Red Bulls Advertising Effectiveness - Case Study Example

Red Bull Case Study Table of Contents Red Bull Case Study 1 1. Executive Summary 5 This paper discusses the Red Bull brand, with a major focus on the strategy used to market it. The product’s brand image is derived from its packaging, the slogan used, its flavour, as well as premium pricing. At its initial stages the company focused on word-of-mouth to market itself in Austria, and this enabled it to spread progressively to other countries. The brand’s popularity has however been rocked by controversies surrounding the product’s ingredients. Despite this, the brand has maintained its originality and this has been a major factor contributing to its spread in many countries. This is supported by Red Bull’s innovative advertising strategy. 6 2. Introduction and history 6 Red Bull GmBH was started in 1985 by Dietrich Mateschitz, an Austrian who formerly worked with Procter & Gamble Blendax as a marketing manager. Mateschitz launched Red Bull in Austria in 1987 with the slogan “Red Bull verleiht Fluungel” which means “Red Bull gives you wiings.” The drink was available exclusively in Austria for five years before it gradually spread out to other European countries. The growth strategy was premised on the idea of entering markets slowly and methodically so as to maximise impact and hence build a strong reputation. By then, Red Bull’s marketing activities were limited to television commercials that adopted the same format of applying animated shorts to reinforce the product’s slogan. By 1997, Red Bull had spread into 25 countries including Eastern and Western Europe, South Africa and New Zealand. At the same time, sales increased from 1.1 million units to over 200 million units. Further, by 2004 the company had achieved worldwide annual sales of 2 billion cans in 120 countries. But despite this growth, Red Bull remained a relatively small company with only 1800 employees worldwide and 200 at its headquarters (Keller, 2008). 6 With the above background information, this paper analyses the Red Bull brand by discussing the marketing strategies adopted for the product. 7 3. Analysis about Red Bull 7 3.1 Sources of brand equity 7 A basic idea about the concept of brand equity is that the power of a brand lies in the minds of the consumers as well as what they have experienced and learned about the brand over time (Keller, not dated). Brand equity is the value of a brand resulting from high brand awareness and strong, favourable and possibly unique associations that consumers have in memory about a particular brand (Shimp, 2008). The first attribute of Red Bull that appeals to the customer is the can used to package the drink. Red Bull realised that the when the drink was sold in cans, massive sales were recorded, but the sales declined when the drink was offered in bottles, especially in Germany. Hence, the first aspect of Red Bull’s brand equity is the can. This was coupled with the slogan of the products: “Red Bull gives you wings,” and in fact, the ingredients used to make the drink gave it a stronger image. Red Bull was marketed as having a number of properties including: 7 improving physical endurance, 7 stimulating metabolism and helping eliminate waste substances in the body, 7 improving overall feeling of wellbeing 8 improving reaction speed as well as concentration, and 8 increasing mental alertness (Keller, 2008). 8 Red Bull’s brand equity was also leveraged by the flavour, which was intended to communicate the product’s value as a functional energy drink. Although Red Bull was a carbonated drink like cola, it had a medical taste, which was strong indication to consumers that the drink was more than a mere refreshment. 8 As mentioned earlier, the package of the drink too was a strong indicator of brand equity. The drink was packaged in a silver and blue 250 ml can, originating from Japan. The can signalled to consumers that the drink was better than the conventional soft drinks. The can reflected a stronger image than the bottle as was the case when Red Bull offered the product in bottles in Germany. 8 The brand positioning of Red Bull also reinforced the brand equity. With the slogan “Revitalises body and mind,” the product conveyed its tangible benefit in a manner that was easy to understand. The product also targeted dancers, ravers and clubbers in Austria, who used the drink to stay refreshed at late-night parties. The drink was also popular among people who wanted to stay awake for long hours, and the slogan gave it a strong brand image (Hatch & Taylor, 2009; Lantos, 2010). 8 Another source of Red Bull’s brand equity was is price. From the beginning, Red Bull pursued a premium pricing strategy. It was thought that Red Bull’s energy-enhancing properties would be more perceivable if the product was priced above the traditional cola. Thus, by charging a premium price, Red Bull could reinforce energy positioning and also carve out a unique niche in the beverage market (Keller, 2008). 9 3.2 Marketing programme and strengths & weaknesses 9 The company used a number of marketing strategies including word-of-mouth, sponsorships, athlete endorsers, sampling programmes, point of purchase marketing and electronic media buys. However, word-of-mouth was the most preferred method because the company believed that best method was to get the consumers who used the products to give testimonials to others. Ideally, traditional communications such as mass media advertising were initially avoided for more localised methods (Dahlén, Lange & Smith, 2009; Pride & Ferrell, 2006). 9 Strengths of the strategy 9 The company had an advantage in Austria where it launched the product because the energy drink concept was new, so users would easily pass the message to others. This was supported by placing empty cans of the drink in clubs and bars to create the impression of popularity. With this strategy, consumers in neighbouring countries such as Germany and Hungary who had not been in Austria received information about the product through word-of-mouth testimonials. Hence, consumers outside Austria were informed of Red Bull’s unusual benefits as well as its distinct ingredients such as “taurine” (Keller, 2008). 9 The advantage of using word-of-mouth in marketing is that the method not only requires minimal cost but also allows the message to be spread beyond its source (Katz, 2010). This is how Red Bull was able to spread to other countries, hence the over-mystification of the product. Word-of-mouth can also benefit a company by reducing the need for innovation as customers learn from each other (Ward, 2003). 10 Weaknesses of the strategy 10 The mystification of Red Bull through the word-of-mouth coverage also led to the spreading of negative rumours about the product. Rumours arose regarding the popularity of Red Bull in Europe, with some people claiming that the product was associated with drug overdoses and even deaths. Though Red Bull was not the direct cause of the overdoses or deaths, the word-of-mouth rumours persisted, leading to wide coverage of the of the product in the press. 10 3.3 Marketing momentum & brand extensions 10 Red Bull entered new markets by focusing on its “seeding programme.” By this method, the company micro-targeted “in” shops, stores, bars and clubs. This strategy enabled the products to reach the cultural elite first, with the hope that this group would spread the message through word-of-mouth down the pyramid of influence. The company also targeted opinion leaders (including entertainment celebrities and sports athletes) with the hope that they would influence consumer purchases. Additionally, the product was offered in limited quantities at the initial stages and this helped improve the brand status. After selectively seeding a particular market for six months, the company would then expand its presence to locations surrounding the seeded areas. The new locations were characteristically less price-sensitive than the seeding locations and were used to widen access to the brand. Red Bull eventually reached the mass market by having its products in supermarkets. The company also used a pre-marketing strategy to create awareness in areas where the product was not yet available. Pre-marketing encompassed sponsoring events that took place in a country where Red Bull was not available, for instance the Red Bull Snowthrill of Chamonix in France (Keller, 2008). 10 Red Bull did not specifically define its demographic or psychographic segment of the market. Instead, the company sought to reach a wide range of consumers based on their need for a stimulating drink. This enabled it to penetrate into numerous market segments (Keller, 2008). 11 The company also ventured into brand extension to increase its coverage and hold of the market. For instance, in 2003, noting that 21 percent of the soft drinks consumed in the United Kingdom were sugar-free, as were over 30 percent in the United States, the company decided to come up with a sugar free version of Red Bull, which was referred to as Red Bull Sugarfree. This drink had the same amounts of taurine, caffeine and glucuronolactone but had artificial sweeteners and only 10 calories vis-à-vis the 110 calories in the original Red Bull Energy Drink (Keller, 2008). According to Cheverton (2006), brand extension is inevitable especially where the existing brand is perceived to have matured but there seem to be no other alternatives to innovate. Hence, the existing brand is used to support the launch of the new product. In this case, the Red Bull Energy Drink was used to support the launch of Red Bull Sugarfree. 11 3.4 Potential benefits & dangers with moving into new areas 12 When a firm moves into a new area it has the advantage of having an expanded market but also experiences challenges of being unfamiliar with the market and is thus exposed to factors such as stiff competition. Red Bull’s venture into new areas faced such reactions. The company faced stiff challenges entering the European market because its key ingredient, taurine, had not been approved by most member states of the European Community. It only got an entry through Scotland, but France was apprehensive until the drink was proved to be 100 percent safe. 12 Red Bull also started on a wrong footing in the United Kingdom, as rather than sticking to its traditional approach of marketing, it portrayed the product as a sports drink rather than a stimulation drink; it did not pursue the word-of-mouth strategy, opting instead to sell via the largest beverage channels; and it focused on billboard advertising rather than electronic media. Consequently, it was regarded a failure in the United Kingdom after losing over $10 million in the first 18 months in that country. Competition was a key concern because the United Kingdom was dominated by Lucozade, which had been in the market for decades. Nevertheless when the marketing strategy was overhauled, Red Bull claimed an 86 percent market share of the “functional energy” category in 2001, and in the same year, it became the third biggest product by value in the soft drinks market. Interestingly, Red Bull gained a lot from venturing into new markets as the United States and the United Kingdom later became its largest markets. 12 Although successful in the United States, Red Bull faced significant competition from new product innovations. This saw its market share in the United States drop from over 80 percent in 2000 to 51 percent in 2002, and to 47 percent in 2005. Despite this, Red Bull enjoyed the advantage of originating the energy drink in most of the markets in which it ventured, implying that it was able to establish its brand prominence in its own terms (Keller, 2008; Onkvisit & Shaw, 2008). 13 3.5 Red Bull’s advertising effectiveness 13 The Red Bull logo design is one factor that embodies the effectiveness of Red Bull’s advertising. The bull is an embodiment of strength, stamina and courage. Cold colours silver and blue were used to represent the intellect (which goes with the products’ premium pricing), and the hot colours, gold and red were used to represent emotion. The claim that the “Red Bull Energy Drink revitalises body and mind” is reinforced with the slogan “Red Bull gives you wiings.” The catchy motto is aimed to convey innovation, individuality, fun, and agility; hence promoting the emotional value of the brand. Red Bull’s advertising creativity is kept direct, simple and fun by use of cartoons that through their comical depiction of a bull, have achieved a high degree of customer recognition (Riesenbeck & Perrey, 2009). 13 The ads used by Red Bull have been effective because they directly communicate the advantages of the products without giving an assurance of the physiological result. The product’s slogan is obviously an exaggeration but clearly sends a strong marketing message. In addition, the use of animated video spots was also highly effective because the method refrained from defining a specific targeted group (Keller, 2008), which was a key marketing strategy adopted by the company. Hence advertising has been a major source of Red Bull’s competitiveness, in line with Tellis’ (2004) assertion that advertising is a major means of competition among firms. 14 4. Conclusion & Recommendation 14 Red Bull has managed to evolve from a brand initially limited to the Australian market, to a global brand with major stakes in the United Kingdom and the United States. The success can be attributed to the marketing strategy which is felt from the logo, the slogans and nature of advertisements used. Its brand equity has also been reinforced by premium pricing, which portrayed it a drink above the conventional cola. The company opted to use word-of-mouth as its main advertising strategy, and this was successful in Austria and neighbouring countries such as Germany. In spite of this, the popularity led to controversies assorted overdoses and deaths resulting afters consuming Red Bull. This was a major concern for the brand in Europe, and many countries were hesitant to allow red bully into their markets. Additionally, stiff competition has seen red Bull lose its stake in the United Kingdom and the United States markets. But Red Bull stands out as an original brand, which has aided its penetration into many markets. 14 My recommendation is that the company should focus more on producing sugar free products as it did in the United Kingdom. This will be a boon to its brand extension strategy, particularly in the present day when sugary products are major health concern. 15 References 15 1. Executive Summary This paper discusses the Red Bull brand, with a major focus on the strategy used to market it. The product’s brand image is derived from its packaging, the slogan used, its flavour, as well as premium pricing. At its initial stages the company focused on word-of-mouth to market itself in Austria, and this enabled it to spread progressively to other countries. The brand’s popularity has however been rocked by controversies surrounding the product’s ingredients. Despite this, the brand has maintained its originality and this has been a major factor contributing to its spread in many countries. This is supported by Red Bull’s innovative advertising strategy. 2. Introduction and history Red Bull GmBH was started in 1985 by Dietrich Mateschitz, an Austrian who formerly worked with Procter & Gamble Blendax as a marketing manager. Mateschitz launched Red Bull in Austria in 1987 with the slogan “Red Bull verleiht Fluungel” which means “Red Bull gives you wiings.” The drink was available exclusively in Austria for five years before it gradually spread out to other European countries. The growth strategy was premised on the idea of entering markets slowly and methodically so as to maximise impact and hence build a strong reputation. By then, Red Bull’s marketing activities were limited to television commercials that adopted the same format of applying animated shorts to reinforce the product’s slogan. By 1997, Red Bull had spread into 25 countries including Eastern and Western Europe, South Africa and New Zealand. At the same time, sales increased from 1.1 million units to over 200 million units. Further, by 2004 the company had achieved worldwide annual sales of 2 billion cans in 120 countries. But despite this growth, Red Bull remained a relatively small company with only 1800 employees worldwide and 200 at its headquarters (Keller, 2008). With the above background information, this paper analyses the Red Bull brand by discussing the marketing strategies adopted for the product. 3. Analysis about Red Bull 3.1 Sources of brand equity A basic idea about the concept of brand equity is that the power of a brand lies in the minds of the consumers as well as what they have experienced and learned about the brand over time (Keller, not dated). Brand equity is the value of a brand resulting from high brand awareness and strong, favourable and possibly unique associations that consumers have in memory about a particular brand (Shimp, 2008). The first attribute of Red Bull that appeals to the customer is the can used to package the drink. Red Bull realised that the when the drink was sold in cans, massive sales were recorded, but the sales declined when the drink was offered in bottles, especially in Germany. Hence, the first aspect of Red Bull’s brand equity is the can. This was coupled with the slogan of the products: “Red Bull gives you wings,” and in fact, the ingredients used to make the drink gave it a stronger image. Red Bull was marketed as having a number of properties including: improving physical endurance, stimulating metabolism and helping eliminate waste substances in the body, improving overall feeling of wellbeing improving reaction speed as well as concentration, and increasing mental alertness (Keller, 2008). Red Bull’s brand equity was also leveraged by the flavour, which was intended to communicate the product’s value as a functional energy drink. Although Red Bull was a carbonated drink like cola, it had a medical taste, which was strong indication to consumers that the drink was more than a mere refreshment. As mentioned earlier, the package of the drink too was a strong indicator of brand equity. The drink was packaged in a silver and blue 250 ml can, originating from Japan. The can signalled to consumers that the drink was better than the conventional soft drinks. The can reflected a stronger image than the bottle as was the case when Red Bull offered the product in bottles in Germany. The brand positioning of Red Bull also reinforced the brand equity. With the slogan “Revitalises body and mind,” the product conveyed its tangible benefit in a manner that was easy to understand. The product also targeted dancers, ravers and clubbers in Austria, who used the drink to stay refreshed at late-night parties. The drink was also popular among people who wanted to stay awake for long hours, and the slogan gave it a strong brand image (Hatch & Taylor, 2009; Lantos, 2010). Another source of Red Bull’s brand equity was is price. From the beginning, Red Bull pursued a premium pricing strategy. It was thought that Red Bull’s energy-enhancing properties would be more perceivable if the product was priced above the traditional cola. Thus, by charging a premium price, Red Bull could reinforce energy positioning and also carve out a unique niche in the beverage market (Keller, 2008). 3.2 Marketing programme and strengths & weaknesses The company used a number of marketing strategies including word-of-mouth, sponsorships, athlete endorsers, sampling programmes, point of purchase marketing and electronic media buys. However, word-of-mouth was the most preferred method because the company believed that best method was to get the consumers who used the products to give testimonials to others. Ideally, traditional communications such as mass media advertising were initially avoided for more localised methods (Dahlén, Lange & Smith, 2009; Pride & Ferrell, 2006). Strengths of the strategy The company had an advantage in Austria where it launched the product because the energy drink concept was new, so users would easily pass the message to others. This was supported by placing empty cans of the drink in clubs and bars to create the impression of popularity. With this strategy, consumers in neighbouring countries such as Germany and Hungary who had not been in Austria received information about the product through word-of-mouth testimonials. Hence, consumers outside Austria were informed of Red Bull’s unusual benefits as well as its distinct ingredients such as “taurine” (Keller, 2008). The advantage of using word-of-mouth in marketing is that the method not only requires minimal cost but also allows the message to be spread beyond its source (Katz, 2010). This is how Red Bull was able to spread to other countries, hence the over-mystification of the product. Word-of-mouth can also benefit a company by reducing the need for innovation as customers learn from each other (Ward, 2003). Weaknesses of the strategy The mystification of Red Bull through the word-of-mouth coverage also led to the spreading of negative rumours about the product. Rumours arose regarding the popularity of Red Bull in Europe, with some people claiming that the product was associated with drug overdoses and even deaths. Though Red Bull was not the direct cause of the overdoses or deaths, the word-of-mouth rumours persisted, leading to wide coverage of the of the product in the press. 3.3 Marketing momentum & brand extensions Red Bull entered new markets by focusing on its “seeding programme.” By this method, the company micro-targeted “in” shops, stores, bars and clubs. This strategy enabled the products to reach the cultural elite first, with the hope that this group would spread the message through word-of-mouth down the pyramid of influence. The company also targeted opinion leaders (including entertainment celebrities and sports athletes) with the hope that they would influence consumer purchases. Additionally, the product was offered in limited quantities at the initial stages and this helped improve the brand status. After selectively seeding a particular market for six months, the company would then expand its presence to locations surrounding the seeded areas. The new locations were characteristically less price-sensitive than the seeding locations and were used to widen access to the brand. Red Bull eventually reached the mass market by having its products in supermarkets. The company also used a pre-marketing strategy to create awareness in areas where the product was not yet available. Pre-marketing encompassed sponsoring events that took place in a country where Red Bull was not available, for instance the Red Bull Snowthrill of Chamonix in France (Keller, 2008). Red Bull did not specifically define its demographic or psychographic segment of the market. Instead, the company sought to reach a wide range of consumers based on their need for a stimulating drink. This enabled it to penetrate into numerous market segments (Keller, 2008). The company also ventured into brand extension to increase its coverage and hold of the market. For instance, in 2003, noting that 21 percent of the soft drinks consumed in the United Kingdom were sugar-free, as were over 30 percent in the United States, the company decided to come up with a sugar free version of Red Bull, which was referred to as Red Bull Sugarfree. This drink had the same amounts of taurine, caffeine and glucuronolactone but had artificial sweeteners and only 10 calories vis-à-vis the 110 calories in the original Red Bull Energy Drink (Keller, 2008). According to Cheverton (2006), brand extension is inevitable especially where the existing brand is perceived to have matured but there seem to be no other alternatives to innovate. Hence, the existing brand is used to support the launch of the new product. In this case, the Red Bull Energy Drink was used to support the launch of Red Bull Sugarfree. 3.4 Potential benefits & dangers with moving into new areas When a firm moves into a new area it has the advantage of having an expanded market but also experiences challenges of being unfamiliar with the market and is thus exposed to factors such as stiff competition. Red Bull’s venture into new areas faced such reactions. The company faced stiff challenges entering the European market because its key ingredient, taurine, had not been approved by most member states of the European Community. It only got an entry through Scotland, but France was apprehensive until the drink was proved to be 100 percent safe. Red Bull also started on a wrong footing in the United Kingdom, as rather than sticking to its traditional approach of marketing, it portrayed the product as a sports drink rather than a stimulation drink; it did not pursue the word-of-mouth strategy, opting instead to sell via the largest beverage channels; and it focused on billboard advertising rather than electronic media. Consequently, it was regarded a failure in the United Kingdom after losing over $10 million in the first 18 months in that country. Competition was a key concern because the United Kingdom was dominated by Lucozade, which had been in the market for decades. Nevertheless when the marketing strategy was overhauled, Red Bull claimed an 86 percent market share of the “functional energy” category in 2001, and in the same year, it became the third biggest product by value in the soft drinks market. Interestingly, Red Bull gained a lot from venturing into new markets as the United States and the United Kingdom later became its largest markets. Although successful in the United States, Red Bull faced significant competition from new product innovations. This saw its market share in the United States drop from over 80 percent in 2000 to 51 percent in 2002, and to 47 percent in 2005. Despite this, Red Bull enjoyed the advantage of originating the energy drink in most of the markets in which it ventured, implying that it was able to establish its brand prominence in its own terms (Keller, 2008; Onkvisit & Shaw, 2008). 3.5 Red Bull’s advertising effectiveness The Red Bull logo design is one factor that embodies the effectiveness of Red Bull’s advertising. The bull is an embodiment of strength, stamina and courage. Cold colours silver and blue were used to represent the intellect (which goes with the products’ premium pricing), and the hot colours, gold and red were used to represent emotion. The claim that the “Red Bull Energy Drink revitalises body and mind” is reinforced with the slogan “Red Bull gives you wiings.” The catchy motto is aimed to convey innovation, individuality, fun, and agility; hence promoting the emotional value of the brand. Red Bull’s advertising creativity is kept direct, simple and fun by use of cartoons that through their comical depiction of a bull, have achieved a high degree of customer recognition (Riesenbeck & Perrey, 2009). The ads used by Red Bull have been effective because they directly communicate the advantages of the products without giving an assurance of the physiological result. The product’s slogan is obviously an exaggeration but clearly sends a strong marketing message. In addition, the use of animated video spots was also highly effective because the method refrained from defining a specific targeted group (Keller, 2008), which was a key marketing strategy adopted by the company. Hence advertising has been a major source of Red Bull’s competitiveness, in line with Tellis’ (2004) assertion that advertising is a major means of competition among firms. 4. Conclusion & Recommendation Red Bull has managed to evolve from a brand initially limited to the Australian market, to a global brand with major stakes in the United Kingdom and the United States. The success can be attributed to the marketing strategy which is felt from the logo, the slogans and nature of advertisements used. Its brand equity has also been reinforced by premium pricing, which portrayed it a drink above the conventional cola. The company opted to use word-of-mouth as its main advertising strategy, and this was successful in Austria and neighbouring countries such as Germany. In spite of this, the popularity led to controversies assorted overdoses and deaths resulting afters consuming Red Bull. This was a major concern for the brand in Europe, and many countries were hesitant to allow red bully into their markets. Additionally, stiff competition has seen red Bull lose its stake in the United Kingdom and the United States markets. But Red Bull stands out as an original brand, which has aided its penetration into many markets. My recommendation is that the company should focus more on producing sugar free products as it did in the United Kingdom. This will be a boon to its brand extension strategy, particularly in the present day when sugary products are major health concern. References Cheverton, P. (2006). Understanding Brands. London: Kogan Page Publishers. Dahlén, M., Lange, F. & Smith, T. (2009). Marketing Communications: A Brand Narrative Approach. New York: John Wiley and Sons. Hatch, S. & Taylor, J. (2009). Rigorous Magic: Communication Ideas and Their Application. New York: John Wiley and Sons. Katz, H. (2010). The Media Handbook: A Complete Guide to Advertising Media Selection, Planning, Research, and Buying (4th edition). New York: Taylor & Francis. Keller, K. L. (not dated). “Measuring Brand Equity,” Dartmouth College Keller, K.L. ( 2008). Best Practice Cases in Branding, Lessons from the World’s Strongest Brands (3rd edition). New York: Prentice-Hall. Lantos, G. P. (2010). Consumer Behavior in Action: Real-Life Applications for Marketing Managers. London: M.E. Sharpe. Onkvisit, S. & Shaw, J. J. (2008). International Marketing: Strategy and Theory (5th edition). New York: Taylor & Francis. Pride, W.M. & Ferrell, O. C. (2006). Marketing: Concepts and Strategies (13th edition). New York: Cengage Learning. Riesenbeck, H. & Perrey, J. (2009). Power Brands: Measuring, Making and Managing Brand Success (2nd edition). New Jersey: Wiley-VCH. Shimp, T. A. (2008). Advertising Promotion, and Other Aspects of Integrated Marketing Communications (8th edition). New York: Cengage Learning. Tellis, G.J. (2004). Effective Advertising: Understanding When, How, and Why Advertising works. London: Sage. Ward K. (2003). “Controlling marketing and the measurement of marketing effectiveness.” in Baker, M.J. The Marketing Book. London: Butterworth Heinemann. Read More