy has given it considerable brand awareness and, in some markets, brand preference for its intensive marketing campaigns. Therefore, consumers seem to actively pursue to the brand as their favourite choice of energy drink and, because of its affordable price in most market groups, makes it a best seller. There are many competitors in this market, which will be described in more detail in this report, thus consumers are likely willing to accept substitutes based on price and effective competitive marketing strategies. 1.1.2 Current Pricing Red Bull has managed to appeal to youth markets and broad mass markets, giving it a well-known brand reputation. This has given them the unique advantage to utilize premium pricing strategies as the drink that currently holds 65 percent of market share worldwide (Patterson 2009, 1). In the United States, pricing for a 4-pack is $5.89 and a 12-pack for $19.99 (Marco 2008). In certain markets, this represents a premium of .50 to $1.00 per can that consumers are clearly willing to pay for brand preference. Competitors include approximately 23 different energy drink manufacturers as more are introduced every year (bized.co.uk 2010). Even though Red Bull is priced at premium strategies, they still manage to massively outperform other energy drinks through its creative and innovative marketing and advertising strategies. The company is able, with these high prices, to recapture the costs of manufacture and achieve sales at approximately $1 billion. Consumers, with this high level of market share, seem to prefer Red Bull over most competitors and are able to attach high mark-ups to individual or multi-pack offerings. 1.1.3 Current Distribution Red Bull is currently distributed internationally on most continents. It is marketed in convenience stores, grocery store outlets and hypermarkets, as well as regional sales environments. This makes the distribution strategy convenient to buyers of all demographics so that consumers can find their trusted Red Bull brand name wherever they shop for their grocery needs. The brand is so intensively strategized in terms of distribution that they have even developed customized Red Bull coolers even in surf wear stores (brandingstrategyinsider.com 2009). Different, trendy nightclubs and other social environments also have intensive promotional campaigns to back ongoing distribution of this product (Wipperfurth 2003, 8). Though it is not available from the manufacturer directly, Red Bull is available in almost every grocery-based outlet and in social hotspots for convenience and higher marketing exposure. 1.1.4 Current Promotion Red Bull has a variety of different promotional strategies that appeal to specific target groups and to the mass customer looking for a convenient energy supplement. Red Bull, to avoid costs, avoids celebrity endorsements but creates a closer connection to its target audiences especially related to sports. Red Bull has received positive media coverage for its youthful, trend-setting market segments regarding its apparent ability to glow green under different nightclub fluorescent lighting (answers.com 2010, 2). This has given this product more promotional exposure in the nightclub environment and has made it a popular mixer with different alcoholic additives. At the same time, the creation of the Red Bull Music Academy in New York gives it better promotional appeal to nightclub-minded youth markets (answers.com). The most recent promotional message, Red Bull Gives You Wiings, compares the product to the divine as though to reinforce its health benefits and energy supplement benefits. This concept uses animation to give the brand its own personality by using humour as a focus of ad strategy (marketingpractice.blogspot.com 2008). This has the potential to appeal to more mass market groups, not necessarily specific segments being targeted, such as children and those attracted to brand’s with distinct personalities. The chosen style of promotions send two messages to buyer groups: The brand has a distinct personality and is a fun beverage drink while also being hip and flexible. 1.2 Environmental Scanning This section describes the external analyses related to Red Bull in relation to political influence, economic and social environments, and other external forces impacting brand success and marketing strategy. Since it is distributed internationally, Singapore is the target of focus for this analysis. 1.2.1 Political Environment The Consititution in Singapore does not currently have any provisions related to environment and no framework law regarding environmental protection and business management (Tan 1998). This has advantages in a nation with a world-class distribution and economic infrastructure as it means little in terms of being regulated by political forces in areas of impact of air quality for transportation (distribution) and other costly efforts often imposed in other developed regions related to environmental quality and corporate social responsibility. Singapore’s governmental leaders are considered some of the most progressive in terms of offering large taxation breaks for new business development or those looking to enter the market, making it advantageous for Red Bull. 1.2.2 Economic Environment Offers Singapore’s Minister of Trade and Industry, “Singapore is a good place to raise funds, both equity and loans, including venture capital” (Satapathy 2003, 1745). This is advantageous for Red Bull as any long-term strategies for expansion or growth can be guaranteed some form of loan distribution or credit offering based on its economic strength in the region. This is an advantage related to capital funds procurement in a flexible, world-class business infrastructure. The country also has a very high growth rate in international tourism from countries such as China, Australia, India and the United States (singstat.gov.sg 2010). These are countries where the Red Bull brand is familiar, making Singapore an excellent location to use existing promotional strategies to avoid costs and satisfy consumers who demand Red Bull in this home countries. 1.2.3 Social/Cultural Environment English is widely spoken in Singapore, making this new location for the brand more comfortable for international tourists (Herrick 2007). Additionally, the country has world-class standards related to education through the establishment of the Singapore Institute of Management and the Singapore Management University and these generally admit only A-level students (Chin 2008). This close connection to similar educational credentials and language of countries such as the United States and Australia make certain socio-cultural factors congruent that will be advantageous to many existing Western promotional strategies. At the same time, there is growth in this region at the consumer level for Western products with a high adoption rate for imported brands. 1.2.4 Technological Environment Growth in the telecommunications infrastructure in Singapore is also apparent, giving many consumers access to the World Wide Web and other business/personal software packages. In Canada, as one example, Red Bull found promotional success in an online marketing campaign using Twitter and other Internet-based forums (O’Leary 2010). This provides extended opportunities to reach different target or mass market groups in Singapore due to their familiarity with web-based applications, software competence (through educational credentials) and demand for Western imported products. Singapore’s world class telecommunications infrastructure provides many opportunities for growth of the brand once new market entry has been secured. 1.2.5 Natural Environment There is one risk to Red Bull related to the natural resources available in Singapore. In the country, water is scarce and most water needs are procured through importation from Malaysia (Tan 2008). This would pose a risk to new market entry if Red Bull were looking to move manufacturing to this country for its tax break incentives if the water for its production needed to be imported. This would add higher expenses to the cost of goods sold and might force price increases to the already premium pricing strategy. However, this water scarcity issue might be an opportunity as consumers already pay higher prices for imported water supply and they are accustomed to alternatives and higher prices. 1.2.6 Competitive Environment Research evidence did not indicate the presence of other energy drink competitors in Singapore, making this a unique opportunity to capture high market share in this region. In other Western regions, competition includes Rock Star energy drinks, Monster, and Mother drinks. However, in these regions, Red Bull still holds the highest market share. There are currently five million residents in Singapore, with tremendous growth in foreign tourism, all packed into a small 700 square kilometre region (farandfurther.com 2010). Having no identified energy drink manufacturers with a stronghold in Singapore makes this an excellent opportunity to take the lead in water alternatives especially in the face of ongoing demand for imported products. 1.2.7 Demographic Environment Singapore’s domestic economy grew at a pace of 7.9 percent in 2006 (keppelland.com.sg 2010). At the same time, growth in education has led to more jobs creation, showing an increase of 55 percent in 2005 (keppelland.com). When consumers have access to better jobs with higher pay strategies supported by business and political leaders, they will have more disposable income in both male and female target groups that can add to the profit margins for Red Bull upon new market entry. With the majority of this population speaking English and being packed in a small land region, they will likely share similar cultural preferences making it easier to promote and capture the attention of a variety of mass market Singapore consumers. 1.3 SWOT Analysis Table The following table illustrates the activities that can or likely will impact marketing strategy and business strategy. 2.0 Segmentation Theory Why segment? This section explores the rationale. 2.1 What is Segmentation? Segmentation is defined as “division of the total market into smaller, relatively homogenous groups” (Boone and Kurtz 2007, 289). This means taking mass market groups and dividing them into groups that have similar lifestyles, values, buying behaviours, income levels, or other demographic trends. In order to be successful, divided markets must have the purchasing power and scope to bring expected profit margins. Once these traits are identified, targeted advertisements can appeal to these groups. 2.2 Why is Segmentation Used? Segmentation allows brands like Red Bull to create targeted promotions that fit the values or demographic trends of these divided groups and create a consumer connection. “Using a range of segmentation strategies strengthens explicit links between branding and the broader strategic goals of the organization” (Moroko and Uncles 2009, 182). This means that by concentrating efforts, using communications tactics best befitting these groups, long-term business goals such as higher profit or gaining higher market share can be accomplished and more sales secured. It can build group consumer loyalty and help create brand preference instead of simple awareness. 2.3 How can Firms Benefit from Multidimensional Segmentation Approaches? A brand like Red Bull might determine that lifestyle interests represent one group, through psychographics, while another group simply has a need for health-conscious products but does not share the same lifestyle. Where psychographics are called lifestyle segmentation (Rodoplu 2008), demographic segmentation focuses on geography or income availability. By using multi-approaches, targeting can be accomplished through advertisement that is uniquely customized for each group and build consumer loyalty in the process. For one group the brand might have preference because of humour, while other groups find connection through responsible formulas or low-fat content only. 3.0 Target Market Identification This section describes the multi-dimensional approach to be used by Red Bull. 3.1 Geographical Traits Singapore has the best logistics hub in the world, even over the Netherlands, Germany, Japan and Hong Kong (edb.gov.sg 2010). When it comes to importation and supply chain, the ease and convenience of airborne product imports and sea-based imports can be secured easily. 3,000 logistics and supply chain organizations operate in this country (worldcustomsjournal.org 2007). Singapore is also considered the cleanest country in the world where littering leads to hundreds of dollars in fines (farandfurther.com 2010). This provides opportunities for Red Bull to use a deposit system that appeals to buyers that value the cleanliness of the city and secure higher sales. Singapore also experiences a very warm climate, making it ideal for expatriate leadership and foreign managers with experience in Red Bull branding (etc) to help with training and recruitment costs. 3.2 Demographic Traits There were 176,000 new jobs created in Singapore, a growth from 113,300 jobs the year prior (keppelland.com 2010). This creates higher income availability from many target groups. Red Bull further has a strong brand personality and Singapore has diverse citizens and foreign tourists that will understand humour and health-based marketing communications. Most occupations in Singapore are business and management related, which will also enhance human resources costs by procuring talent locally that are already equipped with how to function appropriately as part of the Red Bull brand. High volumes of white collar workers are also found in Singapore, those business professionals looking for energy boosts with no noticeable competition to select from. Advertising that appeals to this group and their high resource availability can secure higher profit margins. 3.3. Psychographic Traits There is a rising middle class and affluent class in Singapore that is being developed by increased educational credentials and job experience. Family is one very important aspect of lifestyle in Singapore. In fact, the country has an established family day where members of a unit are invited to get out and enjoy life together through a variety of events (Keng, 1995). These family days would be incredible opportunities for Red Bull to promote its product by having mobile vendors that can publicize and expand brand awareness. Outdoor activities are also very important in Singapore, in areas of sports, family picnics, boating, camping, and other recreational activities (Keng). This growth in outdoorism makes them tourist oriented, giving Red Bull a chance to enhance its overall exposure in the new market. 3.4 Behavioural Traits There is growth in demand for Western products in Singapore, having a high importation rate of these products. This is evidence that they would be willing to accept the brand based on psychographics associated with outdoor recreation and other sports-related activities. Since this would be a new market opportunity, attitudes cannot necessarily be determined until more market research is accomplished. However, in 2010, Singapore held its first Red Bull Art of Can festival that allowed Singapore citizens to help design concepts for Red Bull packaging through creative artwork (recntn.com 2010). This gave the culture an opportunity to learn about Red Bull and win valuable prizes, such as a trip to Berlin. This associates with their cultural heritage as well as giving them more Red Bull brand awareness from generic community citizens and foreign visitors as well. 4.0 Target Market Collage This section isolates the characteristics of one particular target market, the recreational user of Red Bull, associated with their new affiliation for outdoor living and sports-minded lifestyle. 5.0 Rationale of Target Market Collage All of the images chosen for the collage represent the target market for the recreational user that will be involved in many outdoor and family activities. With growth in jobs and demand for white collar jobs, comes the ability to have more resources for these sports and outdoor activities. Starting with demographics, the jobs image simply reinforces the Singapore citizens have access to quality careers that will give them better resources. At the same time, high growth in white collar jobs affords the target market the ability to spend more quality time with tourist-related, outdoor activities. Health-conscious consumers represent this target group as part of healthy living and love for getting active in outdoor sports and recreation. The city is clean, warm, with a quality logistics hub. All of these factors are strongly associated with the pride for the city and its cleanliness and growth in tourism. This target market has patriotic beliefs regarding Singapore that makes them more active as family citizens looking for new recreational activities. They can enjoy the clean air and all of the amenities of the climate and the ability to get much-demanded Western products. At the behavioural level, the map illustrates Western product demand and their creative outlets when visiting outdoor recreational activities. The art contests described in section three shows how it affects all mass market groups and will be relevant for the chosen target market. This group is also accepting of the brand and enjoyed the contest that offered large-scale prizes related to Red Bull creativity, hence the wheel of fortune was used to reflect this love for sweepstakes and brand activities. At the psychographics level, this group enjoys sports and other outdoor activities, therefore the image of happy soccer players were illustrated to show this growth at the lifestyle level. Family is important in this target group, the sports-minded, and often take their children and husbands/wives on these government-sponsored family days. With this group is also higher disposable income, leading to the image of the happy citizen holding up the currency to show their growth in income that comes from better education and also white collar job status growth. Further, within the collage, the more noble Red Bull brand signature photo was used to show the electricity that can be produced by Red Bull for the outdoor enthusiast. It shows Red Bull in a more modern form for those that seek recreation, outdoor fun, and family values associated with a transformational Singapore that exists today. 6.0 References Answers.com. “Hoover’s profile: Red Bull GmbH” (2010): 2. http://www.answers.com/topic/red-bull-gmbh Bized.co.uk. “Who are their major competitors?”. (2010). http://www.bized.co.uk/compfact/redbull/redbull6.htm Boone, L. and Kurtz, D. Contemporary Marketing, 12th ed. Thompson-South Western (2007). Brandingstrategyinsider.com. “Brand Personality Inspiration”. (2009): 2. http://www.brandingstrategyinsider.com/2009/10/brand-personality-inspiration-1.html Chin, Lim. “Singapore”. NUS Business School. (2008): 216. http://www.gfme.org/global_guide/pdf/215-222%20Singapore.pdf Drinksmixer.com. “Red Bull”. Drinks Mixer (2010). http://www.drinksmixer.com/desc646.html Edb.gov.sg. “Industry background: EDB Singapore”. (2010). http://www.edb.gov.sg/edb/sg/en_uk/index/industry_sectors/logistics___supply/industry_background.html Farandfurther.com. “Singapore”. (2010). http://www.farandfurther.com/singapore/singapore.htm Hein, Kenneth. “A bull’s market – the marketing of Red Bull energy drink”. Brandweek (2001). http://findarticles.com/p/articles/mi_m0BDW/is_22_42/ai_75286777/ Herrick, Devon M. “Medical tourism: Global competition in health care”. National Center for Policy Analysis. (2007): 4. http://www.ncpa.org/pdfs/st304.pdf. Keng, K. A. “Assesing macro environment trends in Singapore: Implications for Tourism Marketers”. (1995). http://www.hotel-online.com/Trends/AsiaPacificJournal/TrendsSingapore.html Keppelland.com. “Market review: Singapore economy grows strongly. 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School of Applied Technology and Management (2008). http://www.tourism.bilkent.edu.tr/~benice/restonews/page52.doc Satapathy, C. “Can Singapore be a Hong Kong to India?”. Economic and Political Weekly 38, no.18 (2003): 1745-1746. Singstat.gov. “Visitor arrivals by country of residence”. (2010). http://www.singstat.gov.sg/stats/themes/economy/ess/essa111.pdf Tan, Alan. “Preliminary assessment of Singapore’s environmental law”. National University of Singapore. (2008): 2. http://sunsite.nus.edu.sg/apcel/dbase/singapore/reports.html Tan, Alan. “APCEL Report: Singapore. Preliminary assessment of Singapore’s Environmental Law”. National University of Singapore (1998). http://sunsite.nus.edu.sg/apcel/dbase/singapore/reports.html Wipperfurth, Alex. “Speed in a Can: The Red Bull Story”. Plan B. (2003): 8. http://experiencethemessage.typepad.com/blog/files/Speed_In_a_Can.pdf Worldcustomsjournal.org. “Singapore’s supply chain security program”. World Customs Journal 1, no.2. http://www.worldcustomsjournal.org/media/wcj/-2007/2/singapores_supply_chain_security_program.pdf Read More