Developing New Product for Red Bull: Market Research and Marketing Strategies

This report contains the research conducted on developing new product for Red Bull company. It includes market research, segmentation, targeting, positioning, pricing, promotion, and distribution strategies.

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Front-page MK4002
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Marking Criteria Comments Mark
Strong and Informative
Background information.
Demonstration of
engagement with the
relevant and reliable
sources.
/10
Evaluation of Marketing Mix
and STP theories.
Demonstration of
understanding of the key
theoretical concepts.
Quality of justification of the
provided ideas.
/50
Informative summary and
quality of referencing style.
/10
On the day of the
presentation:
Creativity of the ideas,
material and poster. Ability
to work as a team and
answer the questions.
Professional appearance.
/30
Overall mark/comments /100
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Table of Contents
Introduction 3
Company Overview3,4
Segmentation, Targeting, Positioning 5,6
Product 6,7
Price 7
Promotion 8,9
Place 9,10
Summary 11
References 12,13
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Introduction
This report contains the research conducted on developing new product
for Red Bull company. In order to understand customers’ needs but, also
to minimise risk of failure market research has been concluded. Applying
Segmentation, Targeting and Positioning tools helps to specify target
group of customers, their desires and brand perception. Marketing Mix
have provided the evidences to define key issues which company is facing
when implementing new product, but also helps to create clear position in
the market.
Company background
The Red Bull launched in 1987 in Austria, and, with their core message
“Red Bull gives you wings” have triggers people dreams and aspirations.
The founder of this renowned company Dietrich Mateschitz have
developed not only new product but new category energy drink in the
market. At present Red Bull is being sold in 171 countries around the
world, and research has shown that more than 75 billion of the Red Bull
cans have been consumed so far (Red Bull,2019). The company approach
to marketing transform the way people perceive advertising by creating
own campaigns and implementing new strategies. Today they operate in
several business sectors, from football clubs to TV broadcasting and
lifestyle magazines. Red Bull is well known as main sponsor for extreme
sports events and athletes. Moreover, the company have created own
brand events like famous Red Bull Soapbox which attracts young people
from all around the world every year (Red Bull Soapbox,2019). Company
mission is to retain leadership in energy drinks market while maintaining
high standards and exceptional customer service. Red Bull values stands
for people, ideas, culture, consequently, they stay ahead of its
competitors in CEO, gender, diversity, overall culture and employee net
promoter ranks (Comparably,2019).
Red Bull have many competitors such as Coca Cola, Nestle`, PepsiCo,
Monster etc. (Pratap, 2019). After 31 years in the market company retain
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strong position with 45% market share, however there is growing
competition from other brands like Monster which manage to gain 40% of
market share.(Maharaj,2016).
The chart below shows how the global market for energy drinks have
divided.
Graphics by Insight Survey
Despite growing competition Red Bull remain favourite energy drink in
well-developed countries with USA leading in consumption.(The Drink
Business,2013).
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Segmentation
Market segmentation divides the whole market into smaller segments to
allow company to specify distinct groups of buyers with specific needs
and, supports decision which specific group to target (Kotler,
Armstrong,2018).
Segmentation for new soft gums will be mainly divided by geographical,
demographic and psychographic factors. According to Red Bull GmbH
Report(2016), this particular brand appeal mainly to young ,single and
professional people living independently in big cities on high income.
While young professional and childless couples aim for flavours and sugar
free edition of this popular drink, students seem to pay attention to
effectiveness and stick with classic version of Red Bull. Common
denominator for those individuals is very active personal and private
lifestyle but also interest in extreme sports. The age range of Red Bull
consumers vary between 16 – 40 years old with high degree of loyalty to
the brand.(Dudovskiy,2016).
Targeting
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Target marketing aims to identify a set of customers with commons needs
and goals that a company select to serve. Choosing concentrated
marketing strategy to begin with, supports company to achieves a solid
market position based on greater knowledge of customers needs (Kotler,
Armstrong,2018).
Significantly majority of groups mentioned in Red Bull GmbH Report are
students and people connected with higher education therefore main
target group for new soft gums. For many young people going into college
is the turning point in their live. In this challenging environment they more
likely to look for products that will help them to keep up their energy
levels during long day. Offering them product which works eight time
faster than typical high energy drink will set new trend. Also, these
particular customers are open to new, innovate products which come from
world famous brand they trust. Consequently, it seems that targeting
students and young professional to be the best choice.
Positioning
A product position depends on how consumers perceives brand while
comparing with competitors.(Kotler,Armstrong,2018). The positioning
strategy for new product will be mostly based on its image and product
differentiation. This unconventional strategy was successfully adopted by
Red Bull brand in the past when market for high energy drinks didn’t exist
and advertising was expensive.(Phelan,2018). New soft gums bring the
promise of extreme performance and reliability. Unique and innovative
Red Bull Cogito are the only alternative for canned energy drinks offered
on campuses. Consider their pocket style and super-fast activation time
soft gums are most likely to gain competitive advantage in the market in
short time.
Product
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“New products are the lifeblood of a company” therefore, for every
business developing new products is essential to keep the company
growth and provide customers with more satisfying experiences. Every
new product is subject to life cycle(PLC) which usually have five distinct
stages. When some inventions decline quickly others remain in mature
stage for long time due to efficient management over their life cycle.
(Kotler,Armstrong,2018).
Soft gums are new alternative in Red Bull products range and their main
advantage is the time of activation. While energy drinks and capsules
start to work in around 45 minutes the new soft gums activate in just 5
minutes.(Kallmyer,2018). Ultrafast penetration and efficiency come from
ingredients glycerol and high caffeine concentration. Just two soft gums
provide 100mg caffeine while average 250ml energy drinks contains
around 80 mg caffeine.(DeNoon,2012). Also, the form of new product is
design for the accurate dosing without side effects. Soft gums are packed
in pocket style blisters which is much more convenient then carrying cans
of drinks. Taking into account different customers tastes soft gums will
come in three flavours: Mint, Tutti - Frutti and Cranberry.
Red Bull brand its well know around the world and people associate the
name with high energy drinks and extreme sports, therefore choosing
name for new invention its critical. Soft gums are brand extension and
develop under new product category as Captagels Soft Gums Technology.
Operating under Redbull Cogito name gives this new product advantaged
of instant recognition and quicker acceptance among its customers.
(Claessens,2015).
Price
Based on Penetration Pricing, when a product is launched initially, the
producer offers a lower price in order to attract a great number of
customers and gain a large market share. This will result in high sales
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volume and falling costs, consequently letting producer to cut their prices
even further (Kotler, Armstrong,2018).
This product targets a certain consumer, like students who are more
likely to look for lower prices for goods. Businesses can decrease their
costs by using alternatives for their supply like using a better technology
for packaging which can lead to a higher demand for their product as
result of lower price of their products.
In the following example, the price is £3.99 for six tablets in each pack to
encourage customers to adjust their need base on emotional factors
rather than rational reasons, it has psychological effect on the consumers
because studies show that people’s decisions are more likely to be
influenced by their emotions than logics.
With that being said, as soon as the good enters the market, company
will lose a small amount of profit, but in long run company can increase
the price and the sales simultaneously which leads to a surge in their
profit (Dunsby,2018).
Promotion
Promotion within an organisation is crucial aspect in the growth and
development of a new product. This is mainly done in marketing to
enlarge or expand the awareness of a product or services and also to
create brand loyalty. Promotion for a brand such as Red Bull is very
important as this will help generate sales and create more interest for the
organisation (Kotler, Armstrong,2018).
In order for Red Bull to promote this new product the first aspect they
need to consider is the media platform in which they can easily reach
their target market. The company can apply three basic type of
promotion, which through research has proven to be pre-eminent and
very efficient. Red bull has applied all the three-basic type of promotion in
the past for most of their new products and this method has brought out
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positive result. The first promotional tools the company can use is
advertisement. Red bull can advertise their new product on different
electronic media such as television, YouTube and Facebook. Electronic
media has a great and positive impact on promotion, this is because the
usage of this platforms is very often, and messages can reach the
customers rapidly. Furthermore, social media stimulate online
communication between the business and the customers. The second tool
the company can apply is sales promotion. This can be applied by the
brand in using the slotting allowance method. This means the brand can
pay a premium cash which can be agreed between the brand and other
retailers for the cost involved in placing the new products in their stores.
The premium payment also covers other charges such a penalty in case
the new product is very slow with sales (Infoentrepreneurs,2019).
The company can also consider personal selling. This method of
promotion is very effective and adequate, this is because it is done face to
face and the salesperson of the brand has the opportunity to give
adequate information about the product and also convince the customers
in buying the products. This approach of promotion is very vital as not
only it boost sales it also creates product awareness to the customers
(The Economic Times,2016).
Additionally, the brand could also put in consideration and organise
networking and community involvement. As have been done in the past
Red Bull employs students as brand managers and, provides them with
free samples of new product to be distributed around campuses during
events venues. By doing so the prospective customers can take part in
different and various activities and also learn about the product which in
return can be in their interest and this can maximise the sales for the new
product (Glassdoor,2019).
Place
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The distribution channels that currently used by Redbull to deliver the
current products line (energy drinks) may not seem appropriate for new
product for several reasons.
Firstly, the product category’s is different, RedBull Cogito is classified as
supplements product, which is subject to certain restrictions like age
restriction and other legal restrictions this will directly influences the
distribution channel selection. Secondly the age of product, reasonable to
expect that existing product lines are more likely than the new products
to flows easily through the existing distribution channels because the
older product are more established and well known (Anderson,
Coughlan1987). These factors have a direct impact on the distribution
strategy, considering all these factors it recommends the following
strategies to be applied:
 Adopting the selective distribution strategy by using a mid-range of
sales outlets to deliver the product to the targeted audience.
 Vending machine in gyms, sport centres, and student communities
are strongly recommended for soft gums.
Based on the fact that proposed product needs sort of control from the
producer suggested that the distribution channels must be multichannel
functions so the control can be shared between the Redbull and its
intermediaries. It is expecting that retailers play a major role as
intermediary to deliver the product to the end-users but, have to keep in
mind which types of retailers fit the nature of product. Proposed to be part
of the distribution operation needs to be specialized in supplements
products such as Holland Barrett, Boots, and Lloyds pharmacy. Frazier and
Lassar (1996) stated before the rise of the Internet most companies would
market their products use indirect channels using independent
intermediaries such as wholesalers, distributors, and retailers. These days,
marketing channel structure become rather direct channel or
multichannel functions where the control of the channel is shared
between the organisation and its intermediaries.
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The figure below shows the main features of the distribution channel of
the RedBull Cogito.
Figure 1 Redbull new product distribution channel structure
Summary
This study has shown that selecting Red Bull as brand for the new product
will be beneficial for the business and attract more customs. The market
research based on STP have identify students and young professionals as
target customers, therefore further analysis is based on that. Soft gums
are well advanced technologically, and effectively provides for customers
needs of quick and long-standing mental performance. Undoubtedly, the
time of activation of Redbull Cogito will bring competitive advantage and
create strong brand image. The price of the soft gums is competitive while
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comparing with the energy drinks, but also provides customers with the
value of unique product in the market. The promotion mix consist the
specific blend of sales promotion, personal selling, and advertising
through digital media. Consequently, choosing this specific marketing
tools will deliver a clear and persuasive message to the target audience.
Choosing to distribute RedBull Cogito through sales outlets and vending
machines allocated around campuses will help to maximize the sales and,
provide easy access for the target market.
References
Anderson, E. and Coughlan, A. (1987) International Market Entry and
Expansion Via Independent or Integrated Channels of Distribution. Journal
of Marketing. 51(1), pp. 71-82. Available at:
https://www.kellogg.northwestern.edu/faculty/coughlan/htm/personalpage
_files/Papers/1987%20Intl%20Mkt%20Entry%20JM%20w%20Erin.pdf
(Accessed:09/03/19).
Claessens, M. (2015) BRANDING DECISIONS – 4 BRAND STRATEGY
DECISIONS TO BUILD STRONG BRANDS. Available at: https://marketing-
insider.eu/branding-decisions/ (Accessed:03/03/19).
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Comparably (2109) Red Bull Competitors. Available at:
https://www.comparably.com/companies/red-bull/competitors
(Accessed:11/03/19).
DeNoon, D. (2012) How Much Caffeine Is in Your Energy Drink? Available
at: https://www.webmd.com/food-recipes/news/20121025/how-much-
caffeine-energy-drink#1 (Accessed:01/03/19).
Dudovskiy, J. (2016) Red Bull Segmentation, Targeting and Positioning.
Available at: https://research-methodology.net/red-bull-segmentation-
targeting-positioning/ (Accessed:01/03/19).
Fabian, (2013) Red Bull Available at:
https://www.thedrinksbusiness.com/2013/04/red-bull-energy-to-spare/
(Accessed:14/03/19).
Frazier, G.L. and Lassar, W.M., (1996). Determinants of distribution
intensity. Journal of Marketing. Available at:
https://journals.sagepub.com/doi/abs/10.1177/002224299606000405
(Accessed:05/03/19).
Infoentrepreneurs.org. (2019). Ways to promote your product or service.
[online] Available at: https://www.infoentrepreneurs.org/en/ways-to-
promote-your-product-or-service/ (Accessed: 06/03/19).
Glassdoor (2019). Red Bull. Available at:
https://www.glassdoor.co.uk/Reviews/Red-Bull-Student-Brand-Manager-
Reviews-EI_IE12190.0,8_KO9,30.htm (Accessed: 12/03/19).
Kallmyer, T. (2018) Caffeine Metabolism. Available at:
https://www.caffeineinformer.com/caffeine-metabolism
(Accessed:01/03/19).
Kotler, P. and Armstrong, G. (2018). Principles of Marketing. 17th ed.
Harlow: Pearson.
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Maharaj, Y. (2016) Does the sports and energy drink market have a
‘spring’ in its step? Available at:
https://www.insightsurvey.co.za/blog/sports-energy-drink-market-spring-
step (Accessed:14/03/19).
Phelan, J. (2018) Best practice: how Red Bull became a marketing
powerhouse. Available at: https://www.hellosoutherly.com/red-bull-
marketing-powerhouse/ (Accessed:07/03/19).
Red Bull (2019) The company behind the can. Available at:
https://energydrink-uk.redbull.com/company-profile (Accessed: 05/03/19).
Red Bull (2019) A RACE FOR THE WICKEDLY ADVENTUROUS.RED BULL
SOAPBOX RACE 2019. Available at:
https://soapboxrace.redbull.com/uk/en/about/ (Accessed:08/03/19).
The Economic Times (2016) Definition of 'Personal Selling'. Available at:
https://economictimes.indiatimes.com/definition/personal-selling
(Accessed: 14/03/19).
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