BUS FPX 3030 Assessment 3 Price Analysis

BUS FPX 3030 Assessment 3 Price Analysis

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Capella University

BUS-FPX3030 Fundamentals of Marketing and Sales

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Price Analysis

Price analysis is the process of determining whether the price of a product or service is fair and reasonable, without focusing on the vendor’s specific cost or profit details. The goal is to establish pricing that allows the company to profit while maintaining competitiveness in the marketplace. In essence, price analysis involves comparing the current price with known benchmarks for reasonableness (Santee, 2020).

Pricing Strategy of Red Bull

Red Bull employs a unique pricing strategy that sets it apart from its competitors. Instead of engaging in price competition, Red Bull focuses on differentiation and premium positioning. The brand follows a value-based pricing approach, charging a premium price for its products based on the perceived value to consumers. This strategy positions Red Bull as a high-quality energy drink brand with superior functionality and branding compared to competitors such as Monster and Rockstar, which offer more economical alternatives. Red Bull justifies its premium pricing through its use of premium ingredients, exceptional taste, and distinct functional benefits. The brand also uses a skimming pricing strategy by introducing new and innovative products at a premium price. This approach has helped establish Red Bull as a luxury and exclusive brand, appealing to consumers willing to pay more for superior quality (Roberto et al., 2019).

Pricing Strategy for Competitive Advantage

Red Bull’s pricing strategy plays a crucial role in its competitive advantage within the energy drink industry. By marketing itself as a premium, exclusive brand, Red Bull has cultivated a loyal customer base and distinguished itself from competitors. Premium pricing can create a perception of higher quality and exclusivity, leading to increased demand and customer willingness to pay higher prices. This strategy also results in higher profit margins, allowing Red Bull to invest in marketing and innovation, which supports its competitive edge. Through this approach, Red Bull has maintained a strong market position and established a reputation for superior quality and exclusivity, appealing to its target market (Snowdon, 2019; Stacey et al., 2019).

Analysis of Price Strategy and Its Effects on Business Success

Red Bull’s pricing strategy, grounded in value-based pricing, has been instrumental in its business success. By charging premium prices based on perceived consumer value, Red Bull has differentiated itself from competitors and solidified a strong brand image. This premium pricing approach has contributed to higher profit margins, which in turn fund marketing and innovation efforts, helping the company sustain its competitive advantage. While Red Bull’s pricing strategy maximizes profitability, it also focuses on maintaining market share by appealing to a specific niche that values quality and functionality. The strong brand image that Red Bull has cultivated, coupled with its premium pricing, has been vital to its financial success (Stacey et al., 2019).

Recommendations to Improve Business Success

Red Bull should evaluate the pricing of competing energy drinks with coffee flavors and establish a competitive price for its new product line. Pricing too high may deter budget-conscious consumers, while pricing too low might suggest lower quality. Red Bull should continue leveraging its value-based pricing strategy to maintain perceptions of quality and exclusivity for its new coffee-flavored drink. Additionally, bundling this new product with existing popular Red Bull products could create cross-selling opportunities and enhance sales. The company could also use promotional pricing, such as discounts and limited-time offers, to encourage consumer trials of the new product. Red Bull should assess regional pricing based on local demand and competition to maximize market share while maintaining its competitive advantage (Bennett et al., 2019).

Characteristics of Pricing System and its Effect on Marketing Mix

Red Bull’s pricing strategy is a key component of its marketing mix, reinforcing its premium positioning and value proposition. The brand’s pricing system is consistent across its entire product range, from the original Red Bull to Red Bull Zero and Red Bull Editions. This uniformity strengthens the perception of Red Bull as a premium brand. Moreover, the brand employs dynamic pricing strategies, adjusting prices based on factors such as location, season, and events. For example, Red Bull may increase prices during major sporting events to capitalize on heightened demand, while offering discounts during off-peak seasons to stimulate sales. This adaptability allows Red Bull to optimize revenue and maintain brand exclusivity (Chen et al., 2019).

Pricing Decision on New Line of Product

Red Bull’s pricing decisions for its new coffee-flavored beverages will significantly affect other components of its marketing mix, including placement, promotion, and product. The pricing strategy will influence consumer perceptions, competitiveness, and market share. Setting prices too high may limit distribution, as retailers may be reluctant to stock an expensive product. Conversely, pricing too low could damage the brand’s premium image. The pricing decision must balance profitability and the need to maintain Red Bull’s premium status (Tahmassebi & BaniHani, 2019).

The pricing of Red Bull’s coffee-flavored beverages should also align with the brand’s overall messaging and quality proposition. Consistency between pricing, product quality, and promotional efforts will ensure that the brand maintains its position in the market (Chen et al., 2019).

Pricing System and Its Impact on Economic and Overall Success

Red Bull’s premium pricing system has been a significant factor in the brand’s economic success. By differentiating itself from competitors through higher prices, Red Bull has built a strong brand image associated with quality, exclusivity, and high performance. This strategy has contributed to higher profit margins and allowed the company to invest in marketing and product development. As a result, Red Bull has achieved a dominant position in the global energy drink market, holding a 70% market share. The premium pricing strategy has also enhanced consumer perceptions of quality, reinforcing the brand’s reputation as a premium product (Bennett et al., 2019).

Conclusion

Red Bull’s pricing strategy has played a critical role in its financial performance, market share, and consumer perception. The brand’s premium pricing approach has allowed it to stand out from competitors, attract a niche market of consumers, and establish a reputation for quality and exclusivity. The pricing decisions for Red Bull’s new coffee-flavored beverages will significantly impact other elements of the marketing mix, and the company must carefully balance profitability with the need to maintain its premium brand image. By continuing to leverage its premium pricing strategy, Red Bull can sustain its market leadership, build brand loyalty, and enhance overall profitability.

References

Bennett, R., Zorbas, C., Huse, O., Peeters, A., Cameron, A. J., Sacks, G., & Backholer, K. (2019). Prevalence of healthy and unhealthy food and beverage price promotions and their potential influence on shopper purchasing behavior: A systematic review of the literature. Obesity Reviews, 21(1). https://doi.org/10.1111/obr.12948

Chen, X., Liu, Y., Jaenicke, E. C., & Rabinowitz, A. N. (2019). New concerns on caffeine consumption and the impact of potential regulations: The case of energy drinks. Food Policy, 87, 101746. https://doi.org/10.1016/j.foodpol.2019.101746

Erdmann, J., Wiciński, M., Wódkiewicz, E., Nowaczewska, M., Słupski, M., Otto, S. W., Kubiak, K., Huk-Wieliczuk, E., & Malinowski, B. (2021). Effects of energy drink consumption on physical performance and potential danger of inordinate usage. Nutrients, 13(8), 2506. https://doi.org/10.3390/nu13082506

Lee, M. M., Falbe, J., Schillinger, D., Basu, S., McCulloch, C. E., & Madsen, K. A. (2019). Sugar-sweetened beverage consumption 3 years after the Berkeley, California, sugar-sweetened beverage tax. American Journal of Public Health, 109(4), 637–639. https://doi.org/10.2105/ajph.2019.304971

BUS FPX 3030 Assessment 3 Price Analysis

Roberto, C. A., Lawman, H. G., LeVasseur, M. T., Mitra, N., Peterhans, A., Herring, B., & Bleich, S. N. (2019). Association of a beverage tax on sugar-sweetened and artificially sweetened beverages with changes in beverage prices and sales at chain retailers in a large urban setting. JAMA, 321(18), 1799. https://doi.org/10.1001/jama.2019.4249

Santee, J. (2020). Red bull rampage: Using pop culture to promote curiosity and a research mindset. College Teaching, 1–2. https://doi.org/10.1080/87567555.2020.1786350

Snowdon, C. (2019, December 31). VOX Pop: Why banning energy drinks doesn’t make sense. Papers.ssrn.com. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3852054

Stacey, N., Mudara, C., Ng, S. W., van Walbeek, C., Hofman, K., & Edoka, I. (2019). Sugar-based beverage taxes and beverage prices: Evidence from South Africa’s health promotion levy. Social Science & Medicine, 238, 112465. https://doi.org/10.1016/j.socscimed.2019.112465

Tahmassebi, J. F., & BaniHani, A. (2019). Impact of soft drinks to health and economy: A critical review. European Archives of Paediatric Dentistry, 21(1). https://doi.org/