How Red Bull used the principle of relativity to shrink their can and grow their sales

In this episode, we examine the promotional prowess of RedBull from marketing the drink and facing challenges that came with it's unique and 'unwelcome' taste.

Transcript

[00:00:00] Welcome back to Behavioral Science for Brands, a podcast where Richard and I use behavioral science to inform marketers and brand leaders on how they can improve their brands and make more effective marketing based on behavioral science. Uh, today we're featuring Red Bull. We're talking cans, premium pricing, and the danger of listening to your consumer's opinion too much.

I'm Michael Aaron Flicker. And I'm Richard Shorten. Let's get into it. So Richard Red Bull is really a very interesting brand. It comes from Thailand, where it was an original recipe back in the seventies designed for. Truck drivers and people that were needing energy for all night. And when the founder originally discovers the taste, the product, he says, I think this is something that could be used outside of Thailand.

Uh, fast forward to today, red Bull is sold in over 170 countries, [00:01:00] 8 billion cans a year. It's really an unbelievable powerhouse. Um, they control. Around 40% of the entire energy drink market globally. So this is a big brand that's known for big advertising, big marketing. It's a very profitable product, so they spend a lot to promote it.

And uh, and because of that, there's lots of material for you and I to look at as we start to really dig in and understand the brand. So we saw. Lots of examples of behavioral science. What's one of them that we wanted to highlight today? I think one of the most interesting points is when they market tested it, when it's moving outta Thailand, coming to western markets, many of the samplers fed back negatively.

They said it was a weird taste. It left us sticky feeling in the mouth. What most brands would've done at that moment is changed the formulation and made it much more suitable for Western palettes. [00:02:00] They didn't do that, and I think they were right not to change the recipe because Red Bull is a functional drink.

It, it is there to keep you awake, to give you wings, and in many areas we believe in trade-offs. So if it tastes bad, the belief is probably gonna be, well, it must be pretty potent. Now this idea of trade-offs in food is not speculation. There's a lovely study from Ragunathan who's at Macomb's Business School, I think it's University of Texas.

And for his study he lays on a buffet of Indian food, lots of different elements, gets people to sample all the different elements and ask them, he asks them later to feedback on how much they liked each part of the buffet. He's only interested in one data point. No, the mango lassi. So lassi is a, is a yogurt drink and.

Sometimes he describes that yogurt drink as [00:03:00] being a health drink. Other times as an unhealthy drink, when he looks at the ratings between the two groups, there is a massive variation. People rate the drink fifty-five percent higher if they think it's unhealthy. Rigunathan's argument is. Partially, we taste what we expect to taste.

Mm-Hmm. So if you're told something's healthy, you assume it's not gonna be great tasting. 'cause often the things that we really enjoy are full of fat. Sugars. Sugars. Yeah, exactly. You think it won't be so nice tasting and that becomes a self-fulfilling prophecy. You go and look for evidence to, to prove that assumption.

Whereas if you're told it's unhealthy. Your expectations are set in a different way. You expect it to be really, really tasty. Now that study, I think, can be applied to Red Bull rather than health versus unhealthiness. Here, the products. It tasted bad and therefore people were thought, well if it tasted bad, their claims about giving [00:04:00] it energy.

Their claims about this being real medicinal boost. Yeah. Must be true. The potency must be correct. Exactly. And you know, when they talk about what's in red Bull, it's not just caffeine, it's caffeine, taurine, and B vitamins. It makes you just hearing, it makes you think, well this, this has gotta have a potent taste if it's going to be effective.

Absolutely. And paradoxically, if they heard. Remove that foul taste. I think they would've had less interest in the products. Um, they're not the only brand, by the way, to have emphasised foul taste, um, other functional. Not quite drinks, but mouth washes have done it. That's what it might. So yeah, li li Listerine the taste.

You h twice a day or, and this might not be such a big brand in America, but it's massive in Canada. Buckley's, no. Okay. So Buckley's, fascinating story. Family-owned brand, tiny brand. It's like 10th in the cough syrup, uh, market. The owner, Frank Buckley, decides [00:05:00] to radically change their advertising and they just keep on emphasizing.

How foul it tastes. So the strap line is something along the lines. If it tastes awful and it works, uh, there's another ad that says. Our largest bottle is 250 milliliters. You know, anything larger would be cruel. Yeah. Um, and it's, it is amazing. Within a few years they have shot up in terms of market share.

They're the number one player. They're not spending as much as some of the big brands yet. They have cemented that position and it's a phenomenally, well-known brand in, in, in Canada. So again and again, we've seen brands think about taste, I think in a sophisticated way, recognizing that. Actually sometimes admitting a flaw in the product, admitting a weakness, like bad taste can be effective If you can link that to another benefit, either potency, yeah, in terms of Red Bull or efficacy in terms of a a, a cost [00:06:00] cough syrup or a medicine.

Yeah, and I think the Listerine example, which we jumped over a little quickly for American markets is really compelling because a lot of the current campaigns for Listerine are people swishing it in their mouth, showing the intensity of the, of the flavor. I wouldn't say they look uncomfortable, but it's certainly not a.

A overly pleasant experience and in showing that swishing in the mouth and the, and the counting until 15 before you spit it out, they're really showing that it must be working. In my knowledge of teeth care, I'm not sure mouthwash is high on the list. Brushing and flossing are what they recommend.

Mouthwash is really an optional step. They say to fight gingivitis, but really it mitigates bad breath, I think is the number one use of it. Yeah. It's. It's interesting how often this, this comes up in, in medicine, and this one isn't a, a experiment or uh, a definitive [00:07:00] case, but there is A, I think it's Jerry de La Femina, who was an ad exec in the seventies.

He talks about his autobiography, a antiseptic ring that supposedly stung when it was put on, and they'd worked out how to remove the sting. The advice was don't get rid of the sting, because if you take the sting away, you remove people's belief that it's actually potent. So I think red Bull, Listerine, uh, Buckleys, they're all applying a very, very counterintuitive but powerful idea.

Sometimes weaknesses and problems have mirror benefits, and if you remove the problem, you can sometimes undermine your strength. Yeah. Wonderful. Well, let's take a break and when we come back, we'll dive deeper into Red Bull and we'll talk about another innovative thing they've done to help premiumize the brand.

Behavioral science for brands is brought to you by Method One. Method One builds digital first marketing systems that help brands grow. [00:08:00] They are behavior change experts who solve business challenges by creating meaningful connections with consumers with deep disciplines in many brand categories. Reach out to them.

If you'd like to be leveraging behavioral science in your marketing or advertising, welcome back to behavioral Science for brands. We're talking Red Bull, Richard, and, uh, you know, we were, we were talking in the break about how Red Bull. Really has a pretty premium perception here in America, but that's not the way it is in Thailand originally created as a potent drink to help people doing manual jobs, brick laying, cement laying, or late night truck driving.

It was really had this medicinal potency to give you energy when you need it. It most. Bring it out of Thailand and into the Western market. They start in Austria, I think y yeah, in Austria. And then they expand over Europe and then into America, uh, to the United States, uh, but with a very [00:09:00] different package and a very different price point.

Why don't you talk a little bit about that? The price is fascinating. If you go back to when they launched, it's worth reminding ourselves of what a tricky task they had. They're not just trying to break into any category, they're trying to break into soft drinks, Coca-Cola, Pepsi. These are huge marketing entities that have a real lock and grasp on that, on that market.

So to not only launch successfully and to charge a massive price premium versus those. Competitors. That is a huge achievement. Now, paradoxically, what I think they did that helped them, and Rory Southern talks about this brilliantly, is they reduced the size of the can. Mm-Hmm. And they don't sell in a 330 millilitre can, like's 250.

Absolutely. So it's a smaller can and it's differently shaped. It's, it's not squat, it's tall. Tall. That's important because there is a broad theme of behavioural science. When it look. When it comes to [00:10:00] pricing, that we don't weigh up how much we prepared to pay for a product by looking at its inherent values and how much it benefits us.

But instead, we think, what's a similar item? How much do I pay for that? And then if this new item is better, I'll pay a little bit more. If that, if the new item is worse, I'll pay a little bit less. If they'd launched in a 330 mil can that looked like Coke, soda can. Soda can, yes. Um, people would've said, well, Seventy-five cents.

Is that roughly what a Coke charges? 75% is a fairer, fair amount for Coke. Maybe because this thing has so much caffeine, I'll pay 80 cents. Paradoxically, you put it into a completely different shaped size and shape. Can people forget that the comparison set is Coke and Pepsi. Suddenly you are let loose of any of these anchors, any of these comparisons, and therefore you are free to charge whatever you want.

And they went for a significant price premium. Mm. [00:11:00] I think in the UK they were charging at least double from memory when they, when they launched. And that is a. Insight from behavioral science that far more brands I think could be applying. Do you think it also helped that they were not advocating what most soft drinks would say is refreshing and they were kind of creating a new category.

I mean, energy drink was not a massive category, if at all, until they established it. So not only are they trying to break in and steal she of throat from Coke and Pepsi, but they're trying to create a new category as well. Yeah, I think that's fair. The, but my argument would be energy drink and a highly caffeinated drink like Coke aren't completely different.

They are, they they overlap. Yes. So if they had put the drink in a three-thirty mil can, the people would've, they would've made that association. They would've made the association. And yes, because it's slightly different. They might have been able to accept a little, a little premium, but I don't, I, I would argue [00:12:00] not anything like the degree they did charge.

Um. By a different design, and as you say, there is a fundamental difference to the products. Those two things together maybe liberated them and liberated their pricing. I. I'm going to speak directly to our US advertising listeners and remind them that marketing is much wider than just the creative that we put into market.

Changing the product packaging can be one of the most effective things you can do in order to premiumize a brand, helps set it apart in a category, and that's really what Richard's talking about here. The ability to. Not allow the comparison between red Bull and soft drinks to be made because it's in a taller, skinnier can, different size.

You can't make the math calculation easily from a price perspective. And I think that we wanna remind everyone that there's a lot more tools at our disposal than just making an ad campaign, [00:13:00] than just making a, uh, you know, a, a commercial. Absolutely. And, and I think it's somewhere. Where we've actually gone backwards as an industry in the 1950s and sixties.

Ad agencies had huge input in end products, but we've progressively become, um, uh. Badged into a, into a smaller role of Yes. Creating, you know, hopefully beautiful imagery. The danger is if you see that as the only tool at your disposal, you are leaving out many other mechanisms to change customer behavior.

And I think whether you work at a traditional ad agency or at a marketing consultancy, the role of all of us is to think about the end consumer, what their needs are and how we can best deliver it. And, and as brand leaders, people that. Engage agencies. We know the best ideas can come from anywhere. So even if Agency X makes commercials, if they have the insight that could potentially help the brand, then we can [00:14:00] go and get someone else to do it.

But you, they get the credit for K saying, what if we weren't being compared with soft drinks? What if we could change that base? Association. It gives you a real chance to, to change the trajectory of the brand. Definitely. So, Richard, as we'd like to do, we like to wrap each episode with the key points of today's discussion.

We've discussed three board things. Firstly, the power of weaknesses, the. If you have a weakness with your product, make sure at bad taste, make sure you consider whether there is a mirror strength. Mm-Hmm. Because we know from their studies book by people like Ragunathan that often people assume the. In the case of Red Bull, a bad taste leads to being more potent.

So think about whether there is a counter-intuitive approach of emphasizing some of those problems. The second thing we discussed was another counter-intuitive idea, which is around pricing The. People don't behave like rational calculating machines. They [00:15:00] don't just look at the benefits that you bring and then work out a fair price to pay.

They're very, very influenced by the mental comparison set they hold. So if you can shift that mental comparison set, you can shift willingness to pay. In the case of Red Bull, it was breaking the association with soft drinks like Pepsi and Coke, and instead setting up a a new category. And then the third and final point that we've, we've kind of touched on a little bit, but which definitely unites the pricing and the bad taste examples, is the danger of listening to simplistic market research.

If you just go out and ask people directly what you should do with your product. They'll tell you to price it fairly. They'll tell you to make it taste nice. They'll tell you lots of things which should influence us, but in reality actually aren't necessarily effective. So I think have a healthy skepticism to what customers claim in research and think [00:16:00] more about running simple experiments or pilot tests instead.

Well, that brings us to the end of today's episode. Um, for those that were listening questions that you have, comments that you wanna leave, by all means reach out to Richard and I. Richard, we'd like to always end on a fun note. Um, we talked about Red Bull's beginning in Thailand. Do you have a favorite Thai dish that you enjoy?

My go-to staple would be, I think Thai green Curry. Oh yeah, yeah. Thai green curry. Yeah. Delicious. Delicious. And for me, pad, see Ew. Which is a wide egg noodle, uh, often made with chicken or it could be with vegetables. Very tasty. Very nice. Very nice. Wonderful. Well, thanks everybody for listening. Until next time, I'm Michael Aaron Flicker.

I'm Richard Shorten.