Sources of Red Bulls Brand Equity - Case Study Example

Introduction: Red Bull is an energy drink founded in 1985 although it started being sold in Austria in 1987. Since its inception, Red Bull has expanded its presence to many other countries and has come to be known as one of the best energy drinks in the functional food category. Despite the growing competition from upcoming brands, red bull has continued to increase its revenue base. The reason behind Red Bull’s success has been associated with the company’s marketing strategy mainly centered on the word of mouth as well as the value that the consumers have come to attach to the drink. This report aims at analyzing some of the branding issues associated with Red bull’s success. 1. Sources of Red Bull’s brand equity There are various sources of brand equity for Red Bull which includes the following; a) Awareness In 1987, Red Bull was launched in Austria before its presence fast spreading to other markets globally. Red Bull choice of brand positioning slogans portrayed the material advantage of the brand in a manner that was easy to grasp. The use of word of mouth proved an effective advertising strategy since opinion shapers influenced their peers into buying the brand ((Dawson, 2009). Word of mouth also spread the brand knowledge to consumers outside Austria even before it entered their markets. Placing of empty cans at various places shortly after its launch created an illusion about the brands popularity. Consumers’ perception that the brand is better than it actually is. b) perception The company created a perception about the brand superiority through proper choice of slogans such as ‘Red Bull gives you wings’ making it become a preferred drink for those wanting to boost their energy. Their advertisements made claims such as ‘the brand improves physical endurance’, ‘improves reaction, speed and concentration’, ‘and increases mental awareness’ among others. As a result, people consumed the brand to get some of these properties. The slogan that it revitalizes ones body and mind attracted customers so as to get their bodies and minds revitalized. c) Status Their market entry strategy targeted opinion leaders such as sportsmen and entertainment celebrities and pursued a premium pricing model. This influenced people to buy the brand since they associated it with people of certain status. The pricing served to convince people about its superiority and popularity. These sources of brand equity for Red Bull do change depending on the market or the country as each market is governed by different set of rules and regulations depending on its host country. For example, the Austrian market had different categories of food and drugs from those of other countries which made its approval difficult in the country initially. 2. Red Bull’s marketing program’s contribution to the brand equity Red bull adopted the following market programs that contributed to its brand equity. Use of word of mouth was a central component of all Red Bull’s marketing activities during the early stages of entering the market that proved very successful strategy. Developing Red Bull mystique from its inception, it was source of intrigue for customers. The functional category was new for Austrians hence curious and adventurous customers purchased the brand and spread the word. Placing of empty cans at various places created an illusion of popularity. Word of mouth also spread awareness of the brand to other countries even before its introduction to the markets. This was a considerably successful marketing program. Market entry strategy – the company strove to build buzz about the brand through its seeding program where it micro targeted in shops, clubs and stores hence enabling the cultural elite to access it first before spreading the word to other customers and influencing them (Rustenburg, 2008). Premarketing activities such as sponsoring sporting events served to establish awareness in markets where the brand had not yet reached. Hence, through the premarketing program, the brand established itself as the pre-eminent brand. Target market- The brand did not have a target market since the company attempted to reach a broad range of consumers. This enabled them to reach a broad market and was instrumental in the success of Red Bull. -Marketing activity – this included advertising, sampling, event marketing, sports marketing and point of purchase marketing. Strengths of the program Through the premarketing strategy, the brand to stand out as the pre-eminent brand -event marketing positioned the brand as an independent stimulating beverage - Through targeting a broad range of consumers, the brand grow into numerous market segments -Their sampling program made the product available at the precise location and in the correct way when needed urgently - point of purchase marketing enabled Red Bull to develop itself as preeminent brand in retail environment Weaknesses -Word of mouth program is a time consuming process. The program only covered the age group of 14-29 years though the target market was not specific. 3. Maintaining the marketing momentum Red Bull’s marketing strategy has made it take markets by surprise and it continues to maintain its stronghold in the energy drink market despite the growing competition. However, it has to maintain its marketing momentum in order to maintain its position in the existing markets through continued use of the following strategies; a) Positioning Use of youngsters as ambassadors and brand managers ought to go on as the youngsters will continue consuming the brand as they grow. b) Pricing The premium pricing policy should be continued since the brand’s popularity has grown over the years and people associate high prices with quality and status. c) Product Red bull should redesign its packaging, overall look and feel since as a brand goes through its life cycle, and it has to continuously refresh itself to remain relevant in the market. d) Advertising Red Bull has to use advertising more than ever before as a marketing strategy as competition increases while bearing in mind the taste and preferences of people in the new markets since culture and perception play a great role in accessing new markets. Brand extension This is a strategy where a triumphant organization makes use of the same brand name on dissimilar products so as to increase and leverage brand equity. However, I do not recommend brand extension for Red Bull since it has the following dangers; a) Image Red Bull risks damaging its image if the correct extension is not chosen and the chosen extension gets a negative impact. b) Consumer perception Venturing into extensions like isotonic will create consumer confusion since Red Bull has on no account placed itself as a healthiness drink. Therefore, consumers will think that Red Bull is actually not good for health and hence the reason they have now ventured into another category. c) Focus The organization has been using a focus approach when promoting their central competency devoid of any other doubtful claims. Incase they venture into brand extension and it doesn’t work out, their reputation will be damaged as a result. d) New Market If the extensions fail, this will hamper the core brand progress as competitors will use the scheme of dispersing incorrect information hence making Red Bull entrance hard. 4. Red Bull’s move into herbal teas, fast food chains and magazines. The move makes sense since the products could be sold in all the markets where Red Bull is sold without much difficulty and these could lead to increased profitability (Saucer, 2001). Venturing into magazines is particularly important since in addition to the additional revenue expected, the venture will also be used in advertising Red Bull. Benefits of the move The company will take advantage of the existing market for Red Bull to sell these products without undergoing additional costs. The company will take advantage of the good reputation associated with Red Bull (especially for herbal tea) in marketing the new products that will be a new source of revenue. Where fast food chains are opened, the company will also sell Red Bull hence expanding its market base. Venturing into magazines will serve the dual purpose of advertising in addition to revenue generation Dangers of the move As the company is venturing into completely different lines of production, it is likely to loose focus of its core business and hence loose its reputation. Competitors might use the move to create an impression that Red Bull is loosing its ground (popularity) leading to reduced profitability and hence the move to new areas. -Red Bull risks damaging its image and reputation if the move fails. 5. since Red Bull wasn’t advertised as a product that is limited to being used in one accession, its users are likely to continue using it even when their priorities shift. Therefore a consumer who is first attracted to Red Bull as a night life enhancer in his early years may later use it as a pick me up in his old age. This kind of advertising has made Red Bull to be very effective in advertising to varied groups. Bull has been very effective in advertising their product to the varied groups especially to the young. Their strategy is that of advertising the brand to the young in the hope that as they grow, they will continue using the brand into their old age (Ferguson, 2008). The trend is that the young drink Red Bull directly and as they grow, they start using it as a mixer. The use of opinion leaders and the word of mouth in advertising has been very effective since they greatly influence others into using the brand. However if Red Bull can come up with a strategy to advertise Red Bull to ages above 29 years, it will be able to raise its market share since it seems that it concentrates on the ages between 14 and 29 years. References: Dawson, M. (2009). Viral marketing and Red Bull. Retrieved October 21, 2010, from Rustenburg, G. (2008). Strategic analysis Red Bull. Retrieved October 21, 2010, from Saucer, A. (2001). Red Bull all the range. Retrieved October 21, 2010, from Ferguson, R. (2008). Word of mouth and viral marketing: Taking the temperature of the hottest trends in marketing. Journal of consumer marketing, 25 (3), 179-182. Read More