Red Bulls Segmentation and PESTLE Analysis - Case Study Example

Red Bull Analysis (Name) (University) Red Bull Analysis Executive Summary Red bull has pioneered in the beverage industry for decades. Its success has been facilitated by a number of strategies that significantly boosted its attractiveness and penetration in different market segments. The beverage market is highly dynamic and has grown over the years. Therefore, this paper seeks to present various factors that have facilitated the growth of the product in different market segment. Through a PESTLE analysis, external market conditions will be extensively discussed. On the other hand, the company’s challenges will be discussed as witnessed by any products launch in a new segment. Contrariwise, this product has been selected given its dominance in the beverage industry, market niche andeffective strategies that have been employed in facilitating its market penetration. Contents Red Bull’s Segmentation 4 Demographic Segmentation 4 Psychological Segmentation 5 Geographic Segmentation 6 PESTLE Analysis 6 Target Market 7 Potential Market 7 Market entry Strategy 9 Conclusion 9 Red Bull Analysis The product The product is typified by two elements in its formula namely energy enhancing ingredients and caffeine. The beverage contains 70 mg of caffeine and energy enhancement ingredients which include Glucuronolactone, Taurine and various other vitamins and sugars. Red Bull’s Segmentation The Red Bull Company offers its product in different target market and has significantly penetrated different markets. Although Red Bull’s marketing and promotional campaigns seems focused on one media, the products are targeted on a small market segments of between the age of 18-25. The company has, therefore, better managed its4Ps with respect to its target segment and acquiredsizable advantage on the traditional soft drink company (MarketLine, 2012). Additionally, the market segments are selected in such a manner that will set an example for probable consumers in increasing the market base for the final consumers. Demographic Segmentation A key component to the product’s global success is the company’s account on social variables. Over the decades, the company has enforced a global perspective regarding lifestyle clusters, consumer habits, mixing demographics and taste preference in creating an appeal for the product. In such segmentation the market is divided into groups on the bases of the age, gender, occupation, income among others. These segmentation strategies are easily measurable. Since its inception, the product has been launched using an aggressive, international, marketing campaign channeled towards the extreme sports fanatics and the active young individuals. This robust campaign has successfully transformed the world of divergent lifestyles that consolidate sports, athletes, and cultures. Presently, the company targets primary audience such as the youth, bachelors, and the professionals. The company segments its consumers through the following base; i. Age Youngsters of between the ages of 16- 30 years which accounts for Red Bull’s major customer base. Below 16 years account for most of the Red Bulls sales. Elderly and Middle Age: The products is typified by zero calorie and special edition that is less harmful to elderly. ii. Gender The products is targeted towards the male young adults as its secondary customer base. iii. Occupation Working professionals, students, athletes, and sports enthusiast. Psychological Segmentation Red bull has successively used science to understand the psychology of the consumers better across different levels. With the changing dynamics, the company has attempted to cope to the continuous change and develop flavors that attract more customers. In this regard, the company has initiated different divisions namely; i. Lifestyle: working class executives ii. Personality: ambitious iii. Occasions: Regular, special iv. User Status: regular user v. Benefits: Quality vi. Usage rate: medium vii. Attitude toward products viii. Readiness Stage Geographic Segmentation Different schemes have been used in the spatial location to segment its market. Different schemes have been implemented in different geographical units, cities, and regions. Geographical variables have been consolidated in segmenting the market in the following ways; City: Class-B and Class-A cities such as the metro politician areas Area: Red Bull limits it coverage to semi-urban and urban areas that consist of a major consumer base. PESTLE Analysis Political/legal (low) Although political effect is low, a number of government regulations have a profound effect on alternative beverage. Nonetheless, the company manufactures all its products from its central factory in Austria. Hence, by manufacturing its product in one central area, it is susceptible to tariffs, tax laws and distribution cost. In this respect, markets typified by reduced tax laws and tariffs offer proffered investment platforms. Red Bull’s nature of dominant product offering has however presented legal and political issues. Norway, Denmark, and France at some point banned Red Bull’s products over the concerns of the ingredients (Euromonitor International, 2012). Tentatively, high caffeine levels have presented its vulnerability to regulatory costs (Staff, 2012). Economy (Moderate) The premium pricing of other beverages makes Red Bull sensitive towards the shift in economic conditions. In this regard, it affects the consumer purchasing power in the case of a reduced consumer’s disposable income. Tentatively, an increase in the consumer’s disposable income increases the consumer’s purchasing power. Social (High) Consumer’s social preference is multifaceted. The reasons for consuming alternative beverage products arecomplex, given the divergence in consumer preferences. Consumers not only want to quench their thirst but also maintain their lifestyle, health, image among other factors affiliated to the beverage (Euromonitor International, 2012). Technology (Low) The technology incorporated in the alternative beverage industry has not changed much. Hence, it does not pose any considerable effects on the success of the product. Target Market Energy drinks are targeted by young adults favorably inclined to sporting activities and events. In this regard, the product targets the athletes or sporting fanatics of between the ages of 17-38. Presumably, many sporting activities/events are associated with the need for energy that sustains the intensive sporting activities. The young and active adults are targeted since the young generation are inclined to its effect for the need of endurance and performance. It has furthered to sell certain lifestyle that are affiliated to these target market. Potential Market Asian countries are inclined to the beverage products but have shown a significant increase in the sales of the products. Given its increased population in the region it will offer a proffered potential market for the product. South America, on the other hand, has experienced a rapid growth in the sports drinks and the energy beverage consumption. The Gulf region (UAE) market offers a potential market for the product given its growth in the food and beverage industry. The region has a sustained increase in hypermarkets, facilitated by the increased population in the Gulf region. As such, an exponential increase in the food processing industry has ominously improved (Soeiro, 2013). Therefore, the region will offer a large consumer base for the product. A large consumer base is important for the introduction of the product, since a ready market is instrumental in realizing increased sales. In 2009, the Middle East food and beverage industry was valued at an excess of USD 32 billion. The Cooperation Council for the Arab States of the Gulf, one of the world’s largest importer, has registered an annual revenue of about USD 13 billion.This shows the Gulf’s increased demand for food and beverages. Evidently, UAE’s imports 90 percent of its food needs, hence it cannot create the product at local levels (Soeiro, 2013). Therefore, UAE will potentially offer an attractive investment opportunity as a “first choice” international market. Although Red Bull maintains its leadership position,competitors such as Hansen Natural Corp will offer stiff competition that has retained about 16 % of the world’s value (Euromonitor, 2012). As such, it is highly likely Hansen’s subsequent investment in the region will pose great threat and result to declined leadership position. Competitive Pricing The product’s premium pricing has hindered its development in the larger consumer base. Thus, its pricing has become less justified given the increased analogous notion of reducing its pricing to appeal to a more sensitive consumer. Monster Energy’scompetitive pricesare anticipated to pose a threat to the product’s success. Maintaining an Edgy Brand Name The company anticipatesspending in excess of over 30 percent of the sales on advertising. It might however lose its edgy brand image through widening its marketed audience in a new region. Market entry Strategy Partnership Partnering is instrumental when entering foreign markets. The partnering strategy will include simple co-marketing arrangements with the local suppliers who will distribute products to different locations in the region. They will form an important part of the product’s supply chain. Unmistakably, partnering is an imperative and efficient strategy when entering a market of different cultures, both social and business (Corrigan, 2010). Conclusion It evident that Red Bull has maintained its marketing strategy in different market niche. External factors such as social and economic factors affect the attractiveness of the market given the dynamics of the product. Nevertheless, the Gulf region has created a favorable market opportunity for investment. Backed by its steady growth and demand for food and beverage, it will offer a ready market for the product. References Corrigan., K. (2010). The Complete Guide to Service Line Marketing. Danvers, MA: Health Leaders Media, 2010. Dahab, S., and Soeiro, F. (2013). Internationalization Strategy of Água das Pedras to Dubai. Euromonitor International. (2012). Red Bull GmbH in Soft Drinks (World). Retrieved from Euromonitor: http://www.portal.euromonitor.com/ MarketLine. (2012). Red Bull: A trailblazer in marketing strategy. Retrieved from MarketLine: http://www.ebscohost.com/academic/business-source-complete Staff., R. (2013, January 18). It’s No (Red) Bull! Chicago Considers Banning Highly Caffeinated Energy Drinks. Retrieved from Radar Online: http://radaronline.com/exclusives/2013/01/Energy-drink-ban-ordinance-chicago-ed-burke/ Read More