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PROJECT II. T~E CONSUMER AND HIS RESPONSE TO PRODUCTS, AND PRODUCT OPPORTUNITIES IN THE FUTURE SUHMARY OF MAIN CONCLUSIONS PART r. SMOKIER COMPENSATION TIIEORY Priority 1 There is a need for further research into quitters, starters and switchers including switchers into and out of the hi-fi segment. The objectivs of .the research (and this is not the place to propose specific methodologies) is to obtain more knowledge of the following basic questions:- - does the overt hi-fi segment (or any other health oriented segment in each particular market) sustain the smoking habit amongst people who would otherwise quit or does it help to reduce their physiological dependence on smoking and thus act as a staging post to quitting? - are smokers who smoke high delivery brands more likely to quit than smokers who smoke middle or low delivery brands? - are smokers of strongly image-oriented brands less likely to quit or is the converse true? The questions above specifically refer to quitting action but the study would also, of course, include the other actions of switching and starting a~d. variation in consumption levels (eg. do starters adopt hi-fi brands or non hi-fi brands). The answers will obviously not be simple and result in the identification of seg- me,is of smokers of differing magnitudes with the further posslbility of leading to more detailed research, perhaps involving the compensation theory. Priorit7 2 The syndicates have been assured that nicotine is the major physiological 'hook' of the smoking habit. It is quite possible that future health publicity will discredit the public image of nicotine and there is hence a need to investi- gate whether there are other constituents which could perform a similar function as a substitute for nicotine. Priority I. could only be carried out in individual markets. Pro~ect would require research at the Centre. PART If. A. PRODUCT OPPORTUNITIES The following basic conclusions were reached: (a} Successful positioning in a new constituent segment is more likely to be achieved by being first and by obtaining perceived validation of one's claims through endorsement by a real or apparent disinterested third party source. BAT Industries document for Province of British Columbia 14 November 2000 BAT INDUSTRIES 00290471

(b) Various positionings have proved to be successful and a number of these positionings are still available to BAT in various markets: - being the lowest - lower delivery line extensions - low, but not the lowest, with a perceived product plus - low with strong image qualities - pre-positioning~ ego establishment before a constituent receives publicity or is the subject of a league table. (c) The prime constituent likely to receive public attention in the near future is CO but various other gas phase elements need also to be the subject of product development. The prime product development opportunities are seen as:- - charcoal filter without 'charcoal taste' - high or middle nicotine/low tar/low CO - low tar nicotine and CO with enriched perceived tobacco taste - low CO with middle tar and nicotine - general low gas phase but with taste & middle nicotine - the lowest tar and nicotine (l.O tar and .I nicotine) with some taste perhaps through tobacco enrichment. - 'normal cigarette' with reduced or eliminated adverse sidestream (room aroma) properties. In any or all of these cases~ the existence of the basis for a cl~im.i. of a product plus or breakthrough, possibly supported by a visual difference~ would be advantageous. (d) The need for more thorough examination of the potential for a low delivery international (UK type) housemark or low CO version of an existing international housemark. ~ ~ (e) The need to cnusider whether to withdraw from specific industry agreements and in any event the need to be ready to act if competitors do' at'shOrt ~otice. :PART lI. B. M~)IA &CREATIVE OPPORTUNITIES ~pecific suitability of %he various opportunities identified "~nd timing in their use obviously varies from market to market, flowers#, certain basic principles are agreed. (a) Communication of reduced constituent properties will tend to increase in effectiveness in proportion to the degree to which it is perceived to emanate from valid third party sources and/or carry the endorsemenf of such st,ureas. BAT Industries document for Province of British Columbia 14 November 2000 BAT INDUSTRIES 00290472

(b) Use of the pack, outer and insert cards to carry specific rather than pure image co...unication provides a viable oppor- tunity to communicate in a restricted environment. (c) Consideration should be oiven to the use of brand names which either : communicate the product benefit .. or convey reassurance or security (eg. "MERIT% "TRUE", "SELECT") (d) Saturation with hi-fi news items may or may not occur. It will not, however~ remove the need for continued communication of "traditional" cigarette imagery because health concern is by no means the only motivation behind the brand choice of all smokers, or perhaps any smoker - and this w£11 stil! be true in the 1980's. If it does occur, it will emphasise the need for hi-fi communi- cation which can communicate product dif[erences which can be presented as distinguishing features which are also benefits. (e) The need for more innovative conten~ and method of communication in a "saturated" or restricted environment is self-evident and various spe~.iflc t@chniques have been suggested, incIudin9 i~proved education of the trade £n passing on to consumers information on brand bene~itSo This is, however~ not the place to detail these techniques • ~1. lO. 76 Project Chairman: P.B. Smith BAT Industries document for Province of British Columbia 14 November 2000 BAT INDUSTRIES 00290473