RED BULL SURPRISING COCA COLA

Red Bull, an energy drink sold by Austrian company Red Bull GmbH, has the highest market share of any energy drink in the world, with 5.387 billion cans sold in 2013.

Austrian entrepreneur Dietrich Mateschitz was inspired by an existing energy drink named Krating Daeng, which was first introduced and sold in Thailand. He took this idea and modified the ingredients to suit the tastes of Westerners.

In Thailand, energy drinks are most popular with blue-collar workers. Red Bull repositioned the drink as a trendy, upscale drink, first introducing it at Austrian ski resorts. Pricing was a key differentiator, with Red Bull positioned as a premium drink.

Red Bull, the upstart, caught Coca Cola by surprise, and now dominates the world market.

Aaahhh… the power of the right positioning and pricing strategy!

THE CHALLENGER’S MINDSET

Reis and Trout (1994) claim that positioning is a battle for the mind. And speaking of the mind, Morgan (1999) argues that the most critical success factor for market challengers is the managerial mindset. The key issue, he suggests, is to think like a challenger rather than to accept the marketing status quo and conventional wisdoms. The ways in which this might best be done include:

1. Forget how the data collectors traditionally define your category. Define it by the way the user thinks of it. Now who is your most dangerous potential competition?

2. Look long and hard at your present marketing thinking. Be brutal: how much is high interest and how much is low interest? And what are you going to do about the latter?

3. The consumers don’t want to know what you think about them. They want to know who you are and what you believe in. Do you know? Honestly? And do they? Didn’t Steve Jobs also share this view?

4. Everything communicates. How much of your available ‘media’ – and not just the conventional media you pay for, but the way you act and the way your staff represent you – is projecting your identity?

5. Take away your primary communications medium. How would you go about building an emotional relationship with people without any television advertising, for example? Got it figured out? Then do it!

6. What is the category killer in your market, and what should you risk to create it yourself?

MILITARY ANALOGIES

Marketing strategists often refer to military strategies when discussing market challenger strategies. Here are three of them:

Frontal attacks. In launching a frontal attack, a market challenger can opt for either the pure frontal attack (by matching the leader product for product, price for price, and so on) or a rather more limited frontal attack (by attracting away selected customers).

Flank attacks: As an alternative to a costly and generally risky frontal attack, many strategists have learnt the lesson from military history that an indirect approach is both more economical and more effective. In business terms, a flanking attack translates into an attack on those areas where the leader is geographically weak and in market segments or areas of technology that have been neglected.

Encirclement attacks: Encirclement involves launching an attack on as many fronts as possible in order to overwhelm the competitor’s defences. In this way, the defender’s ability to retaliate effectively is reduced dramatically. Whilst this is an expensive strategy to pursue, and one that is almost guaranteed to lead to significant short-term losses, its record of success in the hands of certain types of company is impressive.

Two well-known successes from encirclement are Yamaha on Honda motorcycles, and Komatsu on Caterpillar in construction machinery.

Will Subaru defy conventional wisdom?

We noted earlier that brand positioning is a battle for the mind. Conventional wisdom has it that a brand should own a word, and that when this word is etched in the minds of the target market, attacking it is likely to be futile.

BMW owns the word ‘performance’ and expresses its positioning as the ultimate driving machine. Volvo owns the word ‘safety’, and although they almost abandoned that position a few years ago, they have reclaimed it.

But Subaru is attacking Volvo’s positioning strategy by airing a series of advertisements focusing on how safe their cars are. Conventional wisdom says they shouldn’t, because that position is already taken. So the question is, can Subaru successfully challenge Volvo on the brand positioning of ‘safety’?

What do you think?

Herman D Alvaranga, FCIM, MBA, MISM, is president to the Caribbean School of Sales & Marketing (CSSM). E-mail hdalvaranga@cssm.edu.jm