PRICE ANALYSIS
Pricing Strategy Analysis: New Line of Coffee-Flavored Energy Drinks by Red Bull
Red Bull is introducing a new line of coffee-flavored energy drinks into the market. The product and place analyses carried out by the marketing team have all yielded positive feedback, and the company wishes to do a price analysis to complete the four Ps of the marketing mix. The price set will dictate how the new product line performs in the market. If the price is too high, it could affect sales given the level of market competition, while if it is low, it could eat into the companys profits, thus threatening its sustainability.
Red Bulls Pricing Strategy in Relation to the Competition
Red Bull is a market leader in the energy drink market. Its closest competitors in the US include Monster, Rockstar, CELSIUS, and the Starbucks Energy Drink. A quick price comparison of the Red Bull Energy drink and its main competitors on Walmart Online shows that Red Bull products are relatively more expensive. For instance, a single 355ml can of Red Bull costs $2.68, as compared to $2.50 for a similar can of Monster Salted Energy Drink, and $1.88 for a can of Rockstar Sugar Free (Walmart.com). The Red Bull energy drink 4 pack costs $10.48, as compared to Monsters $7.18 and Rockstars $6.68 (Walmart.com). Similarly, the Red Bull 12-pack retails at $20.58, while Monster and Rockstar retail at $19.98 and $18 respectively (Walmart.com).
Based on the above observation, this analysis concludes that Red Bull adopts a premium pricing strategy, which involves tactically pricing ones products and services higher than the competition (Datta, 2017). For a brand to use premium pricing successfully, it must demonstrate a return on investment in exclusivity, uniqueness, luxury or quality (Datta, 2017). Red Bull controls market share in the energy drink industry because the company was the first in the market and is known globally for producing the worlds best-selling energy drink. Therefore, the Red Bull premium pricing strategy thrives on the aspect of quality, which makes customers willing to pay the higher price. The strong brand in respect to quality serves as a source of competitive advantage for the company, and it has to retain the quality to attract more customers.
The Price Strategy and Business Success
The premium pricing strategy could equally be adopted for the new product line. This would help the company build a brand image and generate high revenues from the new...
…to reach the targeted quality-sensitive customer. The premium price will call for the product to be availed in stores, retail outlets or ecommerce sites where high-income, quality-sensitive customers frequent. Having the product in a
retail store in a low-income area where customers focus on price above quality may result in high costs and low sales.
Impact of the Pricing Strategy on Red Bulls Economic and Overall Success
Profitability is the most common measure of a companys economic success (Simon, 2015). A company can increase revenues by increasing its price or units sold, or both (Simon, 2015). Premium pricing takes into account all the costs of production and a profit mark up when deciding the final price. Thus, premium pricing for the new product line will definitely result in higher profitability for Red Bull in the short run. However, whether the company can sustain this profitability to ensure overall organizational success in the long run will depend on how well it can build and develop a powerful brand image (Simon, 2015). To achieve overall organizational success, Red Bull will need to demonstrate the return on investment, anticipate the needs of customers, and offer products that satisfy these needs and offer value to ensure customers remain loyal…
