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Sample Essay On Red Bull: Critical Success Factors (CSFs)

Because of many important and competing interests in business, it may become possible for managers or corporate directors to make every one in a firm to focus in the same direction and on the essentials of the firm. This is the moment when Critical Success Factors (CSFs) can help. They are the essentials that a firm’s management must get and do right in order to achieve the vision, mission and goals set forth by the company. A CSF is a critical activity of factor that must be done to realize the success of a company (Rockart, 1979; Boynlon & Zmud, 1984). When these ‘limited number of areas’ are satisfied, an organization will achieve competitive performance. Rockart (1979) noted that these ‘few key areas’ must go right, and constant attention and review must be done by management. The CSFs are closely related to the organization’s mission, Vision and goals.

Dating back to 1982 when Dietrich Mateschitz, came aware of tonic drinks, Red Bull energy drink has become the most successful story in the beverages industry in the last decade. Mateschitz, founded Red Bull in 1984, and selling it in 1987 on the Australian market after developing a unique marketing plan. It eventually became a new product category that is now consumed in more than 164 countries (www.Redbull.com). In 2011, more that 4.6 billion cans of Red Bull have been consumed (www.Redbull.com) globally. Today, the 8394 employees share the success of this Energy Drink headquartered in Fuschlam, Austria.

Understanding the key success factors and strategy for Red Bull energy drink is a plus for industry players, the company and business managers.


Market-Target:
Target marketing is on of the CSFs of Red Bull energy drink. The company has pursued an effective strategy of which market to serve in order to achieve a competitive positioning. Red Bull’s energy drink target group is not defined by demographics (e.g. age, race, sex) but by a ‘state of the mind’. The marketing message is that Red Bull will make the consumer, active, energetic, have drive, awake, physically and mentally fit. The company has also continuously provided information for ‘competitive athletes and those who want to follow their footsteps’ . Every human being dreams to be ‘athletic’ or ‘sporty’-hence Red Bull’s targeting strategy made Red Bull worth $ 10 billion in 2008, capturing 60% market share in US and Europe. This targeting strategy aims at ‘providing a benefit that consumers can feel’-as opposed to imagining and/or seeing.

Red Bull’s target market is thrilled by a collection of scientific research conducted by various researches, institutions and made publicly available in the company’s website. These studies support the idea that ‘Red Bull Energy Drink vitalizes body and mind.’ The results of the studies conclude that: Red Bull energy drink; increases performance (Alford et al. 2001; Ivy et al. 2009), increases reaction and concentration speed (Alford et al. 2001; Horne & Reyner, 2001) and improves vigilance (Seidl, 2000). This ‘scientifically supported’ marketing and targeting strategy is aimed at capturing athletes and other consumers who value success and power.

Red Bull gives you wings whenever you need them

More energy means more success

Stimulates both mind and body

Brand Positioning: In order to acquire a distinctive and meaningful position in the target market, Red Bull has adopted various marketing strategies, which include; focus on the brand, lifestyle marketing, premium pricing, internalization, Asian innovation, innovation marketing, event and opinion leader marketing. Hence Red Bull’s brand positioning emerges from the energy drink’s benefits;

‘Red bull vitalizes body and mind’

The unique brand personality of Red Bull has emerged from this message. Red Bull’s brand personality is innovative, intelligent, self ironic, witty and charming. The company effectively identified a competitive advantage-‘state of the mind’ upon which it has built its position. Its overall positioning strategy is to build upon ‘people’s minds’ and create ‘benefits that consumers can fee.’ The company has also effectively communicated this position in the market and gained a competitive edge against competitors. This differentiation strategy that has various components has worked well for the company in retaining its current market position.

RED BULL’S SUCCESSFUL POSITIONING STRATEGY: WHY?

In less than 20 years, Red Bull has become a perfect example of imitable business development strategy. With its unique products, the company has become a perfect example in the energy drinks sectors and also an enviable marketing strategy. The fact behind the success of Red Bull’s energy drink is rather straight forward-doing things differently and focusing on the brand. However, executing this strategy hasn’t been as straight as it seems: the company has invested a lot in it and not lost focus in its internationalization strategy.

The differentiation and brand positioning has proved successful as justified by worldwide expansion and increased sales turnover over years. Red Bull’s unique and innovative products required a unique communication and marketing strategy-and this is what Red Bull went for. Compared to other market competitors, Red Bull adopted unique product creations, packaging, pricing, distribution and marketing strategies. These are the elements that have differentiated and positioned Red Bull’s energy drink in a saturated market with giants such as Coca Cola and Pepsi Coke.

Creating a new product category based around innovation is rare. Red Bull focused on creating a product with benefits that consumers can feel, effective and detectable. To create brand loyalty, Red Bull created a product with benefits that consumers can feel or see. Food is naturally healthy, and any marketing message that is coded to depict this is highly persuasive in consumer marketing. Red Bull has taken advantage of this ‘natural energy’ to position its energy drink in the market. Hence, Red Bull’s targeting and positioning strategies have succeeded due to;

New product-category creation;

Focusing on one brand;

Premium marketing;

Focusing on the consumer benefit;

Innovative packaging and distribution;

Premium pricing, and,

Lifestyle marketing

BRAND-ENHANCEMENT: POSSIBLE STRATEGIES

Some consumers argue that Red Bull is too sweet, while others disagree. The energy doesn’t do well in the taste tests. The slim silver can has all the ingredients of the drink listed-yet some people argue that the product isn’t patented. Regardless of all this debate, Red Bull has managed to capture and maintain its 70 to 90 percent market share in the energy drinks market (Gschwandtner, 2004).

Not even giants such as Coca Cola and Pepsi Coke have been able to take away this market share from Red Bull. Red Bull’s founder, Dietrich Mateschitz, said; “If we don’t create the market, it doesn’t exist.” The company has done all what it takes to create and maintain new markets. There are possible strategies that the company can pursue to maintain its dominance in the next three years. However, these strategies are just proposals, they aren’t in any way exclusive, and their success will be determined by market forces and changes that occur daily in the globalized market.

Brand Focus-One Brand, one Product

To be successful in this market, Red Bull needs a clear and consistent statement that rings benefits in the mind of the consumer. This statement has to be supported by a long-term marketing expenditure, with the aim of developing a consistent, clear and uncompromising brand position in the competitive market. This brand focus and position has to be enhanced by the creation of new categories of products with perceived or felt benefits to the consumer. Red Bull has already practiced this business strategy-which has worked well for the company.

In order to put all the focus on this one can, product or brand, Red Bull has to avoid; licensing, franchising, umbrella brands, brand-merchandizing and excessive diversification. In the next three years, the company must focus on enhancing the brand loyalty by pursuing more of event marketing-such as in sports, culture and organizing and supporting more innovative and image building events. The company should focus more on targeting the ‘Y generation’-which is mobile, fun-loving, lifestyle oriented and sick will all classic marketing strategies. It should create more ‘wings teams’ and pursue an aggressive ‘street marketing’ to enhance the brand image. The company can also establish Niche-brands targeting various groups, such as women and men. However, establishing niche brands should be a cautious process to circumvent excessive diversification.

Premium Pricing

To maintain its market position, Red Bull must continue to be seen as a premium product in the market. Just like products such as cars, consumers have a tendency of relating product price to its quality. There is usually a trade-off between product price and quality. Price is also an important element in the marketing mix and it affects the other three in various ways. Before a product is created, the marketing strategy, including target and positioning is formulated in advance. Price is an important element in positioning, because of its relationship with product quality. However, the impact of pricing on positioning will be determined by other elements such as promotion and distribution.

Though there are various objectives to pricing, such as profit, revenue and quantity maximization, quality leadership can also be achieved through this strategy. This is why Red Bull is keen on applying pricing strategy to maintain its quality perception. This strategy is often referred to as ‘premium pricing’ and can work well for the company in the next three years. Red Bull is not cheap-it’s indeed more expensive than its competitors. It however still retains a large market share. In some cases, Red Bull managers, determine the prices to be sold at cafes, restaurants, pubs, night clubs and hotels.

This has been referred to as the ‘ON sector’. Nevertheless, the firm may also practice price stabilization to avoid price wars and maintain stable or moderate level of profit. The company can also focus on psychological pricing which aims at sending signals of what the consumer considers fair, product quality and popular price points. However, it also prudent to note that pricing strategy can be a double edged sword, because every sector has a lower priced product. This must be used with care and changes in the market considered when necessary.

Red Bull is far more the most expensive non-alcoholic drink in the market and this premium price must be supported by the product’s benefits.


Above-The Line Advertising

Red Bull has adopted a market communication strategy that will work to maintain the brand in the market for long. Its marketing concept will play an enviable role in the next three years. As noted earlier, one of the company’s Critical Success Factors is focusing on the brand an creating new categories of products based on innovations. This is a plus for the company considering the changing market needs due to globalization. To maintain this brand loyalty, the company has to practice a well tailored ‘above-the-line advertising and marketing strategy’. The purpose of this strategy is to ensure continued brand awareness; image and it must be accompanied by other ingredients.

The company has to keep strengthening its slogan ‘Red Bull gives you wings’-which is aimed at building the brand personality. In its marketing, the company should also enhance the use of opinion leaders and other personalities in sports, media and culture-which are a perfect target. Red Bull should continued building more relationships with these groups and treating them as friends. Agreements and partnerships with top athletes is working well for the company. Red Bull should sponsor and organize more events, in sports and culture. This is ‘event marketing’ aimed at enhancing the brand image of the company.

These proposals are in no way exclusive, the company has a myriad of other opportunities to pursue in order to remain a leader in the next three years. Additionally, none of these factors can succeed alone, a combination of all of them will ensure the company enjoy market competitiveness in the coming years.

References

Alford C. et al. (2001) ‘The Effects of Red Bull Energy Drink on Human Performance and Mood,’ Amino Acids 21, 2, 139-150.
Boynlon, A.C., and Zmud, R.W. (1984) ‘An Assessment of Critical Success Factors,’ Sloan Management Review, 25, 4, 17-27.
Center for Food and Healthy Studies: CFHS, (2008), 10 Factors for Success in Energy Drinks -Europe and the U.S.
GSCHWANDTNER, G. (2004), The Powerful Sales Strategy Behind Red Bull, Selling Power Magazine.
Horne J.A., Reyner L.A. (2001) ‘Beneficial Effects of an “Energy Drink” Given To Sleepy Drivers, Amino Acids 20, 1, 83-89.
Ivy J.L. et al. (2009) ‘Cycling Time Trial Performance Improved By Ingestion of Caffeine Energy Drink,’ International Journal of Sports Nutrition and Exercise Metabolism 19, 61-78.
Red Bull Corporate Website (2012) ‘Company Figures’
Red Bull Corporate Website (2012) ‘World Wide Expansion
Rockart, J., F. (1979), ‘Chief Executives Define Their Own Data Needs,’ Harvard Business Review, 2, 81-93.
Seidl R. et al. (2000) ‘A Taurine- and Caffeine-Containing Drink Stimulates Cognitive Performance And Well-Being,’ Amino Acids 19, 3, 4, 635-642.