Week 8 - Pricing/Channels and IMC

Effective firm/product that brings the mix together for its consumers:

I am a caffeine junkie. While my first love is coffee to achieve my habit, I do like fizzy drinks and sometimes I want something other than a hot drink. I cannot say what first drew me to try Red Bull, but discounting the dubious claims of the health benefits of the ingredient, Taurine, it was primarily the tangible benefit of its caffeine content that reeled me in. I did find the drink refreshing, I liked the taste and it was a nice change from the routine.   

I would categorize Red Bull as having an intensive distribution approach, being widely available in grocery stores, convenience stores, restaurants and bars. It started more selectively however, relying on the word of mouth and viral effects. With a tagline of “Red Bull Gives you Wings”, it was originally targeted at young males with the emotional appeal of advertising to associate itself with the image of extreme sports and the energy needed to participate in these activities, “it revitalizes the body and mind”. It has also grown as a subculture product in bars and dance clubs. This is attributed to the interesting nature of mixing alcohol with a stimulant: this allows young partygoers to drink more while masking the depressant effects of alcohol, thereby giving them stamina well into the wee hours of night.  Although the company seems to officially shy away from this particular use of their product, the fact that their promotional activities involve sending representatives in attention getting vehicles to alcohol related events and festivals suggest they understand the value this particular benefit provides to this segment, and its importance to the overall business.

The pricing is pretty high for what I consider a soft drink, and I have rarely witnessed discounts, despite increasing competition and availability of other energy drink brands. Thus, I would categorize it as a fixed pricing scheme, with premiums paid for the drink on an individual basis (primarily for the convenience at particular establishments) vs. buying it in bulk at the grocery store. Keeping the price high maintains its positioning as a premium, highly desired and “cool” product for its target base.

As the product has gained in popularity amongst the young, it would seem that the company does seek to target further growth with other segments. This is evidenced by their quirky commercials on television and other mainstream media with the very simple cartoons and the impression when you drink the product, that you can fly away. I am not sure if these commercials are targeted towards the very young as future customers (being a cartoon with a fantasy theme) or whether they promote general awareness to a broad market.

Red Bull chooses its communication tools very effectively. The Red Bull website, www.redbull.com, barely mentions the actual product, just all the activities they are sponsoring. Curiously, you have to look for the small link under other menu options to actually view information about the product.  Its Facebook page boasts nearly 28 million “likes”, evidence of its success at social media. This page also emphasizes more heavily on the sports and activities for which it seeks to be associated rather than the actual product it sells. Even more curious, Red Bull pretty much is about this single product, the energy drink. They have packaged it differently (the “energy shot”, a “cola”), but it is essentially a one product company. However, they have capitalized on this product to offer apparel, posters and other chotchkies  (for the various activities they sponsor at premium prices, I might add) which in turn provide more advertising and promotion for them. It is quite a feat when a company can get the consumer to pay for merchandise which essentially helps the company advertise its product! Red Bull is active in public relations, with its “Wings for Life” campaign, selling merchandise with a portion of the proceeds benefitting research for spinal cord injuries.

The company reported over 4.6 billion cans of the product sold in 2011, with revenues of €4.2B. Although I am not sure of the distribution of these revenues of the drink vs. promotional merchandise, it is a very impressive mix of perceived value by the targeted consumer segment involving clever advertising, channel selection, and pricing strategy.

Week 7 - Colgate Palmolive Cleopatra Case

My team was selected to write up the case memos for this topic this week, therefore, I will be submitting that separately. I will resume normal blogging next week, stay tuned!

Week 6 - Product Development Management

Reflections from the readings and videos

Considering the “products” that I personally use, I have to imagine I am not a branded company’s ideal consumer. Looking around my household, I see a plethora of “generic” brands, no real tendency towards repeat purchases, and I tend towards products that I believe best fit the need at the lowest price. I don’t wear brand name jeans, I have no preference to the electronics I buy, and vehicles, etc. are functional and practical to me (tangible goods), not status symbols (even if I was a millionaire, I would not pay $1700 for a Gucci handbag!). As for the layers of the products, I believe it is the same story – my personal PC hardware has to be powerful enough to run the specific software that I plan to use on it, anything provided beyond that is all well and good, but not particularly necessary for me.  I do look to reputation for quality and reliability for vehicles (my intagibles side). I am usually willing to try new things to satisfy needs in better ways, rather than stick loyally to a particular brand. 

This is especially true now that I have located from the US to the UK, where the land of brands is new and somewhat unfamiliar. I guess it’s a good thing that I don’t have a strong affinity for my old brands, because most of them are unobtainable in this new market, at least under their “old” names. It is interesting, because I can tell that some brands have been modified by the same parent company to better target the UK consumer, such as dish detergent. Paper towels (or “kitchen towels” as they are called here) are essentially the same thing under a different brand. About the only thing I do have an affinity to stay with is my toilet paper brand, LOL, but I guess I had better get over that as well!



Joy (US) and Fairy (US) liquid dish soap,
essentially the same product by the same
parent company, P&G.



Do these brands look familiar to one another? Bounty (US),
owned by P&G, sold its right to this product in the UK
to SCA of Sweden in 2007 with the understanding that it
would be under a separate brand.



As for new product development (PD) and product lifecycle, there are multiple examples of products becoming obsolete, ranging from the electric typewriter to music cassettes (who can forget vinyl and 8-track as well?) to 35mm camera film. And I suspect that music CD’s and DVD’s will not be long in also becoming obsolete. True, there does become something of a small niche following for the older technologies, but not on a volume based scale. The pace of emerging technology has a direct impact on PD and only the most nimble companies will be able to capitalize on new innovations, compared to those who move too slow to realize that technology will obsolete their tried and true products. The advent of digital media really drives this point home, and has been a very disruptive technology for many companies who formerly relied on older technologies to offer the same products/services. The following example highlights the 7 (or 8) step PD process, it is from a firm called Ideo, which specializes in innovative product concepts. This example in particular shows how this firm tackled a redesign of the shopping cart, getting from idea generation to prototype design in only 5 days, which I found particularly impressive. Although the product has not yet caught on in a mass market, I think it is an excellent basis on how firms can respond to shorter product lifecycles when considering their own PD needs. It was highlighted on ABC’s Nightline, and the 8 minute video can be found at the following link: http://www.youtube.com/watch?v=M66ZU2PCIcM

Ideo Shopping Cart Concept

Week 5 - Segmentation, Targeting, Differentation and Positioning Examples

Last week, I sought to better understand the definitions and explanations for Market Segmentation, Targeting and Positioning. I wanted to give myself some time to think about and observe some key examples of how companies have done this with various products. I have chosen two examples which I feel provide insight into differentiation in the marketplace, and that have had the most recent impact on my own experience and perception with products.

Comes in convenient multi-purpose
dry sheets.

Laundry detergent: If one thinks about the purpose of laundry detergent, it is very basic – overall, consumers want a product that is going to do the job of cleaning clothing in the most value added way.  Given that all detergents on the market essentially meet this basic need, why would consumers choose one brand over another? Thus, companies have invested heavily into determining how to differentiate their product from the competition and what influences various consumers. Throughout the years, we have seen basic detergents evolve into specific cleaning purposes (formulated especially for bright colors, or for use with hard water, etc.), more concentrated versions of detergent for the cost conscious consumer (more loads per amount used), liquid vs. powder vs. tablets, claims of superior cleaning ability and other distinctions. For myself, the scent of the laundry detergent carries great weight in my choice – even if a particular brand is the best value for the money, if I don’t like how it smells (especially considering one has to wear it all day), I won’t buy it.  I have recently chosen a new brand due to my expat assignment in the UK, due to the way the washing machines work here. Purex has laundry detergent and fabric softener in the form of a dry sheet, which I can toss into the load very conveniently (and the scent is tolerable as well).

DVDs: A market segmentation that I have not liked as well is the DVD industry. Did you know that DVD’s are formatted by geographical region, so that DVD’s released in the US do not work with players in Europe, etc.? Presumably, this is to allow the marketers to differentiate pricing and maximize promotional activities with release timing in each of the regions (heaven forbid that a person in the UK be able to buy a copy of “John Carter” at the same time as someone in the US, it would just ruin the profitability of the film!). However, for someone who brought a substantial collection of US DVD’s with her to Europe only to have the US DVD player fail 4 months into the assignment, I am frustrated at the inconvenience of not being able to readily procure a player that is compatible. One thing I can assure the industry is that I will NOT be buying replacement DVD’s in the Euro market as a result of this setback – I will figure out a way to utilize that which I already have, or not watch them at all.

In my opinion, the segmentation strategy for the DVD market does not seek to enhance customer value at all, but only to maximize profit for the industry. This is a key difference to the example of the laundry soap market, which is more representative of obsession on the consumer and what is valued in the product offered.