Red Bull's Marketing Strategy

All big brands around the world are now shifting towards the phenomenon of globalization. A product is no more confined to geographical boundaries. Globalisation calls for global marketing strategies being implemented around the world to resonate the brand’s identity and its image to target customers. A synonymous marketing strategy is cost-effective and this is the strategy applied by many big companies around the world. However, experts also say that this is not always a wise strategy because consumer behaviour around the world varies from culture to culture and from nation to nation. For instance, an American consumer will react and respond differently as compared to a Nepalese consumer. Thus, while implementing global marketing strategies, a wiser move would be to tweak it, customise it, and to relate it with the local consumer behaviour. Similarly, few international big names in Nepal have only implemented their global strategies and are not probably exploiting the huge potential they have. One such case is that of Red Bull in Nepal. Since the entrance of this drink in Nepal, it has done well enough to survive in the Nepalese market as compared to some of the other energy drink brands. Red Bull has implemented its global marketing strategy such as unconventional method without really evaluating its effects on the customer loyalty in Nepal. Thus, the question still remains whether the customer loyalty is influenced by Red Bull in Nepal that uses global unconventional marketing strategies.

Statement of problem

Red Bull’s marketing strategy around the world is to use unconventional strategies that involve guerilla stunts and buzz generating tactics to communicate to their customers. Guerilla marketing is based on below-the-line (BTL) activities where brand recall is created through events and stunts that are mostly related to sports (X-games), parties, adventure and music. The sports Red Bull supports are ones that are not popular in Nepal. Formula one and X-games are not really popular. Similarly, Red Bull does a lot of promotional events at discotheque to enhance its brand. But this is not applicable in Nepalese situation because we don’t have any such type of place. This is where the problem lies for Red Bull in Nepal. Like everywhere, the strategy depends on unconventional marketing which is not applicable and does not relate to the Nepalese culture and tradition. For example, how many people in Nepal would be interested in free style football? Hence, if they conduct a sports event based on free style football, still many people who are unrelated to these events will not consider joining there. Also, the idea of X-games that involve moto (motorcycle racing), skiing (ski big air, skier cross), snowboarding, snowmobile, Inline skating, skateboarding, and car racing are not played in Nepal. Thus, any event based on these games would be absolutely useless here. We do not have well organised night clubs and discotheques, as already described. These areas are the best places where most of Red Bull’s promotions and selling would take place around the world. Red Bull also conducts a lot of its adventurous events around the world in deserts and mountainous areas. In these contexts, security is the prime issue. One would also argue Red Bull should use above-the-line (ATL) methods of promotions (e.g. television, print and radio) to communicate to a larger audience. The bottomline here is that Red Bull Nepal is not considering the local culture and consumer behavior and is blindly implementing its global marketing strategies to communicate with its customers. That is why the current research has been done to find out the effectiveness of Red Bull’s global unconventional marketing strategy, for example BTL method, in customer loyalty in Nepal.

Aim and Objectives

Aim

The current research was conducted to find out the effectiveness of Red Bull’s global unconventional marketing strategy (e.g. BTL strategy) in customer loyalty in Nepal.

Objectives

To analyse the situation of consumers in energy drink

Do they consume energy drink?

Are they aware of energy drinks available in markets?

Do they prefer any energy drinks?

To analyse the factors that affect potential target market of Red Bull in Nepal.

Do gender, age-groups, marital status and income of consumers have any effect on Red Bull market in Nepal?

Analysis of the Red Bull brand in customer loyalty

What consumers think about Red Bull quality?

Why consumers think Red Bull was unique among drinks?

What consumers think about Red Bull brand?

Will Red Bull consumers keep on purchasing it on future?

Will Red Bull non-consumers consider purchasing it on future?

To analyse the effectiveness of Red Bull’s marketing strategy in customer loyalty in Nepal?

Will sampling affect customer loyalty?

Will promotion events affect customer loyalty?

Any suggestion in enhancing customer loyalty?

Justification of the study

At the end of this study, our research will help understand the effectiveness of Red Bull’s global unconventional marketing strategy (e.g. BTL strategy) in customer loyalty in Nepal. In addition, this study will be important to analyse the Red Bull brand in customer loyalty.

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A detailed report would be generated regarding consumer behavior, preferences, attitudes, reactions, lifestyles, and characteristics which would help us prepare an in-depth analysis on our research objectives. An exciting prospect of this project would be to find out to what extent Red Bull possesses the ability to reach markets and reach consumers as using unconventional marketing strategies limits their reach and opportunities. Lastly, the study will generate recommendations that will be crucial in Red Bull marketing strategy in future.

Scope of the study

The study comprises of conducting a research in different parts of Kathmandu targeting individuals and groups (principally university and college students, celebrities and media related persons) falling into our target criteria in order to find out the effectiveness of Red Bull’s unconventional marketing in Nepal. The research also involves interviews with industry experts to gain their viewpoints and comments on the matter which was important to understand about Red Bull markets in this country.

CHAPTER-2

LITERATURE REVIEW

Unconventional marketing

In the corporate world, the term marketing simply refers to activities carried out by organizations or individuals in order to generate awareness capture interest and boost sales. There are mainly two strategies to generate marketing, for example conventional and unconventional marketing. The first, conventional marketing, a traditional marketing technique, mainly refers to the use of media or ATL activities for the purpose of promoting the brand. These conventional methods comprise of television advertisements, print advertisements in newspapers, magazines, broadcasts on radios, billboards or hoardings and other sources of media. Unlike conventional marketing, the unconventional marketing refers to all those forms of marketing that require lower budgets and more time, imagination, creativity and a lot of energy rather than monetary support. Compared to conventional marketing that lacks an interaction between the organization and the end user, unconventional strategy is more interactive with customers and gets them really engaged with the activity itself. Examples involve public interceptions, random giveaways or free sampling, and publicity stunt (PR).

Unconventional marketing is synonymously used as guerrilla marketing, buzz marketing, public relation tactics, viral marketing, social media, BTL in various literatures. This marketing campaign is principally interactive with consumers who are unexpectedly targeted in unexpected places. Therefore, this campaign is aimed at generating buzz and viral marketing via a unique, engaging and thought-provoking ideology (Romane Knight, The Best “Guerrilla Marketing” Strategies, http://marketingnotesja.hubpages.com/hub/The-Best-Guerrilla-Marketing-Strategies (Blog), accessed on 21 September 2012).

While both forms of marketing result in increased awareness, persuasion and education of the brand, unconventional marketing helps build a bond between the brand and the customer. The Exforsys Inc. website (2011) states that unconventional marketing is an experiential marketing which appeals to the emotions. The customer develops an emotional attachment to a brand, product, person, or idea. Therefore, unconventional marketing greatly enhance the customer interaction in order to gain valuable insights and consequently enhance loyalty.

Customer loyalty

When a company or a business organisation is opened, it is aimed to generate and retain a loyal customer who would continuously attach with the company in the context of its long-term cost-effective business. The ideology of retaining a long term relationship with brand loyal, i.e. the customer who has the continuous requirement of the same product is called customer loyalty. Customers will leave the company or organisation if it is not aimed at curomer loyalty. Various explanations have been found regarding customer loyalty in literatures. Sivadas and Baker-Prewitt (2000) said “there is an increasing recognition that the ultimate objective of customer satisfaction measurement should be customer loyalty”. Anton (1996) described “satisfaction is positively associated with repurchase intentions, likelihood of recommending a product or service, loyalty and profitability”. In 1997, Guiltinan, Paul and Madden (1997) said that satisfied customers are more likely to be repeat (and even become loyal) customers (Guiltinan, Paul and Madden 1997). While these statements indicate that customer satisfaction is one of the factors of customer loyalty, customer dissatisfaction does not always lead to a reduction in loyalty. For example, even dissatisfied, some customers may be loyal because they don’t expect to get any better service even if they did change (Reichheld 1996).

In addition to customer satisfaction, brand loyalty may be another factor which may play in customer loyalty. Sometimes, customers can also feel a sense of loyalty and emotional attachment to a particular brand (Fournier 1998). However, the relationship of the brand with a customer is a two-way process in which it is not concerned how a customer feels to a particular brand, and this association is just ‘preference’ or ‘proclivity’ (Peppers and Rogers 2004).

Customer Acquisition

The assurance phase

Customer Development

The education & bonding phase

Customer Commitment

The sales phase

Customer Retention

The continuation& activity phase

Customer Loyalty Cycle

Satisfaction

Satisfaction

Satisfaction

Satisfaction

S2

S1

S3

S4

Figure 1: Customer Loyalty Cycle as a Business Model used by the Scuba Schools International (SSI) Dive Centres. They acquire students and convert them into loyal customers. S1: Step 1, S2: Step 2, S3: Step 3 and S4: Step 4 (Adapted from http://divessi-indo.com/acquisition/systems.php, accessed on 24 September, 2012).

Finally, price may be one of the determining factors of customer loyalty (Fisher 2001). For example, good pricing is an important factor in encouraging customer loyalty (Abratt and Russell 1999). In contrast, if a customer is loyal to a brand, he/she will not care of future price changes (Clark et al. 1995) indicating price may not play a role in customer loyalty.

While customer loyalty depends on different factors, the process of customer loyalty is not an easy task in business. The process of customer loyalty can be achieved in 4 steps (Figure 1). The first step is called the assurance phase in which customer is acquired via different marketing or business strategy. Then, customers are made satisfied and then, they are given different trainings and education programs to keep them bonded. This is the education and bonding phase and is the second step of customer loyalty. Again, the customers are made satisfied and customers make commitment in the sales phase or third phase. The satisfaction to customers is continued and customers will stick to the same brand or the same company in the continuation and activity phase. This is quite important to keep the customers retention. The cycle is repeated followed by customer satisfaction. Therefore, customer satisfaction may be one of the important factors in customer loyalty (Figure 1).

Measuring marketing effectiveness

Companies spend billions of dollars annually on marketing. Because of increasingly competitive markets, firms strive to produce higher and higher profits. This leads to calls for justifying the marketing expenditures (Rust et al 2004). Powell (2002) states that marketing effectiveness is the quality of how marketers perform their marketing activities in order to optimize their expenditures and achieve both short and long term goals. The difference between marketing effectiveness and efficiency is explained by Rust et.al (2004) as they state for example, that price promotions may be efficient in delivering short-term revenues and cash flows but ineffective in the long run if it is destroying profitability and brand equity in the long run.

Figure 2: The Chain of Marketing Productivity (Adapted from Journal of Marketing 2004, vol. 68, pp. 76-89).

The “Chain of Marketing Productivity” is a conceptual context that can be utilized for evaluating marketing effectiveness (Figure 2). This model explains the effects of certain marketing actions of a firm on its position and standing in the market. Rust et al (2004) believe that every firm must have a business model which is used to track the effectiveness of marketing expenditures in influencing the knowledge, beliefs and emotions of the customers that ultimately leads to purchase behaviours. They stress on the fact that marketing efforts such as advertising and product improvements help in building long term assets such as brand equity. These long term assets are leveraged to deliver profitability in the short run. Customer thoughts, beliefs and feelings that lead to purchase behaviours are usually measured through non-financial measures such as attitudes and behavioural intentions. These non-financial measures drive financial performance measures like sales, profits and stock values in the short and long runs (Rust et al 2004).

Behaviours

Hoyer and Macinnis (2009) states that consumer behaviour reflects the sum of all consumer decisions from acquisition to disposition of goods, services and experiences. Behaviour of the consumers is a dynamic process reflecting acquisition, usage and disposition activities. The questions of what, why, how, when and how much to acquire, use and dispose a particular offering can have a major impact on how strategies for marketing and communications are developed. In order to produce, communicate and provide appropriate goods and services, marketers need rich insights on consumer behaviours and what they value (Hoyer & Macinnis, 2009).

Marketing efforts such as communications and promotions have a long term impact on consumer behaviour. In recent years, consumers have become more price- and promotion-sensitive over the time because there is a lot of information and choice available to them. This is why more and more companies are attempting to influence consumer behaviours through marketing efforts such as promotions and communications (Mela, Gupta & Lehman, 1997).

Sales Revenue

Sales revenue numbers are the most objective measures of marketing effectiveness. Financial benefits, such as sales, from particular marketing efforts are assessed in numerous ways. One traditional method is the Return on Investment (ROI) which is the relative return that is obtained from the required expenditure. Financial impacts like these affect the firm’s financial position in terms of profit and cash flow. However, these methods are controversial and ineffective if relied upon solely. This is because most of marketing efforts are played out in the long run; there effects cannot be observed in the short run, while methods such as ROI only assess short term effectiveness of marketing efforts. A better usage of such methods must incorporate future cash flows so as to predict and determine the long run marketing effectiveness (Rust et al 2004).

Brand Equity

Brand equity is a relatively new concept which has developed from the past two decades as core marketing concept. It suggests that brand value can be derived from the discounted cash flows received from the sale of products/services as a result of associations of the brand with those products/services (Rust et al 2004). Rust et al. (2004) further cite Tybout and Carpenter on the enormous brand equity of Home Depot which was the US$84 billion in 1999. This shows that even though there may be a short-term divide between ROI and marketing efforts, it may not be completely ineffective due long laSting value offered through brand equity. Elements of brand equity such as customer lifetime value, brand awareness, associations and recognition can be determined by recognizing prevailing perceptions regarding the brand and functional as well as emotional value propositions that the brand provides (Dunn &Halsall, 2009).

The impact on customers and resultant developments in valuable assets such as brand and customer equity influence a brand’s market share and revenue, hence, enhancing its competitive position in the market. Long term benefits of these assets can increase customer responsiveness to brands and its extensions, willingness to pay premiums, referrals, increased usage rates, lower after sales support costs, customer retention and loyalty. All of these factors reflect a larger market share to be enjoyed by the brand with guaranteed greater profitability (Rust et al 2004). There is a wealth of means to measure market effectiveness. Methods to evaluate marketing tactics and impact of marketing expenditures provide the necessary tools to affect the practice of management and to bring further credibility to marketers. From an accounting standpoint, marketing productivity must be categorized into modifications in financial assets as well as intangible assets such as brand equity (Rust et al 2004).

Red Bull-History

Red Bull is a popular energy drink that had been manufactured since the early 1962 by the TC Pharmaceutical Co., in Thailand by Chaleo Yoovidhya. The name of the company was subsequently changed into Red Bull Beverage Co. Ltd. It was introduced into the Europe by the Austrian guy Dietrich Mateschitz, who found out that one of the Thai energy drink called Krating Daeng (Thai: Red Bull) was good at soothing the Jetlag. He finally realized that the Asia has a wide potential market for “Energy Drinks” and there was no such kind of product available in the West or the Europe. In 1984, he established an Austrian company called Red Bull GmbH that sold about a million cans in 1987. Consequently the sale was expanded to other countries like the UK, Germany, Switzerland and others (http://www.fundinguniverse.com/company-histories/red-bull-gmbh-history/). Throughout the world, it is the leader in the energy drinks market and has about 70% of the market share and has annual sales of billion dollars (Data Monitor, Red Bull GmbH, 2004).

Red Bull-Branding

When introduced to the markets of the world, very few believed in the successful potentiality of Red Bull as a brand and product. The mere concept of energy drink was brought into inception by Red Bull and most believed that such a confined product category of energy drink was not required when you had other options such as tea or coffee as energy boosters. Beardwood (2010) remarked that Red Bull might be a slightly safer alternative to alcohol. Although there are negative assumptions related to Red Bull brand, it has now become the leading energy drink manufacturer around the world. Regani in 2006 believes that the soul reason of the success of Red Bull in marketing is due to its audacity to think out of the box and its trend setters rather than followers (Regani (2006).

Red Bull-The brand

While considering Red Bull as a brand, it reflects energy, enthusiasm, active life, trend setters, adventurous and everything that is about youth and its whereabouts. When a person is found to consuming Red Bull, the image created in mind is a ‘cool’ and ‘trendy’ one and that is the kind of positioning they have achieved as a brand. All brand managers at Red Bull maintain that the positioning of Red Bull will never change no matter what the situation is, as that is what Red Bull, as a brand has thrived on. Red Bull is more about the brand than the product itself.’ According to Gschwandtner (2004), it is not Red Bull’s sales strategy that helps it sell like hot cakes around the world, but it is its innovative branding strategy that has helped it become the number one energy drink name of the world.

Red Bull-Marketing strategy across the world

Red Bull as a brand is rebellious in nature and it certainly proves the kind of unconventional marketing strategy it has chosen. They absolutely refuse to advertise and use some of the conventional modes of promotions such as billboards, banner advertisements, taxicab holograms and blimp in a way that many brands would opt to do. Even their TV spots are very different from others. Played only on niche channels, they are merely sketches of a mysterious Austrian artiest that tries to amuse the audience more rather than educating them. They completely pursue unconventional marketing techniques to build the brand that majorly includes buzz generating tactics, event-based marketing, hiring brand ambassadors, supporting student projects, free sampling and others.

Rather than going on mass, Red Bull targets underground style with BTL activities. It aims to produce viral buzz by paying college going students, disc jockey (DJ)s and young opinion leaders to host events and parties where the drink can be served. These are the sort of parties Red Bull encourages its ambassador to lead or organise as it aims to associate its brand with such events. Therefore, strong Red Bull branding can be observed at club, café and discotheque where young crowds are mostly present.

Red Bull does not spend on advertising and flashy celebrity endorsement. They hire hip youngsters, students and unconventional sports athletes to endorse their brand and promote it. These not only cost less but are also more effective as they are closest to the target market and know the required consumer behaviors. Besides that Red Bull organize and sponsor extreme sports events like the X-games and freestyle football which against complements their strategy of unconventional marketing.

Campaigns

Their campaigns are mostly based on organizing events that are associated with the brand. These events usually include unconventional sports, parties, student based events and exhibitions. They use such events to heavily brand their product using all kinds of aesthetics and tools. Plus, they also sample at these events to generate product trial and to let their target consumer experience the functionality of Red Bull. Their most recent campaign was the world tour of free style biking champion Kenny Belaey who was taken to all Red Bull operating countries where he performed stunts at different schools, colleges and universities. This event was used to build an impression for Red Bull as an adventurous, outrageous and unique brand. Sampling was also conducted at all stunt venues. Before the tour of Kenny Belaey, Red Bull organized the Free Style footballing competition all around the world where youngsters flaunted some cheeky skills to win the major prize of going to the World Cup in South Africa.

Publicity stunt/buzz generating tactics

The main motive of Red Bull behind using unconventional and unique marketing strategies is to generate or create people talking about them that gradually support to promote them. They aim to create a buzz through their events that is why they do not prefer using the conventional modes of communication (e.g. TV, radio and print media). Red Bull aims to create a viral fever through its events where people are amazed by the activities they perform and talk about it. The message spreads like wild fire that is the thing each Red Bull brand manager or brand ambassador targets in all its operating countries. Main motive is to do something so outrageous and unique, that people keep talking about it. Therefore, the brand is both getting the required mileage and developing a customer base for itself.

A small example of how Red Bull tried to generate a buzz was the high jump that their hired athlete attempted from the tallest buildings in all the Red Bull operating countries. Media was invited to the stunt and heavy Red Bull branding was exhibited. There was great hype and anticipation because of such an outrageous attempt being made by a person. People kept talking about it and there was a certain buzz about this stunt. The venues for the stunt were heavily branded with Red Bull aesthetics to demonstrate that it is Red Bull who owns the event. The stunts were successfully completed in all Red Bull operating countries with the media heavily publishing it on TV, print and radio. The ‘amazing’ factor was achieved as people were talking about it and this was exactly what Red Bull wanted to achieve with this stunt. In this context, it might not be selling the product through these stunts but it is actually developing the brand as an adventurous and unique one and also that it is creating a buzz about Red Bull which is basically the target and aim of the Red Bull brand manager or ambassador at the closing of the event.

Endorsements

Red Bull does not really rely on celebrity endorsement as that is not its style. What it does is acquiring sports teams around the world and supporting them as its official sponsor. The following endorsements are currently made by this brand:

Red Bull is the official sponsor of all X-games conducted around the world. This endorsement complements their marketing strategy of being unconventional. All venues and player dresses are Red Bull branded and heavy sampling is done at these events.

Red Bull has acquired two football teams around the world. One plays in the Major League Soccer in the United States of America and is known as the New York Red Bulls (http://www.newyorkredbulls.com/), accessed on 25 September, 2012). The other one is in the Austrian Football League and is known as Red Bull Salzburg (http://www.austria-salzburg.at/, accessed on 25 September, 2012). Both the teams have their kits branded with Red Bull. Red Bull Salzburg even have their stadium named after Red Bull and is called the Red Bull Arena. One can easily notice the heavy branding of Red Bull at the stadium. This is an effective plan that involves the heavy media coverage of football all over the world.

Red Bull owns a Formula One team which has been doing incredibly well since the acquisition took place (http://www.formula1.com/news/headlines/2010/5/10796.html, accessed on 25 September, 2012). The car and the driver’s dress are completely branded with Red Bull logos. This is again a very effective because Formula One racing gets a lot of coverage around the world and gives Red Bull the required mileage in its target audience.

Red Bull endorses the major stars in unconventional sports and gaming. A stand out example is Kenny Belaey who has been supported by Red Bull throughout his career as a free style biker (http://www.tribalzine.com/?Kenny-Belaey-after-the-success-of, accessed on 25 September, 2012).

Sampling through brand ambassadors

Another strategy of the marketing by Red Bull is the contract with brand ambassadors at schools, colleges and universities to represent the brand at social events and hangouts. These brand ambassadors are given cartoon/s of Red Bull to sample at parties and spots where Red Bull might be needed. These situations occur when students are in mental or physical stress due to various reasons, for examples sports events or time of academic examinations. The idea is to hire ‘cool college going students’ to represent the brand amongst its intended target market.

Another promotional strategy is involved in educating consumers. Red Bull organises travel in by its staffs in a car that carries large cans of Red Bull. The Red Bull staffs target those individuals who lack energy and wishes of energy. Then, the staffs give a free can of Red Bull to these people. This strategy seems to be successful during the introduction of Red Bull into public.

Red Bull-Establishment in Nepal and structure

Red Bull was finally launched in Nepal in 2002 and since it has been a leader in the market with relatively lesser competition. Red Bull was brought to Nepal by S.M. Chawla Company that only handled distribution of Red Bull initially. When the headquarters in Dubai assessed the sales in Nepal, they decided to officially start their operations in an office of their own. In 2004, Red Bull Nepal was established with three functional departments namely Marketing, Sales and Finance. Red Bull is currently being operated in Kathmandu with the Asian head office being in the United Arab Emirates (Figure 3). It has set up its premises in all three cities where distribution and marketing operations are executed. The current organizational structure of Red Bull Nepal is shown in Figure 3.

Figure 3 : The current organizational structure of Red Bull Nepal.

Marketing

The current organizational structure of Red Bull Nepal is governed by Asian Head Office. This office primarily plans and executes BTL promotional activities for Red Bull. Understanding the consumer need and coming up with activities to fulfill them is one of their most important tasks. Pre- and Post- event communications of all promotional activities are also taken care of by this office. Each city has one marketing head and three Student Brand Managers hired from popular universities to work as a team. Marketing department also handles communication via social media like Facebook and others.

Sports and Events

This is a dedicated team that plans around the year activities based on sports and other functional events. Red Bull conducts all its marketing through guerilla style and that is why this department has its special importance. They primarily plan and execute accompanied by collaboration with the marketing department.

Finance

Finance Department consists of a precise and dedicated full-time team member. The finance team distributes the budget for executing the marketing activities. This department also looks after the wage control system. The team also maintains and keeps track record of monthly sales. This department submits the monthly reports of sales performance to the head office in Dubai.

Communication

This department handles all the pre- and post-event communication of Red Bull events and activities through all media that include TV, print, radio and social media. This strategy is similar to the idea of communication in unconventional marketing of Red Bull brand to its audience. This department actively stays in touch with people in the media to disseminate news about everything that Red Bull is doing not just in