University of Economics, Prague

International Business Central European Business Realities

Analysis of Red Bulls Strategy and its

Association with Extreme Sports

Author: Alicja Janek

Thesis instructor: Gina Cook, Ph.D.

Scholar year: 2012/2013

Declaration:

I hereby declare that I am the sole author of the thesis entitled Analysis of Red

Bulls Strategy and its Association with Extreme Sports. I duly marked out all

quotations. The used literature and sources are stated in the attached list of

references.

In Prague on ..................... Signature

Alicja Janek

Acknowledgment

I hereby wish to express my appreciation and gratitude to the supervisor of my thesis,

Gina Cook, Ph.D. I would also like to thank my parents for providing me the opportunity

to experience and excel my education and for their full support during my masters

education.

TABLE OF CONTENTS

Introduction .............................................................................................................................................. 3

Part 1 Sports marketing ........................................................................................................................... 6

1.1 Definition of sports marketing .................................................................................................. 6

1.2 The Sport Marketing Exchange Process ................................................................................ 8

1.3 Sport marketing mix ................................................................................................................. 10

1.4 Sponsorship ............................................................................................................................... 14

1.5 The Sport Marketing Research Process ............................................................................... 16

1.6 Sport markets consumers ....................................................................................................... 19

Part 2 Analysis of Red Bulls marketing strategy .................................................................... 23

2.1 SWOT Analysis .......................................................................................................................... 24

2.2 Marketing mix ........................................................................................................................... 32

2.3 Analysis of consumers ........................................................................................................... 41

2.4 Analysis of consumer decision process ........................................................................... 45

2.5 Analysis of competitors ......................................................................................................... 47

Part 3 Red Bulls extreme sports events ..................................................................................... 52

3.1 Red Bull Stratos ........................................................................................................................ 52

3.2 Red Bull Air Race World Championship ......................................................................... 56

3.3 Red Bull Formula 1 .................................................................................................................. 58

3.4 Other events ............................................................................................................................... 60

Conclusion .............................................................................................................................................. 64

References .............................................................................................................................................. 67

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List of figures

Figure 1 Managing the Exchange Process, George R. Milner ................................................. 8

Figure 2 Marketing Mix, George R. Milner ................................................................................. 11

Figure 3 Characteristics Of The Sport Product, Sport Marketing, B. Mullin.................. 12

Figure 4 Three Systems Interacting in Event Sponsorship, A. Ferrand, L.Torri .......... 16

Figure 5 Marketing Information System, P. Blakey ................................................................ 18

Figure 6 Red Bulls Line extension, Red Bull Brand Strategy, S. Jaindl ........................ 30

Figure 7 Red Bull In The World, www.redbull.com................................................................ 38

Figure 8 Red Bull Wings Teams Car ............................................................................................ 40

Figure 9 Use Of Energy Drinks By Brand and Age, www.samsha.gov ............................. 43

Figure 10 Energy Drink Brand Market Share 2012, www.energydiend.com .............. 47

List of tables

Table 1 SWOT, Red Bull: A Trailblazer in marketing strategy ........................................... 24

Table 2 Red Bull revenues, Red Bull: A Trailblazer in marketing strategy ................... 25

Table 3 Energy Drink Prices, Consumer Reports Online ..................................................... 37

Table 4 Based on Sales of energy drinks, www.theatlantic.com ....................................... 48

List of pictures

Picture 1 Red Bull Stratos, Red Bull Stratos website ............................................................. 53

Picture 2 Felixs landing, Red Bull Stratos website ................................................................. 55

Picture 3 Red Bull Air Race, Red Bulls website ....................................................................... 57

Picture 4 Red Bull Formula 1, Red Bulls website ................................................................... 59

Picture 5 Red Bull Flugtag, Red Bulls website ......................................................................... 61

Picture 6 Red Bull X Fighters, Red Bulls website.................................................................... 62

Picture 7 Red Bull X Alps, Red Bulls website ........................................................................... 63

3

Introduction

This thesis is an analysis focused on Red Bull, one of the most unique and innovative

organizations within the dynamic area of energy drinks, a fast-growing area of the

beverage sector. It is an important topic because Red Bull GmbH is a market leader with

a very successful marketing strategy that plays a big role in todays sports sector. Red

Bull manufactures energy drinks, which are described as functional beverages providing

various benefits, especially in times of increased performance (Red Bull, 2013). It is

said to improve concentration, alertness, increase the energy level and reduce the feeling

of tiredness. Today, there have been over 35 billion cans of Red Bull sold in 165

countries over the world. Their headquarters is in Austria and the company is currently

employing 8,966 employees; Red Bull continues to have incredible growth recording a

15,9% increase in 2012 (Red Bull, 2013).

Brief History of Red Bull GmbH

In 1982 Dietrich Mateschitz visited Thailand and for the first time tried the Thai energy

drink called Krating Daeng, which was created by Chaleo Yoovidhya. He was amazed by

the drink that immediately took away his jet lag. Therefore he decided to develop the

recipe of Krating Daeng and in 1984 he founded Red Bull GmbH and Chaleo Yoovidhya

together with his son became Dietrichs business partners owning 49% of the company

shares. Red Bull was first sold in its domestic market of Austria and the official launch of

the product took place on the first of April in 1987. And in the same year, they reached

sales of one million cans. Since the sales were very successful, they decided to expand

distribution into the neighboring countries, so in 1992, they started in Hungary and

Slovenia. They introduced their energy drink into the German market in 1994 and only a

couple of months later, Red Bull became number one in the energy drinks market, putting

it ahead of Gatorade, which is a very famous brand producing sports-themed beverage

and food products. However, after expanding across Europe with no experience, there

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were many trials and errors done by the company and at the end Red Bull was $12

million in the hole. Mateschitzs strategy to overcome this problem was to fire all his

staff and hire a professional marketing firm instead. They focused on buzz marketing

targeting students and young males. They also hired many students to promote their

brand within their campus and to give free samples away. This strategy was very

successful and effective in most of the countries; however Red Bull still did not manage

to enter markets of France, Denmark or Norway because of some health concerns.

After hiring marketing teams, Mateschitz realized that extreme sports events could be a

profitable avenue to take Red Bull up. Therefore, they started supporting around 500

extreme sports athletes and organizing exclusive parties. By 1997, Red Bull managed to

expand into the U.S. market proving that buzz marketing strategy was very successful.

Todays extreme sports events are hosted all over the world and almost every sports

sector is covered. Red Bulls desire to maintain their leadership position is reflected in

their mission statement To spread out wings over the world (Red Bull, 2013).

The author has chosen this topic for her thesis because she has always been impressed by

Red Bulls way of running their marketing campaigns and loves how much they

contribute in extreme sports world. The author believes they change the world and not

because of introducing their energy drink into the market, but they create unforgettable

events, increase the extreme sports popularity and help many talented athletes to become

the best ones in the world. As Dietrich Mateschwitz said Red Bull isnt a drink, its a

way of life. Red Bull does not have any extraordinary taste or quality, but people love it

because of Red Bulls GmbH style and contribution to extreme sports. It is important to

understand the success of their way of marketing, its innovative features and engagement

to extreme sports.

The objectives of this thesis are to show how Red Bull develops its marketing strategy

and identify the principles and processes involved, to describe the tools and techniques

used in their marketing and show how they have been applied. However, the main goal of

this thesis is to explain how effective is the association with extreme sports for Red Bull.

In order to achieve all the above objectives, the thesis will begin by explaining what is

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sports marketing, why it exists and how it works. Afterwards, the author will focus on

Red Bulls marketing strategy and explain in detail what is their current strategy, what

tools they are using and who are their consumers and competitors. The last section will

give the examples of Red Bulls marketing strategy and attempt to show that their

association with extreme sports makes their brand extremely successful.

The methodology used during the writing of this thesis was broad. The first theoretical

part was based on texts related to the field, including those written by Kotler, Ketler or

Brooks. The author of the thesis also referred to theoretical texts and literature reviews.

For the second part, a review was done including articles from contemporary journals as

well as interviews with famous marketing specialists. The practical part was written

according to recent big Red Bull events and all the facts and data were taken from the

energy drinks official website.

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Part 1 Sports marketing

1.1 Definition of sports marketing

Sports marketing is divided into three sectors: marketing of a sport, marketing products

and services through sports and promotion of a sport to public. This thesis is mostly

referring to marketing through sport, which dates back as early as the 1870s when

tobacco companies used to make cards with pictures of baseball players on them and used

to insert them within cigarette packs to boost their sales and develop loyalty for their

brands. Since then marketing through sport has changed and improved to the more

advanced one with huge sport events sponsoring a brand. The change was done because

of the society who became more demanding and it is more difficult to impress and

convince them.

Therefore, todays marketing of a sport is about advertising of a sport and sport

associations such as Olympics or Tour de France (F. Samet, G. Russell, 2008; The four

domains of sports marketing). Their goal is to catch the attention of many people and

make their events famous all around the world. They bring huge revenues and promote

the winners or their countries.

Promotion of a sport to the public is about promoting a certain sports category in order

to increase the participation. The idea of it is to stimulate people to start doing sports. The

purpose of it is not to create a lot of revenue, but to bring some positive social changes.

For example social sports marketing can be used by the government to improve the

national public health.

Marketing products and services through sports is the use of sporting events, sporting

teams and individual athletes to promote various products, whether they are sport related

products or non-sport related ones. (F. Samet, G. Russell, 2008; The four domains of

sports marketing). In this case, product does not have to do anything with the sport but

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famous sport athletes use their image to promote the product. I am going to focus on this

sector as it applies to Red Bull, whose product is non-sport related.

To sum up, sport marketing is simply the marketing of brands by using sports to connect

with a broad set of targeted customers. It is a tool used to build brand awareness and

promote their product to increase sales. It can take any form from using sporting events,

teams or athletes to promote various brands and products. Organizations can use different

sources like sponsoring events, athletes or teams using media channels like radio or

television during sports events broadcast, or advertisement at the point of play or sporting

venues.

One way brands reach out to consumers is through sport. Sport marketing has taken off

recently, with approximately $11.6 billion spent on sport sponsorships in 2008, according

to Contemporary Advertising & Integrated Marketing Communications by Arens,

Weigold and Arens. According to an ESPN poll, 21% of people have tried a product for

the first time due to a sport sponsorship, and 65% of people believe that sponsorship is an

integral part of producing the game. Sports fans believe that sponsorships are necessary at

their favorite games and events.

Sports marketing takes advantage of the fact that fans are loyal to their teams and

athletes with the latter being loyal to their endorsements and the loyalty tends to persist

over a longer period of time as compared to other forms of marketing. Apart from brand

visibility, companies are targeting more emotional connect with the fans for their brands

and this is facilitated through social media which makes it possible to reach different

segments of customers.

Another reason for sports marketing taking off in a big way is the fact that sportsmen are

seen to be more real in comparison to a movie star: the audience knows that when an

athlete runs its him running in the flesh and blood giving the event hes taking part in his

everything, while the same may not hold true for an actor performing a stunt scene in a

movie as it is not the actor who is being exposed to risk but rather a body double who is

doing the scene (IIFT, A. Budati, N. Bansal).

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1.2 The Sport Marketing Exchange Process

If the company wants to be successful, they first find out customers needs, they include

their wants into organisations planning and decision making process and the last very

important stage is to take into the account their competitors marketing strategy to make

sure ours will be innovative and different from anyone elses. It is called an exchange

process when many people are involved in. Below is a description of this concept and

explanation of who and why is managing the exchange process.

Figure 1 Managing the Exchange Process, George R. Milner

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Sport marketer

One important role in sport marketing is playing a sport marketer whose job is to identify

what needs and wants are being satisfied during the exchange process. As Kotler and

Ketler said in Marketing Management (13th

ed), Pearson Education International,

Prentice Hall, identifying the process of exchange is the act of obtaining a desired object

from someone by offering something in return. In return for the sport consumers

membership they can receive physical activity, entertainment or health and fitness. The

very challenging process is to correctly identify various segments of the population. Once

the sport marketer has obtained the above information, he/she can introduce sport

benefits to different groups. For example, the special product assigned to a one-day

football match and one-week football match are different and will attract different

segments of the market. Some people will be interested more in a one-day event, because

they are busy, work hard and do not have a lot of free time. Other segment such as

students or young professionals would enjoy more spending a couple of days in the

entertaining event.

After having established the range of product attributes in relation to consumers needs,

the sport marketer will start on the challenge of affecting the exchange.

Consumers

Consumers are the most important element in the whole process, as without them, sport

marketing wouldnt exist. Developing an understanding of who sport consumers are and

what factors influence their consumption behaviors guarantee to achieve the success.

Consumers are the ones who make the final decision and purchase our product, so it is

relevant to find a way to satisfy their needs and keep them happy. Satisfied consumers are

the ones who are loyal to the brand. Therefore it is fundamental to learn how to

communicate with your consumers. Many sport brands do that via subscriptions where

they notify their consumers about scores or news of their favorite teams, athletes or

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players and the end are sending the reminder or a sample of their product. They want to

keep their consumers constantly engaged and interested in their brand.

Marketing Challenges and Opportunities

Every marketing challenge can be converted into new opportunities. For example

building Internet website of our organization or promoted product, we can develop and

maintain close relationships with customers. This communication could be useful for

increasing fun identification. In general, social media is a challenge for sport marketers.

In order to turn it into new opportunities, companies should start with a strategy and a

social media business concept to define objectives such as sales, brand awareness,

marketing goals and create a plan of how to achieve these goals.

External Stakeholders

Sport marketing is known as marketing of sport, however marketing through sport is

becoming more famous. The best example of this is Red Bull GmbH who is sponsoring

sporting events as a way to identifying with sport. It can be also used as an improving

ones image through their association.

1.3 Sport marketing mix

Every sport organization must develop a mix of marketing strategies to convince

customers to buy their products. The four factors price, product, promotion, place are

very well known as 4Ps of marketing (D. Shilbury, Strategic Sports Marketing, 2004).

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Figure 2 Marketing Mix, George R. Milner

The sport product

Below figure 3 presents the important divisions for sport products. Within the core, the

sport product offers some benefits to the consumers such as health, entertainment,

sociability or gaining achievements. As mentioned before, the job of sport marker would

be to find out why a certain group of consumers would choose to satisfy their need by

purchasing a sport product or a product that is related to sport events. The most

significant point should be that this sport product is unique.

The second circle is about generic sport form such as equipment or sport rules. In every

sport there are some rules that need to be followed or equipment that needs to be used.

What each consumer sees in a sport is very subjective, however there are some general

forms that should be set and followed.

Third circle specifies sport forms and divide them into different categories. There is

football, volleyball, skydiving, scuba diving and many others, which helps us to identify

consumers and focus more on their marketing strategy.

The last one divides Marketing into sectors like Product description, Price, Place,

Promotion and Public relations.

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Figure 3 Characteristics Of The Sport Product, Sport Marketing, B. Mullin

Sports pricing

It is difficult to price an individual sport product unit by a standard costing. For example,

how can we allocate fixed and operating costs to the game ticket. Therefore, pricing the

sport products is usually based on the marketers sense of consumer demand, which

means for certain seats or certain hours during the day. The company needs to decide

what is the expected profit from the specific sport form and how to achieve it. If it is a

football game, how much can we charge for a seat comparing to other sports. Then they

have to analyze if it is a certain sport season. For example if it is summer, then it costs

less to organize a tennis match, because it can be outdoor so the organization can save

some expenses.

A consumer attending an event considers the entire cost of attending when determining

the value of the event. This cost includes both the monetary cost and the personal cost of

attending.

The price of a sport product is relatively small comparing to the total costs paid by the

consumer. For example, if their family goes to the football match, they pay 1000CZK for

a game ticket, but additional costs include travel, accommodation, food, drinks and that

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would be at least a few thousands Czech crone more. Indirect revenues from the events

are often greater than direct operating revenues.

Sports distribution

A typical product is made at the manufacturing site and then transferred to the location

where it is available to customers. Moreover, even if they will not be bought the day

after, most likely they can be sold a week later. However, none of these apply to sport

products or events. Place where products are produced are usually stadiums or some

special fields and at the same place product will be consumed. It means that once the

game or event is over, the ticket cannot be sold later on. Furthermore, location of the

event is very relevant. Sometimes there are special reasons for located a game or event at

the certain place including tradition or history of a performing team. However, the non-

sport products can be produced and consumed in two different locations. It is important

to make your product easily available to all the consumers.

Sports promotion

There are different types of promotion. The most common is advertising and these are

paid messaged via media, newspapers, magazines, television or radio. That means often

commercials promotion the sport or product before or after the movie in TV. There could

be also some adverts and notes in the magazines or newspapers informing about the

product or sport event. Another option is to choose radio advertising where a speaker

would be promotion the product. All of the above methods are usually expensive and

require some investment.

There is also personal selling, which includes face-to-face presentations when a seller

directly approaches a potential consumer. It is mostly about building a relationship with

the consumer and making them feel special. A sales person can immediately answer all

the consumers question and convince them about the quality of the product. Another one

is PR, when media create a non-paid advertisement of the organization It is not always a

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good promotion because it can be also negative. The company has no impact on the

media and cannot predict on what will be published. The last one is called sales

promotion including various special offers in order to increase sales of a product such as

free samples or discounts in order to get to know the product.

While promotion sport, the sport marketer should be aware of the unpredictable nature of

the product. Promotion can help offer a tangible aspect with the use of souvenir sales. For

example when a consumer buys a ticket to watch a basketball match of his favorite team,

if he receives a mug with a picture of this team, he will most likely remember attending

this event.

Another good way to make your consumers remember the event they have attended is to

use some celebrities. Their expanded egos can lead to wholesale promotion and can get

the media attention.

The best way but also the most expensive one of promoting sport, sport products or non-

related sport products would be through sponsorship. Thanks to that, companys brand

would get famous, gain a good image and increase products awareness.

1.4 Sponsorship

Sponsorship is the exchange process between two parties when one of them is obtaining

something from the other one and in return receives something that satisfies both of them.

According to Alain Ferrand, there are four conditions that have to be met:

An organization that is looking for sponsors has to conceive a sponsorship offer in

connection with the rights which it holds

The offer must represent value for the potential sponsor

The organization must be able to deliver this provision of services specified in the

exchange

The potential sponsor should be free to accept or refuse the offer

In other words, the right holder should be able to analyze the offer and expectations of

potential sponsors and can design or implement changes in order to satisfy them.

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The provision of a service depends on the possessing marketing rights related to the range

of use of an events brand and athletes image. It is necessary to point out that no

organization holds the marketing rights of sport in general or in a particular sport. Indeed,

sport is a social practice that can develop outside all institutional contexts. The practice of

sport becomes institutionalized insofar as an assembly is structured around a mission.

The mission is embedded deep within the statues of sports organizations (A. Ferrand, L.

Torri, Routledge Handbook of Sports Sponsorship Successful Strategies, P. 47).

Nowadays, sports sponsorship exists within a global system. It joins together more and

more stakeholders. There are two types of stakeholders: internal and external ones. The

internal stakeholders are employees, politicians, athletes, sport clubs, and the external

ones are media, sponsors, communities etc. Sponsorship is a multilateral relationship

involving a number of stakeholders within the global system.

Below figure 4 presents a system mentioned above where stakeholders are independent.

In the event system the main stakeholders are:

Rights holders and they are held either by an association or a company. The most

important goal is that athletes or sporting groups have their own rights while

organizing an event.

Audience are participants, spectators or judges and they differ depending on the

sponsorship operation. It is expected from them to attend a sport event, be excited,

entertained and do the search of information regarding the event.

Media do not construct the event, but they will help to build an image if the

interests of event will be sufficient.

Sponsors are the ones who provide funds or support for an event.

Agencies are usually the consulting firms in sport marketing. Their goal is to find

firms for sponsorship, work on an agreement etc.

Local authorities are the state, regional or local ones who can be involved in the

events system.

Sports system involves participants who are specific to the sport club and it establishes a

traditional hierarchy (international, national or regional clubs). It also points out public

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and semi-public sport management organizations because their number can influence the

impact of the event.

The geographical and social system covers events and its stakeholders.

Figure 4 Three Systems Interacting in Event Sponsorship, A. Ferrand, L.Torri

1.5 The Sport Marketing Research Process

Marketing research is a process involving a few necessary steps and each of them must

be completed in order to achieve success. If the problem or decision has not been

correctly identified, then all the further steps will be misdirected. The most important role

during the research process is played by decision makers in the organization and those

responsible for carrying out possible future directions related to the issue.

The sport marketing research process creates the need to get inside of the sport

environment, sport competitors and sport consumers. After gathering all data, they are

being analyzed and the relevant information is being used. This process requires a

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database system often referred to a Marketing Information System (MIS) (Source:

George R. Milner, Mark A. Macdonald, Managing the Exchange Process, 1999). The key

information requirements are:

Who are the sport consumers, their profiles, segmentation and consumers of

competitors?

For example: extreme sport addicts, students in the age between 18 to 25

Where is the sport purchase made, is the decision made

For example: from home

When is the purchase made?

For example: after school, during the weekend

What are the benefits that consumers are looking for, factors influence their

decision?

For example: adrenaline, satisfaction

Why do sport consumers purchase?

For example: to increase their excitement level

How much do consumers purchase?

For example: 1 product per day

Marketing Information System should contain answers to all above questions. The basis

of a good MIS is the management of the data flow. Mullin (2007) suggested the five steps

of data flow as:

1. Collect data from a wide range of sources e.g. ticket buyers, groups, e-

newsletters

2. Process the data

3. Create one single data repository

4. Use the data for all sport marketing activity

5. Track campaign effectiveness

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MIS gathers both internal and external information. The internal one includes information

such as sales records, enquiries, personal details. The external one relate to sport market

reports, sport market segment, characterizes of consumers. Below Figure 5 presents a

basic process performed by a MIS.

Figure 5 Marketing Information System, P. Blakey

The necessity for a sport organization to focus on information sources internal and

external to the organization means that the factors that can be controlled by the sport

organization and the factors outside the control of the sport organization are accounted

for in the process. This process requires special tools such as MIS or SWOT analysis to

coordinate the data that has been generated. These tools also help to identify the most

significant components for the sport marketer to consider in the planning phase or the

sport marketing planning process (P. Blakey, Sport Marketing, 2009).

First step was to do the research process and now we know what kind of product we

should deliver to our consumers, why would they enjoy it and where would they make

the purchasing decision. Next step would be to specify our consumers market, divide

them into different segments, then choose our target and work on the positioning, so how

to make our brand unique.

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1.6 Sport markets consumers

Segmentation

Sport market segmentation helps to identify the consumer market. Usually the sport

consumers market is split into smaller groups that have some similarities and their

characteristics help to create a target group. The goal of market segmentation is to

identify groups of sport consumers who have common wants and needs and the person

responsible for it a sport marketer. He divides the target groups according to

demographic, geographic, psychographic and behavioral factors and then prepares the

strategic sport marketing planning.

Demographic segmentation

Demographic information includes age, gender, ethnic background and stage of the

family lifecycle or income, education, occupation of potential consumers. This

information is easy to obtain and very helpful while preparing the marketing strategy.

Age is a basis of demographic segmentation. Sport has been always divided into age

categories. Back in the school, children compete against their own age group because of

the similar size and skills level and therefore it encourages fair competition. Age from a

spectator perspective combines with other variables such as gender and income, to

predetermine consumption behavior. For example, the audience at a Super League

netball games is not the same composition as a Premier League football match. This is in

part due to differences in ticket prices (income related), fan identification perhaps

through cultural socialization in school (gender related) and these factors help to create

the average age profile of sport spectators and participants (P. Blakey, Sport Marketing,

P. 45).

Gender differences have been always playing an important role in sport marketing. This

was established years ago when girls were assigned to different sports than boys.

However, males and females can participate in the same events or activities so in the

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marketing strategy one should take into account both groups. However, usually males and

females have different interests. Males are fans of football, basketball or rugby, while

females enjoy more watching volleyball, handball or badminton. Different interests

would result in attending various events. On the other hand, there are many uni-sex sports

such as tennis, jogging or swimming so it is relevant to keep in mind both males and

females when creating sport marketing.

Ethnic background takes into the account race, religion and nationality. Ethnicity implies

common customs, values, and attitudes within a group of people who are bound by a

common cultural identification. Many aspects of consumer behavior, for example their

perceptions, likes and dislikes are often different among consumers with dissimilar ethnic

and cultural backgrounds. Some ethnic groups spend more than the market average for

certain types of goods and services.

Income, education and occupation are usually combined. Involvement in sport at any

level can be very costly. Not everyone can afford to fulfill expensive sport requirements

and get necessary equipment. Therefore there are some barriers to entry certain sports

because of the costs of participation. However, these have decreased in recent years as

average income has increased, meaning greater power for new members.

Geographic segmentation

Geographic segmentation is the division of the market according to different

geographical units such as continents, countries, regions or neighborhoods. This form of

segmentation provides the sport marketer with a quick overview of consumers within a

limited area. Increased mobility means greater access to sport events. Geographic

segmentation can be a useful strategy to segment markets because: it provides similarities

and differences between consumers in a certain area, can identify cultural differences

between these areas, it also takes into account climatic, cultural and language differences

between geographical units.

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One of the tasks of sport marketers is to identify the similarities of sport consumers to

propose sport products, services or events that fulfill their wants and needs. Sport

consumers are influenced by both internal and external factors.

For the providers of sport products or services, it requires time and effort to understand

their consumers needs in order to bring some sporting experience to their happy

consumers.

Targeting

Once the marketer creates different segments within the market, then he devises various

marketing strategies and promotional schemes according to the tastes of the individuals

of particular segment. This process is called targeting. Once market segments are created,

organization then targets them. In sports marketing this is the selection of the groups,

which the sport marketing objectives aim to be satisfied. The final decision is based on

size, reachability, measurability, and degree of behavioral variation (R. Shank, Marketing

of sport, 2009) in the potential sport target market.

The size of the sport target market should not be too large otherwise it becomes too

difficult to differentiate similarities and differences between its members. It also should

not be too small, because than the potential of sales is limited.

Reachability is the ability to communicate with the sport target market. Nowadays, it is

easy to reach all kinds of consumers via different kinds of advertising. However, most of

the methods are expensive and limited by the marketing budget.

Measurability covers size, accessibility and purchasing power. As mentioned, before,

MIS can measure demographic, geographic and behavioral segmentation.

Behavioral variation is about the similarities in behavior, attitudes and lifestyles. It is

important to understand consumers lifestyle in order to select a suitable marketing

strategy.

Target market selection can equally be based upon distance or drive-time from the sport

revenue, historical sales records, identified through a market research survey, or from

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sport industry sales patterns informing indexing methods to identify market potential

(especially in sport retail sales). One, or multiple, sport target markets can be pursued

depending upon the sport marketing objectives of the sport organization, that is, to

maintain or penetrate sport markets. Again the sport marketing budget will determine the

sport marketing strategy to be followed, be it a parallel or staggered program of sport

marketing implementation where multiple sport markets are being targeted (Balley, P.

59).

Positioning

Sport market positioning builds an image of the sport product or service in the mind of

the target sport consumer. Usually, this image is compare to the one created by the

competitors, so the product should be unique. So the most crucial question is how to

differentiate our sport product or service from that of the competitors and then determine

which sport market niche to fill. It is important to remember that one product can be

targeted into different market segments and hence, it would require multiple market

positioning strategies.

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Part 2 Analysis of Red Bulls marketing strategy

The marketing strategy that has worked best for us is not to publish our strategies

-- Red Bull

Red Bull has a well-known, innovative and simplified brand all over the world.

Mateschitz, the owner of Red Bull, once said We do not bring Red Bull to the people.

We bring the people to our product. Red Bull employed special marketing teams,

building the Red Bull brand from the ground up. And they managed to establish brand

awareness across the world and they keep growing the brands identify through word of

mouth. Red Bull succeeded in entering new markets, today their brand exists in 165

countries. Their marketing strategy is very unique and it is not directly correlated to the

energy drink. Red Bull has aligned its brand unequivocally and consistently with

extreme sports sponsorship. They are number-one at creating content so engaging that

consumers will spend hours with it, or at least significant minutes." said by Rebecca Lieb,

analyst at Altimeter Group. That is very true, because Red Bull as a brand is mostly

associated with extreme sports. The drink by itself is not very unique, its recipe is shown

on the package and has never been patented so it is easily copied.

Red Bull is associated with sports to further promote and grow the Red Bull brand and

reach a broader audience of fans. Thanks to the establishment of Red Bull as an extreme

sports icon, the company has become a leader not only in the energy drinks market, but

also in the use of sport as a brand extension (S. Gorse, Entrepreneurship through sports

marketing: Red Bull, 2010).

In order to analyze Red Bulls marketing strategy, below there is a description of

companys advantages and disadvantages, and then detailed description of the product

itself and what it consists of, how is it distributed, where is it available for purchase and

what methods Red Bull is using for promoting their energy drink through the company.

Once we know more about the products marketing strategy, the author will analyze

energy drinks and then Red Bulls consumer market: who are they, how many of them

there are and how can we find them. At the end, the author provides a presentation of Red

Bulls competitors, i.e. who they are and if they can harm Red Bulls business.

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2.1 SWOT Analysis

SWOT is a structured way of evaluating the image of a company. The author will now

describe strengths, weaknesses, opportunities and threats of Red Bull GmbH and give

some examples and ideas on how to improve their image.

Table 1 SWOT, Red Bull: A Trailblazer in marketing strategy

STRENGTHS

Market leader Unique marketing Generation Y Brand identity

WEAKNESSES

Lack of innovation Unhealthy product Expensive marketing campaigns Lack of patent Side effects

OPPORTUNITIES

Product line extension Extending target group Geographical expansion Distribution

THREATS

Public health concerns Dangerous mix with alcohol Competition Inability to move forward

Strengths

Market leader

Red Bull has been the leader in the energy drinks market for a long time. Every year, it

achieves sales of between 4 to 6 billion dollars (figure 5). Red Bull was the first launched

Source: Hein, K. A Bulls Market the marketing of Red Bull energy drink, 2011.

25

energy drink and has achieved today a clear market leading position with 4,204 billion

cans sold worldwide in 2011, representing an increase of 7,6% against 2009.

Furthermore, Red Bull is competing in 13 West European countries and is the main

leader in 12 of these and other top 20 brands are having only 17% of share (Red Bull: A

Trailblazer in marketing strategy, 2011). Even the products offered by leading drinks

manufactures are failing to make major headway against Red Bull, with products such as

Coca-Colas Burn absent from the top five.

Table 2 Red Bull revenues, Red Bull: A Trailblazer in marketing strategy

Unique marketing

Red Bull has been very successful in its marketing strategies and increasing consumers

brand awareness. They create many sports events, promotions and street marketing

campaigns to get consumers attention. The Wings Teams (group of students giving

away free red bulls to active consumers) role is to establish a relationship with the

potential consumers, to let them discover the product, talk to them about its advantages

and to convey the information from the consumers to the company about their

appreciation or dissatisfaction of the product. Red Bull found out that the best way to be

close to its consumers and to convince them is to hire them. The Student Brand Manager

is an ambassador of the brand in their own school. Their objective is to be sure that Red

Bull is present at every strategic moment in the student social calendar: integration week-

end, sportive events, big parties, etc The strength of Red Bull is an ability to instill a

genuine passion for the brand in the Wings Team and the Student Brand Managers.

Therefore, these committed people are more likely to promote a good image of the brand

and to have a greater positive impact on targeted consumers (Red Bull: A Brand built on

Source: Hein, K. A Bulls Market the marketing of Red Bull energy drink, 2011.

26

Marketing). Red Bull is famous for its unique methods of marketing. For example since

1992, Red bull has been creating easy cartoons with simple but recognizable drawings,

which are telling some funny ,short, cheeky, self-ironic and unpredictable stories and can

be adapted to every market. Every year each of the subsidiaries can choose some spots in

the Red Bull cartoon data base according to their current market situation.

Generation Y

Red Bull is mainly targeting generation Y, which focuses on people born between 1980

and 1994. Generation Y consists of young individuals whose attention needs to be grab

by interesting and original marketing campaigns. Red Bull speaks to the young

generation with worldwide positioning: Red Bull vitalized body and mind and its

slogan is known by all: Red Bull gives you wings. Red Bull is organizing such teams

as Red Bull Wings or Student Brand Manager Programme, where their own target

consumers can promote their product because that makes their product look more

reliable.

Focusing on one certain group gives Red Bull an advantage over other brands who target

wider groups of consumers.

Brand identity

Red Bull has built its brand identity for many years around sponsored events. Two years

ago, there was a survey made on the website brandtags.net where users could have

entered words, phrases or any sentences that they associate with different brands. Nine of

the 40 most commonly occurring terms for Red Bull dealt with speed and power and four

pertain to risk-taking and recklessness. In comparison, the 14 other most popular drink

brands at brandtags.net average less than one speed or power associated word per brand

and almost zero risk-taking or recklessness associated words per brand (J. Acquino Red

Bulls Logo alone can affect your behavior). Red Bull has a strong, fresh and

fashionable brand identity. Their logo is well known all over the world and the image

they build around their logo is very successful.

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Weaknesses

Lack of innovation

Todays Red Bull owns few brands: Red Bull, Red Bull Sugar Free, and three new

flavors drinks (The company had decided to discontinue its Red Bull Energy Shot and

Red Bull Cola brands in 2011). The release of Red Bull Sugar Free was a response to

consumers worry about calories intake. The answer to the diet drinks was strong and,

despite this lack of innovation in healthy drinks, Red Bull remained the US value leader

with 43.2% share, leading second place Monster by over US$800 million in 2011 retail

sales (J. Feliciano, Innovations in Energy Drinks, 2011). In the energy drinks market,

there are more and more new drinks launched by competitors. For example, one of the

biggest competitors of Red Bull, Rockstar has launched 10 different products with

various flavors and less caffeine inside.

Red Bull has established itself as the traditional energy drink leader. For many years, they

have been using the same logo and packaging while other rivals introduce new drinks,

more new flavors and more healthy ones to the market.

Unhealthy product

Red Bull contains of 80mg of caffeine in one can, and it is more than twice that in a can

of Coke. Dylan ODonnell says the amounts of guarana, taurine, and ginseng found in

popular energy drinks are far below the amounts expected to deliver either therapeutic

benefits or adverse events. Energy and sport drinks are a very small sector of the overall

soft drinks market. Nowadays, many consumers interests are changing their lifestyle into

the healthy one, drink fresh drinks and be active instead of sitting home and drinking

energy drinks. In my opinion, Red Bull would benefit a lot by introducing a healthy drink

into the market.

Expensive marketing campaigns

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As mentioned before, Red Bull is focusing on sponsoring extreme sport events. Red Bull

GmbH is a private company and does not report its financial statements. However, it is

easy to calculate that all the events they have sponsored, for example Red Bull cliff

diving, skydive from the edge of space, Formula 1 and many others are very expensive to

organize. Despite the massive costs Red Bulls marketing campaigns, their rivals also

investing huge amounts, and therefore Red Bull is gaining smaller returns from the

investments. For example, sponsoring Red Bull Stratos, where Felix Baumgartner was

jumping out of the stratosphere cost Red Bull approximately 15 million dollars. (Red Bull

website).

Lack of patent

Unlike Coca Cola, the contents of Red Bull are actually not patented. All the ingredients

are listed on the side of the can. That makes it easy for the competition to copy the recipe

and create a similar taste of the new energy drink.

Side effects

Red Bull is famous because of its energy boost and is very often used by students to

enhance focus, alertness and concentration. Red Bull website claims that its product

vitalizes body and mind and that it increases performance, concentration and reaction

time; stimulate your metabolism and improves vigilance and emotional state. However, it

is essential to remember not to overdose such energy drinks as it might cause some

harmful effects on consumer health.

Caffeine is a central nervous system stimulant, and one 8.3-ounce can of Red Bull

contains 80 mg of caffeine. If someone drinks several cans of Red Bull daily, they likely

will experience some adverse reactions due to excessive intake of caffeine. Examples of

side effects from too much caffeine are feelings of anxiousness or nervousness. Another

common side effect from too much caffeine is trouble sleeping or insomnia. The Mayo

Clinic reports that excessive ingestion of energy drinks is associated with increasing

cardiovascular danger that includes experiencing chest pain, a myocardial infarction or

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heart attack, and cardiac death. (A.M. Tacon, Side Effects of Red Bull Energy Drink)

Because of the mentioned side effects, sales of Red Bull is banned in Norway, Uruguay

and Denmark.

Opportunities

Product Line Extension

The brand has the financial ability to develop and offer a line extension which could

result in gaining new consumers. As mentioned before, one of the biggest weaknesses of

Red Bull is their lack of innovation. Red Bull should extent its product line to include

energy drinks which provide health benefits. These new energy drinks should be also

formulated with dietary supplements so that older consumers would be interested in the

new edition too.

A few examples of the energy drinks in the proposed product line are shown below:

Red Bull Vitamin C Vitamin C is an essential vitamin to boost the immune system for

all age groups. Therefore, this drink would provide plenty of benefits to revitalize the

skin as well as boost ones energy

Red Bull Memory Boost It includes Ginko Biloba which helps to improve memory and

also promote overall mental health. It would be perfect for students to improve their

memory task performance.

Red Bull Stress Reliever Nowadays, everyone is often stressed over their work and that

drink would include Ginseng that helps to relieve stress and increase ones energy level at

the same time. (Red Bull Brand Strategy: Line Extension, 2011)

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Figure 6 Red Bulls Line extension, Red Bull Brand Strategy, S. Jaindl

Extending target group

Red Bull is mostly focus on 18-25 target age group, but when they grow up, it does not

necessarily means they will not be drinking energy drinks anymore.

Red Bull is strongly associated with extreme style sports such as skydiving, paragliding,

hang gliding or base jumping. They should also expand their target market to less

extreme sports enthusiasts such as golfer, women and healthy conscious consumers. By

doing so, they would show that anyone can enjoy their product and not just males sport

addicts.

Geographical expansion

Today Red Bull exists in 165 countries around the world. They are targeting the core

markets of Western Europe, USA and the growth markets of Brazil, Japan, India and

South Korea. Red Bull plans to strengthen its global position by expanding its presence in

Asia. That is a great opportunity for a company, because the more countries will be

selling their product, the more profit the company makes. In Asia-Pacific, Japanese

brands have traditionally led the regional rankings table. However, stagnant domestic

demand and the slow or non-existent overseas expansion of Japanese brands have led to

poor share gain at regional level. In contrast, Red Bull is more aggressive in terms of

geographical expansion and recorded strong volume growth in China, Hong Kong, India,

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the Philippines, Azerbaijan and Pakistan over the past few years. Red Bull overtook

Osotspa Co Ltd's M brand in 2005 and took the lead in the category with a retail volume

share of 13% in the Asia-Pacific region. However, Red Bull's leading position is not yet

well established, and this is reflected in the marginal gap between itself and the second

and third ranked brands, M and Otsuka's Oronamin C with respective shares of 12.1%

and 11.7% (Euromonitor International, Red Bull plans Asian expansion, 2011).

Distribution

Vending machines are effective advertising tool and sales tools, because of the constant

exposure. Red Bull should focus more on this way of product distribution as it would

help to increase their sales and face industry trends. Moreover, even though Red Bull is a

top selling energy drink in the clubs and pubs, there are still places where Red Bull is not

distributed to. For example, in some of the supermarkets, the only energy drink available

is Monster.

Additionally, there are countries such as Norway, Denmark or Uruguay where sales of

Red Bull is prohibited. In my opinion, Red Bull GmbH should focus more on those

markets and think of a strategy how to enter their markets.

Threats

Public health concerns

In Norway, Uruguay and Denmark sales of Red Bull is banned because of the risk that

products can have for ones health. Several media make negative publicity around the

brand. Sometimes Red Bull is forced to proof with scientific evidence that its product is

not so dangerous with a normal use. Other media reports were targeted towards parents

stating the caffeine levels in Red Bull can be dangerous if consumers by children or

teenagers. Red Bull released a lot of statements to cut the negative media attention.

However, it keeps coming back and will be difficult for Red Bull to ever achieve a

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positive aura around their product.

Dangerous mix of Red Bull with alcohol

In Poland, there is a special warning on the cans of Red Bull, saying that mixing Red Bull

with vodka could have dangerous effects. One study showed that ingestion of a

caffeinated energy drink (Red Bull) with vodka reduced participants perception of

impairment of motor coordination in comparison to vodka alone, but did not significantly

reduce objective measures of alcohol-induced impairment of motor coordination, reaction

time, or breath alcohol concentration (Ferreira et al., 2007).

Competition

Major competitors of Red Bull are Coca Cola and Pepsi. They both have launched their

own energy drink versions to compete with Red Bull products. However, at the moment

they do not succeed. Nevertheless, Red Bull should keep their eyes open and be

innovative in order not to get surprised by new rivals such as Monster or Rockstar.

Inability to move forward with the product

As discussed before, Red Bull is well known for its very successful advertising; however

the product itself could be in danger of becoming stale. Funny cartoon adverts is working

very good for now, but it will not entertain people forever. The same with sponsoring of

extreme sport events, it is a large investment for the company but one day it can be not

enough for the consumers. Hence, Red Bull should be more creative and work on some

new ideas to keep their product interesting.

2.2 Marketing mix

After analyzing the advantages and disadvantages of Red Bull GmbH, below there is a

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detailed description of Red Bulls product, price, how they promote it and where is it

distributed to. This will be done using a method called "Marketing mix" as it is a general

phrase used to describe the different kinds of choices organizations have to make in the

whole process of bringing a product or service to market. The 4Ps is one way of defining

the marketing mix, and was first expressed in 1960 by E J McCarthy.

Product

This section is focused on specific features and benefits of its product. Red Bull is a

popular sweet energy drink brought to the market to give something of an adrenaline

effect to the consumers. It contains caffeine, taurine, glucuronolactone, B-group vitamins,

sucrose, and glucose and it is sold in 250ml cans. The product is the same all over the

world. Its logo presents two crimson coloured bulls facing each other at the background

of a yellow sun and it symbolizes the tenacity and the high octane energy that drink

provides. It comes in one design and the recipe of Red Bull can be copied as it is not

patented.

Red Bull is created to increase performance during physical and mental activities. The

benefits of this product are increased performance, concentration, reaction speed,

vigilance, improved mood and stimulated metabolism.

Now I am going to describe each ingredient from Red Bull (source: Bryan DiSanto, The

Complete Guide to Red Bull Ingredients, 2012)

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Taurine

Taurine is a nonessential amino acid that plays a big role in brain tissue and nervous

system function. It is an very strong antioxidant, act as a blood thinner (reduces blood

clots), and can reduce numerous risk factors for heart disease, for example LDL

cholesterol, triglycerides or blood pressure. Taurine regulates levels of waters and salt in

the body, as it can form into bile salts. It works as an inhibitory neurotransmitter in the

brain and can also affect learning and memory.

Glucuronolactone

It is a chemical made naturally in the body when glucose is metabolized. It boosts energy,

increases the feeling of well-being, reduces drowsiness and increases attentiveness and

reaction time. It also has a detoxifying effect on the liver and can help spare glycogen

stores stored carbohydrates that supply muscles with energy during intense exercises.

Source: Red Bull Label, www.redbull.com

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Glucuronolactone may fight fatigue and it is present in many energy drinks.

Caffeine

This ingredient increases alertness, attentiveness, reaction time, metabolism, heart rate

and the amount of body fat burned by the body. It can also cause side effects such as

jitters or raise blood pressure. Red Bull contains 9.5mg caffeine about 80mg per 8.4

can.

Niacinamide

It is a simple Vitamin B3 and it is used for the metabolism of fats and carbohydrates. It is

good for the cholesterol and improves skin condition.

Pyridoxine HCL

Source: http://www.energyfiend.com/caffeine-content/red-bull

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It is a Vitamin B6, relevant for protein metabolism. It is proved that this vitamin

increases the amount of growth hormone released as a result of hard workout.

Inositol

Vitamin B8 which helps build cell membranes regulates proper fat and carb metabolism

and helps to prevent excess fat build-up in the liver. Inositol combines with choline to

form a compound called lecithin, which helps reduce cholesterol levels. Interestingly,

inositol is vital for proper hair growth and can help prevent constipation. It has also been

shown to improve mood and treat depression (Bryan DiSanto, The Complete Guide to

Red Bull Ingredients, 2012).

Price

Red Bull is using a premium pricing strategy all over the world. As we can see in the

table below, Red Bull is priced above the competitors products and not only in UK, but

in all the countries where Red Bull is available, their price is highly above their

competitors. Consumers will pay more due to the high quality of the product, well known

brand and products benefits. It is a unique functional drink that has promising and

delivering benefits that no other energy drinks can offer and that is the reason of their

premium price.

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Table 3 Energy Drink Prices, Consumer Reports Online

Place and distribution

Red Bulls distribution strategy was different from others. At the beginning, instead of

targeting the biggest distributors with the greatest reach, Red Bull targeted small ones

who often become exclusively Red Bulls distributors. Red Bull would find the small

bars, restaurants or stores and provide them a small cooler to sell the beverage from.

Red Bull has created a pull distribution policy, when consumers demanded the product

and therefore supermarkets and shops needed to stock their product. Red Bull has also

considered using vending machines as a distribution method. If vending machines were

installed at key locations (gyms, universities, clubs) then there would be increased

awareness and sales. Today Red Bull is distributed to all bars, restaurants, clubs, stores or

gas stations. It is easily available everywhere we go.

Source: www.mysupermarket.co.uk

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Figure 7 Red Bull In The World, www.redbull.com

Above figure shows the map of countries Red Bull is being sold. There are 165 countries

where Red Bull is available. 4.631 billion cans of Red Bull were sold in 2012 worldwide;

that averages out to about 12.7 million cans being sold a day worldwide, an 11.4 percent

increase from 2011 (Red Bull website).

Promotion

The most interesting element of Red Bulls marketing mix is its approach to promotion.

They know how to involve all the activities in order to reach all target market. Their

favorite promotional approaches are:

Above-the-line

These are the advertisements related to things people can see via media. This type of

promotion focuses on advertising to large audience and the examples are television,

cinema advertising or online media. Red Bulls above the line promotion is meant to

increase top of mind brand awareness among customers.

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Below-the-line

Below the line advertising is trying to reach consumers directly and focuses on small

target group instead of mass audience. Red Bull creates and organizes different events all

over the world in order to reach wide group of consumers. The examples of events are

Red Bull X-Fighters, huge tournament of freestyle motocross motorbikes, Crashed Ice a

world tour winter event, which involves downhill skating in an urban environment or Red

Bull Flugtag where competitors attempt to fly home made flying machines.

These events begin the AIDA process, which stands for sales process, attention, interest,

desire and action. Red Bulls events provide experiences that excite surprise and

challenge both participants and audiences.

Pull marketing

Word of mouth promotion is based on the principle of pull marketing. It relies on the

transmission of a positive marketing message from person to person through conversation

or a personal communication such as email or text message. Pull marketing gets

consumers to bring other consumers to product. In contract, push marketing uses above-

the-line promotional techniques to put product in front of consumers in order to generate

sales. (G. Salsburg, Marketing Company of the year, 2010).

Red Bull is using this promotional approach very often by getting consumers excited

about the product and sharing this excitement with their family and friends. Once they

hear something about the product or event, then they will do more research by

themselves. The idea is to create interesting stories for people to talk about, which at the

end helps to create brand awareness and grow sales.

Dietrich Mateschitz, founder of Red Bull has also used this strategy to promote his

original product in the 1980s. Back then, he hired a Red Bull Wings Team to go out to

the people and talk face to face with them about the product. It resulted in creating

consumer interest in the product and once they tasted the product, they became advocates

for the brand and shared their feedbacks with friends and relatives creating Red Bulls

40

awareness.

Innovations in promotion

Red Bull is doing its best to approach consumers in the most original ways, for example:

Red Bull Wings Team It is a group of students who go out on the road in their Red Bull

car to help launch the product in new markets. The branded car has a Red Bull can on the

back of it (picture below). Teams offer a cold can of Red Bull to the ones who are active

and in need of energy boost in order to show the products qualities. It creates a personal

and positive product experience.

Figure 8 Red Bull Wings Teams Car

Student Brand Manager Programme When individual students help to organize

different events on their campus. The idea of it is to get people talking about the product

and get students involved on their own campus. For example building excitement in

Flugtag event or spreading the word about new upcoming events or coordinating Red

Bull Wings Team to provide energy drink to students who need it the most.

Red Bull Bedroom Jam It is a competition for young musicians to get them of their

bedrooms and onto the big stage and giving them a life experience. Red Bull records

bands playing live from their bedrooms and make it available for others to watch via

Internet. The bands that managed to get the most attention online, then compete for long

41

term career support and the opportunity to play at big festivals around the world. This

programme brings a lot of attention and media interests and hence, increases the brand

awareness.

Red Bull Reporter It provides opportunities for writers, filmmakers or presenters to

report on Red Bull events giving them a chance to have their work published. This

project helps Red Bull to get the attention of its knowledgeable audience. And the goal is

to build brand loyalty by creating close relationship with consumers. (Greg Salsburg,

STiR- Communications Marketing Company of The Year)

Red Bull is famous from their creativity and innovative ideas. After a detailed

explanation of their marketing tools, it is important to understand who they are aiming at

while creating such programmes. Below there is an analysis of the whole energy drink

consumers and then, description of Red Bulls consumers.

2.3 Analysis of consumers Red Bull has consumers all over the world. In this section the author will analyze energy

drink consumers market and then focus on segmentation, targeting and positioning of

Red Bulls consumers. It is also important to understand why do the consumers drink

energy drinks and how can we influence their choice. This will be analyzed in the part

regarding the consumers decision process.

Energy drink consumers

65% of energy drink consumers are between the ages of 13 and 35, with 65% of those are

male. Teen consumption has grown rapidly since 2002, with an increase in ages 13-17

from 18% to 31% (Marin, 2007). In the U.S., 35% of all teens aged 12-17 drink energy

drinks, vs. 15% of adults aged 18 and over (Mintel, 2008).

Young adults ages 18-24 are the key consumers in the market with 34% drinking energy

drinks in 2008. However, during 2003-08, respondents ages 25-34 have also exhibited

42

impressive growth in the incidence of consumption (14% in 2003, rising to 23% in 2008).

Combined, these two demographic groups accounted for 45% of all energy drink users in

2008 (Mintel, 2008). Young adults are also typically more likely to try new beverages

(Strenk, 2008). They are not afraid of anything and like new things and changes.

Moreover, young adults are the ones who also like to drink alcohol and most of them like

mixing energy drinks with alcohol, which is very dangerous. A large appeal of energy

drinks is the ability to mix with alcoholic beverages. Approximately, 52% of adult

internet users ages 21-34 used energy drinks to mix with alcohol over a three month

period. According to one study of college age consumers, the most common reasons for

energy drink consumption were insufficient sleep (69%), studying (56%) and to mix with

alcohol (57%) (Nutrition Journal, 2007). Therefore, the biggest reason of drinking

energy drink is not for mixing it with alcohol but to prevent insomnia. However, there are

many sources that say energy drink can be addictive and can increase ones chances of

living unhealthy and dangerous life.

The journal of Drug and Alcohol Dependence published a paper that found energy

drinks could result in caffeine toxicity and addiction, plus increase a young persons

chances of abusing hard drugs (Warlick, 2008). Another study by the American College

of Health stated, students who drank at least six energy drinks per month were three

times as likely to have smoked cigarettes, abused prescription drugs and been involved in

fights, (Warlick, 2008). Young consumers have reportedly abused energy drinks having

multiple drinks one after another to provide a consistent boost of energy (Gates, 2008).

Todays biggest group of consumers of energy drinks are men, as women care more

about their health and weight and energy drinks contain a lot of sugar. Moreover, high

amount of caffeine and aggressive marketing campaigns of energy drinks are also the

reasons of negative influence of women when choosing drink.

Additionally, because of the high caffeine content in energy drinks some doctors, parents

and schools are warning teens not to consume these potentially unhealthy energy drinks

(Mintel, 2008). The Virginia chapter of the American Academy of Pediatrics revealed,

There is no good reason for children and teenagers to consume these products (Legge,

43

2008). It is important to remember that energy drinks are not for everyone and in my

opinion there should be a prohibition of energy drinks sales to young consumers.

Red Bulls consumers

Red Bull energy drink focuses on people who are interested in sports. However, in their

marketing strategy, young adult males are on the top of their target list.

Figure below shows that Red Bull is consumed the most by people aged between 18 to

24, but it is still high up to age 44. Therefore, we could say very generally that target

market for Red Bull consists of Men between the ages of 18 to 44.

Figure 9 Use Of Energy Drinks By Brand and Age, www.samsha.gov

However, Red Bulls top target audience will be male college students and young

professionals who spend their days studying, or at the office and go out to bars or clubs in

the night. They can afford Red Bull, as most of them have some part-time jobs or are still

depending on their parents. They live a very stylish life, share apartment with their

friends, own an iPhone, dress fashionably and drink alcohol 1-3 times per week. They are

44

usually single who enjoy their freedom and like sport and try to keep being fit and

attractive (Medimark, 2011).

Red Bull has an image of a cool and affective alternative to coffee or soda. Their

advertising is focused on sports and entertainment and that brings them a lot of young

consumers. Sponsorship of extreme sports results in a big group of new sport freaks, who

like the fact that their favorite sport or athlete is being promoted. Additionally, Red Bull

knows how to get the attention of people and bring new customers into their company.

Their promoting activities such as driving a car with a massive Red Bull can on top and

handing out free energy drinks on college campus is consistent and very effective.

However, their main role of strategy is played by word of mouth (WOM). After a big

event such as Red Bull Stratos, everyone was talking about Red Bull for a couple of

weeks. It brought the interest of even non-target group and helped Red Bull to get the

attention from all over the world.

People drink Red Bull during the day to stay concentrated while working or studying and

during the night because it tastes good to mix it with another alcoholic beverages. Red

Bull is available to consumers in gas stations, grocery stores convenient stores and many

bars or night clubs. It is very easy to get it and its accessibility brings every day at any

time more and more new consumers.

Red Bulls non consumers

Women do not drink Red Bull very often. They are drawn to the social status that

accompanies coffee and tea drinks (Heckman, 2010). It is because they are more

concerned about their health and the high caffeine content that drinks have. Additionally,

they prefer to drink some more female drinks instead holding a grey can in their hand.

The other type of non-user is people above 45 years old. They already have a habit of

drinking coffee when they are nervous and have no need to drink Red Bull. They are also

45

not very interested in extreme sports so Red Bulls marketing strategy is not very

convincing for them.

The last group that does not drink Red Bull are children, because their parents will not let

them buy the product with caffeine and they do not have their own money to purchase the

product by themselves.

2.4 Analysis of consumer decision process Before consumers make a final decision of purchasing the product, first they all go

through some stages in order to make a good decision. During this process, consumers

select a product among multiple alternatives. There are four stages that everyone goes

through and I am going to describe each of them.

1. Need Recognition

It is the first stage of consumer decision making process and it can be described as result

of an imbalance between actual and desired needs (Lamb et al, 2011, p.190). In the case

of Red Bull, consumer finds the need of increasing his energy level because he feels tired

or needs to stay more awake. It occurs in the Red Bull target segmentation, when people

instead of having a coffee to wake up, they will look for energy drink. Therefore, when

they feel exhausted, having no energy, then they will think to consume Red Bull because

of its positive desired result afterwards.

2. Information Search

The second stage related to information research. Once the consumer realized his needs,

he would be looking for information about possible ways to satisfy himself. It is relevant

to stress that the extent to which the consumer needs to search for information depends

on his current information levels and the perceived value of the additional information

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(Pradhan, 2009, p.123). Customers are usually influenced by marketing strategies of

retailers during this stage. Namely, retailers communicate information about the brand

through various communication channels that can include any combination of

advertising, direct marketing, public relations and publicity, personal selling, events and

experiences and sales promotion (Kotler and Keller, 2009). Red Bull is doing very well in

this stage, because of its effective advertising campaigns. Consumers will already know

about Red Bulls existence so they will not spend too much time on market research.

3. Evaluation of Alternatives

It is a third step of consumer decision making process where consumers are looking for

other options. In this stage Red Bull should influence their choice and attract their

consumers more than competitors do. When customer will be choosing an energy drink,

he will most likely compare price, taste, nutritional values and size of the product. So far,

Red Bull dominates on the energy drink market even though Monster and Rockstar sell

their drinks in a bigger size for the same price.

4. Purchase

The last stage is about making a purchase. Red Bull purchases are generally planned,

knowing the product category, but not the specific brand. So people know they want

some energy drink, but they are not sure which one to buy. He will be presented with all

the options from this category once he arrived at the shop, and then make a final decision

to purchase the one that would satisfy him the most.

However, it has to be stated that if the need isnt great and the solutions the consumer

finds arent desirable enough to motivate a purchase, the consumer may postpone the

purchase until a satisfactory opportunity presents itself (Lake, 2009, p.29)

Since we already know what market are we interested in, now would be relevant to focus

on rivals and get to know something about them. Even though, for now on Red Bull is a

market leader, there are more and more new energy drinks being introduced into the

market.

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2.5 Analysis of competitors Since the introduction of Red Bull into the energy drink market in 1987, it has risen to the

very top of the market, holding 42% of the current energy drink market. Since Red Bulls

inception, there are now over 300 varieties in energy drinks in over 210 brands in North

America alone (Agri-Food, 2008). Red Bull is known for expanding, its high quality

product and great advertising. Other energy drink companies offer wider variety of

products and at a discounted rate in order to encourage consumers to their new product.

Red Bull is famous from sponsoring extreme sports such as snowboarding, surfing, car

racing, skydiving and many others and that keeps them in front of the competition.

Below figure presents the amount of market share in energy drink market where Red Bull

is the leader.

Figure 10 Energy Drink Brand Market Share 2012, www.energydiend.com

In the todays energy drink market, there are two other drink companies holding the other

high percentage of the market share and the author will focus only on these two, as others

are not real competitors to Red Bull.

Table below shows the rank of Top 3 energy drinks and its sales among few years.

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Table 4 Based on Sales of energy drinks, www.theatlantic.com

Drink Rank 2012 sales

($millions)

2011 sales

($millions)

2010 sales

($millions)

2009sales

(% share)

2008 sales

(% share)

2007sales

(% share)

RED BULL 1 2,950 2,300 2,200 40 35,2 42,6

MONSTER 2 2,600 1,900 1,500 23 27,3 14,4

ROCKSTAR 3 780 660 400 12,3 11,1 11,4

Monster Energy

Monster Energy is an energy drink launched by Hansen Natural in 2002. It uses a very

similar advertising strategy to Red Bull. They sponsor extreme events such as motocross,

car racing, BMX, snowboarding or skateboarding. However, Monster uses a very

different marketing strategy than Red Bull. Monster chooses to use a local approach and

be focused on smaller audience groups. While Red Bull creates commercials that can be

shown on TV in many different countries after editing the language. The local approach

appears to be working, because ever since Monster has come into the market it has been

pulling away from Red Bulls market share (Rexrode, 2011). Monster generates most of

its sales from convenience stores and mass merchandisers, club stores or bars and

nightclubs. However, due to exclusive agreements, Red Bull has commanding presence

in this segment and that limits Monsters ability to generate big revenue from this

channel. Monster has also a very good website, which lists profiles of bands and extreme

athletes, as well at the Monster Girls who tour events in order to promote the energy

drink.

One of the Monsters biggest advantages is its can size as its product is being sold in

16oz cans, twice the size of Red Bull. Therefore, consumers get twice the product for the

same price. Namely, Monster offers 16 oz. can per $2, while Red Bull can has quantity

8.3 oz in $2. Another advantage is that Monster has a great number of flavors such as

original, Lo-Carb, Ripper, Mixed, Assault, Java, Hit man etc. Ingredients of Monster are

Carbonated water, sucrose, glucose, taurine, sodium Citrate, caffeine, sugar etc. when

Red Bull currently has only 3 new flavored drinks.

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Source: www.monster.com

Monster is targeting a similar group to Red Bull as their consumers live an active life full

of moments that are mentally and physically stimulating. Their target market consists of

males from the teen years to the ages of around forty who follow extreme lifestyle.

However, Monster is focused more on small specific segment, for example young surfers

or skateboarders. For example Monster has aligned its brand with extreme athletes such

as those who compete in the X-Games and promotes the M logo on their clothes.

(Integrated Company Analysis Report, Hansens, 2011).

Rockstar Rockstar is another energy drink which was launched in 2001 by Russell Weiner and

became an international brand sold around the world. They currently offer ten different

products from the original energy drink and these include Rockstar Energy, Rockstar

Sugar Free, Rockstar Zero Carb,Rockstar Juiced Mango, Rockstar Juiced Pomegranate,

Rockstar Juiced Guava, Rockstar Punched, Rockstar Punched Citrus, Rockstar Roasted,

and Rockstar Energy Shots in Tropical Punch and Wild Berry. The companys website

offers the following description of the Rockstar brand:

Bigger. Better. Faster. Stronger. Rockstar is the world's most powerful energy drink.

Enhanced with the potent herbal blend of Guarana, Ginkgo, Ginseng and Milk Thistle,

Rockstar is scientifically formulated to provide an incredible energy boost for those who

lead active and exhausting lifestylesfrom athletes to rock stars. Enjoy this fully

refreshing lightly carbonated beverage super chilled.

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Rockstar also comes in a 16oz can for similar price to Monster. Their advantages are big

variety of flavors and sponsoring sport events. Rockstar is a major sponsor of the

Mayhem Festival, a music festival consisting of heavy metal artist (Rockstar website).

Red Bull has sold more than 4 billion cans in over 160 countries, while Rockstar has only

19 international locations so far.

Source: www.rockstar.com

Rockstars advertising is not very successful yet and hence, the revenu