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m n m m u m m m m m m m m u m n m m [---- I PROGRAM RECOMMENDATIONS :l ~m~k ~d,905

m mmm m m m m m m m m m m m mm | m L [ E LUCKY STRIKE DIRECT MARKETING PROGRAM RECOMMENDATIONS Clarion Marketfng & Communications 340 Pemberwick Road The Mill Greenwich, Connecticut 06831 June 28, 1990

m m m m m mm m mm m m m n mlm m m m m m [ LUCKY STRIKE DIRECT MARKETIMP- OVERVIEW LUCKY STRIKE IS MADE UP OFTHREE D~TINCT FRANCH#SES'R-IAT REQUIRE SEPARATE PROGRAMS TOADDRESS VERY DIFFERENT NEEDS. NON-FILTER FRANCHISE PRIMARY NEED IS TO REWARD LOYALTY FILTER FRANCHISE -- TOTAL U.S. PRIMARY NEED IS TO INCREASE PURCHASE AMONG CURRENT SMOKERS BY DEFENDING AGAINST OCCASIONAL PURCHASE OF OTHER PRICE VALUE BRANDS. FILTER FRANCHISE -- C-2 TEST MARKET - PRIMARY NEED IS TO GENERATE TRIAL

m m m mm m m m ,--, mm m mm m m m m m m m ! LUCKY STRIKE DIRECT MARKETING OVERWE~_ NON-FILTER FRANCHISE CHARACTERISTICS OLDER, VERY MALE SMOKERS FIERCELY LOYAL -- LITTLE OUTSWITCHING -- PEOPLE LEAVE BECAUSE THEY QUIT ALTOGETHER LITTLE tNSWFrCHING - OTHER NON-FILTER SMOKERS ARE ALSO VERY BRAND LOYAL - FILTER SMOKERS DO NOT SWITCH TO NON-FILTER NO ADVERTISING OR IMAGERY -- GREEN PACK COMMEMORATIVE OFFER (NON-FILTER VERSION) MAY HAVE APPEAL HOT CONDITIONED TO USING COUPONS PROGRAM GOALS REWARD LOYALTY AMONG OUR EXISTING FRANCHISE INEFFICIENT AND PROBABLY INEFFECTIVE TO ATTEMPT ANY OFFENSIVE SWITCHING EFFORTS AMONG COMPETITIVE SMOKERS pROBABLY NOT NECESSARy TO USE COUPONS -2-

m m m ,,~ mmm m m m m n m m mmm m m m n m m LUCKY STRIKE DIRECT MARKETING OVERVIEW FILTER FRANCHISE - TOTAL U.,~ CHARACTERISTICS OLDER, MORE FEMALE LOWER LOYALTY LEVELS THAN NON-FILTER - COMPETITIVE SET AND CURRENT MARKET ENVIRONMENT HAVE MOST LIKELY FOSTERED ON-GOING BRAND SWITCHING AMONG THESE SMOKERS ON THE BASIS OF PRIDE LI'f-il..E INSWITCHING - COMPETITIVE PRICE VALUE BRANDS ARE LESS EXPENSIVE AND MORE AGGRESSIVELY MERCHANDISED, THEREFORE REASONS TO SWITCH TO LUCKY STRIKE HAVE SLOWLY BECOME LESS COMPELLING NO ADVERTISING OR IMAGERY -- CREATIVE BASIS FOR PROGRAMS IS PRIMARILY "BULL'S EVE" BRANDING HEAVILY CONDITIONED TO THE USE OF COUPONS FOR LUCKY STRIKE AND FOR NUMEROUS OTHER BRANDS -B-

! m m m m m m m m ,~ m m m m n m n m m LUCKY STRIKE DIRECT MARKETING OVERVIEW FILTER FRANCHISE - TOTAL U.S. (CONTINUED) PROGRAM GOALS INCREASE SHARE OF PURCHASE AMONQ CURRENT SMOKERS OFFENSIVE SWITCHING EFFORTS WOULD NEED TO BE VERY AGGRESStVE AND WOULD "I~EREFORE BE EXPENSiVE/INEFFICIENT MORE NAMES NEED TO BE COLLECTED BEFORE DIRECT MAlL CAN BE TESTED PRIMARY OPTIONS AVAILABLE CURRENTLY ARE IN-CARTON PROGRAMS/OFFERS RECOMMEND NAME COLLECTION BE DEVELOPED AS PART OF IN-CARTON PROGRAMS SO THAT MAIL OFFERS CAN BE MADE AT A LATER DATE -4--

am | I I t I I Imu I um | | n I ! n | I I-- LUCKY STRIKE DIRECT MARKETING OVERVIEW FIL'~ER FRANCHISE - C-2 TEST MARKET CHARACTERISTICS FRANCHISE TO BE BUILT - [NSWITCHING FROM CURRENT FULL MARGIN LEADERS AND {TO A LESSER EXTENT) FROM PRICE VALUE BRANDS HEAVY ADVERTISING/IMAGERY -- CREATIVE BASIS EXISTS FOR DEVELOPMENT OF PROGRAMS TEST MARKET PROVIDES LABORATORY TO TRY NUMBER OF OPTIONS IN PREPARATION FOR NATIONAL USE LATER PROGRAM GOALS INITIALLY, TRIAL AMONG COMPETITIVE SMOKERS IS THE PRIMARY GOAL - AS WE MOVE FURTHER INTO THE TEST, LOYALTY BUILDING BECOMES MORE IMPORTANT PROGRAMS SHOULD REINFORCE IMAGERY AND WILL REQUIRE PRICE OR PRODUCT INCENTIVES TO GENERATE SUFFICIENT TRIAL -5-

| | | Inn | am B B in n mini n | ~u mm | | | m LUCKY STRIKE DIRECT MARKETING OVERVIEW NAME SOURCES NON-FILTER FRANCHISE 110M RESPONDERS TO IN-CARTON OFFER 1200 EXISTING IN THE DATABASE* FILTER FRANCHISE - TOTAL U.S. 3400 EXISTING IN THE DATABASE* FILTER FRANCHISE - C-2 TEST MARKET COMPETITIVE MALE SMOKERS IN DATABASE MARLBORO WINSTON CAMEL PRICE VALUE 4,600 3,300 1,0e0 3.00~ 11,900 PROJECTED 6000 RESPONDERS TO GREEN PACK AD (0.5% - 3,0% OF CIRC.) ANOTHER 8000+ WCKY STRIKE SMOKERS EXIST IN THE DATABASE, HOWEVER FILTER/NON-FILTER IS NOT IDENTIFIED - 6 -

m m ml m Iron In nun unn m rain ~, m ~11 nni n I uu I |-- LUCKY STRIKE DIRECT MARKETING PROGRAMS NON-FILTER FRANCHISE OBJECTIVE - REWARD LOYALTY MAIL COMMEMORATIVE GREEN PACK OFFER BASED ON CREATIVE ALREADY PRODUCED FOFI C-2 TEST MODIFY TO USE EXISTING NON-FILTER GREEN PACK INCLUDE LUCKY STRIKE SQUADRON COLLECTION FOLLOW AFTER 6 MONTHS WITH A SINGLE ITEM OFFER. MAILING CONSISTS OF A LETI~R PLUS A REPRINT OF THE ZIPPO LIGHTER PETERSEN INSERT AD. COST- $182.6M -7-