Price Analysis
Question
Red Bull’s marketing manager has tasked you with preparing a plan for introducing a new product line of energy drinks with a coffee flavor.
You've already received positive feedback on the product and place analysis you've conducted. Now you're being asked to submit a detailed analysis of the price for this new line of products. You're feeling good about the work you've done so far, but you know the overall marketing plan isn't complete yet, and that your pricing analysis needs to be thorough and support the earlier product and place analysis you developed.
Companies need to decide which pricing approaches and strategies they will apply in order to both make a profit and make the price attractive to the final consumer—you. If the price is too high, Red Bull’s sales could drop, and if the price is too low, its profits could be impacted, since there are competitors in the marketplace. Since Red Bull is the market leader in energy drinks and is now marketing a new line of coffee-flavored energy drinks, please examine their pricing strategy and provide your recommendations.
Overview
Continue with the next part of your marketing analysis and focus on the next of the 4 Ps—the pricing decisions for Red Bull. In this analysis, you will also make a recommendation for how Red Bull should handle pricing for its new line of coffee-flavored drinks. Pricing influences your buying decisions, and companies and their competition use pricing and the product life cycle to compete for your attention and dollars. The recommendation you make will not only reflect the rest of the overall plan for the product line but can have a real impact on the product's success.
Preparation
Read Chapters 6 and 19 in your textbook about consumer decision-making and pricing concepts in order to prepare for this assessment. Here is a website that can help provide background on Red Bull’s current pricing strategy:
Premium Pricing: The Ins & Outs of a Successful Brand Strategy.
If you need guidance in locating additional information about Red Bull, please ask your faculty member.
Instructions
Create a price analysis in which you do the following:
Accurately analyze the pricing strategy of Red Bull in relation to the competition.
Which pricing strategy does Red Bull use, and how does it compare to similar products in the product category?
Which pricing strategy is being used to effectively create a competitive advantage?
Provide an analysis of the price strategy and its effect on business success.
Explain whether Red Bull’s pricing strategy maximizes profitability or market share?
What recommendations can you make in terms of pricing decisions that may improve business success for the new coffee flavors?
Accurately analyze the pricing system along with its characteristics and effect on the marketing mix.
Describe how Red Bull’s pricing decisions on its new line of coffee-flavored drinks affect the other Ps in the marketing mix: place, promotion, and product.
Analyze the pricing strategy's impact on the economic success of the company.
Describe the effect of the pricing strategy on the overall success of the company.
In the analysis:
Incorporate information from three other sources related to the content of the assessment. Cite any resources you use.
Be sure your analysis presents a focused purpose through strong organizational skills. Also, be sure it presents evidence through strong paraphrasing/summarizing, appropriate tone, and sentence structure.
Planning
Consider the following as rough guideposts for setting aside the time you need to do your work. You will want to adjust these as you learn more about your own pace and working style.
Research and reading: 4 hours.
Interactive activities: 30 minutes.
Writing: 6 hours.
Revising: 2 hours.
Additional Requirements
Written communication: Communication should be clear and well organized, and support a central idea, with no technical writing errors, as expected of a business professional.
References: References and citations are formatted in a consistent style, using APA. See the Campus page Evidence and APA. Also refer to the Business Academic Professional Document Guidelines [PDF], which provide basic formatting and APA guidelines you should follow to create attractive and usable documents not just within your business program but in the workplace as well.
Resources: Incorporate information from three other sources related to the content of the assessment.
Length of paper: Approximately 3–4 typed, double-spaced pages, in addition to the title and references pages.
Font and font size: Times New Roman, 12 point.
Competencies Measured
By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and scoring guide criteria:
Competency 3: Examine the relationship of basic marketing strategies to business success.
Analyze the pricing strategy of a company in relation to its competition.
Analyze a company's price strategy and its effect on business success.
Analyze a pricing strategy's impact on the economic success of a company.
Competency 4: Apply effective marketing planning and implementation.
Address assessment purpose in a well-organized text, incorporating appropriate evidence and tone in grammatically sound sentences.
Competency 6: Evaluate management implications of marketing and sales plans.
Analyze a pricing system along with its characteristics and effect on the marketing mix.
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Solution
Red Bull Price Analysis
Since the establishment of Red bull, the company has been able to establish itself as a strong, fresh, and fashionable brand identity in the market. It is clear that Red Bull describes a unique energy drink that helps for health, creating market and brand image. More importantly, the company has been able to establish the connection of its products with the young people in the market. In the energy drinks industry, several rivals and competitors have been making Red Bull strategic in the market. Although there are several competitors in the energy drinks industry, Red Bull has remained the market leader. At the top, the company charges a premium for its products and customers, the pricing strategy that has made it maintain competition in the market. In fact, the pricing approach of Red Bull has always been to set the price of its products at a high level (Teigeler & Hahne, 2019). Customers are now ready to pay because they believe the company's energy drinks offer special advantages over competitors (Teigeler & Hahne, 2019). The company's pricing strategy has made consumers make price-quality inferences about Red Bull. Red Bull's ability to position itself as a premium pricing brand has made it attract more consumers in the market who pay for premium the quality of the product and its benefits. Red Bull has also greatly increased profits and moved away from competing on discounts as a result of premiumization by pricing (Teigeler & Hahne, 2019). The method of the business's pricing plan has been created to reach the mass market while maintaining a reputation for excellence.
It is fundamental that Red Bull is using premium pricing where consumers pay a premium for the company product due to its quality and benefits. Given that Red Bull is a well-established brand and a market leader, it easily charges a premium for its products, and the consumers will always buy its products because of the quality. It is clear that the firm is effectively positioned in the market, something that is essential for the new product that the company needs to introduce in the market (Team, 2021). More importantly, Red Bull's pricing strategy maintains profitability in the market and attracts more consumers. With unique and extremely well-coordinated marketing, introducing the new product using the company's premium pricing will make it record positive returns. Therefore, it is clear that the pricing strategy used by the company is effective because it makes the consumers trust the quality of their products in the market.
For many years, Red Bull has held a dominant market share in the energy drink industry. What has made the company remain competitive in the market is following a premium pricing strategy for most of its products. Although the business must consider value-based pricing when assessing the standard rates for its beverages, it has successfully leveraged high pricing to forge a competitive advantage. From the analysis of the Red Bull pricing strategy, it is clear that it was set high to give the consumers the impression that a product is of high quality (Woodruff, 2019). More importantly, using the pricing strategy, Red Bull has made its product more preferable to the consumers because of its quality. It is also fundamental that the consumers' brand value and perception of the company have been boosted by its premium pricing strategy. The success of Red Bull in the market has been contributed by its pricing strategy because more consumers were attracted to it because they believed with high quality, the products are high quality.
From the analysis of the company pricing strategy, it is clear that it helps Red Bull maximize its market profitability. The company's decision to embrace a premium pricing strategy was essential because it helped it perceive to the consumers that the product has a higher value than its competitors, thus recording higher profitability. Using this strategy, the company made a high profit in the market because it created tougher barriers to competitors and increased the brand value for all its products in the market.
Red Bull was the first to introduce the market for caffeine-containing energy drinks, according to research. As a result, the business was able to determine its intended pricing inside the market. Although the company has a competitive advantage in the market, I recommend that it make some significant changes to its marketing decision to improve the business success of the new coffee flavors (Heaslip, 2019). I think pricing skimming is a critical decision that may improve the business's success in introducing new products in the market. By embracing a price skimming strategy, the company could set high prices for the new product it is introducing in the market and gradually lower the price as more competitors enter the market. The proposed pricing system analysis shows that it benefits the company because it enables it to take advantage of early adopters and later reduce rivals (Heaslip, 2019).
The use of price skimming strategy by Red Bull on its new line of coffee-flavored drinks has great effects on other Ps in the marketing mix. It is clear that the company's pricing decision helps it increase its sales when introducing new products, thus indicating that it needs other Ps in the marketing mix. More importantly, the price decision by Red Bull is mostly successful in the market you are likely to enter. From the pricing strategy analysis, it is fundamental that it helps the company maximize profit when the new product is deployed in the market. The strategy helps the company increase the company profit within the shortest time possible (Team, 2021). Therefore, for the overall success of the organization, a pricing strategy is essential because it affects the company's profit margin. Further, the pricing strategy allows the company to make more money when the consumers are still willing and able to pay. It is also significant that the pricing strategy assists the company in expanding its market share and enables its new product to penetrate the market effectively.
References
Heaslip, E. (2019, April 3). How to determine the right pricing strategy for your business. https://www.uschamber.com/co. Retrieved July 4, 2022, from https://www.uschamber.com
Team, M. B. A. S. (2021, July 22). Red Bull Marketing Strategy & Marketing Mix (4PS). MBA Skool. Retrieved July 4, 2022, from https://www.mbaskool.com/marketing-mix/products/16734-red
Teigeler, J., & Hahne, A. K. (2019). Product and Price Analysis of Red Bull in Central Europe: Marketing Mix. GRIN Verlag.
Woodruff, J. (2019, February 6). What is a premium pricing strategy? Small Business - Chron.com. Retrieved July 4, 2022, from https://smallbusiness.chron.com/premium-pricing-strategy-1107.html
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