Suggest the possible impact the success of the brand marketing might have on: a. Pricing strategy Red Bull were the first company in the energy drinks market; they created the market. This meant that they were able to charge a premium price because there was no competition and so could exploit consumers. However, with high profit margins and a high growth market, the market was very attractive and so competitors entered the market. Normally, this increased level of competition would result in a price reduction and therefore squeezed profit margins. This was not the case for Red Bull. The products in the energy drink market are rather homogeneous, all conferring the same function: providing energy. Normally, in a homogenous market, we would expect the driving force to be price. However, because Red Bull were able to successfully augment their brand to create an emotional connection, they are still able to charge a premium price without the risk of losing market share. They augmented the brand using intangibles such as a sense of danger and edginess. The current pricing strategy implemented by Red Bull is ‘rapid skimming’ as they are charging a high price coupled with high levels of advertising. Red Bull do not use conventional advertising mediums (tv, radio, billboards) but still spend a large amount of revenue on advertising (35%). The price for Red Bull differs on the market segment. When bought from a supermarket, the cost is approximately £1.50 per can. However, when bought in a club, the price is approximately £3.00 per can. This is because it is a captive audience and the perceived benefits of consuming the product in a club are higher due to attributes that the drink provides (a feeling of euphoria / a legal drug). The high price is also used to convey a quality product. The high price increases the involvement of the consumer. b. Distribution channel management Red Bull were initially very selective with their distribution techniques, selecting the areas where the ‘in-crowd’ gathered as the distribution area. By only distributing the product in certain areas, it created a level of mystique and scarcity around the product. This level of scarcity increased demand and made users seek out the product. This created a pull distribution policy; consumers demanded the product and so supermarkets, bars and shops needed to stock the product. Red Bull targeted key distributors in an area of interest. If a distributor would not distribute the product, Red Bull would create their own distribution network by buying a warehouse and using their own vans. Although this increased the amount of work required for Red Bull, it gave them increased control. Red Bull have 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 thus sales. However, because Red Bull have such a limited product range, vending machines would be somewhat under utilised; there would only be 2 products available. This perhaps makes this a rather unfeasible distribution method. c. Product line management Red Bull currently has a limited product range; they offer the standard Red Bull product and a sugar free version. Red Bull had a limited run of caffeinated water but this was restricted to Thailand. Mateschitz is clearly aware of this weakness, stating ‘It makes no sense to build a company on one product.’ With such a high level of brand awareness, Red Bull could create and market a new product with a relatively modest advertising budget. Extending the product line by introducing new flavours would help Red Bull to recapture some of its lost market share due to the limited product range. Initial taste tests revealed that 50% of consumers did not like the taste of Red Bull - by introducing flavours that are more appealing, Red Bull could increase the amount of users. Due to the way Red Bull has been positioned (as an edgy, dangerous product) Red Bull need to be careful with future product developments. For example, the sugar free version of Red Bull is considered ‘wimpy’ and may tarnish the brand if the wrong market group starts to be seen using the product. Also, because of the perceived ‘anti-brand’ image of Red Bull, when introducing new products, care would have to be taken to which advertising techniques are used. Currently, Red Bull only use TV advertising in established markets to reinforce the brand rather than to attract new users. Clearly, with a new product, the conventional methods would have to be used which may contradict their current positioning of not using TV as a way to sell.