The International UNOSummer School 2012

Red Bull: Case AnalysisDaniel Mader Andreas Mair Jennie Walker

Ellie Walker Macon Blount

Marketing PrinciplesJeffrey R. Foreman, PhD

MKT 3501.1

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Table of Contents

Company Overview 3

Corporate, Business, and Marketing Strategy 5

Market Orientation 6

Marketing Macro Environment 7

Consumer Behavior and Psychology 8

Porter’s Five Forces 12

Pricing Strategies 14

Integrated Marketing Communications 17

Social Media Press Release 19

Future Problems for Red Bull 20

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Company Overview

I. Mission Statement and Slogan

A. Mission Statement

No official mission statement could be obtained, since Red Bull is not a publically traded

company.

B. Slogan

“Red Bull gives you wiiings.” / “Red Bull verleiht Flüüügel.”

This slogan was popularized via TV commercials in German-speaking countries in the

1990s; the slogan was later translated into English as Red Bull became more

internationalized.

Controversy arose over the rights to use the English slogan in the early 2000s when a

patent attorney from Sarajevo claimed that he had patented the slogan for his own

purposes back in 1997 in Romania1. The slogan is still in use today by Red Bull.

II. Core Competencies

Needless to say, the brand has developed an image for power, speed, and recklessness2,

and dominates the energy drink market all across the globe.

As can be seen in Pricing Strategies, the energy drink is marketed as a premium product.

Special ingredients like taurine and alpine spring water in addition to a high

concentration of caffeine in a can half the size of other energy drinks are used to

differentiate Red Bull from competitors

1 “Streit um Red-Bull-Slogan.” Der Spiegel 23/2001: 102. Print.2 Brasel, S. Adam, and James Gips. "Red Bull ‘Gives You Wings’ For Better Or Worse: A Double-Edged Impact Of Brand Exposure On Consumer Performance." Journal Of Consumer Psychology (Elsevier Science) 21.1 (2011): 57-64. Academic Search Premier. Web. 29 July 2012.

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Red Bull is known primarily for its dominating position in the energy drink business,

selling its Red Bull Energy Drink.

In Austria, the company has also started its own TV channel, called Servus.TV, and a cell

phone service called “Red Bull Mobile”3

Red Bull sponsors not only many extreme sports athletes4, but also a Formula 1 racing

team that won both the constructors’ and drivers’ championship in 2010 and 20115

Red Bull CEO Dietrich Mateschitz has also created the foundation “Wings for Life”,

which seeks to support people suffering from paraplegia. The ultimate goal of the

foundation is to make paraplegia curable6.

III. Energy Drink Production

Production of Red Bull is completely outsourced. Rauch is Red Bull’s licenced partner,

and produces and fills the cans in factories in Austria (for the European market) and

Switzerland (for Americans)7

IV. Official Company Figures8

Red Bull employs 8,294 people in 164 countries

2011: Company turnover increased by 12.4% from EUR 3.785 billion to EUR 4.253

billion

Key markets: USA (+11%) and Germany (+10%)

Growing markets: Turkey (+86%), Japan (+62%), France (+35%) and Scandinavia

(+34%)

3 Red Bull. Web. 5 Aug. 2012.4 “Athletes and Teams” Red Bull. Web. 5 Aug. 2012.5 “Company Figures” Red Bull. Web. 5 Aug. 2012.6 Wings For Life. Web. 5 Aug. 2012.7 “Red Bull.” Wikipedia: The Free Encyclopedia. Wikimedia Foundation, Inc. 26 July 2012. Web. 5 Aug. 2012.8 “Company Figures” Red Bull. Web. 5 Aug. 2012.

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Strategy

I. Introduction

Little official information could be obtained, as Red Bull is not a publically traded

organization. Thus, much of what follows is essentially speculation.

For corporate level strategy, see the Overview.

In recent years, Red Bull has developed several different SBUs, including their own

media house for TV, mobile phone services, print and digital media, music publishing9,

and movie and documentary production; hosting extreme sports events; and of course

their Red Bull energy drink.

II. Marketing Strategy for Red Bull Energy Drink

Red Bull started marketing its energy drink to club goers and the underground scene in

Austria in the 1980s and 90s10.

“Viral” marketing: CEO Mateschitz paid opinion leaders like DJs and students for

promoting the energy drink at parties.

Marketing for Red Bull became more diverse as the company became more well-known,

both in Austria and abroad.

o Comic-style TV spots popularized the slogan “Red Bull gives you wiiings.”,

while the Red Bull logo started to appear on the suits and vehicles of sports

athletes.

o The Red Bull homepage also advertises the product to industrious students and

business (wo)men, broadening their original target segment.

9 Red Bull Media House GmbH. Web. 5 Aug. 2012.10 Arlidge, John. “How Red Bull woke up the teen market.” The Observer 5 Dec. 2004: n.p. Print.

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The shift from focusing on the underground youth scene to extreme sports sponsorship is

probably the most drastic change in marketing strategy Red Bull has executed.

Red Bull is today priced as a premium energy drink (see Pricing Strategies).

The company often organizes free trial distribution to attract new customers. This seems

rational especially considering the reluctance a potential consumer might feel when

pondering the purchase of the expensive drink for the first time.

Market Orientation

I. Target Market

Young urban males ages 16 to 29

Risk takers

Young consumers and athletes

II. Positioning

Alcoholic drink mixer

Extreme Sports

Sky diving

Formula 1 sponsor

Spends 30 to 40% of revenues on hard core marketing11

Buzz marketing

11 Bhasin, Kim. "How Dietrich Mateschitz Ignored The Haters and Created the Top Energy Drink on the

Planet." Business Insider. Business Insider, 15 Feb 2012. Web. 6 Aug 2012. 

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Guerilla marketing

Mixed marketing

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Macro Environment

I. Political

Bans from EU countries

No regulation on labeling of such drinks

12 "Market Report on the $10 billion Energy Drink Market." . WorldPress.com, 26 Nov 2010. Web. 6 Aug 2012.

<http://fixteas.wordpress.com/2010/11/26/market-report-on-the-10-billion-energy-drink-market/>.

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Age limits should be set on purchasing

Health risks associated with Red Bull

II. Economic

Rising disposable incomes encourage premium purchases

Major soft drink manufacturers have been attracted to the sports and energy drink market

partly by the premium prices that currently exist for these market products.

III. Social

Negative health concerns

Longer working hours, increased road traffic, more need for energy boost

Increasing consumer concern around diet and personal health

IV. Technological

Improved manufacturing techniques and processes could lead to lower prices

Innovation within the market—new products—looking for ultimate hangover cure

Consumer Behaviour and Psychology

I. Consumer Purchase Decision Model for Red Bull Energy Drink

A. Problem Recognition

Red Bull is mainly marketed to people who feel the need for an extra energy boost in

their lives, e.g. athletes, but also stressed-out business people, students, etc.

B. Information Search

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Since Red Bull is a relatively low involvement product, value is accessed primarily

through an internal search13.

C. Alternative Evaluation

Evaluative criteria for Red Bull Energy Drink include:

o Red Bull has the image of being a premium product (see Pricing Strategies), and

will thus best satisfy the consumer’s need for additional energy when compared to

the competition.

o Recent controversy over the possible negative side effects of Red Bull may also

impact the evaluation process (see Problems for Red Bull)

o The traits associated with the brand personality of Red Bull – speed, power, and

recklessness14 - may also factor favourably into the evaluation process, given that

they are similar to the traits of the potential consumer.

Consideration Set

o Direct Competition: Monster, burn, Full Throttle, Rockstar

Advantage for Red Bull: One brand = one company. The other energy

drink brands are subsidiaries of larger companies, and may be neglected.

o Indirect competition: The soft drink market in general, esp. the cola and fruit

drink producers, eg. Coca Cola, or Rauch

Advantage for Red Bull: Smaller size of serving, special purpose for

drinking (energy boost!)

D. Purchase Decision13 Alba, Joseph andWesley Hutchinson. „Knowledge Calibration: What Consumers Know and What They Think They Know.“ Journal of Consumer Research. 27.2 (2000): 123-57. Print.14 Brasel, S. Adam, and James Gips. "Red Bull ‘Gives You Wings’ For Better Or Worse: A Double-Edged Impact Of Brand Exposure On Consumer Performance." Journal Of Consumer Psychology (Elsevier Science) 21.1 (2011): 57-64. Academic Search Premier. Web. 29 July 2012.

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There are two possible points of sale for Red Bull: The “ON” and the “OFF” sector (see

Pricing Strategies):

o “ON” sector: Since the product is consumed at the point of sale, the purchase

decision is very straightforward. One example is consuming Red Bull at a dance

club strictly to combat sleepiness and exhaustion. No great consideration will go

into where or when to buy the product.

o “OFF” sector: Many supermarkets will receive special display shelves from which

to sell Red Bull. This helps to differentiate Red Bull from competitors, who often

share a shelf with other energy drink brands.

E. Post purchase Behavior

There is conflicting scientific evidence as concerns the effects of Red Bull on the human

mind and body:

o The consumption of Red Bull may lead to negative side effects (see Problems for

Red Bull)

o “Red Bull® Energy Drink significantly improves driving performance and

reduces driver sleepiness during prolonged highway driving.”15

o “Findings indicate that 255 mL of Red Bull containing 1.3 mg/kg of caffeine and

1 g of taurine does not alter repeated sprint performance, RPE, or HR in women

athletes versus placebo. One serving of this energy drink provides no ergogenic

benefit for women athletes engaging in sprint-based exercise.”16

15 Joris Verster, et al. "Positive Effects Of Red Bull® Energy Drink On Driving Performance During Prolonged Driving." Psychopharmacology 214.3 (2011): 737-745. Academic Search Premier. Web. 29 July 2012.16 Rodney Marquez, et al. "Effects Of Red Bull Energy Drink On Repeated Sprint Performance In Women Athletes." Amino Acids 42.5 (2012): 1803-1808. Academic Search Premier. Web. 29 July 2012.

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o “We show that brand exposure can have double-sided effects on behavior, with

brand identity associations creating both positive and negative effects on objective

consumer performance. [...] as Red Bull's brand identity of speed, power, and

recklessness work both for and against the players. Even though brands were

exposed supraliminally, effects travelled through unconscious channels.”17

o “Red Bull energy drink significantly increased upper body muscle endurance but

had no effect on anaerobic peak or average power during repeated Wingate

cycling tests in young healthy adults.”18

o “Energy drink consumption has been anecdotally linked to the development of

adverse cardiovascular effects in consumers, although clinical trials to support

this link are lacking. [...] Red Bull® consumption was associated with a

significant increase in pain tolerance in all participants. These findings suggest

that Red Bull® consumption ameliorates changes in blood pressure during

stressful experiences and increases the participants’ pain tolerance.”19

o “The limited research concludes that taurine and glucuronolactone in Red Bull

have not been proven to improve body functions.”20

II. Sociocultural Influences on Consumer Behavior17 Brasel, S. Adam, and James Gips. "Red Bull “Gives You Wings” For Better Or Worse: A Double-Edged Impact Of Brand Exposure On Consumer Performance." Journal Of Consumer Psychology (Elsevier Science) 21.1 (2011): 57-64. Academic Search Premier. Web. 29 July 2012.18 Philip D. Chilibeck, et al. "Effect Of Red Bull Energy Drink On Repeated Wingate Cycle Performance And Bench-Press Muscle Endurance." International Journal Of Sport Nutrition & Exercise Metabolism 17.5 (2007): 433-444. Academic Search Premier. Web. 29 July 2012.19 Ted Wilson, et al. "Effect Of Red Bull Energy Drink On Cardiovascular And Renal Function." Amino Acids 38.4 (2010): 1193-1200. Academic Search Premier. Web. 29 July 2012.20 "Red Bull: The Other Energy Drink And Its Effect On Performance." Athletic Therapy Today 12.2 (2007): 43-45. Academic Search Premier. Web. 29 July 2012.

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From the beginning, marketing for Red Bull was conducted via word of mouth and viral

marketing in the youth-oriented underground21.

Extreme sports athletes are sponsored by Red Bull to serve as opinion leaders and

aspirational reference groups.

Porter’s Five Forces

I. Industry Competitors and Extent of Rivalry: Low

Red Bull has turned their niche market into a mass market and a regular buy for people

around the world.

Its brand familiarity has given them a key source of competitive advantage.

Differentiation by Lucozade (another popular energy drink that is trying to enter the market)

is a strategy being used. They are becoming direct competition adding caffeine into their

drink making it a stimulation drink.

Red Bull has secured distribution channels that make it hard for competitors to enter the

market.

Red Bull has a very loyal customer base, and it’s own research shows that 40% of it’s

customers would go to another store to find Red Bull if a store didn’t carry their product.

II. Threat of New Entrants: Medium

Red Bull equates in the stimulant drink industry to Coca Cola or Pepsi in the soft drink

industry.

21 Arlidge, John. “How Red Bull woke up the teen market.” The Observer 5 Dec. 2004: n.p. Print.

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Supermarket stimulant drinks dominate the budget end of stimulant drinks, but mid range

drinks don’t have many suppliers and attempts to compete with Red Bull’s marketing it a

huge barrier to entry.

Red Bull’s brand power alone would make it hard for anyone to successfully enter the

market.

III. Threat of Substitutes: Low

Price sensitivity is low within Red Bull’s target segments, and because Red Bull

is a spur of the moment purchased commodity, convenience is a standard

purchase criteria for the drink. Brand power and customer loyalty have created

a low situation for product substitution.

Red Bull’s High prices are linked to their high quality, thus identical substitutes

at lower prices don’t really affect the Red Bull market.

Other stimulant substitutes such as coffee, Five Hour energy, or energy

smoothies, all have trade offs with stimulation duration, caloric intake, and

convenience, giving Red Bull its own niche in the stimulant market.

IV. Bargaining Power of Buyers: Low

Being a small market with strong customer loyalty, it’s possible for the company to have all

of the pricing power and for the customers to have very low bargaining power.

There is a pull in the market or a derived demand giving retailers not much bargaining

power.

V. Bargaining Power of Suppliers: Low

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Red Bull has a short supply chain meaning high profit at each stage of the chain.

The production process for Red Bull is uncomplicated, leaving the suppliers with not much

power because there are low input costs.22

Pricing Strategies

I. Pricing Strategy For Red Bull Energy Drink

A. USA prices:

8.4 ounce can $2.00-3.20

24 pack of 8.4 ounce cans $32.00-49.00

B. Pricing Objectives

Red Bull has a strict policy of keeping prices relatively similar and high compared to the rest

of the beverage industry.

Compared to can of Coca Cola, Red Bull is around 3-6 times more expensive.

This is to always maintain the image of a premium, quality product.

C. Pricing Strategy

There are two separate sectors of pricing strategy based on the location of the point of sale23:

“ON” sector: Any place where product is consumed at location.

Examples: nightclubs, restaurants, cafes

22 Hanrahan, William. "Market Audit Sports and Energy Drinks UK Market Focusing on the Microenvironment of

Red Bull." . Warwick, n.d. 

23 Louvet, Claire. "Red Bull: A Brand Built on Marketing." Business Development Strategies. We Are Development, 28 Dec. 2011. Web. Web. 1 Aug. 2012.

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Regional managers set this price at a constant level. Very little to no deviation of

price.

“OFF” sector: Any location where the product is consumed at a later time.

Examples: grocery stores, gas stations

Pricing is still dictated by a regional manager, but more deviation and the possibility

of sales exists.

D. Possible Disadvantages

Due to the high price, the product may simply be too expensive for lower income

demographics.

Sampling Red Bull for the first time is much more expensive than other beverages thus

possibly deterring the first purchase.

E. Possible Advantages

Customers often associate a high price with high quality24.

As a premium product with substantially high market share, Red Bull is able to charge such a

high price without loosing many customers.

II. Positioning

A. Price Communication

Red Bull’s overall value in the marketing mix is greatly affected by price.

Due to a constant high price product, consumers believe that Red Bull is a premium

product.

B. Price Elasticity

24 Friescher, Tim. "Pricing Strategies." Marketing Teacher. Marketing Teacher, n.d. Web. 1 Aug 2012. <http://www.marketingteacher.com/lesson-store/lesson-pricing.html

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Red Bull has a high Price Elasticity of demand due to25:

1. Large number of substitutes (both within energy drinks and even more broad)

2. Low degree of necessity (considered a luxury product)

II. Product Life Cycle Stage

Red Bull is currently in the Maturity stage.

The company has began to differentiate its product due to the large increase in substitutes

Much larger emphasis on brand loyalty

Growth figures are slowing down as the product ages (exception with 2011 where growth

nearly tripled from the previous year26)

A. Distribution Channels27

To ensure quality Red Bull manufactures and packages all of its products by itself

The company does not license out or franchise their name

All for quality control.

Red Bull sells its product through the sectors mentioned above.

B. Supplier-Retailer Relationships

Red Bull has recently instituted a new program, called Perfect Partnership28, for retailers that

help grow the Red Bull brand.

25 Price Elasticity of Demand." QuickMBA. QuickMBA, n.d. Web. 1 Aug 2012. <http://www.quickmba.com/econ/micro/elas/ped.shtml/>.26 "Red Bull Marketing Plan: 2011-2012." Roaring Haus Studio. Roaring Haus Studio, 2011. Web. 1 Aug 2012.27 "Red Bull. A success Story.." Mint Innovation. Kastner & Partners, n.d. Web. 1 Aug 2012. <http://mintinnovation.com/links/docs/Marketing/Red Bull Success story.pdf>.28 "New loyalty programme for Red Bull ." Talking Retail. 18 Nov 2011: n. page. Web. 1 Aug. 2012. <http://www.talkingretail.com/products/product-news/new-loyalty-programme-for-red-bull>.

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Retailers will be rewarded based on the amount of Red Bull sold, the visibility of the

product, the percentage of Red Bull in the store as compared to the rest of the energy

drinks, and product placement.

Integrated Marketing Communications

I. Red Bull’s targeted forms of IMC:

A. Public Relations

Red Bull is successful in their public relations field because they plan accordingly through:

Generating extensive publicity across all mediums, such as: TV, radio, print, flyers,

drinks, towels, stickers, cars, etc.29

Launching parties, activities, events, press releases, and commercials that clearly

communicate the meaning of their product.

Attracting spectators through fun and exciting projects. They make their product look

interesting, intriguing, engaging to participate in and watch to the general public, as well as,

the extreme. Also, Red Bull hits international frontiers.

II. Social Media

Red Bull invests in online platforms that will give them a better marketing ROI in the long

run.30

29 "Red Bull Flugtag." University of Technology Sydney. Crisco Provider, 2008. Web. 6 Aug 2012. <http://www.lib.uts.edu.au/gta/14227/red-bull-flugtag-magnum-pr>30 Brad, Smith. "Why Red Bull Uses Social Media To Get New Customers (Instead Of Only Advertising)." Social Media Today. N.p., 04/20/2012. Web. 6 Aug 2012. <http://socialmediatoday.com/fixcourse/492753/why-red-bull-uses-social-media-get-new-customers-instead-only-advertising>.

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Instead of relying on audience traditional media properties, Red Bull is building their own

audiences through business development and inbound marketing.

Examples of how Red Bull shows content marketing and social media functions:

Red Bull’s homepage looks like an action sports news site.

The company puts out professional-grade news articles, feature stories, and videos

everyday which channels them to social marketing networks like Facebook and Twitter.

III. Advertising

Red Bull mainly markets through creative advertising, targeted sponsorships and events, and

sampling to consumers, in order to receive their product.31

Media Advertising:

Red Bull uses media channels, such as: cinema, TV, radio, press, and the most important,

the Internet.

Their focused advertisements are towards young people.

Sports and Events Sponsoring:

Company’s concentration is on supporting the image, credibility, and visibility of their

product.

They do this by sponsoring extreme athletes and events, as well as, with logos and

stickers.

Sampling:

Sampling the drink is a major purpose of Red Bull because Red Bull is all about being in

the right place and the right time.

31 "The Marketing Mix Strategy." Drawert. N.p., 2012. Web. 6 Aug 2012. <http://www.drawert.com/red_bull_7.php>.

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Social Media Press Release

Red Bull Merges with Apple to Expand its Web TV Channel INNSBRUCK, AUS., Aug. 7, 2012--In April of 2010, the Red Bull company launched its own Red Bull Web TV showing extreme sports competitions and following athletes such as Travis Pastrana and Felix Baumgartner all over the world32.

In early January of 2012, however, Red Bull has extended this online network to Apple’s iTunes and app store for complete mobile access. By downloading the Red Bull TV app along with many others, Red Bull Web TV brings you a selection of international shows ranging from Red Bull Air Races to Red Bull Mountainbiking Chronicles every hour on the hour.

By having the web series available at iTunes and the Apple app store, these amazingly rare video clips are ready to watch at the palm of your hands. The shows can stream live on your iPhone, iPod, or iPad, with just a simple download and there are even breakdancing and music apps you can download from the Red Bull record label app33. From the Red Bull website, you can click “share” to post the link of the shows onto other social media websites like Twitter and Facebook.

Many celebrity athletes associated with Red Bull use the Web TV shows to allow their fans to follow their every day lives. One of these entertainers is Ryan Sheckler, an American professional skateboarder, and three-time X-Games gold medalist. “I want to make a huge contribution to skateboarding…the only way I will know that I have achieved legendary status is when my peers say I have. There is no other way,” he says. He makes his contribution through at least six shows on the Red Bull Web TV.

Red Bull, known for its sensational digital marketing strategies, has truly “upped the anti” with its Red Bull Web TV series. It has especially made a lasting impression in its homebase country, Austria. Red Bull’s new mission at this time is to carry this social media movement to the United States. The plan is to more actively promote their international hardcore sport video clips and shows from their website on the YouTube homepage, Facebook advertisements, tweets, and other blog sites like Tumblr and Stumble Upon.

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32 Red Bull. RED BULL WEB TV TAKES OFF. Redbull.com. Red Bull, 21 Apr. 2010. Web. 5 Aug. 2012. <http://www.redbull.com/cs/Satellite/en_INT/Article/Red-Bull-Web-TV-takes-off-021242829272939>33 "Red Bull TV." App Store. N.p., n.d. Web. 5 Aug. 2012. <http://itunes.apple.com/us/app/red-bull-tv/id364269164?mt=8>.

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Problems for Red Bull

I. Increased Scrutiny on Health Benefits vs. Risks

Red Bull makes the following claims about its energy drink34:

1. Increases performance

2. Increases concentration and reaction time

3. Improves vigilance

4. Stimulates metabolism

5. Makes you feel more energetic thus improving your overall wellbeing

The company provides very little information regarding the health side effects of consuming

their product.

Many studies have been conducted, and there is overwhelming evidence that there are many

negative side effects of consuming Red Bull.

The University of Wisconsin35 has found that Red Bull does not give the boost of

performance and alertness that the company claims.

Research has shown that some of the side effects of Red Bull are: increased risk of heart

disease, increased blood pressure, anxiousness, jitters, and increased chance of stroke.

Red Bull must try to avoid what happened to the tobacco industry after the Surgeon

General’s study.

34 Red Bull. 2012. Red Bull GmbH. 1 Aug. 2012. <http://www.redbull.com/cs/Satellite/en_INT/Red-Bull-Energy-

Drink/001242937921959>

35 Michelle PHD, Harris, Bichler Allison, and Swenson Annika. "Red Bull May Not Give You Wings." Biotech.wisc.edu. University of Wisconsin, n.d. Web. 1 Aug. 2012. <http://www.biotech.wisc.edu/outreach/pdfs/redbullposterltr2p.pdf>.

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There is debate about whether the FDA should increase its regulation on energy drinks. If

they decide to take further action, Red Bull as a company would be unable to survive.

II. Possible Alternatives

Red Bull has yet to comment on the adverse effects of their product.

To help avoid the possible devastating effects of the studies being conducted Red Bull could:

Do their own studies and accept whatever results they find.

Decrease the amount of taurine and caffeine that is currently used in Red Bull.

Create a PR campaign in which they focus on the positives of the product rather than the

negatives.

III. Immediate Action

It is important for Red Bull to know exactly when and where various governments are

increasing the regulation of energy drinks.

The energy drink industry needs to increase its lobbyist presence in governments around

the world.

While there may not be a quick fix to this situation, Red Bull should plan for the worse by

looking into different formulas for their most popular product.

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