- Whatever you think of the Red Bull drink,
you've got to admit the business is pretty interesting.
Because if you ever wondered why a drinks brand
would own two Formula One teams,
four professional football teams,
NASCAR, ice hockey teams,
two E-sports teams,
a clothing company,
a record label,
a media company,
a travel agency,
and then do things like spend $50 million
helping someone jump from space.
That's not a business model
that you read about in textbooks.
In 2021, Red Bull sold 9.4 billion cans of their drink,
which is more than one for every person in the world.
And possibly the craziest part of all of this
is Red Bull doesn't even make their drink,
they outsource manufacturer of their product.
Red Bull is a pure marketing firm.
So from the outside, it can really appear
like Red Bull is throwing
its marketing budget around carelessly.
After all they reportedly spent
between 25 and 30% of their total revenue on marketing,
now that's definitely not typical for the beverage industry.
Pepsi by comparison spent 2.5%
of its revenue on marketing,
Red Bull 25 to 30%, this is insane,
but obviously it's working.
On a really surface level,
Red Bull's marketing strategy can kind of look
like a typical influencer campaign, right?
They pay athletes to run around wearing Red Bull clothing
and driving Red Bull cars.
People then watch their heroes doing these things
and go out and buy Red Bull
so that they can emulate their success.
But whilst there is an element
of influencer marketing in Red Bull,
actually they go much deeper.
The first thing that they do to go deeper
is that they build really long term
brand partnerships with their ambassadors.
And how many times have we seen this,
whether it's Gymshark or Lounge Underwear,
the brands that tend to get the most traction
with influencer have long term relationships
with their ambassadors.
Red Bull finds its ambassadors
by having teams really ingrained
in the sports and music scene so that it works in.
This means that they're really well placed
to spot up and coming talent.
This is quite a long term strategy
and can take sometimes years to pay off
but Red Bull can afford to do it
because of the finance stuff that we'll see later on.
Then once they found someone
that they want to bring into their Ambassador Programme
rather than having a traditional
sponsorship relationship with them,
which can feel really transactional,
like we pay you this much
and you wear these clothes every year.
Interviews with ex Red Bull employees show
that Red Bull actually wants to give its ambassadors wings.
Now this can be providing them training
in their sport or discipline.
It might be hosting athlete summits
where they can come and get tips and training
on things like social media and interview technique.
And of course get nutrition
and product information about Red Bull.
In the case of music, it might be giving them access
to the Red Bull Music Studio that they've got in London
or access to their record label,
or it might be funding crazy stunts
that these athletes would never
usually be able to do themselves.
They also have some pretty hardcore programmes,
like their Student Marketeers Programme,
where Red Bull essentially embeds
Red Bull marketers inside universities
so that they can spread the word
about Red Bull and promote it as part of student lifestyle.
But really what Red Bull is known for these days
is the next level stuff,
the owning of the sports teams
and this is where they've taken things to a whole new place.
If we think about how a traditional beverage brand
like Pepsi would work with sports teams,
they might sponsor a team
or they might sponsor an athlete
or they might run a Super Bowl ad.
And in these cases,
they are paying their marketing budget
to the team, the NFL, the player, or the TV network.
They are basically giving their marketing budget
to the owner of the distribution,
the owner of the eyeballs.
But Red Bull goes a level beyond this,
they don't just pay for the Super Bowl ad,
they film and broadcast the entire event
through their own media company.
If we look at their purchase of the Formula One team,
as an example,
now they bought the Formula One team from Jaguar for $1,
they had to spend $400 million over the next three years,
so they basically bought this team for $400,000,001.
But not only does that give them the advertising space
by calling this the Red Bull Team,
they can then monetize that team,
like all of the other Formula One teams do.
They can sell advertising space
to other brands on their car.
They can win races and collect prize money.
They recently announced just two sponsorship deals,
which have a total combined value of $150 million a year.
This Formula One team is profitable
for Red Bull and has been for years.
So rather than just paying for advertising space
they bought the team,
made the team profitable,
they get much more advertising space
than they'd be able to buy anyway,
and they're making money from it.
Or take the New York soccer team
which they purchased back in 2006 for $25 million.
Well Forbes estimates its value today at $290 million.
So even if they sold the team
having not had any uplift from the brand awareness,
by calling this the Red Bull Team,
they would still be making money on it.
Or think about how they run their own events,
whether it's the Red Bull Cliff Diving World Series,
Red Bull Crushed Ice,
the Red Bull Air Race.
They've run over 30 different events, which they own.
They film and broadcast these events
using their own media company,
so they earn the rights.
They have their record label,
which they can use as a platform
for their artists that they're working with.
This is such big thinking.
Whereas most companies would buy an ad on a billboard,
Red Bull is buying the billboard company
and then running Red Bull ads on it
but also selling advertising to other advertisers.
Okay, Tim, but this is an expensive model.
This isn't the sort of thing that you can jump into
as a startup or a medium sized company.
So how did Red Bull get to the position
where they're able to be this aggressive?
Well, to understand that we need to go back to the start.
When the founder of Red Bull
brought the drink over to Austria,
the energy drink category didn't exist.
People didn't know what this was in Europe
and maybe it's me but I don't think
people buy Red Bull just because of the taste, right?
But that's not what people are buying when they buy Red Bull
because Red Bull is sold as an energy drink
it has more value to it than a regular canned drink.
This not only differentiates it from competitors
but allows them to charge a much higher price
and this is key to Red Bull's growth.
It's reported that a can of Red Bull costs 9 cents to make
and with average wholesale price in the West
being around $1.87,
that gives Red Bull a 95% gross margin.
Obviously this then generates massive profit
and Red Bull takes a decision to reinvest this in marketing
which establishes the brand,
which in turn allows them to sustain that premium price
and becomes a virtuous cycle.
But being able to sustain a higher price
also means that the bars and clubs
selling Red Bull can make more profit.
This means that they're more incentivized
to promote it at the point of sale.
And of course, let's not forget that Red Bull
does use chemically addictive ingredients,
which is a surefire way to increase repeat purchase rate.
So as you can see,
Red Bull's numbers and their profit margin
facilitate all of this growth.
But the thing that facilitates that profit margin
is this differentiated position
from being just a canned drink to being an energy drink,
which brings you the benefits
of whatever you're gonna do with that energy.
Whether it's party or night,
study more,
not crash when you're driving home from a late gig,
whatever it might be.
Okay, so what are the lessons that we can learn
from Red Bull's marketing
that we can apply in our own business?
The first lesson is that
nothing opens up marketing opportunities like high margins,
but of course there's more to getting high margins
than just charging more for your thing.
If you're going to sustain high margins
you usually need one of two things,
the first is a hugely recognisable brand
with some sort of emotional attachment.
This is exactly what Red Bull has
because of their investment
in brand marketing over years and years.
The second thing that you need
is a product with added value
that you can somehow differentiate from your competitors.
Red Bull has this because in the early days
the energy drink market was completely new
and it owned the space.
The next lesson that we can take from Red Bull
is the power of owned media.
Owned media being the media channels
that you own, that you control.
Now paid media, for example,
Google ads or Facebook ads is great,
and there is a time and a place
where every single business needs to do this
and it makes sense to use it as part of your marketing mix.
Red Bull itself invests as much
as $300,000 per month in Google ads,
but really Red Bull's long term successes
come through its owned platforms, its owned media.
And online there are some very simple ways
that every business can be a little bit more Red Bull
by making the most of their owned media channels.
The first is with your company's social media.
To be a bit more Red Bull with your social media channels,
think about how you can make them more interesting
and entertaining to your audience.
Now, if you have a look at Red Bull's Instagram,
for example, what you don't get
is loads of heavily self promotional boring posts.
Now, of course, I get it,
your business isn't related to extreme sports.
You don't have loads of amazing crazy content
that you can post on your channels.
That doesn't matter.
The way to think about this
is to imagine what sort of magazine
you would have to run for your target audience
that they'll be willing to pay for
because they find it either interesting or entertaining.
For example, if you're selling beds,
the knowledge that you have
is about how to help people get better sleep.
If you sell accounting,
the knowledge that you have
might be about how to save people tax
or help them make more profit through their business.
If you sell marketing,
the knowledge that you have might be
to help them do better marketing
or help them figure out how to grow their business.
And by the way, if you want some help growing your business
then check out the free website and marketing review
at explosionengine.com.
We'll take a look at your digital marketing,
figure out a plan for you over the next six or 12 months
to help you generate more leads and sales
through your website, completely free of charge.
Go to exposureninja.com/review
to request your free review today.
But by turning your social media channels
into the destinations that your customers
and potential customers absolutely have to follow,
you make the most of those
and you keep those eyeballs on your channels.
The next lesson from Red Bull's marketing
is to think about the other ways
that you have to connect with your customers at no cost.
Your email list, for example, is a great way of doing this.
The number of businesses that we get
coming through the free website and marketing review
that have email subscribers sat there
but they are not emailing them
because they're too busy or they're doing other stuff
or they don't know what to send them is criminal.
When we start to campaign with one of our clients
we can send out some emails,
which will reactivate this list,
which gets some sales generated.
And it's so quick, and it's so easy to do
because the business doesn't have to pay
to reach those people, you already own their data.
The third and final owned media channel
that so often goes underutilised
is the blog on your website.
We've talked about this a lot on the Exposure Ninja channel,
but the blog on your site
should not be about you and your business,
it should be about collecting the topics
that your audience finds most interesting
and giving your expertise,
sharing your thoughts on these
in order to funnel people through
to some sort of call to action.
In fact, this video shows you how to find
the most profitable blog topics for your business,
which will help you do exactly that.
It runs you through a process
that you can use to research these topics
and also figure out how to turn that traffic
into leads and sales for your business.
So go and check it out now.