Red Bull Case Study - Part 2
Red Bull operates within the energy drink sector of the soft drink market and has been the leading market share holder in this area for the past several years - Red Bull Case Study introduction. It was founded by Dietrich Mateschitz, an Austrian who studied world trade and commerce in Vienna. In 1982, Mateschitz came back to Austria from a visit to Thailand with some samples of an energy drink called Krating Daeng (which is Thai for “Red Bull”).
Two years later he founded the company Red Bull GmbH as a 49 percent partner with Chaleo Yoovidhya, founder of Krating Daeng drink in Thailand. Red Bull is a company and a brand at the same time; they do not stretch their brand out (for example, they do not sell energy bars) instead they decided to stick to the drinks sector of the ‘functional’ foods market only.
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The four products they currently sell are Red Bull Energy Drink, Red Bull Sugarfree, Red Bull Simply Cola, and Red Bull Energy Shots. This report will cover several topics regarding sales force and sales forecasting strategies already implemented by the organization, or strategies they might want to consider. However, before this paper can explain the strategies clearly, a good understanding of Red Bull’s current channels is important.
Red Bull gained popularity throughout the years for various reasons: some say the way they marketed was exceptionally important to their success and others believe they became a leader in the market (with about 70% market share by 2003) not only because they were the first to endeavor selling a soft drink with no intention to sell a good taste (unlike Coca-Cola, or Gatorade), but also because as Markus Pichler – who was in charge for engineering Red Bull’s introduction to the USA – claims “The basic thing is that the product works.
It delivers benefits that are relevant to consumers. We provide them with energy. We are relevant for their lifestyles. ” Red Bull does not have a shop entirely dedicated to selling their products only. They channel their products in three different ways: 1. Convenience stores and supermarkets 2. Sports events and sponsorship 3. Night scene (clubs, bars, etc) The method they used for each channel has been changing as the product progressed throughout its life cycle. As Red Bull was still in its introductory phase, their strategy was to focus on gaining attention and visibility.
They would not close deals with big chains for the process was too slow – it goes faster to deal with individual accounts. Because they were targeting 16 to 29 year old consumers, they concentrated on students and sold the products where the students would hang out (near schools, clubs, gyms, etc). They hired young students to throw student parties and provided them with cases of Red Bull and other free items with their brand on it. Red Bull relied on the mouth to mouth propaganda (or ‘buzz marketing’) and used the underground scene to develop their cult-like status amongst their target group.
When hot clubs and trendy bars bought cases of Red Bull, they would also receive a branded cooler and other POP items which helped Red Bull create visibility. When Red Bull reached Germany, it was claiming a quarter of the sports drink market, beating Gatorade. Red Bull started to associate itself with sponsoring extreme sport events worldwide and became one of the biggest influences in the extreme sports movement. They launched their own flying machine contest call Flugtag (Mateschitz is a passionate vintage aircraft collector).
At these events, celebrity extreme sportsmen (sponsored by Red Bull) advertised for Red Bull simply by wearing the logo, and in most cases there was a car completely decorated in the brand. Of course, everyone walked around with a can of Red Bull during these events too. Basically, Red Bull knew that they would not be able to keep market share if they marketed their product through distribution channels such as retailers or supermarkets only. Red Bull is not one of those products. They have personified Red Bull. It is a lifestyle product – one that reflects the entertainment and sports enthusiasm of Generation Y (a. . a Millenials – people born after 1981). It would keep you going after an arduous race or an exhausting night out at the clubs.
Convenience stores and supermarkets only counted for 30 to 40 percent of Red Bull’s sales (even with the most prominent shelf placements). The majority is sold at bars and dance clubs. Not only was Red Bull sky rocketing in terms of popularity, but also in sales; it is priced almost three times as much as a Coca-Cola can. By 1998 Red Bull has sold over 300 million cans worldwide, and by “2009 some 3. 06 billion cans of Red Bull Energy Drink were consumed world-wide”. Once the name of the energy drink became known worldwide amongst the ‘slightly off the wall’ youth, Red Bull kept their name and attitude. The way they marketed their brand was considered to be a new way of marketing, and they did not have much of a choice to market differently. Their direct target groups, Generation Y, are believed to be cynical to traditional marketing strategies. The so called ‘viral’ marketing strategy Red Bull implemented consisted of hiring Generation Y people to promote their drink.
They made their brand visible on the streets by driving around cars such as the one in the picture above, or by handing out free cans to people who have been identified as in need of some energy. For Red Bull to be successful at implementing this strategy, they will need to recruit the right sales force and organize them accordingly. Red Bull is a business to business (b2b) organization, and because of that they need a strong sales force in the front. One that can represent Red Bull and help their customers sell more cans.
The first thing Red Bull needs to consider about their sales force is the age of the employees. Red Bull being an energetic product with a reputation of “giving you wiiings”, the sales force should be about the same age as the people they are selling or promoting to. For example, for promotion purposes at a bar or club, it would not seem adequate to place a 35 year old employee to do that job. Instead, a 22 year old student for example would do the job better, because he or she is part of the target group and is so to say experienced in the sense of clubs and parties, and not to mention it looks better as well.
However an experienced manager should manage the sales force – and in most cases the older the employee, the more experienced they are. Other than the night life scene, Red Bull also uses convenience stores and supermarkets as a channel to consumers as mentioned before. In the case of selling or consulting a store selling Red Bull, an older employee – as opposed to a student – would be best to hire. This is simply because a young student would come off as less credible and less competent in this field. The retailer would rely on a more experienced looking salesman or woman.
This has little to do with the company or product itself, but more with what fashion a company presents itself to a client or customer. On the other hand, in Red Bull events or sponsorships, the more employees and the better they look, the more the product will sell. Red Bull can be considered a designer brand, even though it is only an energy drink. People do not think Red Bull is cool because it is – they think it is cool because Red Bull made it so. Red Bull concentrates a lot on sport events, many of which are entirely organized by them. They sponsor many sportsmen and women, which range from F1 drivers to female snowboarders.
In these events, the more employees and promoter there are, the better it will be for their sales. Even though Red Bull is in its mature product life cycle phase, Red Bull must keep their brand visible – and what other way is better than a walking advertisement? So Red Bull can combine advertising with sponsoring someone. In a way, by sponsoring a sports person, they are technically employing a living advertisement. As for the structure of the sale force, Red Bull needs a sales manager and a lot of sales people up front directly with the consumers and customers.
Because Red Bull relies on human interaction for selling their products, the amount of employees Red Bull hires is quite high for a company selling four different types of drinks only. By the end of 2009, Red Bull employed 6,900 people in 160 different countries. To manage these employees, a Red Bull manager in t he UK, Mike South, decided to implement mobile phone application so the sales force can report back to him one minute after a meeting with a customer (such as a retailer) to react as quick as possible to their needs. Make it fast, make it simple, make it mobile! ” is their slogan amongst employees. In order to decide which methods of sales forecasts for RedBull should be used it is important that business owners and managers do not only estimate expected units sold, but also to sum up and predict what the business’s production (materials, labor, equipment) costs will be in order to produce and sell this drink. In the case of RedBull, one of the types of forecasts that could be used is to try to do Market researching and to observe customers knowledge about our product.
At the moment, the idea of putting reliance into market research could not be so reliable since the condition of overall economy is still unstable. However, while researching the market we can see in what situations are other companies and on the other hand, it can help us to improve our distribution channels. Another relevant point is customer knowledge which as we already know has good and bad sides. Lack of commitment could not be found in the case of RedBull since Vodka and RedBull is still the most popular drink amongst young people.
Therefore inertia between young population and product is strong. It is possible that as Red Bull’s core market matures, the company needs to broaden its appeal to these mid 20 to 30 year olds, while keeping its appeal amongst 16-24s. From the market analysis it is shown that the company faces competition from a large number of firms, and some of them are multinationals. As the original innovator of the health and energy drinks market, though, Red Bull has the advantage of being the market leader.
If we want to set quantitative targets it is from high importance that the market must be explored and defined correctly(analyze the current situation and condition in market). Setting a quantitative target for RedBull could be explained through the process which is made up of three parts. In the first part we need to predict or forecast future business and economic conditions. Therefore it is relevant that current situation in the market should be known and also to realize what is RedBulls position in the market.
It is also important that a lot of research must be done in order to analyze customers (consumers) since Redbull is one of the most popular energy drinks between young population which means that its future business highly depends on the consumers preferences. Second part of this process would be to sum up the effects of competition. In the functional drinks market RedBull reckon that in 2001 a total of 23 new energy drinks were introduced which means that a company is faced with a competition from a large number of firms.
Since RedBull is the original innovator of energy drinks market it means that it has the competitive advantage of being the leader in the market. Third and final part of the process would be company’s share in the market. It measures competitiveness and profitability. For many products, especially consumer goods, market estimates by region or sales area are available. In order to determine sales targets for RedBull we should try to observe leading indicators in the market such are: population trends, disposable income or economic growth.
These economic indicators could be used to set targets for salespeople. This should be used or appropriate where specific territory information is unknown or not available. Another thing that we would apply in setting quantitative targets would be forecasting the number of possible users and trying to predict the maximum expected purchase of our consumers. Since RedBull is mostly used amongst young population (16-24 years old), our goal would be to try to extend number of users amongst older population in way to increase the number of users in the future.
Each and every business has to operate on the basis of expectations about the future. Particular questions about the upcoming terms have to be answered concerning advertising expenditure, estimate of revenue from sales or the level of production etc. The examination of the future is of importance since that creates the company the advantage of being able to form expectations on its market, follow a reference, a basis that determines the forthcoming business activities and it enables you to get a clear picture about your futur e budget and realistic targets or specific goals that will be achieved.
Therefore, if a company wants to be successful and wants to survive in the long run she must be prepared for the forecasting process. Red Bull, the leader of the energy drinks market as it is already stated, has to carry out various sales forecasting methods. Although several factors that influence the result of the forecast, as well as the future budget and revenues has to be considered in advance. As the sales forecasting process is implemented from the macro level to the micro level the influencing factors should be considered in the same order.
Therefore, the first step is to consider the key factors that could play a role in forecasting the future sales of Red Bull. First of all, the external factor that is present in every kind of market and industry is competition. Although, Red Bull is a leading brand and company on its market, the competition they are facing with is really worth to consider. More and more companies have been entering the market since Red Bull reported high revenues. Currently there are numerous products offered in the functional food sector.
Several attempts were made to introduce Red Bull copied energy drinks, sort of fake Red Bull’s. Couple of these attempts and drinks failed since Red Bull took the case to court. Like in every market all the participants have to have a great knowledge about the competitors. Coca cola and Red Bull had signed a contracted, stated that Coca Cola would not entering the functional food sector. However, Coca Cola violated the contract and entered the market with the energy drink named “Burn”. As a response to that Red Bull launched a new type of energy drink, Red Bull Cola.
Another factor that definitely has an impact on the forecasting and successfulness of the company is the media. The fact that the media can easily contribute to the failure or to the success of a company is unquestionable; we have seen couple of examples for both. Several news and false reports were published since the company has been established and the problem is that these cannot be predicted not like the economic and financial crisis. These had serious effects on the selling figures of Red Bull since they could not prepare in advance how to handle these external factors.
The example above is one of the specific problems that Red Bull has to deal with. About a year ago Red Bull Cola got a great attention. However not for its success, but the ingredients that are used during the production process. The Health Institute in the state of North Rhine Westphalia examined Red Bull Cola and found out what is behind the caffeine-loaded energy drink. According to this analysis, 0. 13 micrograms of cocaine per can were found. Although that amount does not cause serious harm for ones organism but the side effects of these rumours seriously affected the consumer’s opinion of the product.
Another factor that contributes to the sales of Red Bull are simply the seasons. Since most of the events that are organized and sponsored by Red Bull are during the summer the company could expect higher revenues and more cans to be sold. During these sport events, oftentimes extreme sport events where only Red Bull can be bought in terms of energy drinks since she is the main sponsor or organiser. To illustrate this fact, namely that seasons play a role in the life of Red Bull we used one of the not very well-known feature or add-in of Google, the Google Insight.
Google Insight shows us how often the word Red Bull was searched over time. The chart above shows the search indexes (y-axis in millions) and years (x-axis). As it can be revealed that the highest search indexes per year occur in the middle of that year- during summer (Red Bull Air Race, Formula1, Red Bull BMX, and so forth), whereas towards winter the graph shows a constant decline until about December (around December to February Red Bull sponsors skiing and snowboarding events).
Despite the fact that during the summer towards the middle of winter people google “red bull” more frequently, this is not reliable for Red Bull to make any assumptions that sales will increase and should not use this information solely for a sales forecast. In conclusion, due to Red Bull’s size and popularity, especially their market leading position, many factors such as competition and media have an effect on the organization internally and externally. This means that their sales forecasting strategies must be very detailed and accurately implemented.
An inaccurate sales forecast could lead to major problems, unlike a slight inaccurate forecast for a small business. Because the factors influencing Red Bull’s environment are not always foreseeable, such as the discovery of cocaine as part of the ingredients, high detailed research and accurate estimates are of big importance for the company’s health. All in all, Red Bull is a company lead by leaders in a new way. They are revolutionizing the way a firm operates and the way they market.