1. Marketing Mix
In determining the price of a product/service, an organization considers the market, competitive circumstances and costs (Pitt et al. 1994). Within the price element of marketing mix, Red Bull did the following:
Market price: Being a relatively new market, Red Bull had the lateral flexibility to determine its product price based on the level of quality and benefits it intended to offer vis-à-vis the perception it intended the market to have about the product.
Competitive Circumstances: At the start, competition was more or less against direct (very few “functional foods” drink products) and indirect other soft drink products. Owing to the quality and perceived value of the product, it was positioned as a quality brand hence could be charged a little above other competing products (10% above).
• I think that Red Bull management did a good job of trying to balance the act of setting the price level right. Red Bull did not engage in price war with any of the competition.
• Red Bull charged 4 times the average price of soft drinks and 10% above the price of competing energy drinks. It was able to do this because it trusts the efficiency and effectiveness of its product for delivering the benefits/values they claims it would deliver. Moreover, Red Bull was positioned as a quality/first-class product hence it’s price must reflect such, relative to other competing products (direct and indirect) in the market.
What did competition do? The major competition (Monster and Rockstar) offered 500ml (double the size of Red Bull) at same price. This was an initial advantage to Red Bull because it helped position Red Bull as a premium product relative to others.
Changes I’d have made:
I would have allowed the premium price to stay at the initial stage but would have introduced promotions and promotional prices (discounted price) at intervals (maybe twice in year) to aggressively compete with Monster & Rockstar that were...