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Consumer decision-making process

Consumer Decision-Making Process & Influencing Factors

EXECUTIVE SUMMARY

Red Bull have a large market share of the energy and sports drinks market and are often using a different approach to marketing as their target market is very aware of advertising and marketing hype. The likely target customer is between the age of 17 to 25, either a young professional or a student living in a cosmopolitan city or in a city which host a university. Extreme sport is a likely interest of the consumer and the lifestyle is active and energetic. The customers are likely to belong to the age cohort Generation Y. There are two different purchasing situations for Red Bull, either in the need of an energy boost when working hard or studying for exams, or in a club or bar when using the energy drink as a mixer for vodka. Red Bull advertising is either linked with extreme sports such as motocross and surfing, or it is marketed through animated fairy-tales. The advertisements are often emotional and/or humorous. The purchase of Red Bull falls under the category of habitual decision-making and the company is using their four pillars strategy as marketing inputs to influence the consumers. Socio-cultural influences such as recent health issues regarding the high sugar and caffeine content might however have a negative effect on consumers' decision.

1. TERMS OF REFERENCE

This report is written by Marcus Henriksson for the course Consumer Behaviour (MKT361) with lecturer Richard Mannix at European Business School London. The task of this report is to analyse a specific B2C product, in this case Red Bull, in terms of the consumer decision making process and the factors that influence this process. It is to be submitted to the CSPA on November 13th 2009.

2. METHODOLOGY

Secondary sources have been used in order to complete this report. In order to conduct this report models such as Maslow's hierarchy of needs and Freud's psychoanalytic theory have been used. However, one should be aware of the limitations of these models. According to Schiffman & Kanuk (2007) it is impossible to exactly measure in the need hierarchy how satisfied one level of need must be in order to the next need to become operative. Further the authors claim that the need hierarchy seems to be both culture- and time-bound. Concerning Freudian theory, many colleagues have criticised his arguments that personality is primarily instinctual and sexual in nature.

Additional information was gathered from books, journals and websites using Regent's College Library and business databases. For further information please see the bibliography.

3. INTRODUCTION

This report will analyse the likely target customer segments for the product and look at any external factors influencing customers to purchase it. Further a typical chronological buying process for the product will be suggested and the company's marketing mix will be investigated.

Red Bull GmbH is a private Austrian company operating within the functional drinks market. Within this market energy drinks generate approximately 81% of the total market value. Forecasts state that the market is expected to grow over the next four years resulting in a value of $3.6 billion in 2013.

The company's product portfolio includes Red Bull Energy Drink, Red Bull Sugarfree, Red Bull Cola and Red Bull Energy Shots. This report will only focus on Red Bull Energy Drink and Red Bull Sugarfree. Since the launch of Red Bull in 1987 the company have expanded worldwide and the next big focus is Asia with the Japanese market launch.

The UK market is one of the biggest in Europe and Red Bull's competition within the UK includes Lucozade, Monster, Tesco's Kick Stimulation, Coca Cola's Rockstar and Pepsi's No Fear.

4. SEGMENTATION

The segmentation is used to create a profile of likely target customer segments of the product. It includes demographic, psychographic, geographic and behaviouristic segmentation.

4.1 Demographic

The likely customers of Red Bull are younger people in the age of 17 to 25, often younger males however also younger females. Students and young professionals represent the majority regarding the occupational status. Recent studies have also showed a growing association among athletes, in particular involved in extreme sports (Red Bull case study, 2008). Further research, (Mintel, 2003) shows that a third of the UK population consumes sports and energy drinks. In particular the market growth is driven by men in the age of 15 to 34. Studies by Mintel (2003) also stress that targeting a younger audience is positive in the aspect of long-term commitment to the product. However it can have a negative impact on the older part of the population as they might feel left out.

4.2 Psychographic

The characteristic lifestyle of a typical Red Bull consumer is energetic and very active. As stated above extreme sports is a typical activity related to Red Bull. Other characteristics are clubbing and an active social life. The views of life are optimistic among consumers and living in the moment is a key issue. As fun is fundamental for Red Bull consumers, the search for new diverse activities is endless (Bashford, 2006). According to Mintel (2003) men are regarded twice as important as women to sales volume. This is a result of the fact that women are more health-consciousness than men. To tackle this issue Red Bull launched a sugar-free version of its energy drink in 2003.

4.3 Geographic

Cosmopolitan cities such as London, Manchester and Birmingham are likely to be the locations where the majority of Red Bull consumers are situated. Furthermore, cities with universities as well as cities with an active and vibrant nightlife such as Brighton are locations likely for consumers to live in (Kastner & Partners, 2006).

4.4 Behaviouristic

There are two likely purchase situations for the product. A purchase in pubs and clubs when people socialise and party and want to feel energetic is a common situation. Consumer research conducted by Mintel (2003) shows that approximately 30% of energy drinkers consider Red Bull as a mixer for alcohol. Another common buying situation is when students and young professionals need an extra energy boost during hard work or studies. Instead of pubs and clubs the purchase in this particular situation usually takes place in supermarkets and corner shops (Rodriquez, 2006).

4.5 Generation Y

Analysing the segmentation characteristics of Red Bull consumers one can conclude that the targeted audience have many similarities to members of the members of Generation Y. The following section will describe this particular age cohort.

Schiffman & Kanuk (2007) states that the members of Generation Y, also known as "echo boomers" and the "millennium generation", are born between the years 1977 and 1994 and are the children of baby boomers. The age cohort can be divided into three sub segments: Gen Y adults (age 19-28), Gen Y teens (age 13-18), and Gen Y kids, or "tweens" (age 8-12).

According to (Schiffman & Kanuk, 2007) members of this generation are more or less aware of "marketing hype" as they have grown up in a media-saturated environment. The Internet is taking up more and more time of the generation's attention and newspapers are not as popular as it was among their parents, the baby boomers.

5. ADVERTISEMENTS

The advertisements used by Red Bull can be divided into two categories: the version related to extreme sports and the animated fairy-tale version. The following section will give two examples of each category.

5.1 Red Bull Advertisement - Red Bull Athlete Ian Walsh

Available URL: http://www.youtube.com/watch?v=aZdo6Hc-Fl8

This advertisement features Red Bull Athlete Ian Walsh surfing. He surfs on a giant wave and it ends with him sitting on his board in the water saying: "Welcome to my world - The world of Red Bull".

5.1.1 Red Bull Advertisement - Robbie Maddison Red Bull New Year No Limits

Available URL: http://www.youtube.com/watch?v=nXa02tB8DLo

This advertisement features Red Bull athlete Robbie Maddison doing a stunt with his motocross in Las Vegas during a Red Bull event. Also this advertisement ends with the featured athlete taking of his helmet and saying onto the camera: "Welcome to my world - The world of Red Bull".

The advertisements have action, style, sport and a good-looking younger man in it, all very typical to Red Bull. No product information is given, just the feeling of being in "The world of Red Bull", a fantastic feeling.

In order to analyse this advertisement Vaughn's FCB model has been applied, see appendix 1. From the model one can see that the decision of purchasing a can of Red Bull is made on an affective basis. The aim of the communication will therefore be to reach the consumer through an emotional appeal to affect the consumer quickly and to reinforce action, i.e. do. After drinking a can of Red Bull, the advertisements show what the experience is i.e. feel. At the end the consumer gathers information about the product i.e. think.

5.2 Red Bull Advertisement - Frog Prince

Available URL: http://www.youtube.com/watch?v=FD6hUcJ2uBs

This animated advertisement is based on the Brothers Grimm's fairy tale The Frog Prince. The frog drinks Red Bull and turns into a prince, a prince with wings which allude to the company's slogan: "Red Bull gives you wiiings".

5.2.1 Red Bull Advertisement - Genie in a Bottle

Available URL: http://www.youtube.com/watch?v=kuoBi0fBKDc

This advertisement is based on the saying that if you find a genie in a bottle you are granted three wishes that will all come true. In this case the founder wishes to be smart as a fox, as big as a bull and fly like an eagle, resulting in the genie giving him a can of Red Bull.

In contrast to the previous advertisements these particular ones use humor. Since humor is more appropriate for low-involvement products rather than high-involvement products it makes sense to use humor in a Red Bull advertisement. Emotional appeal like humor is relevant to Red Bull's target audience. As stated in section 4.5 Generation Y is very aware of the marketing hype and this kind advertisement is a way to use another approach.

The humor used in the advertisement is further used by telling the story that is linked with the slogan "revitalises body and mind" and it shows the unique brand personality of Red Bull as innovative, intelligent, self-ironic and witty.

The fact that the company is using fairy tales already known to the audience but with a new twist shows the biggest brand strengths as it can improve the consumer to be better, cooler and modernised.

6. DECISION-MAKING PROCESS

The purchase of a can of Red Bull fits under the concept of habitual decision making. A purchase of this kind often meets the following criteria suggested by Solomon (2009):

As this kind of purchase does not require much effort from the consumer the decision-making process is likely to be less comprehensive than for example a purchase of a TV or a car. Nonetheless it is a process where the consumer is affected in different ways.

Please refer to appendix 1b to see an illustration of the entire decision-making process.

6.1 Input

The input is based on external influences that can affect the product-related values, attitudes and behaviour of the consumer. The inputs are marketing inputs as well as socio-cultural inputs (Schiffman & Kanuk, 2007).

6.1.2 Marketing inputs

The marketing inputs from Red Bull consist of different efforts from the company's marketing mix. In order to reach, inform and persuade consumer to buy Red Bull products the company is using advertising, sampling, sport sponsorship and events. These marketing inputs will be developed further in section 7 of this report.

6.1.3 Socio-cultural inputs

As Red Bull is targeting members of Generation Y it is vital for the company to understand how the socio-cultural environment influences this particular age cohort.

A discussed issue regarding energy drinks and especially Red Bull is the health issues. High levels of caffeine, taurine and sugar have resulted in damage to the Red Bull brand image as health-consciousness is rising among consumers. These concerns have led to the energy drink being banned in certain countries including Norway, Denmark and France (Datamonitor, 2009). As a result o this issue, Red Bull launched their light version Red Bull Sugarfree in 2003 (Food & Drink, 2003).

6.2 Process

The process is concerned with how consumers make decisions and consists of three stages: need recognition, pre-purchase search and evaluation of alternatives (Schiffman & Kanuk, 2007).

6.2.1 Need recognition

The need recognised by the consumer in the case of Red Bull is the need of an energy boost. Students studying for exams, hard-working young professionals and sportsmen that need to improve their performance are all likely to face this need situation. The need for Red Bull is sudden in the case of the need for an energy boost. However if the need is related to mixing the energy drink with vodka for a party at home, the need is more likely to be planned.

6.2.2 Pre-purchase search

In the case of a purchase of an energy drink, the buyer are not likely to spend a lot of time searching for information before the purchase because the buyer does not take any high risks in relation to this specific purchase. The buyer will not use sources like the Internet or magazines to find information about the energy drink as this is just a time consuming matter for a simple purchase like this one.

6.2.3 Evaluation of alternatives

As stated above, the extent of information gathered for a purchase of an energy drink is not very high and the buyer would not need to search for information before the purchase. This of course means that there is not much information to evaluate and leads the buyer to the next step, the decision.

6.3 Output

The output consists of purchase behaviour and post-purchase evaluation and the objectives of these are to increase consumer satisfaction of the purchase (Schiffman & Kanuk, 2007).

6.3.1 Purchase behaviour

The actual decision of the purchase occurs when all the gathered information has been evaluated and the buyer has found the product most suitable for its need in all perspectives.

However, once in the store the consumer has the possibility to compare the prices in the actual store. There might be a special offer on any other energy drink that might affect the decision.

There is also the possibility in the case of an energy drink that the specific product is sold out in the store. That case will almost certainly result in the buyer purchasing another brand which is similar in taste to the one initially intended for rather than going to another store to buy it. Furthermore if the buyer is going to buy Red Bull and there is no other type of energy drink available left in the store, the buyer is likely to go to another retailer instead of buying a soft drink.

6.3.2 Post-purchase evaluation

There is however a difference in the extent of this depending on the kind of purchase. A purchase which involves a lot of effort, such as time and money, from the consumer will raise more doubts and lead to a deeper analysis after the purchase. A post-purchase evaluation of a can of Red Bull will most certainly not be as extensive as an evaluation of the purchase of a new car or other high-involvement purchases. The main factors that the consumer will think of is the taste and if the product gives the consumer that extra energy boost to improve performance.

7. CURRENT MARKETING MIX

Simpson & Dore (2002), claim that Red Bull does not use the traditional marketing mix, instead of basing their marketing strategy on the Four P's (price, product, place and promotion), the company use their own strategy referred to as the "four pillars of Red Bull". The pillars are regarded to be equal in strength and performance and consist of advertising, sampling, sport sponsorship and events.

7.1 Pillar 1: Advertising

Concerning advertising Red Bull does not use any print advertising as it is seen as a nonflexible method that will allow competitive advertising. Instead Red Bull is seeking to use flexible media that will enable a quick market response .In order to create an interest and momentum, the company is using media such as TV, radio and cinema where the advertisement is seen or heard and the go away. These TV advertisements are entertaining rather than informative. As Red Bull position itself as an exclusive brand, this type of media is also appropriate as they are considered to reflect the high value of the product. As a result of this, the advertisements are used in a limited amount and very selective. Further, Red Bull is not suited for mass merchandising as it appeals to a particular market.

With the animated advertisements Red Bull has been very successful. These advertisements are humorous and tell a story that sums up Red Bull's positioning statement: "Red Bull revitalises body and mind." Another slogan that through the advertisements has been associated with Red Bull is "Red Bull gives you wings".

In order to encourage impulse purchasing at the point of distribution the company use cocktail cards, distinctive bar fridges and menu stickers. This is done to make the product clearly and easily available. Through visibility the additional advertising material is used in order to generate greater awareness (Simpson & Dore, 2002).

7.2 Pillar 2: Sampling

Sampling is usually only about handing out samples of the product and give product information. In the case of Red Bull sampling is more than that. For Red Bull sampling is a great opportunity to prove and support the efficacy of Red Bull. It also demonstrates the philosophy of the company that includes marketing directly to a specific target audience.

As the "sampling ambassadors" meet directly with the end consumer, it is important that they meet the specific requirements set by the company. The employees involved in sampling are representing the brand and must be able to change a consumer's mind if certain things about the product are unclear. A general sampling employee is a woman between the ages of 18 to 25 and is independent, motivated, confident, flexible and capable of reflecting the brand image.

To make sure that a consumer's first impression is unforgettable the cars used by the sampling employees are equipped with a fridge to keep the beverage cold. In addition the sample is a whole can of Red Bull instead of just a small sip. These factors are very important for Red Bull to fully demonstrate the full functional benefits of the product to the consumers (Simpson & Dore, 2002).

7.3 Pillar 3: Sport sponsorship

A fundamental part of Red Bull's marketing mix is the use of sport sponsorship. Through sport sponsorship Red Bull aims to reach the following objectives:

Red Bull sponsor several athletes involved in extreme sports such as Formula One racing and snowboarding. In order for an athlete to be sponsored by the company, it must meet the following criterion:

The Red Bull policy to only sponsor non-mainstream events is in line with the company's brand image. The chosen area within sport sponsorship is also important because the company does not compete directly with other beverage sponsors like Coca Cola (Simpson & Dore, 2002).

7.4 Pillar 4: Events

Event sponsoring is the last one of the four pillars and events include extreme sports competitions and fun sport events. Two events that really symbolise what the Red Bull brand stands for are the "Red Bull Air Race" and the "Red Bull Flugtag". The "Red Bull Air Race" takes place on the river Thames and is a competition between professional pilots flying on a track around obstacles. The "Red Bull Flugtag" however is for amateurs building vehicles in order to fly the longest possible from a 10 meter high ramp in Hyde Park. The latter event symbolise the fun part of Red Bull while the first one is more about action and speed (Simpson & Dore, 2002).

8. CONCLUSION

Red Bull is taking a very different approach to marketing and have revolutionised the industry with their way of doing things. In order to reach their target audience the company is using media and methods that are more likely to reach and affect the members of Generation Y.

The company's advertisements are using an emotional appeal and the content is either humorous or linked to action through extreme sports such as surfing and motocross.

It is also fundamental to distinguish the two different purchasing situations for Red Bull: the one where the consumer is in need of an energy boost and the one where Red Bull is mixed with vodka as a cocktail.

Red Bull has through its marketing strategy achieved something that is both difficult as well as contradictive: being a strong global brand and at the same time being perceived as unique and rebellious.

BIBLIOGRAPHY

Books

Schiffman, L. G. & Kanuk, L. L. (2007), Consumer Behaviour, Saddle River: Pearson Education

Simpson, J. & Dore, B. (2002), Marketing in South Africa: Cases & Concepts, Pretoria: Van Schaik Publishers

Solomon, M. R. (2009), Consumer Behaviour: Buying, Having & Being, Saddle River: Pearson Education

Websites

Bashford, S. (2006), A Bull Market Available URL: http://www.little-miss-copywrite.co.uk/documents/profiles/red_bull.pdf Date viewed: 7th November 2009

Food & Drink Europe (2003), Sugar-free energy from Red Bull Available URL: http://www.foodanddrinkeurope.com/Products-Marketing/Sugar-free-energy-from-Red-Bull Date viewed: 9th November 2009

Kastner & Partners (2006) Available URL: http://www.ecandy.com/ecandyfiles/SOTIC2006_Grabner(summary).pdf Date viewed: 6th November 2009

Rodriquez, N. (2006), Red Bull Not the Best Mixer: The dangers of combining alcohol and energy drinks, ABC News Available URL: http://abcnews.go.com/health/story?id=2759942&page=1 Date viewed: 5th November 2009

Red Bull case study (2008) Available URL: http://www.bized.co.uk/compfact/redbull/redbullindex.htm Date viewed: 5th November 2009

Databases

Mintel, Sports & Energy Drinks - UK July 2009 Date viewed: 9th November 2009

Datamonitor, Red Bull GmbH - Company Profile 2009 Data viewed: 10th November 2009

Datamonitor, United Kingdom - Sports and Energy Drinks 2003 Date viewed: 10th November 2009

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