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Product Red Case Analysis

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Band Management Case 1
A case Analysis of (Product) Red (A)

Submitted By:
Amit Pathak
Navin Koirala

February 18, 2015

Synopsis
(Product) Red (A) is an innovative business model which integrates business and charity together. (Product) Red (A) is an original approach of raising fund for AIDS patient in Africa by Licensing the brand to the business giant of the world and the fund directly going to Global fund of United Nation. This innovative approach has been very successful in collecting funds raising it form $5million to $50 million contribution by the private/corporate sectors.

Case Facts
Product (Red) is the best instance which can be taken as one of the best marketing campaign with the assist of many huge and reputed firms. The sole purpose of this campaign is to raise funds for HIV/AIDS victims in Africa through “The Global Fund” which is a nonprofit organization with the corporation of reputed business organization like GAP, Armani, Apple, Converse, American Express, Motorola etc. The main concept of this whole campaign is to raise fund with the purchase of Product (RED) and certain part from the purchased amount is funded in the Global Fund to help in the prevention and treatment of HIV/AIDS patient in Africa by bearing the cost of Antiretroviral Drug (ARV), a treatable drug to extend the patient’s lives. Above all this article carries out the various facts and details about Product (RED) and its stages of the development and its business models which are pointed below: * It enlightens in how this campaign generate money to raise fund to the Global Fund. * The articles focuses on the benefits provided to HIV/AIDS patients in Africa with the partnership with various organizations. * It focuses on the business models and decision by choosing the organization for the growth of the brand. * It highlights on the partnership building and create a global brand with worldwide recognition and giving benefits to the partners as well.

Statement of the problem
1. In what ways is the RED model different from the traditional charity model? What are the key criticisms of the model? Are these criticisms valid?
2. How successful has the campaign been? How would you define "success" in this case?
3. Who is the target market for the RED brand?
4. What do you think about RED's selection of its initial partners? Are these brands - and their customers - a good fit for RED? What criteria should RED use to choose future partners?
5. Is the RED campaign sustainable? What changes would you make to ensure sustainability? Stick with the initial partners? Replace them? Add new ones?

Analysis:
Product RED is an initiative or an idea to create brand big enough to generate revenue for the social and toughest health assignment HIV/AIDS patients in Africa which is two-thirds of the world’s HIV-infected population. This unique concept has a simple idea of working toward creating a brand image in an exceptional manner. The way it function is that a brand is licensed to the companies like Armani, Apple, American Express, Converse, GAP and each partner companies created a product with the product logo in return of certain percentage of profit gained by each partner companies to the Global fund to provide the medical care and support services for the patients of AIDS in Africa. In short Product RED came up in building the brand and making fast money to save lives in short amount of time.
The essence of Product RED is market driven. While traditional charities seek donations from different organizations. Compared to old charity model, Partner companies don’t see RED as grantee but an equal business partner because the market response generated financial profit from the association. This becomes the essential vigor for the partners companies to the society and continuously generates more benefit, which simultaneously benefit the people in needs. RED have fashioned a business model with the partner companies without affecting their own business/marketing strategy. Product RED is no more different from other equivalent products in the terms of quality and price. Consumers don’t have to pay more than the original price. RED just offers them a choice that through their consumption they can contribute goodness to the society without paying additional money.
It was a kind of tough decision for the companies to take chances by binding their brand with the complete untested idea which was RED but they put themselves on the line. This also attracted a lot of criticism about the execution of this concept. It was nothing new about the criticism faced if any organization grows rapidly. One of the criticism faced by one of the website called “Buylesscarp.com” which stated to donate the charity amount directly to the marketing campaign and focus on real solution rather consuming on the expensive product. It can be believed that the motto of Product RED is adding the value on the product so that when consumers buy the products, they feel they are contributing in the social cause. Usually people who mind their own business don’t try much just to donate in the charity. So for those who falls into those kinds of categories suites for them who buys those product and make a difference in the lives of other people. Another criticism faced as it benefits the profit to the partner companies more than the charitable causes. It doesn’t matter how much partner companies are getting benefit and it shouldn’t be the matter of concern as well. What matter is how much Product RED is making a difference and contributing to the Global Fund. Product RED is making a contribution of 2% of total Global fund and it is the 15th largest donor ahead of Russia, China, Saudi Arabia and Switzerland. Another strong criticism RED faced was that RED was promoting consumerism and promoting consumerism has a serious social, psychological, environmental effect in society, individual and environment respectively. The concept of consumerism and donation are two different entity and in fact two opposite thing. Hence, this is a serious criticism and in fact a valid one when psychology and environmental aspect of the consumerism is taken into account.
The initiative behind Product RED is that it would craft a beneficiary for everyone. This marketing campaign is focused from both perspectives .i.e. Increase Company’s profit and generates revenue for the social cause. In addition Product RED is principled on profit-motivated giving. To explain this, say suppose a customer is given Rs. 1000/- and is offered to choice to give it up solely for donation or to purchase a product which supports a certain cause. We people are always driven to incentives and hence that customer would choose to purchase and spend his Rs 1000/- for that which he can actually obtain something in return and be the part of the social cause. Product RED sells its product based mainly in this concept and that’s the business strategy for them. Another positive thing can be taken is that this initiative encourages consumer’s awareness to the AIDS in Africa while at the same time allowing easier participation from the consumer of the cause. As a result, around 17% of the general population is aware of this brand which is about the AIDS in Africa.
RED has been targeting those who are more conventional and just mind their own business. The main target audiences for RED are those consumers in their 20’s to early 50’s who make socially responsible purchase which are pointed below: * Coffee Lovers * Fashion Lovers * Technology Driven Consumers * Music Lovers * Premium Product Lovers
Even though the target audience of RED is geared towards the wide range of people, the significance of the campaign stands the same to fight AIDS.
RED has selected high end brand name as its initial partners and this it has done to have great exposure and to make people aware of the brand RED and its cause. This is to say that RED wants to leverage the name of big giants to promote its brand. In other words, the piggy ride with these corporate giants is well justified for a startup like RED. The success of RED as an startup justifies that it is successful in selecting initial partners. But when issue of brand image of RED due to its tie up with the initial partner has to be discussed and analyzed.
The consumer of premium brand are affluent class people. And the study suggests that rich people are more narcissist- they are self absorbed and care for themselves than others. And study also reveals that people with up to $35,000 per year donates around 3.2% of their earning while rich people with per year income of above $75,000 donates around 1.3% of their earning (Szalavitz, 2013). This statistics reveals that low earning people donates twice more than high income people in comparison to their earning. The average earning of rich people are more than twice larger than the earning of normal people but there are many folds normal people than rich people. But for a startup which wants to create awareness and brand name through the piggy ride in premium brand in order to have larger impact, the brand along with the customer is a good fit as of now. RED should choose the partner with low involvement product because in high involvement product charity alone cannot be a differentiation factor and it cannot be crucial factor for the purchase. While in case of low involvement product charity can be a differentiation factor leading to higher impulse buying of that product category and this will benefit not only RED but also to the partner as well.
The present RED campaign as some serious concerns to address. One of them being what Brady said, " If one buys phone. He/she would probably not buy another phone for few years". So, they need to partner with the brand that could make the same person to contribute everyday for RED because it was evident that people exhibited brand loyalty towards RED. Therefore, we think RED should add new partners in addition to the old ones.
Sustainability of RED depends upon whether it could benefit the partner or not. The relation RED should look forward is commensalism where both partner are benefitted equally. Therefore, the partner should be like whose product get differentiated due to licensing for RED and the low involvement product category like daily consumable good would be beneficial as daily consumable goods can provide continuous donation mechanism for RED loyal customer and a continuous flow of fund to RED from its customer.

Conclusion
Therefore, the concept of (Product) Red (A) is well executed as an startup but the sustainability along with the brand image has be considered while choosing new partners. Furthermore, the transparency as well as the execution of the fund should be well documented and communicated to make people believe that their money are being honestly utilized.…...

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