Red Bull Building Brand Equity in Non-Traditional Ways - Case Study Example

Case Study: Red Bull – Building Brand Equity in Non-Traditional Ways 1. Describe Red Bull’s Sources of Brand Equity? Do these sources change depending on the market or country? The sources of brand equity for Red Bull include: Brand Prominence: Red Bull achieved the first mover advantage in the Western markets by inventing “functional energy” beverage category. Brand’s prominence also appeared as a source of brand equity because Red Bull appeared as an originating energy drink in most of the markets it entered into. Market Dominance: Market dominance of Red Bull in international markets also appeared a source of brand equity for Red Bull. Brand equity is calculated by multiplying percentage of effective market share with relative price and durability (loyalty index) (Economywatch). Therefore, market dominance is a source of brand equity for the brand. Consumer Awareness: The awareness which company created in the minds of the consumers before and after entering into the market also stimulated the demand of people for this energy drink. Word-of-mouth appeared as the major driver in creating the awareness among the people for Red Bull. Brand awareness and brand meaning are the major contributors to brand equity (Lovelock, Wirtz, & Chatterjee, 2008) therefore; word of mouth strategy of company has appeared as a source of brand equity. Development of Strong Customer Base: Initially the availability of the drink was limited however; later on it became available in supermarkets. Kraihamer argued that intention of Red Bull was to build strong customer base rather than maximising weighted distribution. Moreover, limited availability also contributed to the development of brand’s cachet. Consumer Preferences: Less price-sensitivity in the Western market as compared to Asian markets increased the access to the brand. Brands which face low price sensitivity and have high volume shares are usually the market leaders (Managing Price In Different Market Conditions , 2006). Red Bull has high volume shares and face low price sensitivity in the western markets therefore, appears as one of the market leaders in the related products category, which is a source of brand equity. Brand Image Associations: Red Bull was launched as a stimulating product for the people who are mentally or physically fatigued and need an energetic and relaxing drink. The association between fatigue and energy in the minds of consumers also contributed to increase brand equity of the drink. On the other hand, most of the other drinks were being sold as entertaining drinks rather than energy drinks. “Brand equity is the accumulated value of the brand image or identity in the consumer’s mind” (Brand Identity Guru). Therefore, brand image of Red Bull in the minds of consumers has appeared as a source of brand equity. Visibility: Visibility of brand through sports events, other events, sampling teams and point of purchase market also contributed to the brand equity. The brand equity value is associated to firm’s visibility (a positive association) (Torres, Tribo, & Bijmolt, 2010). A company which aims to get successful across the geographical boundaries need to develop the marketing strategies which may create global consumer based brand equity. The perceptions of people differ from culture to culture such as the demand and consumption of carbonated drinks is higher in Australia and United States as compared to its trends in India and China (Management Study Guide). The idea is that sources of brand equity differ across geographical locations. Similar implications can be found in the case of Red Bull. Less price sensitivity and high volume share is the source of brand equity for Red Bull in the western market but not in the Asian market, where consumers are more price sensitive. In various countries, Red Bull achieved the first mover advantage which established its brand equity however; the late entry in the U.S. market did not give a first mover advantage to the company. Analyse Red Bull’s marketing program in terms of how it contributes to the brand’s equity. Discuss strengths and weaknesses. Premarketing Campaign: Premarketing campaign of Red Bull created awareness among the consumers in the markets where Red Bull was not selling its products. For example, Red Bull sponsored many events such as Red Bull Snowthrill of Chamonix ski contest in France. This international contest created awareness among French consumers to the drink. In this way without having presence in a market, through its marketing programs Red Bull got able to create awareness. Kraihamer highlighted that Red Bull aims to get recognised as a pre-eminent brand even if it is not present in the market. Demand Push Strategy: A huge marketing budget was allocated to encourage product trials such as point of purchase efforts, word-of-mouth and sampling. Therefore, the strategy of Red Bull has been demand push rather than demand pull. By emphasising on personal selling, Red Bull adopted a demand push strategy (Mayo) and enhanced brand awareness, which is a major source of brand equity. Advertising: Advertising strategy of company was targeting a broad market through cartoonist figures. Rather than promoting product based on its taste, benefits and image associations, company advertised it through featuring an intelligent dialogue between a character with energy deficiency and the other with its solution. Sampling: Free samplings were also distributed only in ideal usage occasions such as on concerts, festivals, sports events etc. Therefore, by providing the free samples to the customers at proper time helped them to realise the association between energy deficiency and need of energy drink. Sampling is a consumer promotion technique in which through product trial, repurchase is encouraged and such promotional techniques contribute to brand equity by increasing brand awareness (Mayo). Brand Awareness: Marketing programs also give significant focus on consumer recognition of logos and other visual elements. The samples teams were sent in the Red Bull branded vehicles which used to help in endorsing the brand. The brand endorsing strategy provides a least expensive way to a brand to substance its company name and to achieve minimal brand status (Kapferer, 1997). The endorsing strategy of Red Bull created brand awareness which is a source of brand equity. The sampling teams of Red Bull comprised of college students who were very energetic and researched the energy drinks market trends. These teams directly endorsed the brand by telling its benefits to the customers. High level of brand awareness and unique brand associations in the memory of customers, create customer-based brand equity (Keller, 1998). Visibility: To increase visibility of the product and to reinforce its brand positioning as an independent stimulating drink, event marketing strategy was adopted in which Red Bull used to control all aspects of events from name, logo, promotions to media production. Sports Marketing: By sponsoring individual athletes by simply making the drink available at competitions, Red Bull got able to encouraged athletic users of drink. Korchia (2006) found a positive relation between number of brand associations stored in the memory of consumers and brand interest and between number of brand associations and subjective knowledge of brand. Therefore, through brand associations Red Bull encouraged the repurchase of its products thereby, creating string brand equity. . Word-of-Mouth: Another marketing strategy of Red Bull was to promote the product through word-of-mouth in the early stages of its market entry. Word-of-mouth not only created a buzz around the brand but it also helped the customers to understand the right time to use the product. In a new market it was recognised as a ‘seeding program’ of brand at micro-level because company used to make the product available in small clubs, bars, stores etc and enable the cultural elites to use it and influence consumers further down the pyramid. Strengths Weaknesses Premarketing helped company to become pre-eminent brand Event marketing enhanced visibility and positioned brand as an independent stimulating brand Broad target market helped brand to grow to various markets on later stages Demand pull strategy attracted customers and allowed them to understand the right time and need to use product Advertising and other marketing programs helped Red Bull to establish its marketing positioning Focus on word-of-mouth was more persuasive in long term as it takes time Sampling and point-to-point sales required huge marketing investments 2. How can Red Bull maintain its marketing momentum? Would you recommend that Red Bull develop any brand extension? If so, what would they be? Would you use the same marketing strategy? Red Bull can maintain its marketing momentum by pursuing the same marketing activities and by reinforcing the same image. However, the changing marketing opportunities create various threats and opportunities for the company, therefore, to ensure a positive consumer response to the future marketing programs; the company needs to understand the changing needs of the customers. The marketing activities should be developed in consideration to the changing needs. In order to maintain its marketing momentum following are recommendations for company: Red Bull should continue with its current positioning strategy Premium pricing strategy is also suitable for Red Bull for this kind of energy drink with high functional performance and quality As previously, product performance was more important for company however, it is recommended that more focus can be given on product taste Current advertising strategy should be continued however, changes should be made from market to market such as in U.S. word-of-mouth is not that much effective as in Europe. Moreover, outdoor advertising should be also used because of increasing competition. Brand extension has become a common strategy since 1980s (Aaker 1990 cited in Ma, 2005) and 82% of new products are the brand extensions and only 15% are totally new brands (Brand Strategy 2004 cited in Ma, 2005). In order to survive and maintain its image in the increasing competition, Red Bull needs to develop further brand extensions. The first brand extension can be a Red Bull Sports Bar in which sports facilities can be offered in parallel to bar. To promote this brand extension, the low fee membership can be offered. The second brand extension can be Red Bull Energy Food. To promote this brand extension, the strategy of energy drink should be pursued. Kim and Sullivan (1998) cited in Loken (2006) argue that past positive experiences of the customers enhance their expectations about brand extensions and these expectations have to be met. Therefore, positive experiences of customers with Red Bull will enhance their expectations about brand extensions and to meet these expectations effective implementation of brand extension strategy is important. Pursuing brand extension strategy can be very risky for the brands because the failure to associate the new product with the parent brand can negatively influence the image and financial figures of the parent brand (Knowledge Box, 2007). Therefore, to maintain a consistency in brand knowledge, the same marketing strategies should be used. 3. Evaluate Red Bull’s move into herbal tea, fast food chains, and magazines. Does it make sense for the company to expand into these areas? What are the potential benefits and dangers? Herbal Tea: Red Bull can be associated with energy, adventure and night-time and this brand image is not compatible with the image of herbal tea. Therefore, the brand extension to Herbal tea is not recommended to the company. Moreover, various herbal tea stimulants and relaxant companies are already operating in the market therefore, entering into a competitive market and changing the image of brand is really not recommended. Fast Food Chain: Red Bull has been previously facing various health related issues in various world markets. The health concerns related to fast food chains are also increasing therefore, fast food chain brand extension is not recommended to the company. Secondly, the image of Red Bull as an energy, adventure and nigh-time brand cannot be associated with fast food. Magazine: Brand extension into magazine can be a good strategic move for Red Bull. By expanding into this market, company can attract its loyal customers and offer them featured articles, night life articles etc. Potential Benefits Product development strategy can help company to continue with market dominance Loyal customers of the company and huge customer base are the potential customers for new products More products will increase profitability of company and share its risk Potential Dangers Reduce the focus from one product thereby, reducing the advantage of company over its competitors by increasing product range Fast-food chain market, herbal tea and magazines business are three highly competitive industries and Red Bull can face failure The established brand equity and image of the company in the minds of customers will be negatively affected if any new brand fails Company can also face dilution of its previous brands 4. Because product usage was not marketed as being limited to one or even a few occasions, Red Bull users could continue to use the product even as their priorities shifted. The case states that “a Red Bull consumer first attracted to the product as a nightlife enhancer in his early twenties might later use the drink as a morning-pick- me-up or a revitaliser during a long day of meetings”. How effective is Red Bull advertising to these varied groups? This statement shows that product of the company has an appeal to a broad range of consumers and in a variety of usage occasions. This advertising helped company to define a broad target marketing strategy. This strategy appeared very effective as in some markets youngsters were the major source of business for Red Bull and in other markets both youngsters and mature people were using product. Therefore, even if the priorities of people shift with age, because of not being marketed with limited product usage, people continued to use product. In other words, even if the reasons of consumption change the real benefit as a revitaliser remains there. In this way this advertising of Red Bull to varied groups helped the company to keep its loyal customers for years. References Brand Identity Guru. (n.d.). Building Brand Equity. Retrieved November 19, 2010, from http://www.brandidentityguru.com/buildingbrandimage.htm Economywatch. (n.d.). Brand Equity. Retrieved November 21, 2010, from http://www.economywatch.com/marketing/brand-equity.html Kapferer, J.-N. (1997). Strategic brand management: creating and sustaining brand equity long term, 2/e. Kogan Page Publishers. Keller, K. L. (1998). Strategic Brand Management: Building,Measuring and Managing Brand Equity. Upper Saddle River: NJ: Prentice-Hall. p.101-103. Keller, K.L. (2008) Best Practice Cases in Branding, Lessons from the World’s Strongest Brands, Third Edition, New York: Prentice-Hall Knowledge Box. (2007, Januray). Brand Extension. Retrieved November 22, 2010, from http://www.bloomhead.com/KnowledgeBox_Jan07.pdf Loken, B. (2006). Shoring Up or Watering Down? Retrieved November 22, 2010, from http://www.carlsonschool.umn.edu/Assets/75902.pdf Lovelock, C., Wirtz, J., & Chatterjee, J. (2008). Service Marketing People, Technology, Strategy, 5/e. Pearson Education India. Ma, Y. (2005). The Role of Consumer Knowledge in Consumer Evaluations of Brand Extension. Retrieved November 22, 2010, from http://aut.researchgateway.ac.nz/bitstream/10292/71/1/MaY.pdf Management Study Guide. (n.d.). Managing Brands over Geographic Boundaries and Market Segments. Retrieved November 22, 2010, from http://www.managementstudyguide.com/managing-brands-over-geographic-boundaries.htm Managing Price In Different Market Conditions . (2006, August 1). Retrieved November 21, 2010, from http://www.hktdc.com/info/mi/a/ac/en/1X004VB4/1/ACNielsen-Insights-Asia-Pacific/Managing-Price-In-Different-Market-Conditions.htm Mayo, C. M. (n.d.). MARKETING COMMUNICATION. Retrieved November 22, 2010, from http://www.referenceforbusiness.com/management/Log-Mar/Marketing-Communication.html River, U. S. (2006). The Effects of Brand Associations on Brand Equity, Subjective Knowledge and Brand Interest. Retrieved November 22, 2010, from http://www.watoowatoo.net/mkgr/papers/mk-ama2006.pdf Torres, A., Tribo, J. A., & Bijmolt, T. H. (2010). Generating Global Brand Equity through Corporate Social Responsibility to Key Stakeholders. Retrieved November 21, 2010, from http://docs.google.com/viewer?a=v&q=cache:hLod1300ptMJ:e-archivo.uc3m.es/bitstream/10016/9314/1/indemwp10_04.pdf+visibility%2B+brand+equity&hl=en&gl=pk&pid=bl&srcid=ADGEEShyTvZPdXVLoSTfUCIVXUtQi2RAw38JqGbiMtzi-Qqd5A8Q6Mm4HHPF6HgsGVwGa1HTYuDr5QPhPDSQ0iybuk Read More