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BUSINESS OBJECTIVE
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BUSINESS OBJECTIVE

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  • 1. BUSINESS OBJECTIVE & MARKETING STRATEGY The company’s current business objective is to expand Red Bull's presence amid a maturing target market and a deluge of new energy drinks being introduced by upstarts and beverage behemoths like Pepsi and Coca Cola. This strategy is supported by the following rationale: though the company’s presence in the market is immense, the maturity of its target audience has called for an improved multi-offer approach to offset the market’s maturity. The market share of Red Bull is currently 47% in US and approximately 80% in other countries. According to the BCG growth-share matrix, the Red Bull energy drink is moving from the Star position to a Cash Cow position, because it dominates the market, but there are small opportunities for market growth. Being a Cash Cow certainly has its advantages and disadvantages. On one hand, maintaining this position as long as possible will enable the company to produce a strong cash flow from year to year. On the other hand, however, every product has a certain life cycle, and the energy drink will eventually enter a decline stage. While maintaining its position as a cash cow, Red Bull should make an investment into product development to introduce a new product in the existing market they already dominate. When Red Bull was formally introduced, it created a new market through the introduction of a new product. Therefore, the company pursued a diversification strategy in terms of product-market growth. Being the market share leader at the time, the company did not face much competition, thus, allowing it to pursue a growth strategy, with emphasis on penetration – selling existing products in existing markets. The main target market of the energy drink is young people aged 16 to 21, thus segmenting the market demographically by age, and psychographically according to a certain lifestyle.
  • 2. Originally, it was thought that physical attributes attained from using Red Bull would be the most beneficial to this active target group. However, as increasing competition enters the market and the target market matures, Red Bull must change its marketing strategy from a penetration growth strategy to a product development growth strategy. This strategy is achieved when new products are introduced in existing markets. Given that the larger corporations entering the market, such as Coke, may have greater resources to aid in innovation and more effective low- cost strategies, Red Bull must differentiate itself through extending its current product line and adopting a multi-offer approach. The marketing mix of Red Bull encompasses many characteristics of a penetration growth strategy. The product has been traditionally manufactured in a slim- case can, with little visual improvement or innovation. Though the company is utilizing Research and Development (R&D) techniques to develop a multi-offer approach, its current product line is simply lacking variation. Red Bull has historically relied on a price-skimming technique as well, whereby the prices are set high in the energy drink niche, based on the assumption that customers are buying more of the product. To further increase the company's market share, unique promotional techniques are also used. Unlike most promotional techniques used in the functional foods market, Red Bull relies mainly on viral marketing. Because the company wishes to focus on the physical benefits rather than taste and image, providing divisibility – or allowing potential customers to try the product – will aid in the consumer adoption process and increase brand loyalty. These promotional techniques are often located in 'underground locations', such as busy city streets and extreme sports events. When the product was first
  • 3. introduced, its promotional tactics included a Red Bull sales team that distributed free products and offered information about the product, hoping consumers would adopt straight-rebuy purchasing behaviors in the future. However, Red Bull soon became a preference product, the company adopted intensive distribution strategy, contracting large wholesalers to distribute the cans of Red Bull in order to achieve mass coverage and using vending machines where the retailers are physically separated from a large number of consumers. Profitability: From http://www.redbullusa.com/flash/historysection/pdf/3/RB_Case_Study_London_Business _School0904.pdf Page 10
  • 4. Key Numbers Key financials for Red Bull GmbH Company Type Private Fiscal Year-End December 2004 Sales (mil.) $2,000.0 1-Year Sales Growth 22% From http://www.hoovers.com/red-bull/--ID__101316--/free-co-factsheet.xhtml? cm_ven=PAID&cm_cat=INK&cm_pla=CO1&cm_ite=red-bull Also look at http://pubpages.unh.edu/~cherylp/pjtcontents.html

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