Assignment 2 – MKT235

Red Bull:
A report on current customer perceptions, competition, brand extension
and maintaining marketing momentum in Australia.

Table of Contents

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Executive Summary.............................................Error! Bookmark not defined.

Introduction...........................................................................................................2
Findings of interviews............................................................................................3
Consumer mind map.............................................................................................5
Position relative to competitors.............................................................................5
Potential for brand extension.................................................................................6
Recommendations.................................................................................................9
Conclusion...........................................................................................................11
Appendix..............................................................................................................12
Bibliography.........................................................................................................15
Error: Reference source not found

Introduction
With the growing functional energy drinks category becoming increasingly
competitive here in Australia, it is important for brands within this market

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to engage with their customers through what has long been considered
‘non-traditional’ forms of advertising. Red Bull was founded in Austria
1985 by Dietrich Mateshitz and has grown over the last 25 years to
become one of the world’s most recognisable and successful brands.
Their iconic ‘silver bullet’ slim cans, and powerful logo depicting two red
bulls clashing horns in front of a yellow sun, have become synonymous
with not only energy drinks, but an entire culture built around fun, energy
and creativity. These consumers are attracted to beverages like these for
both their function benefit of keeping them active and alert as well as a
means of self expression to identify themselves with other like minded
consumers and distinguish themselves from the wider community. The
market for energy drinks is still maturing in many markets and
competition from companies like Coke and Pepsi threatens to dilute the
market and gain a significant portion of Red Bulls market share. With
Red Bull being widely regarded as the creator of this category in most
markets, it is imperative that they continue to develop and evolve their
marketing strategies as markets mature, to ensure they continue to grow
and maintain their position as leaders in their category. The purpose of
this report is to:

➢ Collect data and identify current customer perceptions

➢ Identify Red Bulls competitive position relative to other
manufacturers in its category
➢ Discuss the potential to extend the brand beyond what is currently
offered
➢ Recommend strategies for maintaining their current marketing
momentum in Australia

Findings of interviews
Of the 12 people initially sampled, 5 had tired Red Bull previously, all of
whom were under 30 years of age. Although the sample size is not
significant enough to draw any accurate conclusions, this is indicative of
the average Red Bull drinker here in Australia and is certainly reflective of
way their product is marketed to and perceived by consumers. Examples
of this in their marketing are:

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• Clarity of their message (we are for active aspirational youth, we are
definitely not for old people)
• Value creation (we create events rather than sponsor them –
Xgames, Red Bull Air Race)
• Dialogue (marketing is something we do with rather than to youth –
exemplified by their on-campus marketing activities).

Of the respondents that consumed energy drinks and had tried Red Bull,
all did so to fulfil a functional requirement, that being they consumed it to
keep them active and alert, both during the day and at night. When asked
what they liked least about this product, most felt the premium price was
of most concerned, although this rarely impacted on the decision to
purchase. Of these people half said they enjoyed its sickly medicinal taste
while the others weren’t bothered by it. Almost 25 years after its
introduction Red Bulls product is still communicating the same message
with absolute efficacy.

• Premium pricing strategy – Reinforces the functional benefits of the

product over other beverages.
• Taste – Conveys the message that this product is not to be
consumed as a mere refreshment and should instead be consumed
to fulfil a need.

‘This product is more than just a beverage, it has a purpose’

About 1/3 of those interviewed drank only sugar free Red Bull and
although they had tried regular Red Bull and preferred the taste, they
were conscious about consuming the additional calories. These
consumers, who admit that Red Bull is overpriced, unpleasant to taste and
essentially contains no bio-available energy (which by some definitions
classifies it as neither a food or beverage) yet still choose to drink it on a
regular basis, exemplify the motivators behind why people consume
function energy drinks. Sugar free Red Bull has proved to be a very
successful line extension for the company and since its release in 2001
and now accounts for around 30% of its total beverage sales worldwide.
By introducing a sugar free variant they have expanded their potential
customer base to include individuals who want the functional benefits that
red bull provides, but are unwilling or unable (6.5% of the world’s
population has some form of diabetes) to justify the added sugar.

There does not appear to be any direct link between the negative PR Red
Bull has received over its potential health risks. When asked if the risks
associated with the consumption affected their decision to purchase the
product, the responses were mixed. Those that had heard similar
information dismissed the claims as unsubstantiated or statistically

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insignificant. Those that were unaware of such claims felt that if the
information was correct, they would most likely stop purchasing the
product.

When asked to describe the product, its attributes and how it compared to
other beverages in the category, the following statements stood out:

• It was more expensive than other brands

• It was perceived as being of better quality or better value for money
when compared to beverages of similar price
• It seemed to have more caffeine in it

While Red Bull is and always has been the most expensive beverage in its
category (a deliberate pricing strategy aimed at positioning itself as a
premium brand). The perceptions of better value for money and better
quality would appear to be based less in fact and reliant more on
consumer’s perceptions of the brand as being the market leader in the
function energy drink category. A perception Red Bull gained when it
created the category in the min 1980’s. “If you create a category that
meets the imagination of your target audience, then from day one you will
not only become the market leader in that category, you will also own the
perception of being the leader”

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Consumer mind map

Position relative to competitors

Potential for brand extension

Brand extension is a necessary strategic move at some point in the life of
a brand. It is an essential way to sustain the brands growth, once other
approaches have been explored.(O’Guinn, 2001) Red Bull could
potentially use to this capitalise on its well-developed image in order to

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market products with its brand name in different product categories,

currently not being services by the brand. Launching a new product is not
only time consuming but also required large capital expenditure to create
awareness and to promote a product's benefits. Brand extension is one
product development strategies which can reduce financial risk by using
the Red Bull brand name to enhance consumers' perception due to the
core brand equity.

As product extension can potentially dilute the parent brand image or

cannibalise existing sales, it is important to maximise the potential growth
of the parent brand before undertaking any such endeavour. Growth
should be built by:

1. First, by increasing the volume of purchases by present customers

by parent product (In most markets the functional energy drink
sector is still experiencing double digit growth figures with Red Bull
own growth figures reflecting this trend)
2. Then by new product development and line extension to increase
the brand relevance and address the needs of more specific targets
or situations (Red Bull has done this successfully with the release of
its ‘Sugar free’ line extension in 2001, although the potential for
further extensions may still exist)(Belch, 2008)
3. By the globalisation of business in countries offering high growth
opportunities - India, China, Pakistan (Currently sold in 130 of 195
countries as well as being banned in several European nations and
states).
4. By innovating to modify the competitive situation, create new
competitive advantages or open new markets, thus benefiting from
the pioneer advantage as it did when it entered the energy drink
market(Belch, 2008).

Before undertaking any significant exploration into extending Red Bulls

brand into different categories, it is important to consider the following:

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• The compatibility between the parent brand and the brand

extension – This is probably the most important factor that impacts
on the success of the extension. Compatibility refers to the
similarities between the product attributes, product category and
associations of the parent brand compared to those of the brand
extension. The closer the match between the parent brand and its
extension, the higher the probability of success(MMC Learning,
2008). Red Bull has achieved poor to moderate success with its
‘Red Bull Cola’ product possibly due to perceptions consumers had
about drinking Red Bull for a purpose, their new product had no real
value or usage occasion.
• Quality of parent brand experience – This refers to the
experiences consumers have had with the parents brand, these
include the actual quality of the product, the value and price
perceptions, purchase and consumption environment, and actual
delivery of products promoted benefits(MMC Learning, 2008). Any
brand extension by Red Bull would leverage on this
• Marketing Support – This is one aspect that can play a significant
role in the success or failure of any brand extension that is under
the control of the parent company. Marketing support will help to
create positive perceptions about the company in the minds of
consumers as well as facilitating push and pull demand for the
brand extension.

In order to
Advantages of brand extension

• Trust – New products can seek to capitalise on existing trust

consumers place in the parent brand, its quality, features, reliability
ect. Extensions will benefit from good opinion about the brand to
create “a compelling value proposition in a new segment or
market”.
• Consumer knowledge – consumers already have knowledge and
exposure to the parent’s brand, it then becomes less critical to

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create awareness and imagery of the brand extension and more

about communicating the specific benefits of the new product. This
generally equates to a reduction in overall advertising costs as
promotions for each brand have a cumulative effect on the brand as
a whole.
• Strengthen brand image – A parent brand in its mature stages of
growth can become energised with the release of an extension as it
increases the frequency with which it is associated with its positive
attributes, reinforcing the perceptions consumers have about the
brand.
• Defensive strategy – Companies can use brand extensions as a
means of defence against competitors to protect their core business
areas. By getting a foothold in a market early and establishing
themselves, it limits the threat of competitors using the market as a
stepping stone to attack more fundamental or profitable ones.

Recommendations

In order for Red Bull to continue its marketing momentum in Australia, we

foresee 2 avenues for possible exploration. Both options are targeted at
and cater to the unique characteristics and motivators of those in the 14-
19 and 20-29 year old age range, these being the 2 demographics with
the highest penetration in mature markets such as Australia.

Using Red Bulls wealth of knowledge and strong track record of creating
and promoting niche events like the Red Bull Air Race and the Red Bull
Flutatg, the logical progression for this type of marketing is to extend the
brand to incorporate a series of wholly owned outdoor music festivals.

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Brand extensions like these have proven to be very successful in the past,
the most notable example of which is the V festival which was established
in 2007 as an offspring of Virgin Music which has now grown to one of
Australia’s largest music festivals. In the state of the industry report
produced in 2004 by the ABS, the 1999-03 period recorded a 5.5%
compounded growth p.a in outdoor events and entertainment, a trend
which was forecast to continue for the next 5 years. This is further
supported by the DIIRDs ’10 year tourism and events industry strategy’
report compiled in early 2007 which indicates the events sector as a
whole is projected to grow at a rate of 4-5% p.a for the next 10 years with
1 in 4 Australians attending at least one outdoor music event in 2009.
While events such as these require a massive capital investment, which is
unlikely to see a return in its first few years of establishment, it would
offer the following benefits:

• Complete control over all branding, promotion and media control of

the event
• Enhanced visibility and positive reinforcement of Red Bull position
as a fun and invigorating brand
• Control over alcohol and post mix beverage distribution for the
events
• ROI in the form of indirect product sales as well as revenue
generated by the event

A second low risk, low cost promotion that Red Bull could utilise is to
develop an iPhone application that could be distributed free of charge
through the Apple iTunes store. iPhone users are a perfect match for Red
Bulls key demographic and have the following characteristics:

✔ twice as comfortable with mobile advertising that other phone users

✔ 50% under the age of 30
✔ 93% have used the app store

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✔ 73% have > 5 apps

In addition to this typical response rates for mobile campaigns are around
13%, compared with just .3% for online ad campaigns (Nielsen Mobile,
September 2008). An example of the potential of such platforms was
demonstrated with the release of Audi ‘A4 Driving Challenge’, a free
downloadable application that let users test their drive the new A4 on a
variety of virtual tracks. This application was extremely successful and
achieved over 370,00 downloads in the first 2 weeks, exposing the new
model to an audience of young, tech savvy consumers who may never
have had contact with the brand (Audi of America, Jan 2009). While the
potential for iPhone application development is enormous, Red Bull should
focus on creating an interactive app that allows users to engage with the
brand and personalise their brand experience that can be shared with
other users in the Red Bull community as a means of self expression,
these could include:

✔ Uploads/downloads of live music and extreme sports events

✔ Feedback on surfing conditions, motocross track conditions ect.
✔ Using GPS location to identify best skate parks/bike tracks in area
✔ Identifying potential athletes/emerging sports
✔ Updates on Red Bull events in your area

Branded iPhone applications are the perfect product/entertainment mash

up for companies like Red Bull as they allow for prolonged and repeated
brand exposure, have high viral value and are less likely to be perceived
as advertising. By extending the their marketing into this relatively new
form of advertising it will allow them to

• Reach a desirable market segment (affluent, tech savvy youth) &

keep them engaged
• Enable brand loyalists to express their brand affinity
• Extend their presence to a platform with 24/ access to consumers
• Is low risk and high appeal, with huge buzz potential

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Conclusion

You have to be where they are - The number one preferred method of
communication for students is "face to face" (source mobileYouth 2009).
Great brands know this and are encouraging their people to get out of
their ivory towers, their focus groups and where the youth are at.

Create don’t sponsor - Sponsoring is easy, it’s safe, but in youth

marketing being safe is the riskiest thing you can do. It takes brains and
creativity and corporate culture that encourage calculated risk to come up
with events like the Red Bull X games or Red Bull Air Race.

Be their social fabric - You could waste a lot of money identifying and
chasing trends. What never changes are the timeless drivers of youth
behaviour - 1) The need to belong 2) The need to be significant. Great
brands understand their marketing and product development needs to
start with this in mind

Sell community, not product - Too often we limit our potential to the
product. Consumers, however, buy the can not the drink inside (even in
blind taste tests) Blind taste test are only good if you have blind
consumers. What is the story and community you are selling. How do
youth fit into that story?

Create legacies over advertising - Traditional advertising is easy.

However once the campaign stops youth attention evaporates. How do
you create something that outlives a campaign? Build a legacy, build
something that lasts, build something that youth can take away and
continue the social interaction around

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Appendix

Customer Survey
Age

○ a. 13 - 21

○ b. 22 - 30

○ c. 30 - 38

○ d. 39 - 47
Do you consume energy drinks?

○ a. Yes

○ b. No
If answer is No, please answer why?
Please select all that apply.

○ a. Don’t feel the need to

○ b. Price

○ c. Health concerns

○ d. I was not aware of their benefits

Have you ever consumed Red Bull?

○ a. Yes

○ b. No
If yes, how often do you consume it

○ a. Every day

○ b. A few times a week

○ c. Once a week

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○ d. A few times a month

○ e. once a month

○ f. less than once a month

What is it that you like about Red Bull?
Please select all that apply.

○ a. Taste

○ b. It keep me to be active during the day

○ c. It allows me to stay awake and alert at night

○ d. It mixes well with alcohol

○ e. I don't know
What do you like least about product?
Please select all that apply.

○ a. Taste

○ b. Price

○ c. Packaging design

○ d. Other (specify)
Which version of Red Bull do you prefer more: regular or sugar
free?
Please select all that apply.

○ a. Regular, I like the taste

○ b. Regular, I don’t care about calories

○ d. Sugar free, it has better taste

○ e.Sugar free, it has less calories

○ g. I haven’t taste the sugar free version

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Would potential health risks surrounds Red Bull affect your

purchase decision?

○ a. Yes

○ b. No

○ c. I haven’t heard anything

○ d. I don't care

Which factors do affect your decision to buy Red Bull?

Please select all that apply.

○ a. Brand name

○ b. Ads

○ c. Word-of-mouth

○ d. I just bought it

○ e. Other

○ f. I don’t remember/know

How can you describe the Red Bull in compare with other
energy drinks?
Please select all that apply.

○ a. It is more expensive

○ b. It has cheaper price

○ c. It has better value/taste

○ d.It has poor value/taste

○ e. I can’t see a difference

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