Sales Promotion Energy Drink Study Essay.
1. Introduction: It is widely believed that energy drinks have been an integral part of beverage in UK market. Consumers can commonly buy energy drinks in a number of places such as supermarkets, grocery stores, corner shops or even convenient shop in petrol stations over UK. A report from Independent indicates that the growth of market for energy and sports drinks has increased b nearly 20 per cent from 2009 and it is anticipated to reach ? 1. 1 billion market value per year and there has been 209 new energy drinks launched in the past five years in the UK.
Mintel also reports that the industry could be worth nearly ? 2 billion by 2016. Energy drinks are functional, non-alcoholic, often lightly carbonated beverages, designed to give the consumer a burst of energy by the addition of a number of energy enhancing ingredients, most notably caffeine. Popular brands of energy drinks such as Lucozade Energy and Red Bull deliver a dose of caffeine equivalent to a cup of coffee, while their more potent competitors Relentless and Monster – marketed to extreme sports fanatics – can contain twice that amount, around 160mg per can (Independent, 2011).
Nowadays there around 73 per cent of 16- to 24-year-olds young people drink them regularly and most say they simply like the taste, market analysts Mintel said. Moreover, two-thirds of those aged 16 to 24 questioned by the researchers said the energy drinks improved their performance at work or while studying. The purpose of this study is to analyse and discuss the use and effectiveness of sales promotion on energy beverages and investigate how these brands are doing with their promotions onto existing products to effectively enhance their awareness and market share. It will be done into four parts.
In the first paragraph it will show the methodology planned by implementing secondary research from authentic resources such as Mintel, online articles and professional reports, books and articles etc. Following by an overview of current promotional marketing in UK energy drinks industry, it will be written in the second paragraph and the content will compare the difference of promotions applied among dominated energy drink brands: Lucozade Energy, Red Bull, Monster and Relentless etc. and analyse how the most used marketing skills of promotion target consumers’ purchases to gain their attraction.
In the third part, it will indicate the key findings in relation to sales promotion and select promotions in good and poor views, then finally to suggest which method would be a good way in the future. 2. Methodology: This section contains the techniques that were employed in this market study process. For the purpose of this study the secondary research method and actual fieldwork were mainly utilized with its critically selected data collection methods from authentic resources such as Mintel, owned media, professional reports, and articles etc.
This will enable the research process to be tackled comprehensively in order to draw the right conclusion. It was decided to investigate some representative energy drink brands chosen from this sector. They were: * Red Bull * Lucozade Energy * Monster The chosen energy drink brands target on extreme sports enthusiasts, students and teenagers who have energy needs, and also some of other brands try to attract the video game crowd. Top energy drinks by brand are Red bull in first place, followed by Lucozade Energy, and Monster.
Other brands like Relentless, managed and marketed by the Coca-Cola Company are relatively moderate in UK promotional activities. Overall the target market for energy drinks is mostly male teenagers and sports enthusiasts. – The frequency and occurrence of sales promotion: During the period of this study there were a number of special events implicated, for example, sport events and festivals in spring and summer, Easter holiday, the Queen’s Jubilee, football EURO 2012 and 2012 London Olympic Games.
This report will investigate the relevant promotional activities with different time in the next part and examine how those brands use promotional tactics to net the competitive energy drink market in the UK. 3. Analysis 3. 1 Comparison of the different promotions (April – June) This analysis revealed that all the producers contained a mixture of sales promotional, brand advertising, and PR activity in different occasions. As per secondary research, Red Bull did the most number of promotional activities such as advertising and PR events. Lucozade also did a number of advertising and PR events.
They used similar tactics. However, Monster carried the most number of sales promotions but it constantly using price promotion and also competition games to the teen-aged market in order to get the target involved, because Monster Energy got relatively lower brand image and value from the other two competitors. No matter which brands they all use “price discount” to boost short term sales and provide price-pack deal or prize promotion as a bargain to gain more market share in this industry. TABLE 1 Brand/ Time| April| May| June| Red Bull| SP Activities: 2No. Brand Ads: 3PR Activities: 8| SP Activities: 2No.
Brand Ads: 3PR Activities: 6| SP Activities: 2No. Brand Ads: 4PR Activities: 9| Lucozade Energy| SP Activities: 3No. Brand Ads: 2PR Activities: 6| SP Activities: 3No. Brand Ads: 2PR Activities: 6| SP Activities: 4No. Brand Ads: 2PR Activities: 6| Monster| SP Activities: 5No. Brand Ads: 2PR Activities: 4| SP Activities: 5No. Brand Ads: 1PR Activities: 5| SP Activities: 7No. Brand Ads: 2PR Activities: 6| It appears that all three brands different promotional strategy but the same tendency is that they did more marketing activities when the time is close to summer and some festivals.
3. 2 Promotional Marketing Overview of Energy Drink Since there are number of brands and similar products in energy drink industry marketplace, it is preferably to promote products through different means to obtain consumer’s attention. One of which is undertaking sales promotion. Sales promotion can be defined as ‘’a marketing initiative the purpose of which is to drive a call to action that has a direct impact on the behaviour of the brand’s target audience by offering a demonstrable benefit. ’
(West, 2012, p. 6) Here are some examples of prevalent sales promotions activities as well known in energy drink market: * Price Promotion / Price-pack deal: When browsing in supermarkets or grocery stores the price reduction and pack discount are commonly seen to stimulate shopper’s purchase. Occasionally the price promotion comes up with price drop, discount-off packs, and buy one get one free (BOGOF) or buy more pay less. The promotional price reduction had been constantly conducted by many brands to boost short term sales growth and it can significantly influence on consumer’s purchase behaviour.
* Free Sample/ Point-of-sale displays Promotion It is widely believed that free sample or a trial of energy drink is often offered on streets and events as a firm’s promotional strategy and usually seen in stores where energy drink brands would seasonally offer a promotional new flavour or package of product or money-saving discount to motivate sales. A number of brands like Powerade, lucozade and Monster Energy used to adopt the method to boost their new products and promote the sales and brand awareness.
Free sample can have a significant value that consumer can be aware of the new product and urge a trial as the sample is free. Nevertheless, there might be a risk that consumer think they do not like the taste or quality of the product and cause a negative impression. Moreover, with a strongly colourful and a sensational display used by general energy drinks point-of-purchase can capture consumer’s attention and reach a profitable increase of purchase. Point-of-purchase can assist to improve with building an image for the brands as reported by a (Ioana, C & Aline, T 2008).
In some big supermarkets in the UK like Sainsbury, Morrison etc. many energy drinks are displayed at point-of-purchase to attract shopper’s eyes. * Prize Promotions It can be argued that prize promotion is the most broadly used as a sale promotion to energy drink industry of the UK. Prize promotion is not a promotion of free item. There is no such a guarantee for prize promotion when consumers take part with it. Some companies like Relentless, Rockstar have their promotions giving participants a chance to win tickets for anumber of events and festivals.
As well as the general prize promotion of energy drinks from time to time are designed as a competition or game to win rewards or to give incentives. It can be the question plus slogan which is the most common type of test in a competition. 4. Selected Promotions The effectiveness and the efficiency of promotional strategy should be evaluated critically. It is crucial that if the promotional expenditure can optimise to target a firm’s marketing objective.
This section will compare and look into the effectiveness and the efficiency from two selected promotional skills and also the PR activity during the time period. 4. 1 Promotion No. 1: – Lucozade Energy launches festivals campaign 2012 Taking an aerial view of energy drink market, prize promotion or free item competition is currently used by most energy drink companies. As Thedrum (2012) reported that Lucozade Energy recently launched a new marketing campaign offering customers the chance to win tickets to some of the summer’s biggest music festivals in the UK.
The Win a Festival Road Trip campaign features five limited edition bottles promoting the V Festival, T in the Park, Latitude, Global Gathering and Beach Break Live. Lucozade will be giving music fans the chance to win tickets to each of these festivals and chauffer-driven transport in a reconditioned VW camper van. This promotion is related to youth market to get young people engaged and start from the time close to the summer vacation when most students and young people have more spare time to get involved with its promotional activities.
The ? 2m campaign will include outdoor creative, digital and promotional activities such as sampling and experiential event at all of the festivals. It will run alongside a three month radio partnership with Kiss FM starting in March. These platforms provide the well opportunity to reach a wide range of consumers and inject excitement and consumer relevance into the brand. However, the drawback of prize promotion can be impacted by the law as shown in Mullin’s study (2010) that ‘’prize promotion are heavily regulated by.
British Codes of Advertising and Sales Promotion, the Lotteries and Amusement Act 1976, the Gambling Act 2005, and by other legislation that is far from simple to interpret. ’’ It is apparently recognised that the prize promotion is dynamically attractive to consumers. Consequently, prize promotion is worthy taking by marketers as long as they play it safe. 4. 2 Promotion No. 2: – Coupon/ free mail-in promotion While price promotion is a powerful and effective method to produce immediate short term positive results, it may be not a cure for a bad product.
It seems price-conscious consumers are more likely to spend time to claim the savings, coupons as a form of price discrimination, enabling retailers to offer a lower price only targeting deal sensitive buyers. Alternatively most of energy brands such as Monster, Powerade and Relentless provide a free mail-in for obtaining free voucher, sample or even valuable products. But the drawback is that costumers need to collect the number of proofs of purchase to obtain the items and it may waste time and may only benefit for those customers who drink very often and regularly.
Coupons have pros and cons that make them popular with sales promotion tools for both new and existing products. The following chart shows the advantages and disadvantages of coupon. Therefore, price promotion can enhance short and immediate sales but in terms of building loyalty, it is hard to retain the consumers who are preferable for other premium products like Red Bull and it is difficult to track the time that how consumers will use coupons as a purchase. Coupons have pros and cons that make them popular with sales promotion tools for both new and existing products.
The following chart shows the advantages and disadvantages of coupon. Therefore, price promotion can enhance short and immediate sales but in terms of building loyalty, it is hard to retain the consumers who are preferable for other premium products like Red Bull and it is difficult to track the time that how consumers will use coupons as a purchase. Figure 1: Advantages and disadvantages of coupon promotion (Sources: George E. Belch, Michael A. Belch (2007), Advertising and Promotion-an integrated marketing communications perspective, 7th edition).
4. 3 Relevant events and successful PR activities Brands of energy drink embrace their innovation within promotional activities and as such are able to create a lasting impression on younger consumers. To meet the needs of its customers, a number of energy drink brands communicate with their target audience through numerous promotional events and activities in related to physical competitions, extreme sports, modern music festivals, night clubs, parties which most youths engage in their exercise. – Red Bull Crashed Ice World Championship 2012.
The energy drink maker used mobile to promote and drive registrants for its annual Red Bull Crashed Iced World Championship event, which combined ice hockey, downhill skating and boardercross and took place on March 15 2012 in Quebec City, Canada. The mobile campaign targeted males between 18 and 35 years old across Canada who are interested in skating, hockey and other winter sports. Red Bull Crashed Ice broke new ground in 2012, as more than 200,000 spectators witnessed four exciting ice cross downhill races in Europe and North America which set a new standard for competition.
In this event, the Canada division of Red Bull worked with mobile social network companies on a campaign to drive registrations for the event. The campaign generated more than four million mobile impressions and over 10 percent of total event registrants came directly from mobile. Additionally, 27 percent of registrants engaged with mobile during the event. The company reports that the campaign’s mobile ad buy resulted in 4,000,000 brand impressions in mobile, converting to 8,000 clicks.
Additionally, there were 9 percent QR code conversion off of printed flyers, 39,000 social impressions, with 13 percent of campaign shares shared across Twitter versus 83 percent on Facebook. (Mobilemarketer, 2012) This creative campaign seems not only successfully to impress the brand essence and enhance the brand value to the target audience with the well use of media relations but also produced some of the best action ever seen on ice. 5. Budget and ROI As explained by Mullin that ‘’the only justification for spending money on promotional activity is that it will achieve marketing objectives that contribute to long-term growth in profits.
’’ (2010, p. 107) The basic factors of budgeting for sales promotion are as follows: * Promotional packs: The number of packs usually sold over the period of time that the campaign will run for + plus adjustment for impact of the campaign * Proofs of purchase: Average level of purchase of the category * Opportunities to apply (OTA): The number of promotional packs divided by the proofs of purchase * Redemption rate: Often based on certain assumptions like attractiveness of premium, ratio proof / purchase frequency or support given to promotion * Cost: Everything would be charged in campaign
For example assumed that Red Bull is offering consumers the opportunity to mail in for a free ticket for F1 racing game and then the cost of the campaign can be shown as below: * Campaign for one month = 220,000 cans for one month + c. 10% impact = c. 250,000 cans required * Proofs of purchase said 10 required * OTA = 250,000 / 10 = 25,000 * Redemption rate said 20% (highly attractive premium) * Redemption level = 25,000 x 0. 20 (20%) RR = 5,000 RL * Cost of ticket = ? 30 (preferential price from Red Bull F1 team) * Cost per handling = ? 5.
Cost from redemption = 5000 X ? 35= ? 175,000 Cost of artwork, print, support etc ? ?25,000 Total campaign cost = ? 200,000 To calculate the ROI, it can be the sequence as follows: In this case, said the market price of a can of Red Bull drink is ? 1. 2, The turnovers = 220,000 X ? 1. 2= ? 264,000 The ROI = (Turnovers – Investment) / Investment = (? 264,000 – ? 200,000) / ? 200,000 = 32% Thus, it demonstrates that the campaign will generate a 32% return by the investment. 6. Conclusion
In conclusion, the energy drink industry is a smart industry that is continually developing and using innovative promotion techniques in various ways. As a whole, the industry was very reliant on prize promotions but they should not much frequently depend on price promotion like coupon or free voucher because they tend to devalue the brand in the long run. However, public relations activity is also a vital key for energy drink brands as most youths consume energy drinks and they are more engaged in physical activities and more perceived soothing fresh.
Moreover, the industry should focus more on value added promotions such as prize draw, travel or leisure event promotions which can increase further in popularity as people nowadays gradually continue to seek for ways of enjoying their lifestyle, occasions and events which they have won and are likely to feel warm towards the brand behind the promotion as a result.
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