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Red Bull essay

Free essay example:

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Brand equity is defined as the incremental contribution ($) per year obtained by the brand in comparison to the underlying product with no brand building efforts.The added value to the firm, the trade, or the consumer with which a given brand endows a product” Farquhar, (Sept. 1989 p. 11). Brand equity arises from three sources called enhanced brand awareness, enhanced attitude perceptions and enhanced non attribute preference.
(
 V. Srinivasan et all, An approach to measurement, analysis and prediction of brand equity).

Brand Value Chain is a planned approach that asses the sources and outcomes of brand equity and an approach by which marketing activities create brand value. The brand value chain holds that the value of a brand ultimately resides with customers.

As per Kevin Lane Keller the Brand value chain helps the financial return of developing the brand. The first stage in value creation is when an investment made in marketing activity that affects the brand awareness, identity and customer mindset. The second stage when the company start experiencing affects of market performances and benefits accrued by brands and the last stage when market performance and success of brand affects and maximise shareholders wealth. The model also consist set of moderator variables or “filters” that impact the transfer or flow of value between stages of the model. The remainder of the value chain model describes the value stages and measures associated with each stage.

MARKETING PROGRAM INVESTMENT

The first stage in the value creation model starts with the investment in the marketing program. This stage basically includes the expenditure related to product research, design, product development, marketing communications, trade and intermediary support.

Dietrich Mateschitz (owner of the red bull) when found about an Thai energy tonic called Krating Daeng was popular and highly consumed drink by Thai factory workers and bus drivers, he came up with an idea of RED BULL to be launched in beverage drinks market with its uniqueness and USP was energy charged power drink that vitalizes human mind and body.

Product: Red Bull product comes with a 250 millilitre blue and silver can with an eye catching logo two bulls and a sun, the lightly carbonated drink has a sweet lemony taste contains 80gm of caffeine same as a strong cup of coffee has along with taurine and Vitamin B. Red Bull claimed it benefits that “it charge physical endurance, improve concentration and reaction speed, improve vigilance and stimulates the metabolism” (Red Bull Case Study), in simple words it was the first drink of its kind in the market that promises to charge and vitalise human mind and body and as per their slogan it “ GIVE’s YOU WIING.”

Communication: Red Bull strategy for market entry relied heavily on word of mouth and “seeding”. Red Bull marketing and communications strategy was distinct from the stereotypes methods of promotions. They come up with a strategy of “buzz marketing” and relied heavily on “word of mouth” and seeding. The company targeted a select handful of hip hop and trendy clubs, bars and stores allowing the trend setters the first opportunity to sample its products in hopes that they would become influencers and create a buzz.

Red Bull highlight their brand image as energetic, danger and youth culture focussed on getting the word out through sponsoring and getting their brand associated with youth culture and extreme sports event, many of them had flying theme consistent with the brand slogan. Red Bull strongly believes in the importance of context of their drink consumption therefore

their communication channel are focusing on those events and activities that embodies the spirit of Red Bull.

 Red Bull also sponsored pop culture events which were held in countries like New York, Cape town, Dublin, Rome, these brand associations were increasing brand awareness globally. Additional sponsor events like Break dancing competition helped them to spread the word about Red Bull with trend setters in youth culture. By associating the drink's image with these activities, the company seeks to promote a "cool" public image and raise brand power. In addition, the slender container is used to suggest a "sexier" image than some other cola counterparts.                                                                              image01.jpg

(http://en.wikipedia.org/wiki/Red_bull)

Trade
:  Red Bull adopted a premium price policy its retail price was €2 per can and was sold up to €6 in bars and clubs which was much higher than competiting products. They gave trade premiums to news agent and retailers to sell it at a higher price, thus they are more keep and motivated to sell Red bull to make a good profit margin. Red Bull and had a designated shelf or a special Red Bull can shaped fridge which had chilled cans inside in the retails outlets.

As Kottler describes Brand Positioning “As an act of designing the company’s offer and image so that it occupies a distinct and valued place in the target customer’s minds.” They deliberately set at least 10% higher prices compare to other competiting energy drinks to maintain a premium image.  Kraihamer stated “We are much more expensive than Cola, this is OK because ours is an efficiency product, so we can charge this price premium, which is the secret of success.” Red Bull strategy from the beginning was to place their image in consumers mind as a premium beverage brand compare to other competiting ones.

Employee: Red Bull is interested in recruiting staff who are young, in touch with youth culture, dynamic ,innovative flexible, adventurous, fun loving and passionate about life that keeps the theme of the brand alive. The company recruits student brand managers to promote its product among young student groups. The scheme provides students with free cases of Red Bull and encourages them to throw parties as well raise profile of red bull in their universities press. The firm is currently seeking to set up Energy Teams in more than twenty UK university regions. This marketing responsibility of all employees give rises to the term part time marketers as coined by Gummeson (1991)image02.jpg

 “Being a Wiiings Team member for Red Bull is encountering all different types of people, locations and possibilities. And, at the end of the day, you realize you're working.”

- Kristine Iozzo. (Part of Red Bull Student Brand Mangager) Red Bull website.

The company understand the value and importance of peer network and followed a sales pitch does not look like a traditional sales pitch by selling through peer and social network. They made the trendsetters to be brand managers.

The investment made in the marketing program will be complemented by qualitative aspects of multipliers of value chain model. Red Bull was clear in their philosophy of their product which is relevant to the youth based generation Y target market. They are distinctive in their way of its own kind of energy drink which comes in a unique slim slender container portray

their cool and sexy image, and are consistent with their original formula since 22 years in the market without any variations in taste and theme of the brand.

CUSTOMER MINDSET

The second stage in the value creation model is the customer mind set stage where all the marketing invested activities start impacting on the mindset of customer. This stage includes everything that exists in the mind of customer with respect to feelings, attitudes, experiences, images, perceptions they associate in terms of brand equity. (Aggarwal & Rao, 1996).

Customer mindset include 5 A’s: AWARENESS, ASSOCIATIONS, ATTITUDES, ATACHMENT AND ACTIVITY. They are hierarchical in nature and connected through a series of chain that connects awareness with consumer’s ability to make brand associations where these associations drive attitudes that lead to attachment and ultimately activity.

AWARENESS

Keller (p 54) notes the key elements of Brand Awareness: 1.) Recognition; and 2.) Recall. He postulates that if buy decisions are made at the point of purchase, then brand name, logo, packaging and the other elements of brand recognition are important factors. Red Bull did just this. Red Bull selected a distinctive, slim can. They also created a prominent and eye-catching logo of two bulls and a yellow sun. Package wording effectively communicates the products benefits: Energy Drink. The packaging is an important part of the branding, as we might expect for a low-involvement product. ( Pearson Case Study 4 (2006, p 70) )

 Pearson Case Study 4 goes on (p 70) to note that changing the carefully selected package elements, in Germany substituting a glass bottle for the slim can, resulted in a dramatic drop off in sales. (George, 2008 http://gmrwvu.blogspot.com/2008/11/red-bulls-brand-equity.html).

To increase brand recall, Keller (p 55) advises that a slogan or a jingle can establish the memory linkages that improve recall. Pearson Case Study 4 (p 69) relates that Red Bull developed an effective slogan, “Red Bull gives you wiiings.” They use little advertising but when they do it consists of unusual animated shorts that end with the slogan, “Red Bull gives you wiiings.”

As part of their promotion activity Red Bull hired consumer education teams as part of their awareness campaign to drive cars that were painted blue and silver with Red Bull logo on the side and giant Red Bull can mounted on the back. The vehicle contained fridges stock with cans of Red Bull. According to Norbert Kraihamer, director global sales and marketing of Red bull, they had identified 5 user categories or key accounts to spread the awareness for Red Bull. Those 5 were students, drivers, clubbers, businessmen and sports athlete and specially generation Y. image03.jpg

They identified where these 5 key accounts shops for instance drivers use petrol forecourts, clubbers use it in pubs and clubs, student use it in university campuses and grow brand awareness by giving away free cans at truck shops, office buildings, gyms and construction sites which the teams handed out free to “those in need for energy”. As per Norbert Kraihamer “As soon as I can find loyal customers I can convince them that the product works. If they experience that the product keeps them awake in a good mood, focused and vigilant then they will buy it again. If you do it right you’ll be getting up to 75% or even 80% re-purchase rate.”(Phoenix).

Red Bull also gave cans to DJ’s to drink while mixing music in night clubs. They display empty cans on tables in trendy busy bars and pubs  as well placed on garbage cans outside selected night clubs.

ASSOCIATIONS

Red Bull brand successful brand awareness helps in building brand associations. Keller (p 56) gives the necessary strategy for building a brand image: “Link strong, favourable and unique associations to the brand in memory.”  There are two factors to strengthen brand association: 1.) Personal relevance; and 2.) Consistence in its presentation over time. Keller (p 57) goes on to say that direct experiences create the strongest brand benefit associations. This fits into Red Bulls strategy according to Red Bull Case Study ( Prof Nirmalya et all),  their entry strategy is to seed happening places such as shops, clubs, bars and stores. They thus focus initially on opinion leaders who obtain positive direct experience with the brand. Once word of mouth has created a buzz about the product, they then widen distribution to areas surrounding the spots.  Keller (p 57) postulates that word of mouth advertising is particularly effective at building positive brand image

 The brand was started to become very popular in pubs and clubs as it merged out as an alcohol mixer. Discovery by dance hall devotee in Europe that because of its content of caffeine , it was a perfect agent to mix with vodka for antitode for early morning party exhaustion. Red Bull growing association with alcohol and partying give help them to achieve high percentage of sales and drink was selling like hot cakes. (Abraham D. Sauer, Behind the brands; The triumph and tragedies) .

ATTITUDES:  Brand attitude is the overall evaluation of the brand in terms of its quality and the satisfaction it generates. As per Red Bull case there is a mix reaction of consumer regarding the acceptability of the product, “50 % of the test group was crazy about the Red Bull and satisfied with its outcomes, and 50% said it tasted terrible.” In terms of delivering the quality the drink promises it was proven by several research firms. A research team from Loughborough University Sleep research centre verify Red Bull controversial claims of its ability to increase reaction times and concentration. They tested the product on fatigued bus drivers and the results indicated that one can of Red Bull can reduces sleepiness and two cans could eliminate fatigue altogether for 90 minutes.(Pheonix)

ATTACHMENT: Brand attachment is the loyalty customer feels towards the brand. Red Bull in its promotion campaign associating its name with extreme sports, dangerous, on the edge, adrenaline-fuelled activities, pop culture events certainly gained lots out of it by selling its energy giving drinks, they were highlighted as a first multinational who give something back to society and cultivate a two-way relationship ship between culture and commerce. They made a successful and strong bond among the network of people who like them for doing something right and every one complement their strong effort and commitment they put in. This helps them in creating loyalty among their target groups who are now most valuable part of their success.image04.jpgimage05.jpg

ACTIVITY: Brand activity is the extent where customers purchase and use the brand, talk to others, about the brand, and seek out brand information, promotions and events. (Kevin Lane Keller).

Red Bull sponsors new events as well as linking up with existing events.  They sponsors extreme sports and so again reinforce the brand elements with an exciting venue to showcase their brand.

As they define in their communication strategy that “Red Bull is not just a drink it is a way of life” they provide people with such events that describes the way of life Red Bull promised. They developed their own extreme sports events such as BMX biking, kite-boarding, extreme snowboarding, free skiing, skydiving.

Besides holding an extreme sport image Red Bull also sponsored pop culture events like they form Red Bull Music Academy who brings together aspiring musicians and DJ’s for 2 weeks to attend workshops, they hold these events to different cities of the world.

MARKET PERFORMANCE

Market performance is based on the mindset of customer responses. There are six key outcomes of those responses. The first outcome is the price premium.A great targeted brand can sustain a premium price that mass-market brands cannot.Red Bull takes this to an extreme by charging three to six times more than Coca Cola.  Red Bull charged up to 4 times more per ounce than average soft drinks prices. They deliberately set higher prices to develop and maintain a premium brand image. They give high trade premiums to the retailers and news agents for selling at the premium price which is set by the company. The third outcome

is the market share where Red Bull got highest market share worldwide in energy drinks market that measures the success of their marketing plan. Brand extension is the fourth key outcome, as part of brand extension strategy Red Bull launched Red Bull Cola that shows the success of the brand  in supporting line and category extension.

The last two important key outcomes are cost structures and profitability. Red Bull is operating in the soft drinks industry where profit margin are higher compare to their expenses as their marketing activities are depending on” buzz marketing” than other traditional marketing strategy. Pulling al outcomes tighter in market performance lead to brand profitability, which is the last outcome.

The last stage of the value chain model is not applicable in the Red Bull case as they are not the public listed company, therefore they don’t have any share holders to take in considerations.

By looking at all the stages of the value chain model it is evident how successfully Red Bull had build their brand equity.

State whether you agree or disagree with the title of the case?

Some observers and critics say that Red Bull's branding is revolutionary, calling it an 'anti-brand' strategy. I personally don’t agree with the title of our case study, “Red Bull-The Anti-Brand Brand”. Although Red Bull had not use the traditional methods of marketing but they relied more on out of the box thinking and marketing calling it” buzz marketing” or “word of mouth marketing”.

 
Four Steps In Brand Building

Red Bull followed all the four steps that are to be followed in building a brand:

  1. Ensure identification of the brand with customers and an association of brand in customers’ minds with a specific product class or customer need.
  2. Firmly establishing the totality of brand meaning in the minds of the consumers by strategically linking a host of tangible ad intangible brand associations with certain properties.
  3. Elicit the proper consumer responses to this brand identification and brand meaning.
  4. Convert brand response to create an intense, active loyalty relationship between customers and the brand.

The firm avoided usual so called traditional methods of marketing, relying more on what is called 'buzz marketing' or ‘word-of-mouth’. A brand image was created and cultivated which associated the drink with youth culture and extreme and adventure-related sports, such as

motor sports, mountain biking, snowboarding and dance music. Red Bull's target consumer segment began to adopt nicknames for the product such as 'liquid cocaine' or 'speed in a can', thus spreading its 'left-field' appeal.

image06.jpg

Image: Red Bull associates its brand with youth culture and extreme and adventure-related sports

Brand Building Pyramid

image00.png

( Adopted from: Kevin Lane Keller, Strategic Brand Management, Irwin Mcgraw-Hill, 2003)

Brand pyramid model justifying Red Bull brand associations to customer responses. The strongest brand exhibit duality (which refers to emotional and functional associations) and richness (refers to variety of brand associations or equity at every level, from salience to resonance).

Salience refers to the activities Red Bull had done with respect to awareness of their brand such as they used pick-up trucks as mobile displays, painted blue and silver with a giant can of the drink mounted on top of the vehicle, Red Bull was given to club DJs, empty cans would also be left on tables in hot spots such as trendy bars, clubs and pubs, sponsoring sports events from formula one to extreme sports. Imagery relates to Red Bull attempt in satisfying customer psychological need for vitalising their mind and body. Performances relates to the satisfaction of the customer functional needs. Feelings refer to customer emotional responses and reactions towards the brand that embodies the spirit of Red Bull. Finally resonance, sponsoring extreme sports event and youth culture events that build a strong relationship and level of identification of Red Bull customer with its brands.

Red Bull brand was directly promoted to Generation Y, the so-called 'millennials': people born after 1981 who were believed to be cynical of traditional marketing strategies. Part of this idea involved recruiting 'student brand managers' who would be used to promote Red Bull on university campuses. These students would be encouraged to throw parties (as if encouragement was needed!) at which cases of Red Bull would be distributed.

Red Bull adopted “viral marketing” strategy, they used the youth underground to spread the popularity of the drink. It was their successful branding and marketing strategy that helped them to build strong brand equity and market leading position with highest percentage of market share in energy drinks sector.  

Brand Elements to Build Brand Equity

Red Bull had all the core 6 brand elements that helped them to build strong brand equity.

  1. Memorability – Brand was easily memorable because of unique slim shape of can and interesting logo.
  2. Meaningfulness – Brand was based important theme that they communicate in their promotions
  3. Likeability – They associate their brand with extreme , fun adventurous sports and music culture that were appealing to the customers
  4. Transferability – Was transferable across different product categories and geographical boundaries
  5.  Adaptability – flexible and updatable with current trends
  6. Protectable –  Formula and the logo was protected through patent and copyrights.

(Strategic Brand Management; Kevin Lane Keller)

MEASURING OUTCOMES OF BRAND EQUITY:
Products with strong brand equity can potentially enjoy the following seven important customer related benefits. In the case of Red Bull they were much successful in building their strong brand equity that proves that they were not an anti brand.

  • Be perceived differently
  • Enjoy greater loyalty and less vulnerable to marketing actions
  • Command large margins.
  • Receive great trade cooperation and support.
  • Increased marketing communication effectiveness.
  • Support brand extension.

(Kevin Lane Keller, Measuring Brand Equity)

Based on the above models, activities and theories from the case I would disagree with the title of the case.

Suggest three strategies Red Bull should use today to strength and manage their brand over the next 5 years?

The problem that Red Bull now faces is how to build on its incredible sales growth, as it has become a mature brand within a saturated market. Among the challenges that Red Bull faces, the following are some of the most serious:

  • The loss of its original consumer base, as the ‘millennials’ becomes working adults. How should the firm attract a new group of 16 year old consumers?
  • Health concerns that have emerged in several countries over problems associated with high intake of caffeine. Red Bull was banned in France and Denmark following the publication of these concerns. It is classified as a medicine in Norway and until recently could only be bought in pharmacies in Japan. As the health and energy soft drinks market has reached maturity, Red Bull is concerned that it is unable to target mass consumption in these countries.
  • Being over-reliant on a single brand. Until 2003, the company only produced one version of Red Bull. A sugar-free version was introduced in that year.
  • The mature market for energy drinks has attracted some of the global firms, such as Coca Cola, Pepsi as well as Asda/Wal-Mart, with their own brands seeking to gain a competitive advantage over the market leader.
  • Many of the brands are trying to imitate and copycat Red Bull buzz marketing technique, they are facing challenged by several competitors over trademarks infringements such as Red Rhino that creates brand confusion.

I was doing a survey for this assignment asking from different News Agents based in Glasgow regarding the Red Bull current position in the Glasgow market and trade premium, they state that compare to other energy drinks, demand for Red Bull is higher but competitors are very frequently changing their marketing mix and promotion along with bringing innovation in their version of energy drinks challenging Red Bull market share. He quote that ROCK STAR energy drink is the second best selling drink after Red Bull due to its variations in the flavour. The drink comes in different flavours giving them the same level of caffeine but with flavoured taste like Guava, Citrus, and Mango. According to (Sicco Ven Gelder) Immense competition had shrunken the product life cycles that means customer are now demanding new innovative better products and services  Red Bull stand on its original product made it vulnerable to market variations.

Based on the above analysis my first strategy to Red Bull would be is that it is high time to use their brand muscle and introduce a new product line extension. Red Bull has already established strong brand recognition. They need to come up with flavoured energy drinks to target large segment of the market. As stated by Keller that a category extension for a popular brand enables a new product to benefit from existing awareness and image of the brand. Red Bull can use their R&D to experiment with a fusion of coffee milk and energy drinks and try to come up with innovative variations and taste.

Research supports the assertion that such extensions bring new customers into the franchise and also that the “Flagship brand is highly resistant to dilution or other negative effects caused by negative experiences with an extension.” With this consideration, I would recommend a category extension of Red Bull into the electrolyte replacement drink category

dominated by Gatorade and PowerAde among others. (George Ray, Redmond review, Building Brand Equity in new way)

The second strategy I advise Red Bull to strengthen and manage their brand over the next 5 years is that they need to break from the living on the edge sports image, and rather than sponsoring extreme sports it may be better that they also show their brand sponsorship presence in more traditional sporting activities such as football games, marathons, basketball, tennis and others. This change in extension would introduce the extension product to new category audience.

Third and final strategy for Red Bull is based on demographic. Red Bull facing an ongoing challenge of recruiting 16 year old customers each year as their first generation of customers. Every year their existing customers are getting old and are moving out from their target market. Their communication and marketing strategy was restricted to only Generation Y.
Red Bull need to reach beyond the youth based segments, in order to grow their sales and market share their advertising and marketing should also cater the characteristics of Generation X (Baby Bust). The current advertising campaign should incorporate those themes that will appeal the older and missing demographic that was not part of the advertisement and promotions previously.

References:

V. Srinivasan et all,2005, An approach to measurement, analysis and prediction of brand equity, London Buisness school.

Keller, K (2008). Strategic Brand Management. Pearson/Prentice-Hall.

Pearson Case Study 4 (2006). Red Bull: Building Brand Equity in New Ways!. Pearson/ Prentice-Hall.

Farquhar, (Sept. 1989 p. 11)

Prof Nirmalya et all , Red Bull Case Study

http://en.wikipedia.org/wiki/Red_bull

Gummeson,(1991)
Kottler

Aggarwal & Rao, 1996

George, 2008, http://gmrwvu.blogspot.com/2008/11/red-bulls-brand-equity.html

Claire Phoenix, Feb. 2001 , Soft drinks world ,“ The Red Bull- Facts and Functions” p. 26-35.

Abraham D. Sauer, Behind the brands; The triumph and tragedies

Kenneth Hein, Oct 15, 2001, Brand week, “ Red Bull Charging Ahead, “

George Ray, Redmond review, Building Brand Equity in new way

Nobel et all(2002)

John ,  22 nov2001,” Extreme sports and clubbers fuel energetic rise”,www.ft.com

Wipperfurth, 4 June 2004.” Speed in a Can: the red bull story”,

“Selling energy ,” Economist Online.

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