- BUS FPX 3030 Assessment 3 Price Analysis.
Price Analysis
The existing market leader of energy drinks, Red Bull, is preparing to expand its portfolio with a new line of drinks containing coffee. Another powerful strategy in popularity growth, which is the use of premium pricing, has also remained part of Red Bull marketing strategy because they are leaders in the category (Wilkinson, 2022). Pricing is a weapon that Red Bull has skillfully used to ensure that it achieves its status as a prestige or premium brand.
However, at the price, some new opportunities and threats need to be addressed when you are in a new product area. A preliminary analysis of the coffee-energy drink market and the conception of the customers is required as Red Bull aims to increase its high brand association. As for this research, a look at the current state of Red Bull’s pricing strategy shall be done, followed by recommendations that would make it fit for the new coffee line and the impact that this has on the rest of the marketing mix. After the identification and examination of these factors, we shall proceed to provide recommendations regarding the specific area of pricing for Red Bull, which may assist them in entering into this new market.
Pricing Strategy Relative to Competition
Wilkinson (2022) also notes that Red Bull has always pursued a premium pricing strategy whereby it has set its price at a 15-20% mark over the regular prices of products in their category. As a high-performance lifestyle brand, their goal fits this strategy well. Pricing is another factor that makes Red Bull have an image of being better and more reserved than competitors such as Monster and Rockstar beverages (Greenland, 2021).
Since buyers are looking for prestige and perceived advantages associated with the elite product, they should practice a premium pricing strategy to create a competitive advantage. However, this approach could be challenged by new entrants and changing customer tastes in the coffee-energy drink segment. As we all know, too many famous brands of coffee, such as Starbucks, joined this market with sensational prices. The inability of Red Bull to maintain its coffee energy drinks price higher than that of its competitors means that it has to persuade customers that its products are better in terms of taste, effect, and brand appeal.
BUS FPX 3030 Assessment 3 Price Analysis
One of the strategies for generating the highest possible revenues from early adopters is skimming. This entails choosing high initial prices that are then lowered to capture sensitive price consumers (Kotler & Armstrong, 2021). This may have helped in recouping development expenditures as well as reinforcing a premium image that could be attained through this.
Alternatively, to boost the trial and gain more market share, it might pay to lower the prices slightly more than current coffee competitors. Finally, its price should be high enough to affirm Red Bull’s dominant status in the market but low enough so consumers won’t feel hesitant to pick Red Bull over all the other products in this kind of market.
Price Strategy Impact on Business Success
This has been so because of Red Bull’s outstanding financial prowess and excellent pricing differentiation strategy: more than 40% of energy drinks globally are from Red Bull. The idea behind this method is to make a lot out of each sale. In the same regard, the high brand identity of Red Bull is complemented by a premium price that cements the brand as an industry guru and gives an unyielding reason why customers will always choose this product.
However, there could be restrictions on increasing the total volume and intensiveness of sales in a particular market if organizations rely on the margin-driven pricing strategy alone. Targeting more and more restricted budgets has been a key factor that provided Monster with an increase in its shares through the reduction of prices (Greenland, 2021). For Red Bull to create the necessary position and increase production, it has to increase household penetration, having entered the coffee market.
BUS FPX 3030 Assessment 3 Price Analysis
Therefore, more delicate tactics should be used regarding the coffee line’s price. This strategy could only work if Red Bull is willing to sacrifice some of its profit margins to get the consumers to trial the product and then repurchase while at the same time retaining a premium price to tell a compelling story of product quality. Sales and loyalty benefits are some of the short-term promotional appeals likely to encourage persons with uncertain voting intentions (Grigsby, 2022).
Thus, expansion of the customer base of Red Bull’s coffee sector may help the company raise its sales, improve its production, and obtain better and more stable revenues in the future. Systematic pricing helps Red Bull build the profitability of the brand while, at the same time, the coffee line establishes a position in the market. Thus, the more numerous the audience for specific Red Bull products becomes loyal to the brand, the ability to increase their price will be ensured. Thus, this plan allows for the achievement of the set market penetration goals as well as the generation of good profit. Pricing strategies in the product are a function of the firm’s objectives and are further dependent on the product life cycle.
Impact of Pricing on Marketing Mix
Pricing is another element of the marketing mix since it determines how Red Bull approaches the development of their products. Since Red Bull establishes relatively high prices for its products, it can gain more cash flows for further enhancement of the research and development of its products (Greenland, 2021). It is possible to meet taste and performance requirements, but new compounds and processes will be required as Red Bull moves to add coffee energy drinks. Writing about distribution, Wilkinson (2022) argues that premium pricing accords with niche positioning in supermarkets and other specialty stores, including convenience stores.
The special atmosphere of the brand is maintained, and cheap stores are not used. Red Bull may try to expand coffee line exposure and clientele’s trust by opening cafés and coffee shops. Whereas concerning the promotions, the strengths of Red Bull put it in a position to freely provide other floss and marketing tactics, such as nice ads, along with sponsorship of the ultra-dangerous sports due to its price tag (Brown, 2023).
Nevertheless, Red Bull will have to make a few changes to its marketing mix when it enters the coffee segment. There should be a new emphasis on new flavors and packaging that would meet the preferences of consumers and the occasions of coffee drinkers (Grigsby, 2022). Perhaps legitimacy could be obtained through distribution and promotional partnerships with already-established coffee franchises. Among other things, sampling and trial-building programs will be essential to increase awareness of the products’ needs and how the items are superior to cheaper imitations. However, the relative power of the pricing element in the strategy has yet to disappear.
Extra costs that may be regarded as too high can also negatively impact the coffee line’s performance in capturing new consumers and encouraging frequent consumers. The tools of the marketing mix cannot operate effectively if volume and profitability are not in harmony (Kotler & Armstrong, 2021). To ensure they achieve the required market coverage to support efficient advertising and to justify distribution extension, Red Bull is offering its coffee at a price level a lot closer to its coffee competitors. So if Red Bull wants coffee consumers to pay a premium for their goods, then the entire marketing campaign initiative has to deliver.
Impact on Economic Performance & Market Dynamics
However, the price choice for the Red Bull coffee brand will be judged by its economic impact in the future. Sustaining and securing clients within this sector is very key to the profitability of this brand. They can fail to attract customers to buy their products in large quantities due to competition and high prices of production and marketing the products. It may also be attributed to issues of supply chain management and a lack of readiness from retailers to continue funding the line due to low sales (Greenland, 2021).
On the other side, if the prices are beyond a certain point, the brand equity of premium brands may deteriorate, and hence the resources to continue with the innovation may not be easily available (Brown, 2023). So, to establish a good profit margin, Red Bull needs to be able to predict fluctuations that stem from changes in the price level of the market. Price sensitivity research can mimic volumes at different junctures of its scale. Red Bull might have to change its prices at some point from what they learned about household penetration rates as well as repeat patronage once they have the product out in the market.
BUS FPX 3030 Assessment 3 Price Analysis
Pricing strategy is not just a line on the balance sheet; it has real implications for Red Bull’s position in the marketplace. As to the proposed coffee line, the shift in market share can be influenced by the competitor’s reaction towards its price. There is potential for the category margins to be squeezed due to price reductions that Starbucks, Monster et al. may feel compelled to execute to counter Red Bull’s threat (Grigsby, 2022). To draw consumers’ attention to certain products, stores may increase the movement of trolleys. Red Bull has, therefore, to achieve the right balance between the competitive forces and the merchant relations when fixing their prices. Also affected are perceptions of the Red Bull brand. In this context, the perceived costs deteriorate the value of the coffee brand at the consumer’s end (Kotler & Armstrong, 2021).
Price-sensitive consumers know how to make their displeasure known through social media platforms. When it comes to price, Red Bull needs to come up with strategies that would make people think that it is worth paying a certain price for the goods while maintaining the idea of their product as a high-quality product. For value to be communicated effectively, packaging and advertising must be given pride of place. In the course of the launch of the coffee line, Red Bull will be able to observe if the price strategy is driving overall success by analyzing figures such as the volume and velocity of sales as well as market share and customer satisfaction. Adjustments may then be made to optimize results. To sustain the conjectural advantage within the releasing domain for a longer period, Red Bull might redesign their price strategy depending on the information they obtain from the market.
Conclusion
Red Bull finds interesting opportunities and threats, and its behaviors have expanded into coffee-flavored energy beverages. This study has shown that price strategy has implications that extend across the entire tire marketing mix. Red Bull’s premium approach has worked well for its main products, and this should be applied in different ways when it comes to coffee brands.
Red Bull may grow and penetrate this new niche by keeping the price alluringly above that of some of the more significant competitors but lower enough to require the addition of high-quality products and good publicity expenses. Economic performance and competitive positioning could be best monitored and changed as the line is rolled out.
Moreover, Red Bull is ready to wake up the coffee industry and increase profits with a consumer-oriented approach to setting prices. However, strategic pricing, which is the focus of this paper, is oriented to not only ensuring the growth of profits but also establishing long-term hegemony in the market. Read more about our sample BUS FPX 3030 Assessment 2 Place Analysis for complete information about this class.
References
Brown, J. (2023). Coffee meets energy: The cross-category collision. Beverage Business Insights, 5(2), 15-21.
Greenland, S. J. (2021). Pricing strategies in the energy drink market: A comparative analysis. Journal of Food Products Marketing, 27(3), 154-168.
Grigsby, M. (2022). Launching new products: Pricing pitfalls and best practices. Harvard Business Review, 2022(5), 37-45.
Kotler, P., & Armstrong, G. (2021). Principles of Marketing (18th ed.). Pearson.
Wilkinson, D. (2022, July 11). Premium pricing: The ins & outs of a successful brand strategy. The Weidert Group Blog.
https://www.weidert.com/blog/premium-pricing-the-ins-outs-of-a-successful-brand-strategy