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in the Matter of: R.J. Reynolds Tobacco Company Matter No. D09285. Diane S. Burrows Vol. 2, June 3, 1998 (19980603).

Date: 03 Jun 1998
Length: 555 pages
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c In The Matter Of: R.J. REYNOLDS TOBACCO COMPANY MA7TER NO. D09285 DIANE S. B URROWS V"ol. 2, June 3, 1998 For The Record, Inc. Court Reporting and Litigation Support 603 Post Office Road Suite 309 Waldorf, MD USA 20602 (301) 870-8025 FAX.• (301) 870-8333 Original File 80603bur.asc, 103 Pages Min-U,ScripM Flle ID; 4031580807 Word Index included with this Min-U Script®
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DIANE S. BURROWS VoL 2, June 3, 1998 Yeah 128:1,11;199:20 year 138:5; 153:24; 155:15;166:5;167:3,13; 173:14, 16,16, 20;174:2, 10; 176:14; 177:5,7,7,9, 12,22,23;180:19;186:10; 189:11 years 129:24; 132:5; 136:16;142:24; 155:8; 166:4; 186:10 yesterday 116:17; 120:3; 124:10; 127:7,8;129:3; 135:4, 9,11; 138:10; 141:3; 142:2,21; 143:1, 9, 14, 20;147:21;155:6; 168:9;181:19, 181;19,2217 yesterday's 117:4, 20 ylelded 174:2; 177:11 younger 126:22; 128:19; 145:7, 23; 146:16; 150:24; 151:17; 152:22; 153:10; 155:25;156:17;158:17, 22; 159:15; 163:17; 165:13; 166:3,17,20, 25; 167:13;170:24;171:2, 20; 173:18; 174:7,9; 176:13, 22; 177:14,20; 179:15; 180:6; 181:4; 187:24; 188:4; 189:25; 190:1; 191:6,9; 193:22; 198:12; 199:13,18, 21, 25; 201:4, 20; 204:3, 6,14,17; 207:1, 7; 209:13; 210:20 yours 153:19, 20 youth 149:25 Z Z 142:2
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Results for other variables were not reported. Weaknesses in the teenage NBER model are: • Loose estimation of price, loosely deflated. * "Impure" price elasticity (probably somewhat inflated). • Data from the late 1960's, which may not reflect today's market. 6iational application of this model has the same problems as in the adult QWeI', except that the problem of estimating what teenagers perceive as "real" price change is even worse. DSB/ch - 10/6/82 Code: 5.21 RM033197 - a -
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VBER ELASTICITIES AMONG PERSONS (Sample Restricted to Eliminate Border Effect) REPORTED REPORTED "TOTAL DENAND° INCIDENCE RATE (INC. x RATE) RETAIL PRICE Total 20+ - .264* - .037 20-25 ,74* - .20 26-35 - .44 - .04 .47 3 35+ - .15 - .15 ~ ~ ~ Males 20+ 20-25 _.276* - .171 -1.401* r ' 26-35 - .292 + .029 - .320 c : - y .1 35+ - .246 - .204 - .658* - ~ :. - 1•emales 20+ 20-25 - .136 - .026 - .302 ~ ~ 26-35 - .388 - .134 - .577 9 + 066 - .077 - .118 i 0 35+ . ~ INCOME c Total 20+ + .03 o, *OLS coefflcient statistically significant at 5% level (2-tailed test). N r m W **OLS coefficient statistically significant at 1% level (2-tailed test). DSB/ch - 10/6/82 RM033194 Code: 5.21 6 _
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ATTACHMEhT A IMPORTANCE OF PRICE IMPACT BY AGE/SEX TO TOTAL INDUSTRY 1982 IMPORTANCE TO INDUSTRY II. X 0F SMOKERS RATE PER DAY IMPORTANCE ~ X OF TOTAL CONSUMPTION Teenagers 12-17 4.0 E 17.4 E 2.2 E Males 18-24 8.0 29.7 7.5 Males 35+ 28.7 36.9 33.6 Total 18+ 96.0 31.7 97.8 TOTAL 100.0 31.1 E 100.0 Source: Tracker (% smokers first half 1982, rate in year 1981) adjusted for estimated teenage smoking. _,: IMPORTANCE TO PRIC E IMPACT: Sample ca lculatio n asaumes 10% price ° increase and flat 6 23.0 billion indust ry. Importance of group to total .= change is independ ent of total volume or price change. ~ ~ IMPORTANCE TO INDUSTRY NBER ELAS- ~ - c LOSS FOLLOWING 10% PRICE INCREASE L X BILLIONS TICITY BILLIONS IMFORTANCE 9 Teenagers 12-17 2.2% 13.7 -1.44 Y L 2.0 7.2% ~ ~ Males 18-24 7.5 46.7 -1.40 6.5 23.6 Males 35+ 33.6 20b'.3 - .66 13.8 50.0 Total 18+ 97.8 609.3 - r42 25.6 92.8 TOTAL 100.0 623.0 - .44 E u, 27.6 . 100.0 to k DSB/ch - 10/6/82 Code: 5.21 RM033191 - 3 -
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The models were respecified using a restricted sample which eliminated respondents within 20 miles of a lower priced state, on the premise that the price they actually paid might be lower than the assigned price ("border effect"). For the restricted sample, price was found to be a statistically significant factor in: . Incidence and "total demand" among 20-25 year olds. •"Total demand" among those over 35. 4ihen'the regressions were done by age/sex, significant coefficients were found o.Ttly for males. Though none were found in the female regressions, the higher elaaticity 7r males/females combined than for males alone may imply some effect among females. Selected elasticities are tabulated on the next page. Only boxed values have statistical significance at normal levels. DSB/ch - 10/6/82 Code: 5.21 RM033193 - 5 -
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RJ:REYNOLDSTOBACCO COMPANY MA.T'I'ER NO. D09285 DIANE S. BURROWS VoL 2, June 3, 1998 Page 112 (t] FEDERAL TRADE COMMISSION rq INDEX t] EXHIBITS FO Page 113 ID DESCRIPTION (3] WITNESS: EXAMINATION: No. 27 193 Younger Adult Snloker Diane S. Burrows MR. SHOMN 116 R1 Analysis fe] (VoNme II) p] No. 28 196 Younger Adult Smokers [5] EXHIBITS FOR ID DESCRIPTION . Marked CX-21 No. 11 1 16 10/8/82 Memo with [6] Initials (e] (71 No. 12 119 11016182 Memo No. 29 198 Are Younger Adup (q No. 13 122 10/1382 Memo I67 Snakers Imponara ry[ No. 14 124 Memo Marked CX-622 [e) No. 30 203 11/01I84 Memo (to] No. 15 131 10/7/82 Memo 18 (11[ No 145 10/16l83 Memo [>f No. 31 204 09/17/84 Mamu . (12] No. 17 149 Youth Srrakers (eJ No. 32 209 Successiul Markeling to 1121/B3 Y ounger Adult Smokers 1131 NI No. 18 151 Younger Adull Smokers [10[ (1l] Focus Groups III (15] No. 19 158 02114l87 Merno [19 [tsJ No. 20 159 02I17/84 Strategla [12) Research Report [13) 1171 (141 No. 21 161 02/17l84 Memo [tN (1s] No. 22 163 Document Marked CX-849 (161 [1g] (17J No. 22A 163 0224184 Menw [1e1 A 119] No. 23 167 02129/84 MDD Abstract [21] Form Ro1 (22J No. 24 171 02l29/S4 StrategM R11 Research Repon [221 3 12 1 (231 No. 25 187 03/d0/84 memo [241 (241 No. 26 192 MDIC File No. (zs) 1261 84-44303 (1J FEDERAL TRADE COMMISSION A [31 In the Matter 01: (4) R.J. Reynolds Tobacco Co., [5) a corporation. (81 ) ) ) Matter No. D09285 (7) Wednesday, June 3,1998 lel te) KIIPatrick Stockton LLP 101 1001 West Fourth Street t t[ Wlnston-Selem, North Carolina 27101 t2) 131 The ebove-entAled matter ceme on for 141 administratNe deposHWn, pursuant to notke, at 15J 1:15 p.m, 161 17] APPEARANCES: 161 1s] ON BEHALF OF THE FEDERAL TRADE COMMISSION: DAVID C. SHONKA, Anomey LAURA SULLIVAN, Attorney Federal Trade Commissbn 6th Street and PennsylvanlaAvenue, N.W. Washinglon,D.C. 20580•0000 (202) 326-2436 Page 114 For The Record, Inc. -- (301)870-8025 M9n-U-Script® (3) Page 112 - Page 114
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4 aTTACRMENT 3 TECHNICAL SUPPLEMENT SUMMARY AND CRITIQUE OF THE NBER MODELS Le,vic and Coate of the National Bureau of Economic Research developed two seriea of models relating cigarette prices (and other factors) to reported tARidence, rate per day, and "total demand" (incidence times rate). Ahth`ough reported rates understate true consumption, the models would still be valid'if the under-reporting was constant across the other variables -- gYaphy, age, sex, etc. We ordinarily use this assumption ourselves. Blith`studies were weakened by assuming that prices in all locales/outlets in a et'ste were similar to the statewide average reported by TMA, plus local tax. This may be why both models had low adjusted R-equared values (.11 or lesa, but still significant). Other aspects of the NBER studies are critiqued separately below, since each ueed a different data source, time period, and methodology. THE OVER-20 MODELS • Family income and size • Sex • Marital Status • Health status (perceived) • Region and city size • Race • Working woman or not Using the full sample, price was not found to be a statistically significant factor in incidence, rate, or "total demand". Coefficients for most of the other variables were significant (at the 5% level)` in a direction consistent with our consumer research findings. I rhis ordinary least squares model used data tapes of individual responses to ~ the Health Interview Survey of 1976. It expressed incidence, rate, and "total I damand" af respondents over age 20 as a linear function of: - • Retail price, defined as the TTSA - reported average in the ~ respondent's etate, adjusted for any local taxes. ~ l .. SOURCE: "The Potential for Using Excise Taxes to Reduce Smoking," Working Paper No. 764 of the National Bureau of Economic Research, by E. H. Lewit and ~° ss8 D. Coate, September, 1981. ~ ~ - 9 DSB/ch - 10/6/82 Code: 5.21 RM033192
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CONCLUSIONS In terms of immediate impact, the effect of price on maies 35+ is aost important. Half (50X) of the total drop in iadustry volume is attributable to males 35+, compared to 24% from younger adult males, and 7% from teenagers. (Calculated in Attachment A) But, the lose of younger adult males and teenagers is more important to the long term, drying up the supply of new smokers to replace the old.* This is not a fixed loss to the industry: its importance increases with time. In Eeu years, increased rate per day would have been expected to raise this group's consumption by more than 50%. ia....a_ Diane S. Burrows MARJaTING DEVELOPMENT DEPARTMENT ~B/ C}l e Y ~ a ~ cc: Mr. Mr. J. H. R. Moore E. Osmon ~ lSe. E. N. l4onahan ~ Mr. E. J. Fackelman 0 Mr. J. R. Hribar M.r. P. E.'Galyan .~' Nr. Mr. W. R. W. Doten A. Davis . ! ~ PIDIC . . ' ~ L ~ *AB discuss ftllowing F Ed .E. in my 9/21/82 memo re "Estimated Change in Industry Trend T. Increase". DSB/ch - 10/6/82 RM033190 ~ ,. C i,
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Since the NBER models are based on geographic differences in recail price at one point in time (1976), they do not translate directly to national changes over time: • The positive income elasticity suggests that, over time, price elasticity ehould be applied to retail price deflated by some measure of consumer income. However, the price elasticities are strongly age/sex specific and income meaeurea/projections are not available by age/sex. 4 Since consumer prices may continue to rise faster than income (especially among young adults), using the CP1 as yields conservative estimates of the price impact. a deflator probably •. Restricting the sample to eliminate "border effects" improved the model's applicability to the nation. However, it created some regional bias -- Westerners rose from 18% to 29% of the sample while Northeaeterners fell from 24% to 11%. This may have made the price elasticity more negative than the "true" national value, since positive coefficients were associated with residence in any region except the West. Tbua, the adult NBER elasticities are imprecise for national price changes. Hottever, they probably give a reasonable idea of the groups most affected by price and the orders of magnitude of the effects. THE TEENAGE MODEL SQI)RCE: "The Effects of Government Regulation on Teenage Smoking," by E. M. Lltwit, D. Coate, and M. Grossman. Journal of Law and Economics, Decembec, 1981. these models used personal interview data from Cycle III of the Health Esau?ination Survey*, conducted 1966-70. Incidence and rate findings from HES ItI seem reasonable, perhaps even a cut above most teenage studies. But it is nCt recent. A major goal of this study was pre/post assessment of the Fairness Doctrine, whitb loaded television with anti-smoking commercials from 7/67 through 12/70. Otbar.variablea included: *In Self-Reported Health Behavior and Attitudes of Youths 12-17 Years, United States. HEW, 1975. DSB/ch - 10/6/82 Code: 5.21 RM033195 - 7 -
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• THA retail prices, adjusted to state cost-of-living and changes in the national CPI during the 4-year survey (an improvement over no adjustment, but still makeshift). • Fairness Doctrine intensity versus cigarette advertising and amount of time spent watching TV ~ Family income deflated by state cost-of-living • Number of other children s Parents' education Working mother or single parent Empioyment/allowance of youth respondent (detailed) Student status • Age • Sex • Race • Region and city size Laxge, negative price elasticities were found. The coefficients were stable i'hd statistically significant in all model specifications reported. The suthors sugge:t that these lar e elasticities ma incor orate other effects ~hi¢h the model did not include capture separately. They suggest that the income related variables may have failed [o represent the youth's actual discretionary incotne. NBER PRICE ELASTICITIES AMONC YOUTH 12-17 TE 0 1 ~ REPORTED REPORTED y "TOTAL DEMAND" INCIDENCE RATE (INC. x RATE) Total 12-17 - 1.19 - .25 - 1.44 Th:e Fairness Doctrine was also found to have an important negative effect during its first year (accounting for a 3 percentage point drop in 12-17 !ncidence), but showed diminishing returns during its second and third year. Cigarette advertising on TV was found to partially`offset the Doctrine effects. Thus, the absence of TV advertising after 1970 was implicitly a negative effect, but the absence of the Fairness•was a larger implicit positive. nsB/ch - 10/6/82 RM033196
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941T mt-f- October 13, 1982 Mr. J. W. Johnston Mr. M. L. Orlowsky L. W. Hall, Jr. ims, SUOECT: PRICE ELASTICITIES ~ - PV Attached are three documents relating to price elasticities for your review. ?`S„;,.have asked Jerry Moore to arrange a meeting for the four ~:s(Is to discuss the implications of this information sometime e~t week. All c?: ~ J. R. Moore a PLAINTIFFS EXHIBrr /3 RH000:71R ~ 0 ~ a ~ N W N 4
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C 0!7 F I D E N° ::1 :, October 6, 1982 1'0: ', Mr. L. W. Hall, Jr. YkOH: Ns. D. S. Burrows ftv NBER MODELS OF PRICE SENSITIVITY BY AGE/SEX PLAINTIFF'S EXHIBIT j6M~UND In,i981, the National Bureau of Economic Research (NBER) published two models IsB6ed on consumers' responses to government smoking surveys. Because the NBER models were cross-sectional (testing difference, between peopl. rather than over time) they were able to relate price separately to incidence and rate per day, by age and sex. The NBER elasticities may not reflect the exact effects of price increases, siace their models didn't deal with changes over time. However, the effects they,found for other variables (race, income, working women, etc.) are highly coosistent with our understanding of market dynamics. Thus, it is likely that the NBER models have correctly identified relative price sensitivity among age/sex groups. A detailed critique of the NBER models is Attachment B. SIIlWARY OF FINDINGS Accotding to the NBER models: • Teenagers and younger adult males are highly price sensitive. • Males over 35 have above average price sensitivity. • Women and 26-34 year old men are relatively immune to price. • Price affects incidence; rate per day is virtually unchanged. ~ ~ n NBER PRICE ELASTICITY AMONG; N {J TEENS ACES 20-25 AGES 35+ TOTAL ~ 12-17 TOTAL MALES TOTAL MALES 20+ ~ EFFECT ON: Incidence 1.19 .74 1.28 A A .26 N m N Consumption -1.44 - .89 -1.40 - .45 - .66 - .42 CX-72 J O r DSB/ch - 10/6/82 RM033189 Coder 5.21
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! Mr. L. H. Hall, jr. October 6, 1982 Page Two ~°FINDISCs pany elasticities and indices of their price sensitivity are shown on ttached chart. Brands showed the saee rank order of price sensitivity 11 b both oth:female seenarios. However, brand elasticities were more nearly equal if s and males were assined to react to price. LUSIONS ~PThe tis e in cigarette prices associated with the 1983 F.E.T. increase may affect OS: ;'t'he 3:SRpd;E;;is) bran exte aud d market shares. The degree of these effects will depend greatly nt to which women react to price (an issue not resolved by the NBER on other factors in the marketplace. n All oth er f actors being equal, the relative effects are estimated as follows: ~ • Neither RJR :.oc PM would gain share advantage from the price hike. ~ 0 . Share trends for c7ItiSTOS and Yarlboro may show negative price n. e effects. The degree of effect is likely to be stmilar for these brands. • Strongly female brands, such as Virginia Slios, are relatively invulnerable to price and may improve their market share due to t. • higher prices. SALEM's share may benefit slightly froo higher prices. Newport is more likely to be adversely affected. ~ • VAirTAGE and Merit elasticities are about equal. Their share trends may modestly improve due to higher prices. ~ 0 • The B6H profile suggests a positive share effect from increased c a price. CAMEL is the most price sensitive aaong the brands examined. This may explain some of the brand's 1982 slovdown. "Further slowing may occur as prices rise. $. Burrows ~ T1A1aLLTINC DEVELOPMEl1T DEPARTMENT w DSB/ch ~ cc: Mr. J. R. Moore Mr. H. E. Osnon Ms. E. N. Monahan Mr. P. E. Calyan Mr. R. A. Davis Hr. N. K. Doten t r s. w Mr. E. J. Fackelman Mr. J. R. Hribar Mr. V. R. Eddins Ms. S. w. Teague ~. r I MDIC RM037644 N
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NREq ESTIMATED ERAND/COMPAFY PRICE E1.ASTICITIES E3ast,;lc'.tSes: Tr3ckex;, brand„prof,lles anctd nRe/tzex rntea yRerr day . . . - „. . ~ . ~ ~ Z CONSIJNPTION ATTRIBUTABLE T0- MAi.ES FE`IA1.ES -OSLY MALES" 18-24 25-34 35+ 18-24 25-34 35+ EST. INDEX NINSTON 4.8% 13.1% 56.0X 2.0% 6.91 17.21 - .436 i31 CAMEL 9.9 17.2 58.5 2.6 2.3 9.5 - .524 157 SALEM 5.0 11.4 32.5 7.4 13.2 30.5 - .284 85 VANTAGE 5.9 13.4 33.2 4.9 13.0 29.6 - . 30I 90 RJR (TOTAL) 5.8 13.9 40.5 4.4 9.8 25.6 - .348 104 Marlboro 20.3 25.3 23.0 12.4 9.5 9.5 - .436 131 Va. S1tms .2 .8 3.3 30.3 26.7 38.7 - .025 7 Merit 8.3 16.0 29.2 8.3 14.7 23.5 - .308 92 BbN 4.9 9.1 25.9 8.8 15.8 35.5 - .239 72 PM (TOTAL) 13.2 17.9 23.5 12.1 12.8 20.5 - .340 102 Newport 22.0 19.3 7.1 27.9 13.3 10.4 - .355 106 TOTAL INDUSTRY 7.7 14.5 34.4 6.8 10.7 25.9 - .334 100 Elasticity -1.401 None - .658 - .311 S None - .174 E oSe/ch - 9/27/82 d Co e: 5.19 Pnidu •td t~ P'td I T d.. t i er r• ( 09T5 681es E116 4£4TS .~ ,~ t .ommt~sion pursuant tu subpuena dated Junt• 6. 1997. F'Si: allf.A:~TiCITY''(2 SiCENARIOS) "MA1.ES FEMAI.ES" EST. INDEX - .486 ;21 - .548 137 - .360 90 - .368 92 - .406 101 - .491 122 - .186 46 - .375 94 - .328 82 - .413 103 - .460 115 - .401 100
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DIANE S. BURROWS VoL 2, June 3,1998 (11 A: Sounds reasonable. m 0: Do you have any reason to doubt that date? Csl A: No, I don't have a database. (41 MR. WILLIAMS: Are you going to have (sl questions about this? Iel MR. SHONKA: Let's go off the record. m(Deposition recessed at 5:09 p.m.) (s] (41 (+m (+11 (121 (131 (141 (151 118j (171 (181 (1s1 ('ml 1211 (221 [231 (24] 1251 Page 212 (1] CERTIFICATION O F REPORTER m [31 DOCKET/FILE NUMBER: D09285 (41 CASETITLE: RJ. REYNOLDS TOBACCO COMPANY (sl HEARING DATE:June 3,1998 (a] m I HEREBY CERTIFY that the transcript contained Isl herein is a full and accurate transcript of the notes (al taken by me at the hearing on the above cause before the (10l FEDERALTRADECOMMISSIONtothebestofmyknowledg and p+l belief. p21 DATED: June 4th,1998 (131 (/q 1151 ANDREA L. NOBREGA (t81 (1n CERTIFICATION 0 F PROOFREADER nel (te] I HEREBY CERTIFY that I proofread the transcript (xol for accuracy in spelling, hyphenation, punctuation, and te11 format. LM 1231 (24] (asl MARTIN A. NOBREGA RJ. REYNOLDS TOBACCO COMPANY' MATTER NO. D09285 Page 211 (t] CERTIFICATE OF DEPONENT m (s] I hereby certify that I have read and examined the (4] foregoing transcrpt, and the same is a true and accurate record of the testimony gNen by me, - (u Any add8bns or corrections that I feel are (al necessary, I vAA attach on a separate sheet of paper to the orqlrrel transcrpt. m (el (sl (101 (11I I hereby cert8y that the Indlvidual (121 represenling himsellrhersetl to be the above-named IndNldual, appeared before me this (131 _day of , 1998. and executed ttre (1q above certtllcate In my presence. (15I (1e) (171 NOTARY PUBLIC IN AND FOR (1al (1ai (201 MY COMMISSION EXPIRES: 1211 (24 (23I l2Q R51 Page 213 (1) WITNESS: (2) DATE: (31 CASE: (4) please note any errors and the aorreollons Ihereol on this errata sheet. The rules require a reason for any (sl change or eorreellon. 8 may be general, such as To correct stenographlc error,' or To clarify the record,' (6) or To conform with the facts.' m (8) PAGE LINE CORRECTION REASON FOR CHANGE ro! (101 (111 1121 1131 (141 (t51 (161 (1>t l1Q (191 Ipl (21) (ital (Mi 1241 (2i Page 214 Page 211 - Page 214 (28) Mln-U-Scriplt® For The Record, Inc. - (301)870-8025
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ItJ. REYNOLDS TOBACCO COMPANY MATTHR NO. D09285 Page 183 til BY MR. SHONKA: M 0: What role, if any, does peer acceptance R play in, first, usual brand choice? 141 MR. WILLIAMS: Can we have the context of tsl this or are you asking her as an expert? Object, it's ta) vague and undefined. m THE WITNESS: I don't have a measurement of lal it. I think it's pretty much common knowledge that many l91 people choose a brand based on what their friends, or in pol the case of a married couple, what their spouse smokes, h q and I don't know how to quantify it. I:zl BY MR. SHONKA: nol 0: If I could draw your attention back to 1:41 Exhibit 23, which is the coding form. It should be the 1+s7 coding form. lisl MR. TAYLOR: MDD abstract form. t171 t+el BY MR. SHONKA: 0: I notice one of the terms coded in that is pal social acceptability. Rol 1211 A: Yes. MR. TAYLOR: Meaning key words. rM MR. SHONKA: In the key words, and the DIANE S. BURROWS VoL 2, June 3,1998 Page 185 tq said it read like a novel.That's what I recall. tA A: I think it was a complement. I thought so. I31 Q: Sounds like one to me.You mentioned Larry t41 Hall. Did you see him regularly at this time that you Isi recall? lel A: Not very regularly is what I recall. m 0: Do you recall the context of that comment taJ to you? 191 A: He was over in the corner of the building tiol and stuck his head in the door, I think was the n+l situation. p21 Q: He came by your office? 1131 A: Well, I don't think it was a special trip, tldl but he was in the neighborhood is the way the picture tisl comes to mind, and stuck his head in the office and said t,el I read your report, it read like a novel, something like t+r1 that. t,el Q: He was at this time the vice president of t,el brand marketing, I believe, based on Reynolds Exhibit 1 tzol there? (zil MR. WILLIAMS: He was what he was. 1221 BY MR. SHONKA: tnl question I have is, is the term social acceptability a t23l (241 term that was in common use throughout Reynolds to the tz41 tut best of your knowledge in 1984 when you wrote this 1251 Page 184 t+l document, this document being Exhibit 24? (zl THE WITNESS: Having looked at this report pl and so forth, I believe it was. 141 BY MR. SHONKA: tsl 0: Does the term group sociability mean tsi anything to you? m A: Not really. tal Q: You never heard the expression, that you ro1 recall? twl A: It wasn't a big buzz word. I don't tnl remember. nal 0: According to the date on this document, t+al this document being Burrows Exhibit 24, it was n4l circulated or it is dated February 29th. What happened t+al after that - what's the first thing you are aware of t+s1 after the report went out? t,n A: I really don't know. My first thought was t+el I probably took a couple days off. I'm sorry, I don't t1sl know what the first thing would have been. Ceoi 0: Did you get any feedback? tx+l A: Whether it was the first thing or not, I tzxl got some complements on the report. ta 0: Do you recall from whom? tul A: Well, Dick Nordine for one. I don't really resl - no, I do recall a complement from Iarry hall, He 0: Does that sound right to you? A: No, I believe he was involved in the marketing research department still. I'm not exactly Page 186 t l sure of his position, but it was market research. [zl 0: The Burrows Exhibit 1, page five indicates (31 that Larry Hall was in February of 1982 vice president ta of brand marketing. Do you have any reason to doubt the tsl accuracy of this, of Burrows Exhibit 1? tel A: On what date, February of 1984, as I read m it, he was called vice president of marketing tel development and I believe marketing development rol department was the name that they had on marketing t ol research that year or some surrounding years.They kept t„I changing the name of the department. n21 0: So vice president of marketing and [+31 development was part of research at that time? tul A: That would have been probably the head of t+sl the market research department in plain English. m t,el Q: Thank you for clearing that up. Head of ^' r (171 marketing research, you said? to t+el A: That's the way I translate vice president hsl of marketing development, yes, i~ tpl Q: That's how you think of it? a tz+l A: Yes. rg MR. SHONKA: I ask the reporter to mark as tg Burrows Exhibit No. 25 a document that has the bates tul number502635163,andthathasbeenpreviouslymarkedas t2s7 CX-76 on the underlying proceeding.There is a memo For The Record, Inc. -- (301)870-8025 Mia-u-Script® (21) Page 183 - Page 186
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DIANE S. BURROWS VoL 2, June 3, 1998 Page 147 hi help everyone learn to work this arithmetic and possibly rl] be able to make use of it in their areas. [al That's what comes back to mind. [4l Q: When you say "make use of it in their Isl areas," are you saying that the task force - what do [ei you mean by that? m A: The people the memo is addressed to didn't [el work in the same area that I did.They worked in other R - and, I don't know exactly where - other departments pol within the market research department.These other [++l persons in the market research department were not [+zl familiar with how to implement some of the more or less [+a[ arithmetic that I had been doing to attempt to project n4[ future brand shares or that kind of thing. [+s7 So someone must have had a desire to share pet the learning with other groups within market research, nn and that was - tbat's the general recollection I have [,al about this kind of thing. {,ei 0: Was the work that you did on the task force reo[ related to the econometric model that we discussed t1+1 yesterday? Cm A: I wouldn't say directly related, no, sir. teal Thereiscertainlysomecommonalitybetweenthiskindof [z4l arithmetic and some of the kinds of arithmetic we have rzsl seen in memos from the econometric model days. Page 148 [1l Q: Only in the sense then as an overlap, but m not a continuation of the first project? (31 A: Right. [a1 0: Do you know who set up the task force? [s] A: No, sir. I didn't even remember it. [sl 0: Do you recall why it was set up? m A: I have given you my best kind of lel recollection. mi Q: And you don't recall any other reason for [+ol it? [„t A: No, sir. [+zl Q: S.W Teague is a new name for us on these [+al depositions so far as I know. Could you tell me who he, [+4j she is? [+sl A: I believe that would have been Susan [+sl Teague. l+n Q: Do you know where she worked? l+e[ A: She worked within the market research po[ department, a variety of positions as was typical. She rzo[ and I joined the market research - I ntis-spoke. I [z+l think she joined the company about the time I left the r4l library and began trying to do market research as such. tb[ 0: So you both began market research about the 1241 same time? r,6t A: Well, I technically worked for market RJ. REYNOLDS TOBACCO COMPANY' MATTER NO. D09285 Page 149 [+I research as a librarian, but I recall her being new m roughly the time period after I left the library.That tat could be very imprecise. Our tenures with the company [41 overlapped. [sl 0: Do you know where she is now? (e) A: Where she is? m Q: Yes. [el A: No, not really. [el MR. TAYLOR: It's an hour plus. I'm going [,o[ to make that note only to note it. l++[ MR. SHONKA: We can take a break any time t+z[ someone wants one. [,s[ THE WITNESS: Whatever suits - [14l MR. SHONKA: I will let the witness decides [+sl this one. [+al THE WITNESS: Since it's been suggested, [+7l let's go ahead and do it. [+e (Recess was taken from 2:10 p.m: to 2:30 p.m.) (+s1 (Burrows Deposition Exhibit Number 17 was lxa] marked for identification.) [z+l BY MR. SHONKA: [M 0: While we were off the record I had marked psi Burrows Exhibit 17, which I have given to the witness. a4l Burrows Exhibit 17 is a multi-page document with a cover [zsl that says youth smoking, November 21, 1983.It has been Page 150 l+l previously marked by complaint counsel in the m administrative proceeding as CX-843. t't Ms. Burrows, I ask you to take a look at [4[ exhibit, Burrows 17, and tell me if you recognize the [sl document? [el A: No, sir, I don't. m 0: Do you have any idea who prepared it? [e[ A: No. la[ 0: Do you know or can you tell if it is a [,o[ Reynolds document? [++[ MR. WILLIAMS: What do you mean by Reynolds [+2[ document? [+al MR. SHONKA: By Reynolds document I mean [+41 document that was prepared by somebody in Reynolds. [+sl THE WITNESS: The only thing I could do is [+el look and see if it said Reynolds somewhere and I presume [+n you folks have already looked for that. I believe I [+el have never seen this or heard of it before. [+el BY MR. SHONKA: [zal Q: You are not familiar with it? [z+l A: No, sir. [n[ Q: Tell me, are you aware in the fall of 1983 [ra[ of a series of focus groups that were conducted as part p4[ of a qualitative testing for younger adult smokers? [zsl A: In what time frame? Page 147 - Page 150 (12) Mia-v scritpt® For The Record, Inc. -- (301)870-8025
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RJ: REYNOLDS TOBACCO COMPANY MATPER NO. D09285 Page 191 t+] similar to what is in this report? tB 0: Yes. t3t A: No. µ] Q: Did you make any presentations concerning ts] the subject of the report at all? tsl A: Concerning younger adult smokers? m O: Yes. [s] A: Yes.As I mentioned a minute ago, there [s] was a later project related to younger adult smokers, t,o[ also. t, [i 0: Any presentations you made were in relation [,z[ to the later project, not to this projecc, this project t+31 being Exhibit 24? t,q A: That's my recollection. t s] 0: What are projectsYAX and DB? Does that t+s] term mean anything to you? t n MR.TAYLOR: Is that one question? pe] MR. SHONKA: It is one question? [is] MR.TAYLOR: What does the termYAX mean to pq her? a+] MR. SHONKA: And DB. Let me back up. tzz[ Projects YAX and DB, do you know if that is one project tz3] or two projects? DIANE S. BURROWS VoL 2, June 3, 1998 Page 193 [+[ this, of Burrows Exhibit 26, refresh your recollection p] at all as to those terms? ]a] A: Not really.There is some information in t4] the sentence, but it doesn't remind me of anything. [s] Q: Can you glcan any information about the [s] projects from looking at Burrows Exhibit 26? m A: From reading the sentence I would say that ts] some group called new brands had projects DB andYAX. te] 0: And you have no recollection of those (101 projects? t++l A: No. I mean, the sentence could well have [+z[ been included to further justify the cost of buying this ns] data, was that somebody else could use them also, and I tu] don't know what those were. tis] MR. SHONKA: I ask the reporter to mark tw] Burrows Exhibit 27. [+n (Burrows Deposition Exhibit Number 27 was (,al marked for identification,) (191 BY MR. SHONKA: [zol 0: It's a document that has been previously [z,l marked as C&Ci57. It is a document that is entitled rrm younger adult smoker analysis and it bears the bates tza[ numbers 502033345 through - tz4] [zs7 THE WITNESS: I don't know. BY MR. SHONKA: aa] . MR. WILLIAMS: Before we go on, can we get (2s[ a copy? Page 192 Page 194 [,] 0: Does either term mean anything to you at [] MR. SHONKA: I'm sorryAgain, the bates tA all? [z] numbers are 502033345 through 3359. ts] w A: No. DB is my initials, but - MR.TAYLOR: Plural on the projects, but [o] [4] MR. TAYLOR: Upside down I will note. BY MR. SHONKA: [s[ suggests that it means something to the question in ]s] 0: Ms. Burrows, take your time to look at it, (6) her- m MR. SHONKA: I would like to have the [e] document marked as Burrows Exhibit 26.It is a document [e] that has been previously marked as C%.56. It has a oo] cover page that has a file number 84-44303 inked in, and n+[ the cover page says MDIC marketing development t+zl intelligence center. 1131 (Burrows Deposition Exhibit Number 26 was Iul marked for identification.) I+sl BY MR. SHONKA: tisi 0: Ms. Burrows, on the second page of the nn exhibit, are those your initials at the bottom of the na] page? f+s] A: They look like it. Ip] 0: I asked you to focus on the paragraph that tz+] begins "Action To Be Taken:" and you will see at the end tz2] of the paragraph there is a reference to projects DB and tat YAX. lz<I A: Okay. res1 0: Does this refresh - does your review of (s) but the question is going to be, did you prepare Burrows m Exhibit 27? te] A: I don't know. ro] Q: You do not recognize the document? t+m A: Not really. Some of the content is similar [++] to some things I did, but I don't remember it at all. [,z1 Q: Does the term white paper have any meaning [13] to y0U? [i4] A: Some. (IS] 0: In the context of Reynolds? 1161 A: Yes, some. p7] 0: What is that? [,s] A: Dick Nordine's group sometimes issued ns] reports that were called white papers, and I believe it i2o] was a term somewhat popular in the world at large in ts1] perhaps the '80s for think tank pieces perhaps or kind taz of an academic character. I am not giving a very good rn[ definition, but some of the reports from Dick Nordine's [s4] group, as I recall it, were called white papers. tzs] 0: Ms. Burrows, do you consider Burrows For The Record, Inc. -- (301)870-8025 Min-U-Scrlpt® (23) Page 191 - Page 194
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DIANE S. BURROWS VoL 2, Jttne 3,1998 Page 163 I+1 draft report? (zl A: No. m 0: And by that I mean the dtaft report is (ol typed without the handwritten? (s) Ai I have no idea. (sl MR. SHONKA: Actually, I am going to ask m the court reporter to mark two documents at one time tel here. One I would like to have marked as Burrows (sl Exhibit 22 and the other as 22A. (+a! (Burrows Deposition Exhibit Numbers 22 and (I,l 22A was marked for identification.) (,zl MR. SHONKA: For the record, Burrows 1131 Exhibit 22 has been previously marked as CX-849. It is (ul a memo that I will represent is the best copy that I ust have of a barely legible document that is dated February pal 28,1984. It is a memo to L.W. Hall, Jr. from R.C. (+rl Nordine.The subject is younger adult smoker analysis. (,el Burrows Exhibit 22A, I will represent to (iu) you is a retyped copy or is a retyped version of CX-849, reol Burrows Exhibit 22. re+l MR. TAYLOR: Something you did to try to tnt help us? (2s1 MR. SHONKA: Yes, it is something I had (2<I done in an effort to make Burrows Exhibit 22 readable. tnt MR. TAYLOR: Doesn't appear to be Page 164 identical. MR. SHONKA: I will represent that the typed text is to the best of our ability identical.The line - obviously the type is different, and therefore, the lines do not match. MR.TAYLOR: I just note it because it jumps up at me that the penultimate paragraph - I always liked that word - in the penultimate line on the right side is the word quick fix. Quick fix is in quotations on Exhibit 22 and not on 22A.That just jumped at me, but what else is new. MR. SHONKA: I would have no objection in that.I appreciate the correction. MR.TAYLOR: That's just a comment, that's all it is. MR. SHONKA: With that correction I believe the two are identical. I will represent them to be substantively identical to the best of our ability and - THE WITNESS: I don't have 22A. Should I? MR. SHONKA: I'm sorry. Ms. Burrows, have you had a chance to look at Exhibit 22 or 22A yet? THE WITNESS: One more second, please. MR. TAYLOR: The third paragraph in 22 it says "1984 Plan ending up with all of our new R.J. REYNOLDS TOBACCO COMPANY MATTER NO. D09285 Page 165 (,1 established brands." It looks to me like on 22 there is (zl a slash between new and established. (31 MR. SHONKA: If there is, I give you credit (4I for wonderful eyesight. (s) MR.TAYLOR: I don't have that. I just see ' (el a - m THE WITNESS: I think I see it, too. (el MR.TAYLOR: I guess it doesn't change (sl anything substantive. [101 THE WITNESS: I have looked it over. (+,I BY MR. SHONKA: (121 Q: Ms. Burrows, the reference to in the a31 subject line is younger adult smoker analysis. Was your (141 report sometimes referred to by that name? (isl A: I think it was. (i61 0: The first paragraph includes a reference to pn Tom Rucker. pel A: Yes. (+sl Q: Do you know who he is? (NI A: Yes. R+I 0: Who is he? (221 A: At that time he was a lawyer for IZJ (231 Reynolds. (241 Q: Is he still with RJ, if you know? (xsl A: I don't really know. Page 166 t+l 0: I draw your attention to the fourth m paragraph and I refer you to the sentence that says (sl "After all, younger adult smokers have been high in the t<I company's priorities for ten or more years.Yet, our (sl performance is at a ten year low." lsl Do you see that? m A: Yes, I see it. (el 0: Do you have an understanding as to what (sl those two sentences mean? 1101 MR. WILLIAMS: Object, lack of foundation. (++1 She didn't write this. n21 THE WITNESS: I can read the words and they (+al sound clear. I don't know any meaning beyond that. (14] BY MR. SHONKA: l sl 0: Do you recall what the company's priorities (,e) were or didyouknowwhat the company's prioritieswere pal regarding younger adult smokers in 1984? pel A: No, sir. hsl Q: Did you, in 1984, after having completed a (eq draft of a younger adult analysis report, have an tz+l understanding as to the company's performance? rg MR. WILLIAMS: Objection, lack of (231 foundation. tz.l THE WITNESS: I think there was something Izsi about the company's performance among younger adult Page 163 - Page 166 (16) Min-U-Script® For The Record, Inc. -- (301)870-8025
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DIANE S. BURROWS VoL 2, June 3, 1998 Page 123 i+l MR. TAYLOR: The question is whether you m have seen if like it is here today? la] MR. SHONKA: In its present state. l4] THE WITNESS: I don't think so. I don't ls] recall. - (a) BY MR. SHONKA: m Q: Do you recall seeing the attachment to lal Burrows Exhibit 13? rol MR.TAYLOR: The attachment to Burrows pol Exhibit 13? li ] MR. SHONKA: Yes, the document that appears liz] to be Exhibit 12. p3] MR.TAYLOR: That appears she authored. l+.] MR. WILLIAMS: She already said she saw it. lul THE WITNESS: I assume that what is l+al attached to Mr. Hall's cover memo is the same as Exhibit h7l 12, and since it's signed by me and looks like some of pel the - a lot of the stuff I did on this, I would say I ho] have seen that before. lzol BY MR. SHONKA: tz,] Q: Do you know who Mr.Johnston was, what rui position he held with Reynolds in October 13,19827 p] A: No, not really. rlq Q: Do you know what position Mr. Orlowsky held lzs] at that time? Page 124 Ill A: No, not really.They were both senior m people and that's all I know. o] Q: Were they above Mr. Hall, to your l4] knowledge, or recollection? /s] MR. TAYLOR: Don't guess. If you know and la] can recall. m THE WITNESS: I'm not sure. la] BY MR. SHONKA: lsl Q: Ms. Burrows, do you recall our discussion tio] yesterday regarding your suggestion in a memo that l++] Reynolds sell half packs of cigarettes? (121 A: Yes, I do. Well, in general, yes. nal 0: That way I don't have to bring out another l+4] document. hs] MR. WILLIAMS: Are we going back to the ps] half pack document? lnl MR. SHONKA: No.I asked her only if she l+el recalled the discussion.The reason is so we wouldn't l:ol have to go back to the half pack document. tzol I ask the reporter to please mark this as rz+] Burrows Exhibit 14. Rz] (Burrows Deposition Exhibit Number 14 was raal marked for identification.) tz.] MR. TAYLOR: This is difficult to read. lzs] BY MR. SHONKA: RJ. REYNOLDS TOBACCO COMPANY' MATTER NO. D09285 Page 125 f+l Q: I will - m MR. WILLIAMS: I can't read it, I'm sorry. pl You are going to have to give - ls] MR. SHONKA: I will identify it for the ls] record while you read, but I will wait until everybody ls] is ready. m It is a memo that is labeled confidential, la] It is dated October 14,1 believe, 1982. It is a memo ls] addressed to Mr. L.W. Hall, Jr. from Ms. D.S. Burrows. nol The subject is marketing implications of the NBER study l++l on price sensitivity among adults 20 plus. l1x] MR. WILLIAMS: I think the problem is tNne lu] is mis-stapled. I have got- lt4] MR. TAYLOR: Looks like your second page is ps] my fn'st page. pat MR. WILLIAMS: Oh, I seo. h7l MR. TAYLOR: The second page is worse than ha] the first page. hs] THE WITNESS: I am having a very difficult tml time figuring out what this says, just reading it lzi] because of the copy. lzz MR.TAYLOR: Is there a question pending or lza] you just wanted her to read it at this point? lza] MR. SHONKA: Let me cut through this. 12s7 Maybe we can avoid reading it. Page 126 I+] MR. TAYLOR: Let me tell you what I have m here, too. I have three pages. How many pages do you la] have? Diane? (4] THEWITNESS: Two. ts] MR. WILLIAMS: Mine is two. ls] MR. TAYLOR: My third page is my first page m all over again, so I will take care of that problem. ls] Now I have two pages. ]al MR. WILLIAMS: I'm sorry, what is the date? nm I cannot read the date. 1111 MR.TAYLOR: Something'82. nzt MR. SHONKA: Bear with me a moment. I will l+a] check the exhibit list. 1141 MR.TAYLOR: Looks like it's double digits, t+sl but I'm not totally sure of that. 1161 MR. SHONKA: October 14th.Yes, the i n exhibit list indicates it is October 14,1982. pe] Ms. Burrows, I draw your attention to the t191 bottom of the first page. Can you make out the rml asterisk, and then up just above the asterisk there is a R+1 paragraph that is numbered three and it says "'Half lzm packs' (10's or 12's) of a new or existing younger adult lzo] male brand, as an alternative to the brand's 20s." Do tz4] you see that? rzsl THE WITNESS: I see that. Page 123 - Page 126 (6) Min-II-Script® For The Record, Inc. -- (301)870-8025
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'R,j. REYNOLDS TOBACCO COMPANY 14IATTER NO. D09285 501432327 122:2 O 2 501432336 122:2 502033345 193:23; 194:2 0907 196:17 . 20 117:17; 125:11; 159:5, 502631142 145:12 0941 196:22 6, 9: 162:7; 177:22, 22,23 502635163186:24 0947 196:23 20's 128:9 502756957 167:18 20s 126:23 0949 196:19, 20, 22 502996233 198:14 21 149:25;161:14, 18, 21; 162:3 502996339 199:1 1 22 163:9,10,13, 20, 24; 502996639 198:14 22 24 1G5 164 10 1 ; : , , : 503020443 210:4 1 135:8,13,18,19, 25; 22A 163:9,11,18; 503020540 210:5 138:16,16; 185:19; 186:2, 164:10,20,22 503189845 131:4 5 23 167:17, 20, 24;168:1; 503570907 196:18 169:4; 170:18; 183:14 10 120:3, 8;121:5 503570934 197:15 ' 241G7:3;171:11 12; 10 s 126:22 , 173:6; 179:10; 180:17,19, 507545611 203:18 100 139:1;158:20 20; 184:1,13; 187:17; 514349111 116:22 11 116:20,23; 117:7,14; 188:2, 5, 6; 190:24; 5612 203:18 118:14 191:13;199:17; 204:6, 7 570357 197:25 1149 145:13 25 186:23;187:3,11,13 5:00 195:22 23;196:2 12 119:20,24; 120:7,7, 26 192:8,13;193:1, 6 , 5:09 211:7 13,19; 121:1; 122:15,17, 27 128:5;193:16,17; 22;123:12 17 194:7; 195:1, 2, 3, 9; , 12's 126:22 201:22. 23; 202:1 G 27th 11":18 20 13 122:3, 7, 7, 19;123:8, , 10,22 28 163:16; 196:9,10,13; j 6 120:16;122:13 197:2 13th 122:21 60 180:17 21 19 29 167:19;171:18;198:4, , , 14124:21,22; 125:8; 5;207:5,10,17 6317 198:17, 21 126:17; 127:24; 129:13, 29th 184:14;187:17; 6338 198:18,19 16, 20, 22; 130:14, 25 199:16;200:25 6639 198:15 14th 126:16 2:10 149:18 6th 117:20; 120:19 15 131:5, 8;134:6;135:8, 2:30 149:18 25;136:4;137:1 6 23 , , 1526 179:17 3 7 16 129:24;145:11, 15,18; 146:15 7 131:9 3 212:5 17 149:19,23 24;150:4; 76 187:7, 9 , 30 174:12; 187:1; 203:13, 156:15; 159:14; 205:2 14,19 79 135:14,15,16 18 1 51:10,11,14,21; 31 159:18; 204:22, 25; 167:2; 173:14,16; 174:1, 207:12,18 0 10;177:5,7,22,22,23; 32 159:21; 209:22, 23; 180:17,19,20; 204:7 210:1, 6,13, 17 19 156:15,19;161:20 3359 194:2 I 8 117:5,7; 118:6; 119:3; 173:16; 177:6; 210:24 1981 135:19, 25;155:5 35 176:20 i 80 135:17 1982 120:16; 121:19; 3:20 173:3 122:7,13; 123:22; 125:8; 3:30 173:3 ' 80s 194:21 6 82126:11 :17; 128:5; 131:9; 12 132:14; 133:3; 186:3 4 83 153:4; 155:6 1983 138:6,16;145:3,15; 83-41111 151:19 149:25; 150:22; 151:7; 833-41111 151:16 153:2,25;174:3 40 181:1 4:15 196:7 84 153:4; 170:4 1984 135:25;153:2; 156:16;159:14;163:16; 4:30 196:7 84-44303 192:10 164:25; 166:17,19; 167:6, 4th 212:12 847 161:25 19;170:1,2,7,11;171:4, 18 ; 174:21; 175:3,7,14, 18; 183:25; 186:6;187:1; S 9 205:2; 206:9,14,17; 210:25 5 174:2; 177:11, 12 9 127:20, 21, 24; 128:4, 1992 122:22 501431517 171:16 15,20,22; 129:3,10,18; 1994 133:25 501431572 181:2 130:9,17, 21, 22, 24 1998 212:5,12 501431610 171:16 9113 116:22 A A.M 156:16 ability 164:3,18 able 147:2 above 119:17; 124:3; 126:20;181:2; 212:9 absolutely 157:12 abstract 167:18; 168:6; 169:12,15; 171:6; 183:16 academic 194:22 acceptabiiity 181:4, 9, 15; 182:5, 8, 9, 11;183:19, 23 acceptable 154:16 acceptance 182:10; 183:2 accepted 142:5 According 184:12 acc u racy 186:5; 212:20 accurate 154:17; 159:2; 212:8 achieve 173:19 achieves 181:3 acquainted 135:5; 136:5 Actlon 192:21 actual 144:19 actually 118:10; 162:2; 163:6;199:15 address 118:25; 134:10 addressed 118:6, 9; 125:9; 136:4; 137:3; 143:22; 147:7 addressee 117:9 administrative 119:21; 145:14;150:2;159:11; 198:10 adopt179:6;181:5 adopts 178:7 adult 126:22; 128:19; 145:23; 146:16; 150:24; 151:17; 152:1, 22; 153:10; 156:1,17; 158:17, 22; 159:15;1G3:17;165:13; 166:3,17, 20, 25;167:13; 170:24; 171:2,20; 173:18; 174:7, 9;176:13;177:14, 20; 179:15; 180:6; 181:4; 187:24; 188:5; 189:25; 190:1; 191:6, 9; 193:22; 198:12; 199:13,19, 21; 200:1; 201:4, 20; 204:3, 14,17; 207:2,7; 209:13; 210:20 adults 125:11; 145:7; 176:22; 204:7 advantage 141:15; 1743;177:11;179:24 advertising 209:2, 5, 8, 16,19 afternoon 116:1o, it afterwards 190:2 again 126:7;132:2; 141:23; 172:20; 187:10, DIANE S. BURROWS VoL 2, June 3, 1998 14; 194:1 against172:22 age 174:11; 176:20; 180:8, 15 ageJsex 120:15, 21, 25 ages 174:19 aging 145:25; 146:2,23; 176:18,25;177:2,15; 180:7,14 ago 129:24; 142:24; 172:13;176:24;180:2; 181:20; 191:8; 206:25 agree 138:20 ahead 149:17; 160:17 almost 129:15, 19 alone 173:1G; 177:7 along 143:10;154:11;:168:13 already 123:14; 136:9; 138:23; 150:17; 162:8; 187:22; 197:21; 209:9 ahernative 126:23 always 164:8 among 125:11; 166:25; 167:2, 12; 176:17; 180:6, 17,18,19; 208:1 analogy 156:9 analysis 143:22; 152:21; 153:10; 154:7, 9; 156:1; 158:23; 163:17; 165:13; 166:20; 193:22; 199:13, 19; 200:20; 201:20; 205:11,18,21;206:20 analyst 137:25; 138:8, 12,17;139:15;140:3; 144:2, 9,17;145:6 analysts 119:16 analyzed 172:20 analyzing 145:25 ANDREA 212:15 anger 130:16 angry 130:13 annual 173:13; 177:4 answered 138:23; 197:21 anybody 155:20 anybody's 142:16 anyone 117:24; 118:13, 16; 127:2; 134:20; 187:16; 188:13 appealed 174:12 appear 152:6; 163:25; 170:19;195:8;197:12 appears 122:16; 123:11, 13;131:22;159:17; 171:21;210:18 appended 206:21 appreciate 164:13 appreclates 181:14 appropriate 170:25 approximately 155:8; 202:15 Arabic 179:11 area 130:23;147:8; For The Record, Inc. -- (301)870-8025 Min-U-Script® (1) 0907 - area
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R,J. REYNOLDS TOBACCO COMPANY MATTER NO. D09285 Page 135 (,I THE WITNESS: I'm sure someone asked me to m send this memo and whatever it says. (sl BY MR. SHONKA: (4] Q: You indicated yesterday in our discussion Isl that you at one time were acquainted with Steve Perry? (e( A: Yes. m Q: And if I represent to you that Burrows tel Exhibit 1 indicates that Mr. Petry-page 15 of the (g attachments we were referring to yesterday identifies an t+m S.R. Perry as a Steven R. Perry, and as you recall, when (n( we were talking about Mr. Perry yesterday, this was (+zi during your early period at Reynolds and Burrows Exhibit (+31 1 indicates that at that time Mr. Perry was a marketing (141 research associate statistician between February of '79 l,sl and October of '79, and a marketing research (1s( statistician between November of '79 and September of nn '80. 1181 Burrows Exhibit 1 also indicates that Mr. t+sl Perry between beginning in September 1, 1981 became (zol marketing assistant - marketing systems manager RIRTI. R+I Is RJRTl - it is a reference to International. I draw (zzI your attention to the note at the bottom of the page. (nl It says that.And the following page indicates that Mr. (x.l Perry became marketing systems and research manager tesl RJRTI after December 1,1981 through June 15,1984. Page 136 p( MR. WILLIAMS: Is there a question? tz1 BY MR. SHONKA: t31 Q: Is it your understanding that the Mr. Perry (al addressed in Burrows Exhibit 15 is the same Mr. Perry (sl that you were acquainted with early in your career at (e) Reynolds? m MR: TAYLOR: That you believe to be the (el same one that existed on - (91 MR. WILLIAMS: She already said it was the nal same one. (,il THE WITNESS: I think so1 i said I knew 1121 Steve Perry and now that you mention it, he did do some (,a( statistical something, I think. I++) BY MR. SHONKA: (+sl Q: Did you continue to stay in contact with ( sl Mr. Perry after your early years at Reynolds, after your n7i position as a librarian? I,al A: I wouldn't say I stayed in contact, no. (1s1 0: Did you continue to have business dealings Cpt directly with himt R+) A: No business dealings after he left Izzl Reynolds, I am fairly certain of that. hs! Q: While he was still at Reynolds, and by Im Reynolds here I mean Reynolds domestic or Reynolds [zsl international, did you have any business dealings with DIANE S. BURROWS VoL 2, June 3, 1998 Pags 137 p( him other than that indicated in Burrows Exhibit 15? (zl A: I was rather surprised to even see a memo (sl addressed to him. I recall very limited, if any, (<I business dealings with Mr. Perry. tsl Q: Do you recall any, though, other than that (e] reflected in Burrows Exhibit 15? m A: No, sir, I'm just saying since there is tet this exhibit there may have been some limited, but my tsl recollection he was part of a group that stopped off (+a( every Friday night after work and told good jokes and (, q that's the main thing I knew about Steve Perry, so - (,21 0: I understand.Just where did he stop off? (ia( A: In those days the Sir Winston downtown, .. (141 which no longer exists. ( sl Q: That's unfortunate. I,al A: Part of a large group in those days. (+>) MR. WILLIAMS: David, I thought we gave you (,al a list of the restaurants in Winston-Salem. t+s] MR. SHONKA: It turns out this one is (zol closed, John, that's all. Izi) MR. WILLIAMS: Do we have a number on that ral last exhibit? (za( MR. SHONKA: 15,1 believe. [z<1 Ms. Burrows, after you finished your (zs( position as a marketing research analyst, what position Page 138 I+I did you take next with Reynolds? If you need to m resort - (3I MR. TAYLOR: I don't want her to resort to (4] that. If you remember, answer the question. Isl MR. WILLIAMS: What year are we in now? (el MR. SHONKA: 1983. m THE WITNESS: Well, sir, one technical (sl difficulty I have here is marketing research analyst is (al not exactly a position in my view of things. It's a job (io( level and I believe I said yesterday that I thought I („I probably held three different positions as market (+z( research analyst, so I need you to clarify the question. (isl Do you want me to answer about a position or a level? n•l BY MR. SHONKA: ( sl 0: Let me cut through it and tell you that (,el Burrows Exhibit 1 indicates that on May 1,1983 you t n became a senior marketing research analyst. nat A: Yes, if they say so - oal MR. TAYLOR: That's what it says, we'll (20l agree with that. rta BY MR. SHONKA: (g Q: And the question, you may have sort of [zal answered it already, is was this a job change or a (zal promotion? Issl A: As I recall it, that was a promotion while For The Record, Inc. -- (301)870-8025 Min-U-Script® (9) Page 135 - Page 138
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ATTACN!lENT A IMPORTANCE OF PRICE IMPACT BY AGE/SEX TO TOTAL INDUSTRY 1982 IMPORTANCE TO INDUSTRY II. IMPORTANCE • X 0F RATE PER X OF TOTAL SMOKERS DAY CONSUMPTION Tee~igera 12-17 4.0 E 17,4 E 2.2 E Males 18-24 8.0 29.7 7.5 ales 35+ 28.7 36.9 33.6 Total 18+ 96.0 31.7 97.8 TOTAL 100.0 31.1 E 100.0 ource: Tracker (X emokere first half 1982, rate in year 1981) adjusted for estimated teenage smoking. ' ~ ~ 0 ~ ~ C ~ a .~ ' E t IMPORTANCE TO PRICE IMPACT: Sample calculatio n assumes lOX price ~-; increase and flat 623.0 billion industry. Importance of group to total 1o T change is independent of total vclume or price change. z~ IMPORTANCE NBER LOSS FOLLOWING L Y y TO INDUSTRY ELAS- 10% PRICE INCREASE - BILLIONS TICITY BILLIONS IMPOR ANCE ~ e Teenagers 12-17 2.2% 13.7 -1.44 2 0 7 2% ~ . . . ~ Males 18-24 7.5 46.7 -1.40 6.5 23.6 o. Halee 35+ 33.6 209.3 '-.66 13.8 50.0 u, Total 18+ 97.8 609.3 - .42 25.6 92.8 ro ~ TOTAL 100.0 623.0 - .44 E 27.6 100.0 ~ a w DSB/ch - 10/6/82 Code: S.71 R11n003,72 I
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The models were respecified using a restricted eample which eliminated respondents within 20 miles of a lower priced state, on the premise that the price they actually paid might be lower than the assigned price ("border effect"). For the restricted sample, price was found to be a statistically significant factor in: • Incidence and "total demand" among 20-25 year olde. "Total demand" among those ove!~ 35. f7hen.:the regressions were done by age/sex, significant coefficients were found for males. Though none were found in the female regressions, the higher ilaeticity rfoi males/females combined than for males alone may imply some i:;ffect among females. Sel;.pCted elasticitiee are tabulated on the next page. Only boxed values have a;S;,p,F,fettcal significance at normal levels. / 0 r ! W SB/ch - 10/6/82 F[000=7'__ N W W N Code: 5.?1
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RJ. REYNOLDS TOBACCO CObIPANY iKKATTER NO. D09285 consists 159:17; 196:14 constituted 122:20; 160:7 consulting 133:25 consumers 152:2 consumption 174:11 contact 136:15,18; 155:19 contained 212:7 contains 197:16 content 130:12; 194:10 context 183:4; 185:7; 194:15 continuation 148:2 continue 136:15, 19; 144:2 continued 140:22; 144:16; 189: 10 continues 180:19 Continuing 174:6 contrary 171:23 controversy 157:22 copies 162:25; 188:20; 199:4 copy 120:20; 121:10; 125:21;128:3;142:9; 143:5, 6, 9;159:17; 163:14,19; 171:22,25; 172:10;193:25 corner 157:9; 185:9; 198:11 corporate 132:3, 18; 140:23, 25; 141:5 corrected 162:4 correction 164:13,16 corrections 118:23 CX-404 210:3 CX-56 192:9 CX-657 193:21 CX-72 119:22 CX-76 186:25 CX-77 205:1:207:2 CX-8 198:9; 207:1, 3 CX-842 145:13 CX-843 150:3 CX-846 159:10 CX-847 161:16 CX-849 163:13,19 0 D.S 125:9; 145:15 D09285 212:3 dash 179:23 data 153:17; 154:13, 25; 155:13;156:5;167:1; 175:8;176:15;193:13 database 210:23, 23; 211:3 ~ date 117:8; 126:9, 10; 153:24: 184:12: 186:6; 203:4,9; 211:2; 212:5 ' dated 120:16; 122:7, 13; ! 125:8; 128:4; 131:9; 145:14; 156:15; 159:14; I 163:15; 167:19; 171:17; 184:14;187:1; 205:2; 212:12 dates 155:7 Dave 175:10 David 137:17 cost 174:15, 17;175:4, 1 day 143:4 11, 14, 17, 24; 193:12 11 days 137:13, 16; 141:11; counsel 119:22; 150:1; 160:10, 15; 161:15; 162:16 counselor 142:5 couple 117:15; 183:10; 184:18 course 206:4 courses 206:1 court 119:23; 163:7; 167:15:181:21, 24; 182:3 cover 122:21, 25; 123:16; 149:24; 159:13,18; 192:10,11 covering 190:25 credit 165:3 cuiminate 201:11 culminated 201:13, 25; 202:11 culmination 201:17; 210:19 Curry 156:16 eustomers 174:15 cut 125:24; 138:15; 206:24 CX-20 162:25 CX-21 196:14; 197:11 147:25;174:18;184:18 DB 191:15, 21, 22; 192:3, 22; 193:8 deal 141:4 dealings 136:19, 21, 25; 137:4 December 135:25 decides 149:14 deck 190:5 decline 177:25 deemed 118:22; 144:7 defending 143:12 defined 204:6 definition 182:24;194:23 delivered 209:5 Denver 152:1 department 147:10,11; 148:19; 185:25; 186:9, 11, 15; 206:7 departments 147:9 depends 121:17 Deposition 116:23; 117:4; 124:22; 131:5; 143:4, 12;145:18; 149:19; 151:11;156:19;159:6; 161:2 1; 163: 10; 167:20; 171:12; 187:3; 192:13; 193:17; 196:10; 198:5; 203:14; 204:22; 209:23; 211:7 depositions 148:13 describe 195:12 described 119:14 desire 147:15 desk 169:24; 170:4 detail 146:12 detailed 171:9 deterrent 178:23, 25 developed 206:8,13,14 development 151:16: 186:8, 8,13, 19; 192:11; 210:15 DIANE 116:4; 126:3; 131:10; 159:16 Dick 144:13; 153:8,8,15; 154:10; 156:5; 184:24; 188:17;189:10;194:18, 23; 200:2,17; 203:6, 7, 8 Dick's 154:25 dictate 119:2 differ 139:10 difference 122:25; 180:2; 182:15; 204:10,13 differences 129:14 different 127:11, 16,17; 129:20; 138:11; 164:4; 179:2, 2;189:18, 19 difficult 124:24; 125:19; 178:3 dlfficulty 138:8 digits 126:14 direct 121:21; 155:19 directed 118:13; 119:4; 121:10; 130:17; 200:2 directly 136:20; 147:22 discomfort 181:21; 182:3 discourage 208:3 discussed 127:7; 144;18; 147:20; 209:1, 8, 16 discussion 124:9,18; 135:4 distinguished 178:16 distribution 119:2; 187:15 dividend 174:12,13; 175:22; 176:1 divisions 170:9 DOCKETIFILE 212:3 document 116:21; 117:2, 25; 119:20; 120:12; 122:1; 123:11;124:14,16,19; 127:8;131:3,13, 18; 145:12;146:5;149:24; 150:5,10,12,13,14; 151:10,15,17,21; 152:5, 6,12,17; 153:19; 156:15, 22; 158:20; 159:11, 22; 160:1; 161:14,19; 162:9; 163:15;167:17,18; 168:15; 169:2; 170:25; 171:1, 15,17; 172:5; 173:10, 23; 174:22; 181:1; 184:1,1,12,13; 186:23; 192:8,8;193:20,21; 194:9; 195:13; 196:13; 197:20; 198:8,13; 199:6, 9,18;201:19;203:17; 205:3, 5, 19; 206:25; 210:1, 9, 24 documents 118:24; 129:15;163:7;168;5,11, 20, 25; 169:1, 23; 170:8, 11; 182:2 1; 188:9; 195:8 domestic 136:24 done 134:15; 141:5; 155:2; 163:24; 190:18 door 185:10 double 126:14; 128:8; 207:24 doubt 172:18; 186:4; 211:2 down 176:7;194:3 downtown 137:13 draft 118:20;157:15,16, 22; 158:2; 159:12; 161:1, 12,12:162:7; 163:1,3; 166:20 drafted 119:4 drafts 158:15 draw 126:18; 135:21; 151:22; 166: 1; 179:2 1; 183:13 drew 177:3;210:14 . DRI 155:19 drift 208:9 drive 176:19 driving 175:25; 179:5; 207:21 due 153:23, 25;173:16; 177:7 during 135:12;145:8 duties 144:6,10 duty 141:18 dynamic 176:18, 25; 177:2,15, 24 dynamics 206:4 E E•v-a•n-s 145:16 e.g 208:3 E.J 187:2 E.N 187:2 each 16o:12, 12;172:21 earlier 127:6; 152:7; 154:2; 156:7; 172:12; 180:10; 199:12; 201:19; 204:9 early 135:12; 136:5,16; 153:2, 4 ears 140:9 earthly 209:18 econometric 147:20, 25 DIANE S. BURROWS VoL 2, June 3,1998 editing 130:24 educational 205:25 effect 204:12 effective 174:15; 175:4, 11,14 effectiveness 174:18; 175:17,24 effects 146:1, 2, 23 effort 151:23; 163:24; 200:7 effortless 173:14; 177:5 eight 117:16 either 182:24; 190:5; 192:1 elaborate 176:25; 177:16; 208:7 elasticity 120:15;131:11, 25 else 154:24; 155:10; 164:11; 169:18; 189:12, 21; 193:13 emphasized 187:14 encourage 208:4, 23 end 153:23, 25;192:21; 203:24 ending 164:25 English 186:15 enough 116:13; 196:1 enrichment 206:5 entitled 159:15; 193:21 entry 181:3 errors 160:8 establish 187:20 established 1651, 2 estimates 131:11 etc 207:25 Evans 145:16 even 137:2;148:5; 175:12,18 eventually 177:25; 180:7,15,20 every 137:10;155:8; 172:21; 173:19; 176:14; 210:10 everybody 125:5; 188:20; 195:24 everyone 147:1; 181:13 everything 129:15,19 exactly 119:16; 129:10; 130:12; 138:9; 147:9; 185:25; 189:19 examination 116:5,8 examined 116:6; 142:23 example 181:13 N except 117:8;118:11; co 129:15; 209:7,15 ~o excise 121:14, 23; 156:8 Excuse 162:18 ~ exhibit 116:20, 20, 23; Ul 117:3, 5, 7, 7,14;118:6, 14; 119:3,20, 24;120:3, 7, 7, 8,13,18;121:1, 5; 122:1, 3, 7,15,19;123:8, 10, 12,16; 124:21,22; For The Record, Inc. -- (301)870-8025 Min-U-Scripts (3) consists - ezhibit
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DIANE S. BURROWS VoL 2, June 3, 1998 Page 155 lil suggestion, probably, from segmentation studies which pl had been, I think, done in his group periodically, that (al this might offer me something interesting to build a lal report from. lsl Q: By segmentation study, you mean the 1981, te1 '83 studies that we touched on yesterday? m A: I don't remember the dates, but tal approximately every two years regular studies. tal Q: So the library, the segmentation studies, I ol what else? t>>I A: I really don't remember what all I looked t zl at.The library sounds very likely, and I remember t,sl looking at some data from segmentation studies at his t+41 suggestion because I think there was some foomotes that tis7 said some year segmentation study. (iol 0: Did you go outside Reynolds at all, any hrl suppliers? nsl A: I don't believe so. 1+a1 Q: So no direct contact with DRI or NFO or tzol anybody like that? tz+l A: I don't believe so. ¢z 0: How about interviews, did you conduct Izol interviews with Reynolds people? (zel A: With Reynolds people, I don't think so. I tzsl may have asked some people what do you think a younger Page 156 lil adult opportunity analysis would be or what would be pl interesting or something like that, but nothing I would 131 call a real interview, no. I don't recall any. gl My recollection is I went in the tank and Isl plowed through data until I came up with somethingDick Isl Nordine liked. m 0: We saw a little earlier today how you had lel put that federal excise tax material together for Steve PI Perry. Did you receive - by way of analogy, did you (iol receive anything from other parts of Reynolds to help lI tl you with this? hzl MR. WILLIAMS: Object, vague. lial THE WITNESS: I don't recall any. 11a1 MR. SHONKA: I would like to have marked as ps7 Burrows Exhibit No.19 a document dated February 17, hsl 1984 from Richard C. Nordine to A.M. Curry, RJ. Harden, I+rl J.D. Weber, and the subject is younger adult work (iol session. (1sl (Burrows Deposition Exhibit Number 19 was tzo) marked for identification.) 1211 BY MR. SHONKA: (azl Q: Ms. Burrows, have you seen this document txn before? I note that you have a CC to you, but do you Izal recall seeing it? tzst MR. TAYLOR: Does she have any R.J. REYNOLDS TQBACCO COMPANY MATTER NO. D09285 Page 157 hl recollection? (2] MR. WILLIAMS: You have to ask lal recollection. lal THE WITNESS: Let me read it. (s) BY MR. SHONKA: lal Q: Sure, take your time. m A: I don't remember anything about this memo. lal 0: Ms. Burrows, do you by chance recognize the (91 handwritten notation in the upper corner? Do you t,ol recognize the handwriting? t++l A: No, sir. tixl Q: You have no idea who wrote absolutely hal superb? n4l A: No, I don't. 1161 0: This memorandum refers to a first draft, t1sl and do you know or understand this to be a first draft t,n ofyour- nal A: This memo? (iol Q: No, the reference to first - go to the pal third paragraph, and the sentence says'Because of the Iz,l importance of this subject, we have not tried to avoid lnl controversy, at least not in the first draft." rnI MR. TAYLOR: She says she has no lul recollection of this.Are you asking her if a specific (zsl thing refreshes some other recollection? Page 156 t l MR. SHONKA: If she understand that lzl sentence to be a reference to the first draft of her ril report. LI MR. WILLIAMS: Objection, lack of tsl foundation. cal MR. TAYLOR: She says she doesn't remember m seeing it. I guess, as I understand it, the question tal ought to be does this specific word or words right here (sl cause you to refresh any recollection you might have, hol but- t++l THE WITNESS: I don't know what that means hzl other than to read the words. 1131 t,<I BY MR. SHONKA: Q: Do you recall if you prepared multiple m N tisl drafts? ~. t al hn MR. TAYLOR: Of what? MR. SHONKA: Of the younger adult ~ e t,al strategies and opportunities report. 1191 THE WITNESS: Well, sir, I said before I am tiol not 100 percent sure what document you are talking lz,l about. We have been talking about my first assignment rr21 which in my head younger adult smoker opportunity lzsl analysis was assigned. Are you talking about the report tzal that was the output of that? lssl BY MR. SHONKA: N w w Page 155 - Page 158 (14) M3a-U-Sce3pt® For The Record, Inc. -- (301)870-8025
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C 0 N F I D E N T I A L October 6, 1982 Y'4+ Mr. L. W. Hall, Jr. V_.~ r°` Hs. D. S. Burrows ~: NBER MODELS OF PRICE SENSITIVITY BY AGE/SEX BACKGROUND -~---•----- ~n 1?81, the National Bureau of Economic Research (NBER) published two models based on consumers' responses to government smoking surveys. Because the NBER models were cross-sectional (testing differences between people rather than over time) they were able to relate price separately to incidence and rate per Nay, by age and sex. T,h~ NBER elasticities may not refleci the exact effects of price increases, eince their models didn't deal with changes over time. However, the effects C?l;ey`"found for other variables (race, income, working women, etc.) are highly consistent with our understanding of market dynamice. Thus, it is likely that the NBER models have correctly identified relative price sensitivity among agiNex groups. Ag,tailed critique of the NBER models is Attachment B. SM. k~t1:RY OF FINDINGS s Accoxding to the NBER models: ~ ~ • Teenagers and younger adult males are highly price sensitive. 4 ~ • Males over 35 have above average price sensitivity. • Women and 26-34 year old men are relatively immune to price. u, N / N • Price affects incidence; rate per day is virtually unchanged. 00 tD 4% NBER PRICE ELASTICITY AMONG: J TEENS ACES 20-25 AGES 35+ TOTAL w 12-17 TOTAL ES TOTAL HALES 20+ EFFECT ON: Incidence -1.19 - .74 -1.28 NA NA - .26 u 0 .. Consumption -1.44 - 40 - 45 - 66 89 -1 42 - . . . . . . w ~ I _L ,n„ ,nn RF€nnn;7i0
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CONCLUSIONS In terms of immediate impact; the effect of price on males 35+ is most important. Half (50%) of the•total drop in industry volume is attributable to males 35+, compared to 24% from younger adult males, and 7% from teenagers. (Calculated in Attachment A) But, the loas of younger adult males and teenagers is more important to the Yong,term, drying up the supply of new smokers to replace the old.* This i,s npt a fixed loss to the industry: its importance increases with time. In t,s years, increased rate per day would have been expected to raise this grouq'e consumption by more than 50%. s». iv..A~ Diane S. Burrows KARlCiTING DEVELOPMENT DEPARTHENT Y ~ DSB/ch ~ cc: Hr. J. Mr. H. R. E. Moore Osmon a 0 Ms. E. Mr. E. Mr. J. Mr. P. N. J. R. E. Monahan Packelman Hribar Galyan C e •r a .~ Hr. W. Mr. R. liDIC W. A. Doten Davis L . - e *Ae discussed in my 9/21/82 memo re "Estimated Change in Industry Trend ToTlowing F.E.T. Increaae". 10 nCR/rh - Ifl/~/R9 R}}O}lf).: •~~
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1tJ. REYNOLDS TOBACCO COMPANY MA7TER NO. D09285 Page 199 pl A: 502996339. (~ 0: That is what I have. ~( MR.TAYLOR: Well, I guess I can make the (q other copies. (st MR. SHONKA: Basically I wanted to find out (st if she prepared the document in its original format, m whatever that may have been. M THE WITNESS: I don't know about this tq particular document. I don't know whether or not I (+ol prepared it. („L BY MR. SHONKA: (,n 0: You indicated earlier that you had worked (,3I on a younger adult smoker analysis. Do you recall that pel testimony? t1s( A: Yes, more than one, actually, but, yes. (,s! Q: After you finished the February 29th report pn which we previously marked as Burrows Exhibit 24, after nel you finished that document, you worked on a younger (,et adult smoker analysis or on several, more than one? tzol A: Yeah, whatever I called it.Yes, that rn( there was another project related to younger adult tzzl smokers, yes. [z3t 0: Can you tell me about that project, please? (zq A: The basic impetus for it was that - the asl words that come to mind is, okay, now we know younger Page 200 pl adult smokers are important, what do we do about it. tz! Dick Nordine was asked to do a project directed to that (al question, what do we do about it, and I was involved in (al that project. [s1 Q: Did you have primary responsibility for it? (el A: No, I wouldn't say that I did.That was (N more a team effort. [el 0: How many people worked on that? m A: It could have been a larger number of poi people involved. My recollection is there were mainly („t three of us at Reynolds who worked on it regularly. t+n Q: And other people outside of Reynolds? (+al A: There was a supplier involved in that (+q project. t+sl 0: Do you recall who the supplier was? (+sl A: A name comes to mind, but I'm not sure. it (+71 could have been Dick Westwoodwastheman'snamethatl t+al - that comes to mind. I don't know what the company t,et name would have been. lzm Q: What was involved in the analysis in the n+l project? tm MR. WILLIAMS: This is the second project, r2sl the what do we do about it project? (241 MR. SHONKA: Yes, the one following the ria February 29th. DIANE S. BURROWS VoL 2, Jtme 3, 1998 Page 201 t+l THE WITNESS: The way I recall it, it m spanned quite a long period of time, maybe six months t3t and that a lot of pieces went into it. One of them was lal quite a few focus groups with younger adult smokers and (st I know there were a lot of other components that are not tst leaping to mind at the moment. m BY MR. SHONKA: (a1 Q: This project ran about six months you said? (sI A: That's my recall. We spent quite a long pol while. (+,l 0: Did it culminate in a report, in a formal (,z1 written report? (,al A: No. It culminated in a presentation. [+dt 0: And the presentation, by a presentation, [,s] you mean only one presentation or one - do you mean l,s] only one presentation? [,>t A: The culmination was only one presentation (,al as far as I know. (,e 0: Earlier you had identified a document that (2o was labeled younger adult smoker analysis as it was - I (2,i asked if it was a white paper. (rq MR.TAYLOR:27. [2al MR. SHONKA: Burrows Exhibit 27, yes. r2q Would you take a look at that. Is that the (zst presentation that culminated, that being Burrows Exhibit Page 202 n) 27, is that the presentation that resulted from - t21 THE WITNESS: The second phase, what to do (3] about it? (at BY MR. SHONKA: (sl 0: Yes. ts[ A: No. m Q: Do you remember when you gave that (al presentation that you are talking about? p] MR. WILLIAMS: Which presentation? (,ol MR. SHONKA: The presentation that t„L culminated in the second part, the what to do about it (,zl part of the study. (,al THE WITNESS: When I gave it? t+q BY MR. SHONKA: (,s1 Q: Approadtmtely. t,sl MR. WILLIAMS: I'm not sure there is t,7i foundation. Did she testify she gave it? I thought she nal said there was a presentation. t+sl MR.TAYLOR: You are correct. rpt BY MR. SHONKA: 1211 0: Did you give a presentation? r4 A: Yes, I did. rol 0: Do you remember when? (ral A: I gave it a lot of times. resl 0: Now I am confused.You said there was one For The Record, Inc. -- (301)870-8025 Min•U-Script® (25) Page 199 • Page 202
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R,j. REYNOLDS TOBACCO COMPANY iMATl'ER NO. D09285 Page 175 t~t BY MR. SHONKA: m Q: Does it mean that switching - 131 MR. TAYLOR: Did it mean to her in 1984 Hi when she wrote it that switching was not cost effective? tsl THE WITNESS: No, it didn't. ts1 BY MR. SHONKA: m Q: Does it mean that now in light of 1984 tei data? tei MR. WILLIAMS: I object as vague. Does r ol this - I'm sorry, Dave, does this three paragraphs you p t read mean now that switching is not cost effective? tiet MR. TAYLOR: Even though it didn't then? (131 MR. SHONKA: Did it mean that switching was t,41 not cost effective in 1984? What she said is she didn't tns7 think that. c1sl THE WITNESS: I didn't think in terms of t n cost effecriveness. I don't know whether it would have t et been or not in 1984, even now. t:et BY MR. SHONKA: pq Q: Would you explain to me what you meant by rz,t the three paragraphs, please? trel A: Is it possible that the word dividend is Pat key in underlying your question? That word links up in ta•1 my mind with cost effectiveness, so I was wondering if [zst that's what you were driving at. Page 176 til Q: I was not focusing on dividend. Wttat I M want at the moment is what you meant when you wrote t31 these paragraphs. tal MR. TAYLOR: As opposed to the whole tsi report,whatshemeantwhenshewmtetheseparagraphst tel THE WITNESS: I am having a hard time im pinning down how to respond to a what did I mean tel question.I thought, still think, the words themselves m are fairly clear. 1101 The point that would have been in my mind t+ii in using words like this would have been that I thought 1121 many in the company did not know the importance of n31 younger adult smokers to the market, did not understand mi how Marlboro could gain share every yearwhile Reynolds nsi switching data said gained switchers, but then they lost l+ei share, that there was a general lack of understanding tui among many people in higher positions than I that they vei did not understand that this aging dynamic existed. I nel was trying to drive home the points that switchers at p1 age 35 or whatever was not the only way that brand tzlt shares changed, and that the company should not ignore tzzl the importance of younger adults to their business. trat BY MR. SHONKA: lz4j Q: You made a reference a moment ago to this Rsi aging dynamic and by that could you elaborate on that a DIANE S. BURROWS VoL 2, june 3, 1998 Page 177 p] little bit, please? rq A: Related to the aging dynamic is the first nl sentence of the paragraphs you drew my attention to, the tq last three paragraphs on this page I, the annual influx tq of 18 year old smokers provides an effortless momentum tet to successful first brands, Marlboro grows by about .8 tn share points per year due to 18 year old smokers alone, tet followed by IZIR.I believe that means loses a half a t91 point a year. t,ot The last sentence of the second paragraph t+n RTR yielded a .5 point ingoing share advantage. I think tizi I must have meant loses .5 share points a year by virtue pa7 of the fact that their brands were unattractive to 1141 younger adult smokers, and that is the portion of an rysl aging dynamic that I was focusing on at that time. I+si Q: So in the third sentence, can you elaborate p] on that first sentence there in the second paragraph hsl that I had read, the one that says on the other hand t+s] brands, companies, which failed to attract their fair t2m share of younger adult smokers face an uphill battle? Ceii A: Yes.That means if my brand or company has trq a 20 share of market, 18 plus and 20 percent of 18 year t23t old, less than 20 percent of 18 year old smokers choose tzai my brand, then the dynamic would cause my brand or tm company to decline in market share eventually. Page 178 tii It is after that time or at some point in t2] time smokers become loyal to a brand, many do, and it is (3i very difficult to get them to switch brands. So that's (4] an uphill battle. tsi Q: It is better for the company to get smokers ts: to buy their cigarettes as the smokers first brand than m it is if the company - if the smoker adopts the brand tei later by switching? t91 MR. WILLIAMS: Objection, leading, lack of nm foundation, tnischatacteri7ation of testimony. 111] MR. SHONKA: Is that correct? t12i MR. WILLIAMS: Same objection. tlai THE WITNESS: It is less work in my opinion pai foracompanyorabrandtobecomethebrandchoiceofa c,ai smoker as their first usual brand, which is nei distinguished from the first cigarette or pack of t+ri cigarettes they may ever use or as soon thereafter as t,al possible before loyalty within that smoker and t+9i familiarity and all of the attributes of loyalty become tmi so strong that that smoker will not be interested in (21] switching to another brand. rg BY MR. SHONKA: rrn Q: Is brand loyalty a deterrent to switching? 1241 A: Yes, sir. rrsl 0: Is it a major deterrent? For The Record, Inc. -- (301)870-8025 Miin-U-Sa'ipi® (19) Page 175 - Page 178
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NBER ELASTICITIES ANONG PERSONS 20+ (1976) (Sample Restricted to Eliminate Border Effect) 26-35 35+ Males 20+ 20-25 26-35 35+ Eemales 20+ 20-25 26-35 35+ Total 20+ REPORTED INCIDENCE REPORTED RATE "TOTAL DEMAND" (INC. x RATE) I- .264* - .037 - .41601* .74* - .20 I - . 9* .44 - .04 - .47 9 - .15 - 15 I Y . 56 ~ R 0 1.276+ - .171 -1.401* ~ - .292 + .029 - .320 1~ G ~ - .246 - .204 I - .658* = o ~ - v 9 9 - .136 - .026 - .302 i t ~ ~ - .388 - .134 - .577 s ~ + .066 - .077 - .118 L ~ ~ ~ + .03 .06** - .08** I Ln / N N 'kOLS coefficient statistically significant at 5% level (2-tailed test). **OLS coefficient statistically significant at 1% level (2-tailed test). DSB/ch - 10/6/82 Code: 5.21 RFIi 0o;-,.y
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Results for other variablea wete noL reported. Neakneeses in the teenage NBER model are: Loose estimation of price, loosely deflated. "Impure" price elasticity (probably somewhat inflated). ~ 11 " ae Data from the late 1960's, which may not reflect today's market. ~... onal application of this model hae the same problems as in the adult p~ea, except that the problem of estimating what teenagers perceive as "real" prfce change is even worse. ON ~ V7 N N 0) ko 9 r • W DSB/ch - 10/6/82 N W RH0003727 a
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DIANE S. BURROWS VoL 2, J11ne 3, 1998 151:24 areas 147:2, 5 arithmetic 146:22,23; 147:1,13.24,24 around 181:14; 205:23 article 206:21, 23; 209:9, 17 assigned 139:18; 153:11; 158:23 assignment 139:1; 153:9; 158:21; 189:18 assist 131:24; 168:3 assistant 135:20 assisted 143:11; 153:16 associate 135:14 associated 182:24 assume 123:15; 132:4; 154:20; 171:8 assumptions 142:15 asterisk 126:20, 20 attached 122:12; 123:16; 205:10 14 , attachment 123:7, 9; 205:9; 207:2,11,17 attachments 120:9, 10, 12;135:9;159:23,24 attempt 147:13 attention 126:18; 135:22; 151:22;166:1;177:3; 179:21;183:13 attitude 198:22 attorneys 141:19 attract 173:17; 174:19; 177:19 attracted 174:10 attracting 174:1,15 attributes 178:19 Austin 151:25 authored 123:13; 152:7 autumn 151:7 avoid 125:25; 157:21; 181:12 aware 150:22; 179:6; 182:23; 184:15; 188:9 0 back 124:15,19; 127:7; 141:6, 24;143:13, 14; 146:20;147:3;179:10; 180:13, 25;183:13; 191:21 background 206:1 barely 163:15 based 142:2; 183:9; 185:19 basic 199:24; 205:10 Basically 199:5 bates 116:21;1222; 131:3;145:12;167:17; 167:17- 171:16; 181:1; 193:22; 194:1; 196:16; 198:13; 203:17; 210:2, battle 173:19;177:20; 178:4 Bear 126:12 bears 171:15; 193:22; 198:13; 210:4 became 135:19, 24; 138:17 become 178:2, 14,19 becomes 180:6 began 144:21; 148:22, 23 begin 139:7 beginner 128:7 beginning 135:19 begins 179:22;192:21; 210:2 behavior 182:14 belief 212: 11 believe 122:24; 125:8; 130:3;133:18;136:7; 137:23; 138: 10; 140: 1; 144:8;148:15: 150:17; 153:7; 155:18,21; 164:16; 170:13, 20; 172:17; 174:20; 177:8; 184:3; 185:19,24; 186:8; 187:22; 194:19;203:25;207:10; 208:21 beil209:17 bent 208:24 best 132:9; 133:12; 148;7; 163:14; 164:3,18; 183,25;212:10 better 139:13; 152:1; 178:5; 207:22 beyond 130:13; 166:13 big 184: 10; 189:3; 210:9 bit 177:1; 210:10 blackboard 190:15 block 196:1 blocks 160:8 boss 154:16 both 124:1; 128:3; 148:23 bottom 126:19;128:6; 131:20; 135:22; 167:24; 168:19; 170:19;179:23; 180:12; 181:2; 192:17; 197:12 box 198:10 brackets 174:11; 180:8, 15 brand 126:23; 128:8,9; 139:18, 20, 21, 23; 140:2, 167:12; 173:15; 174:7; 177:6,13, 19; 178:3; 193:8 brands/companies 173:17 break 149:11; 195:17,22, 25,25 brief 133:25; 168:6 briefly 162:6 bring 124:13 broad 143:23 brother 188:20 build 155:3 buiiding 134:2; 185:9 bullet 128:6,18;129:17; 181:2 BURROWS 116:4, 10, 20,23; 117:1,4,6,7,7,14; 118:6, 14; 119:3, 20, 24; 120:2,3,7,7,8,13,14,18; 121:1, 5; 122:3,6,14,18, 18; 123:8, 9;124:9, 21, 22; 125:9; 126:18; 127:8,23, 24,24;128:4,15;129:22; 130:17, 24, 25;131:5, 8, 10, 16, 18; 134:6; 135:7, 12, 18; 136:4; 137:1, 6, 24; 138:16; 145:11,15,18,21; 146:14,15;149:19,23,24; 150:3, 4;151:10,11, 14, 20,21;152:20;156:15,19, 22;157:8;159:6,9,16,25; 160:17; 161:14,15,17,20, 21, 24, 25; 162:2, 6, 7; 163:8,10,12,18,20,24; 164:21; 165:12; 167:16, 20,23,24; 168:1; 169:3; 170:18; 171:11,12; 172:4, 12; 173:5,6;179:10; 184:13;186:2,5,23; 187:3, 6,17; 188:4, 6; 190:23;192:8,13,16; 193:1, 6,16,17;194:5, 6, 25, 25;195:3, 9; 196:9,10, 13;197:1,1,19; 198:4, 5, 24; 199:17; 201:23,25; 203:13,14,18; 204:22, 25; 205:1; 207:5; 209:22, 23; 210:1, 6 buslness 132:4; 133:5, 11; 136:19,21, 25;137:4; 143:23; 176:22 buy 178:6 buying 193:12 buzz 184:10 4, 6, 7, 9,12,14,15, 19; 141:5; 143:24; 144:3,5, 7; C 147:14; 174:16; 176:20; 177:21, 24, 24;178:2, 6, 7, 14, 14, 15, 21, 23; 179:6, C 156:16 7,7, 24;180:1,3,3,6,7, call 146:22; 156:3; 170:23 14,17,21; 181:4,5, 10, called 116:5; 132:5; 15:182:9;183:3, 9: 145:6; 146:25; 152:22; 185:19; 186:4; 198:21; 171:17; 186:7; 188:8, 10, 204:3, 8,10,10, 13, 13, 11; 193:8; 194:19,24; 14,15,16,17,18 199:20 brand's 126:23; 128:9 came 154:13:156:5; brands 139:16,25; 185:12;189:19;190:1,9, 4 143:24;146:1;165:1; 17 areas - consider (2) Min-II•Script® RJ. REYNOLDS TOBACCO COMPA1Vy ' iKATTER NO. D09285 can 124:6; 125:25; 126:19; 127:8; 133:24; 141:21, 22;142:11; 143:17;146:19;149:11; 150:9; 152:11; 153:3; 159:4; 162:13; 166:12; 168:1; 169:23; 174:9; 177:16; 183:4; 193:5,24; 195:14,17,18,25;199:3, 23; 207:23, 24; 208:7 Canada 131:25;132:1, 8; 134:18,21 Canadian 132:4 caption 117:8 captioned 120:14; . 151:15 care 126:7;208:17 career 136:5; 189:5,8 carefui143:7 Carolina 142:6 carry 128:9 case 121:3; 146:9; 183:10; 212:4 cause 158:9; 177:24; 212:9 CC 156:23 CCs117:10;118:10 center 192;12;198:11 certain 118:24; 136:22; 169:17 certainly 147:23; 153:14; 167:1 CERTIFICATION 212:1, 17 CERTIFY 212:7,19 chain 189:2 chalk 190:8,10,13,15 chance 157:8; 164:22; 203:19 change 138:23;139:4; 144:19;165:8;189;14 changed 144:10,15; 176:21 changing 186:11 character 194:22 characterization 143:21;206:11 characterize 181:25; 195:8; 207:18 characterizing 143:4 Charlotte 210:23 charts 132:3 check 126:13;172:22, 23 checked 120:11 choice 178:14; 183:3 choose 177:23; 183:9 . cigarette 178:16;179:4; 181:11,22 cigarettes 124:11; 178:6, 17; 204:16 circulated 184:14 circuiation 187:16; 188:13 ciarify 120:24; 130:16; 138:12; 142:18; 203:1, 1 clean 171:21,25 clear 142:7; 151:19; 166:13; 176:9; 181:18 clearing 186:16 clearly 133:24 - client 141:15; 142:1 closed 137:20 clues 121:9 coaching 160:15,16 coded 183:18 coding 183:14,15 collecting 153:16 Colorado 152:1 comfort 146:10 comfortable 146:8 comment 164:14; 185:7 comments 161:6 Commission 142:10; 212:10 committee 153:14 common 118:19, 25; 119:9; 134:17; 182:25; 183:8, 24; 203:25 commonality 147:23 companies 177:19 company 121:22; 132:6, 9;143:23; 148:21; 149:3; 176:12, 21; 177:21, 25; 178:5, 7,14;188:25; 200:18; 212:4 company's 166:4,15, 16, 21, 25; 167:2 compared 117:11 complaint 119:22; 130:12; 150:1; 161:15 complement 184:25; 185:2 complements 184:22 completed 166:19; 189:16 completely 205>3 components 201:5 computer 168:21, 24; 169:9; 170:8,12 computers 169:24; 170:4 . concerned 189:4 concerning.19.1.4,6 _- .,- v: .. concurrence 119:18'''' ` conduct 155:22 u, conducted 150:23; ' ro 151:25- . ' . pp conducting;143:11 to confidentiai 122:13; ,n 125:7;159:12 P confrontation 181:16 ~ confuse 159:1 confused 202:25 congruence 209:1, 8, 16,19 circumstance 172:25 1 consider 194:25 For The Record, Inc. -- (301)87Q-8025
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RJ. REYNOLDS TOBACCO COMPANY MATTER NO. D09285 Page 119 p) supervisor for review and then his judgment would rq dictate any further distribution. (31 0: Is that to say that Burrows Exhibit 8, [41 which is directed to Mr. Galyan, might have been drafted [s[ with the intention that it would ultimately go to Mr. [a[ Hall? m A: It might or might not have been, I don't [e[ know. la[ 0: But that would have been a common practice? [iol A: That would have been a possibility. It [„l could have been Phil asked me to do it in the first t x place for his own reasons that I don't know. [ia1 Q: And do you recall if you sometimes followed t16l the practice you described? psl A: Yes, I did sometimes, and I don't know nal exactly which situations, but analysts did not issue Inl anything above their supervisor without their (+e[ supervisor's concurrence. he[ MR. SHONKA: Thank you. I would like to [zo[ have marked as Burrows Exhibit 12 a document that has [z+i previously been identified in the administrative [zz: proceeding by complaint counsel as CX-72, and I am (zal handing this to the court reporter. R<1 (Burrows Exhibit Number 12 was marked for tesi identification.) Page 120 hl BY MR. SHONKA: [x[ 0: And Ms. Burrows, I also ask you to take a [sl look at Burrows Exhibit 10 from yesterday. [ai MR. TAYLOR: Are you making that same [sl representation to us here? [sf MR. SHONKA: Yes. I will represent to you m that Burrows Exhibit 12, the text of Burrows Exhibit 12, pi is the same as the text of Burrows Exhibit 10. (q MR.TAYLOR: How about the attachments? voi MR. SHONKA: And the attachments I have not t++i checked, so my representation, I will limit it to the [1zi text of the document, not to the attachments. t+31 For the record, Burrows Exhibit 12 is a [+.[ memorandum from Ms. Burrows to L.W. Hall,Jr. captioned nsl NBER models of price elasticity by age/sex, and it is nsl dated October 6, 1982. [+n I would ask you if you have any [+q recollection of the reason why you sent Burrows Exhibit [+a] 12 to Mr. Hall on October 6th? K THE WITNESS: No.:riy copy says price t2i1 sensitivity by agc/sex. Izm BY MR. SHONKA: hsl 0: I'm sorty, mine does as well. I misread 1241 it.We'll clatifythe record, the subject line says rss1 MBER models of price sensitive by age/sex. DIANE S. BURROWS VoL 2, June 3, 1998 Page 121 [il Does your review of Burrows Exhibit 12 in [x[ any way refresh your recollection as to the likelihood t31 that Mr. Moore in this case asked you to send a memo to 1<[ Mr. Hall? I note that Mr. Moore, for the record, is the isi recipient of Burrows Exhibit 10. [q MR.TAYLOR: If you have a recollection. m Don't guess.If you have a recollection, he is asking [a[ you for that, [c1 THE WITNESS: I don't see any clues as to ho[ how the second copy would have been directed.I don't [++l know. (121 BY MR. SHONKA: [ia1 Q: Do you have any understanding as to what [ui Mr. Hall's interest in federal excise tax issues were at [+s7 that time? [+sl MR. WILLIAMS: Object, lack of foundation. [in It depends on if she has any lnterest in it. [,s[ MR.TAYLOR: So what, if any, interest he tis[ had in 1982 at the time these were written, if you have [zoi any knowledge of that? [2i] THE WITNESS: I don't have any direct M knowledge that I know of.The whole company was [za: interested in the federal excise tax increase, but that ixai would be a guess on my part. [zs[ MR. SHONKA: Next I would like to have Page 122 1,[ marked as an exhibit a document that has the Reynolds m bates numbers 501432327 through 501432336. tal (Burrows Exhibit Number 13 was marked for [4] identification.) Is BY MR. SHONKA: tq 0: And for the record, I note that Burrows m Exhibit 13 isa memorandum dated October 13,1982from [a7 L.W. Hall, Jr.To Mr. L.M. Orlowsky, O-r-l-0-w-s-k-y. [91 How do you pronounce it? 110l A: I would say Orlowsky. l++i Q: And rlr.J.W.Johnston.The memo has [iz: attached to it, first, a memorandum that is labeled i+a1 confidential and is dated October 6,1982 from Ms. [u[ Burrows - in [is[ MR. TAYLOR: Looks like Exhibit 12 to me. H [,s[ MR. SHONKA: To Mr. HaI1.It appears to be ~ nn 12. [,s] Ms. Burrows, have you ever seen Burrows [:c: Exhibit 13 before? Do you recall? [zoi MR. TAYLOR: You mean as it's constituted tati here today, that is, the October 13th cover sheet to the rm October 12, 1992 memotandum? tni MR. SHONKA; Yes. [2e[ THE WITNESS: Since I believe the tes[ difference is in the cover sheet. For The Record, Inc. -- (301)870-8025 Min-U-Script* (5) Page 119 - Page 122
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1LJ. REYNOLDS TOBACCO COMPANY MAT`fER NO. D09285 Page 159 h! Q: Yes. I'm not trying to confuse you. tq A: I'm just trying to be accurate. I am under P] oath and I'm trying. [4] MR. SHONKA: Can we have this marked as lsi Exhibit 20. ls! (Burrows Deposition Exhibit Number 20 was m marked for identification.) ro! BY MR. SHONKA: (91 0: And for the record, Burrows Exhibit 20 has l o! been previously been marked as CX-846 in the 111 administrative proceeding. It is a document that is !,zq stamped draft and labeled confidential at the top. It t,al says on the cover page strategic research report. 1141 It is dated February 17,1984.It is l s! entitled younger adult strategies and opportunities by ha! DianeS.Burmws. pq MR. TAYLOR; It appears my copy consists of lis! 31 pages not including the cover page that you just read liel about. rzo! MR. SHONKA: That's correct. 1:11 MR. TAYLOR: So 32 pages, really. tzzl MR. WILLIAMS: Does this document have any (zsl attachments? 124] MR. SHONKA: It has no attachments. !ze! Ms. Burrows, when you are finished looking Page 160 hl at the document, could you tell me if you recognize it? m MR. TAYLOR: By that, do you mean have you 131 ever seen it before? 1.1 MR.SHONKA:Yes. !sl MR.TAYLOR: By that, further, do you mean !s) have you ever seen it before as it's presently m constituted, that is, with some things underlined, let errors, blocks, question marks, writing? m MR. SHONKA: I referred to the exhibit, ucq counsel, as it is presented to her. n,l MR.TAYLOR: Have you ever seen it as it nrl presently exists, that is, each page with each of the na1 notations on it as it's placed? t+<t THE WITNESS: I'm not sure - l+s! MR. SHONKA: Counsel, you are coaching the l+si witness.That is improper coaching. I simply state nn that for the record, but go ahead, Ms. Burrows. l+e! MR. TAYLOR: I want to make sure what the I+al question is because I want to make sure it's a fair [zm question for this witness.There are ways to do this Iz+l and there are ways not to. t221 MR. SHONKA: Thank you. [xs1 THE WITNESS: I'm not sure if I have ever ez<1 seen this specific set before or not. Izsl BY MR. SHONKA: DIANE S. BURROWS VoL 2, June 3, 1998 Page 161 Iq Q: Do you recognize the exhibit as a draft of tzl the report that you prepared? t3l MR.TAYLOR: By that question, you mean l.1 just the type. lsi MR. SHONKA: I mean just the type without lsl the comments. vl THE WITNESS: Just the typed part? lal BY MR. SHONKA: nl 0: Yes. ha! A: It looks similar to the way I remember the l++l report looking. I think it's reasonable to think it's (+z1 probably a draft. It says draft stamped on the front. ba! MR. SHONKA: I am asking the reporter to pai mark as Burrows Exhibit 21 a document that has been hsl previously marked as Burrows - as complaint counsel nal exhibit CX-847 in the underlying proceeding, and I will hrl represent that the typed portion of the text of Burrows l+e! Exhibit 21 is the same as the typed portion of the hgl document that has been previously been identified as [201 Burrows Exhibit 19. lzp (Burrows Deposition Exhibit Number 21 was lnl marked for identification.) Inl BY MR. SHONKA: lz41 Q: The question, Ms. Burrows, is whether you tzsl recognize the handwriting on Burrows exhibit 847? Page 162 l ! A: No. 121 MR. WILLIAMS: That's actually Burrows la! Exhibit 21. l41 MR. SHONKA: I'm sorry, I stand corrected. Is! Thank you. !s! Ms. Burrows, just returning briefly to tn Burrows Exhibit 20, which is the draft of the report. I lel note that we have touched upon this already.There is rym some printing on this document and the question I have hol is, do you recognize that writing? 1++1 MR.TAYLOR: Any of it? li21 MR. SHONKA: Any of it. na! MR.TAYLOR: The only way you can do that [+41 is start on the front page and look through it. !,s! MR. SHONKA: Okay, take your time. [16) MR. WILLIAMS: Counsel, you asked her to tin identify the printing. Do you mean handwriting? c,e! MR. SHONKA: Excuse me, yes, handwriting. [191 THE WITNESS: Whoever it is can't speB.I t:ol don't know who wrote on that. lzi! BY MR. SHONKA: rg Q: You don't recognize any of it? [23t A: (Witness shakes head.) p.i 0: Thank you for looking. Do you have any !zsi recollection as to who received copies of CX-20, the For The Record, Inc. -- (301)870-8025 Min-U-Script® (15) Page 159 - Page 162
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it,J. REYNOLDS TOBACCO COMFANY MATTER NO. D09285 Pege 151 ut MR. WILLIAMS: Object, lack of foundation. m MR. SHONKA: I'm asking if she knows of it. pt MR. WILLIAMS: I understand. (at MR. SHONKA: Thank you. (a THE WITNESS: What time frame did you say? (s) BY MR. SHONKA: m Q: The autumn of 1983. (a) A: I don't think of anything. (et MR. SHONKA: I would like to have another t+ot document marked as Burrows Exhibit 18. (11] (Burrows Deposition Exhibit Number 18 was (+zl marked for identification.) 1131 BY MR. SHONKA: (ut Q: And Burrows Exhibit 18 for the record is a t+st document that is captioned at the top, marketing (+et developmentproposal,MDDnumber83341111andchetitle (+n on the document is younger adult smokers focus groups, (+e( Roman numeral III - I'm sotry, I misstated the MDD t+at number. It is 8341111 so the record is clear. (xol Ms. Burrows, would you take a moment to [z+t look at the document, please, Burrows Exhibit 18. 1221 Specifically, I draw your attention to the second (2at paragraph on the front page which says "In an effort to tz<t make inroads into this key area, extensive qualitative (zst testing was conducted in Paramus, NewJersey,Austin, Page 152 tlt Texas and Denver, Colorado to better understand adult (z1 smokers as people, consumers and as smokers." t3t Do you see that? (at A: Yes, I see it. (i( MR.TAYLOR: The document says what it (s( says. It doesn't appear to me this is a document that m she authored, unlike some earlier ones. Isn't it tsi usually standard practice to ask her if she has ever lg seen it before? (+ot MR. WILLIAMS: It usually is. t++t MR. SHONKA: We can ask that question. (+z( Have you seen the document before? t+at THE WITNESS: I don't think so.I don't (ui recall ever seeing it. I+s7 BY MR. SHONKA: t+st 0: Having looked at the sentence I have read t+n to you and the document, does this refresh your (+sl recollection at all? (+s1 A: No, sir, nothing. tzot 0: Okay, thank you. Ms. Burrows, do you tx+l recall an analysis that you did or report that was rm called younger adult strategies and opportunities lsat report? rxt A: Some of the words sound familiar, but I am tzst not sure what you might be talking about. DIANE S. BURROWS VoL 2, June 3, 1998 Page 153 (,( 0: Let me come at it this way. In the fall or m in the late 1983, early 1984 time frame, what projects pt were you working on at Reynolds, if you can recall? (at A: Late '83, early '84, is that what you (sl asked? (s! 0: Yes. m A: That was when I believe I was moved to the tst Dick Nordine group - Dick Nordine's group, and the !s( first assignment I recall was I was asked to do a t+o( younger adult smoker opportunity analysis. , (++t 0: That was assigned to you by Mr. Nordine? t+21 A: Yes. t+sl 0: Who worked on that with you? (n<t A: There wasn't a committee formed. Certainly (+51 Dick Nordine would have since he was my supervisor. nsi Other people may have assisted me in collecting some t+rt data or typists, but there was no group that I recall (+sl working on it. t+Bt Q: The document was principally yours or the reot final product was principally yours then? 1211 A: I would say so, yes. Ra Q: How long did it take you to work on that? (zat A: Several months. It was due by the end of tzat the year and I didn't make the date. tzst 0: It was due by the end of 1983? Page 154 t,t A: Yes, that's my recollection. m Q: And you said earlier you started working (3i for him in November on that time? t<t A: Yes. ts1 Q: So they didn't give you much time.When ts( youworked onthe report, how did you go about doing the m oppottttnity analysis? (et A: How did I go about doing it? I wasn't real tel sure what an opportunity analysis was. My recollection (,o( is I asked Dick Nordine and he said something that I t+,t recall being more or less along the lines of whatever [zI you want it to be and the suggestion was I start looking (+st at data and see what ideas came to mind. t+V So it would have been more or less that (,si process, to look at information and see if I could come ns] up with something that would be acceptable to my boss, (+r( and that I thought was meaningful and accurate.That's N (+at about the process. N N (1e( 0: Did you - when you say "looking at to t2ot things," I assume that's materials. Did it include - (z+( probably library research, yes? H (zn A: I would expect so, since I had been a N M librarian. (24) 0: Do you recall what else you did? (zst A: I recall looking at some data at Dick's For The Record, Inc. -- (301)870-8025 Min-U-ScrIpts (13) Page 151 - Page 154
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g.J. REl'NOLDS TOBACCO COMPANY A4ATTER NO. D09285 Page 143 e+l yesterday. ml MR. WILLIAMS: Let me just before she does (si that, two things. One, I am going to object as well to (4i characterizing her deposition testimony from one day to (sl the next, and secondly, I don't have an expedited copy lq of this. I haven't seen a copy of this transcript. m Let's be careful about that. (ei Let me put it this way, I do not have a (ai copy of the transcript from yesterday. Whatever they (ioi are doing today in terms of moving this along has not (iii assisted Reynolds any more than you in conducting or (izi defending this deposition. (isl MR.TAYLOR: Could you go back to what she (+.) testified to yesterday and read it back. (tsl (The record was read.) (1si BY MR. SHONKA: nn 0: Can you respond to the question? (iei MR. WILLIAMS: Same objection. tie] THE WITNESS: I'm not sure what words I ra said yesterday. It is a correct, very general (2» characterization of my work in market research at (z2] Reynolds that more of it was addressed to analysis of resi the industry, the company business or a broad range of p4i brands and not in support of one specific brand. Itsi BY MR. SHONKA: Page 144 (il 0: And the question is, as a senior marketing gi research analyst, did you continue to do that sort of iai work as well as working for the Salem brand research [4i group? (sl A: While I was working for the Salem brand [ei research group, I would have performed duties related to m what was deemed necessary for the Salem brand. I lei believe that while I was still a market research senior M analyst by now, that I was rotated to another job where t+q my duties would have changed. (nI 0: What was the other position? (+z: A: The next position I recall was reporting to (n] Dick Nordine, and I guess I have a sheet, but it (ul wouldn't tell me, would it? (is] Q: So at some point you changed supervisors (isi while you continued to be a senior marketing research (+ri analyst? (is] A: Yes, sir.As we discussed, these titles [+s] and the actual jobs didn't necessarily change at the (zol same time. Iz+l 0: Thank you. Do you recall when you began r.M working for Mr. Nordine? p3l A: I have a recollection that it was in- tz4l MR.TAYLOR: If you have a recollection, tzsl but don't read off a piece of paper or tell him you are DIANE S. BURROWS VoL 2, June 3, 1998 Page 145 ta reading off a piece of paper. (zi THE WITNESS: My recoliection is it was in (3i the month of November, and that must have been 1983. (4i BY MR. SHONKA: (al 0: Thank you. Did you as a senior marketing (sl research analyst ever work on a project called the m Younger Adults Task Force? (el A: I don't recall any task force during that (el period. l,ol MR. SHONKA: I would like the reporter to p,l mark as the next exhibit, which is Burrows Exhibit 16, a p] documentthathasthebatesnumbers502631142through Iisj 1149. It has previously been marked as CX-842 in the ii4l administrative proceeding. It is a memprandum dated os1 November 16,1983 from D.S. Burrows to L.P. Mabee, psf M-a-b•e-e, S.Y. Evans, E-v-a-n-s, and S.W.Teague, nn T-e-a-g-u-e. (+ei (Burrows Deposition Exhibit Number 16 was (iei marked for identification.) 1201 BY MR. SHONKA: [2,i 0: ivts. Burrows, I would ask you to look at the lzsl first paragraph of the memorandum that I have just (zsi identified in which it says, "In our last younger adult (z4i task force meeting you asked me to forward a suggested izsl procedure for analyzing the importance of aging versus Page 146 (+] other effects on brands"' - that's s'- "historical Cei shares of smokers, and projecting possible aging effects ia: in the future." (a1 If you want to take a moment to look at the Is] rest of the document, you may. isi MR.TAYLOR: Is there a question there? m MR. SHONKA: I want to make sure the (ei witness is comfortable before I ask questions, sir. (e1 MR.TAYLOR: In that case you may never get (ol to ask a question as far as her comfort level. nu THE WITNESS: I have looked at it.If we i+zi go into detail, I may look some more. (ai BY MR. SHONKA: (,q Q: Ms. Burrows, the only question I have is, i a: does your review of Burrows Exhibit 16 refresh your iai recollection as to having worked on a younger adult task i,7l force? l s] A: To some limited extent, yes, sir. ia: 0: What can you tell me about the task force? izol A: The way it comes back to my mind is that (zil there was an interest in incorporating some of the (zxi arithmetic, I will call it, or other groups learning to (z3i use similar arithmetic to predict aging effects, and (z.( there was a group that got together, which I see must ixsl have been called a task force, and my role was to try to For The Record, Inc. -- (301)870-8025 Min-U-Scripbs (11) Page 143 - page 146
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kJ. REYNOLDS TOBACCO COMPANY MA.ITER NO. D09285 Page 167 I+I smokers in the report itself, and certainly I saw data fq fromtimetotimeonthecompany'smarketshareamong18 ni to 24 year old smokers. Is that what you want to know? (4) BY MR. SHONKA: [st Q: Other than what's in the report, you would (sl have no recollection today as to how it was in 1984? m MR.TAYLOR: I don't think she has any (ai recollection today of what's in the report. I don't PI think you are trying to ask a trick question. Perhaps (+o1 maybe you just want to unartfully word it. (,tl THE WITNESS: My recollection is the report [+zl pointed out that IZIR brands performed poorly among (+sl younger adult smokers, and whether it was a ten year (+q low, I am not sure. psl MR. SHONKA: I ask the court reporter to [+s1 please mark as the next exhibit, which is Burrows I+>f Exhibit 23, a document that has the Reynolds bates (ts1 number502756957.ItisadocumentlabeledivIDDabstract (t91 form and it's dated February 29,1984. (201 (Burrows Deposition Exhibit Number 23 was (z+1 marked for identification.) (zz) BY MR. SHONKA: [za1 Q: Ms. Burrows, is that your signature on the fMl bottom of Burrows Exhibit 23? (zs1 A: It looks like it. Page 168 i+l Q: Can you tell mc what Burrows Exhibit 23 is? (zl A: I think it is a library sheet, that afcer I (si left the library they implemented a procedure to assist (<1 the library in sort of indexing things and referring (sl people to documents where there was this form was filled [sl out to be a brief abstract of materials that were to be m filed in the library. Key words would be indexing terms lal for library purposes. {al 0: Yesterday you had indicated that while you (+o( worked In the library you did some indexing for reports [t t1 and other documents that were submitted to the pz) library- (rya1 A: Notation or something along those lines, 1141 yes. (ts1 0: Is this the same type of document that was (ts) prepared in the library? (t>) A: No, It isn't. It was much more informal (ta) while 1 was in the library. ttel 0: The reference to key words at the bottom, (za1 does this mean that the documents are researchable on a (zt1 computer? [2zl MR. WILLIAMS: Which- (zsl BY MR. SHONKA: 1241 0: Were those produced with computer searches (zs1 for the documents? DIANE S. BURROWS VoL 2, June 3, 1998 Page 169 t+l MR. WILLIAMS: Which documents are you m talking about, this particular document? Pt MR. SHONKA: Yes, I'm talking about Burrows (a1 Exhibit 23. 151 MR. WILLIAMS: But is your question (si generally? m MR. SHONKA: Generally. (el MR.TAYLOR: I thought the question you [ol asked was were these words put into a computerforsome (to1 sort of search or something. [ttt BY MR. SHONKA: [tzl 0: Are you familiar with MDD abstract forms (ta1 generally? [+a A: Only very vaguely. t+st 0: Did you prepare more than one MDD abstract (+s] form? i,n A: I'm not certain that I prepared this form. (ts) It is possible that someone else prepared the form with (t91 or without my input and asked me to sign to say that it (zo) was a suitable reflection of the report. ham not sure (z+1 who prepared this. (zz) 0: Do you have an understanding of whether (231 Reynolds documents that are on file in the library can (2<I be searched from desk top computers at any place in (2s1 Reynolds? Page 170 ti) MR.TAYLOR: Today or in 1984? tzl MR. SHONKA: 1984. (31 THE WITNESS: I don't think there were any 1<I desk top computers at Reynolds in '84. It's possible, (s1 but not many. !sl BY MR. SHONKA: . m 0: How about in 1984, was it possible to do ts1 computer searches for documents within particular, tol within offices or divisions of Reynolds? I+ot A: I don't think so. (t t( Q: Do you know if documents in 1984 were put 1121 onto the computer system in full text version? ttst A: I don't know for sure. I believe not. t+<1 Q: Were they put on in full text version at ns1 any time while you were there? (+sl A: Not that I know of. tn [171 0: Do you have any understanding - referring tJ F-' (+e1 to Burrows Exhibit 23, do you have any understanding as w [+a] to why the key words appear at the bottom of the page? ~ (zol A: I believe I do. ~ ~ Iz+l Q: What is that understanding? m w A: Those were what old time librarians would (x+l call the subject headings, that if one were looking for (zy the subject of younger adult smokers, it would be (zsl appropriate that the document referenced would be the For The Record, Inc. -- (301)870-8025 Mt1n-U-Scripte (17) Page 167 - Page 170
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DIANE S. BURROWS VoL 2, Jtme 3, 1998 RJ. REYNOLDS TOBACCO COMPANY' MATTER NO. D09285 Page 171 Page 173 pi kind of document one might offer up to somebody lz: searching for material on younger adult smokers, a pi subject heading, an ordinary library term. 141 Q: Do you know if in 1984 there was a general nl [A [ai 141 MR. SHONKA: Off the record for just a minute, (Recess was taken from 3:20 p.m. to 3:30 p.m.) BY MR. SHONKA: lsl practice of putting key words - of including key words [e[ 0: Ms. Burrows, you still have before you lsi on abstraat forms? m A: They look normal being on this form. I te[ assume it's a standard form. I really don't have any toj detailed knowledge with that. l+o[ MR. SHONKA: I ask the reporter to mark (III Burrows Exhibit 24. l+r (Burrows Deposition Exhibit Number 24 was t,sl marked for identification.) (14) BY MR. SHONKA: (,s) 0: It's a document that bears the Reynolds [+el bates numbers of 501431517 through 501431610.It is a [17l document called strategic research report. It is dated l+a[ February 29,1984. It is to Mr. G.H. Long, Mr. M.L. [+s[ Orlowsky, O•r-l-o-w-s•k•y, i•4r. H J. Lees and the title tao[ is younger adult smokers, strategies and opportunities. [z+[ MR.TAYLOR: This appears to be a clean tzz[ copy without any remarks or anything on it. Do you have res1 any knowledge to the contrary? (z4[ MR. SHONKA: No. So far as I know it's a res[ clean copy. [s1 Burrows Exhibit 24? m A: Yes, I do. [s[ 0: I would ask you to take a look at Roman to[ small I, which is the - about the third page of the [+o[ document. p+i A: Okay. nat 0: If you could look at the final three psl paragraphs of that page where it says,'"fhus, the annual [+4[ influx of 18 year old smokers provides an effortless hsl momentum to successful first brands. Marlboro grows by ltsl about .8 points a year due to 18 year old smokers alone. (m On the other hand brands/companies which fall to attract [is[ their fair share of younger adult smokers face an uphiB nB[ batde.They must achieve net switching gains every [zo[ year to merely hold share." [z+i MR. WILLIAMS: What page are we on here? tzz[ MR. SHONKA: Small I. It's the third page l2al of the document.Are you with us,John? [z41 MR. WILLIAMS: Yes. lzs[ BY MR. SHONKA: Page 172 [q MR. TAYLOR: Obviously there is a mark in m the margin. la1 BY MR. SHONKA: l41 Q: Ms. Burrows, I ask you to take your time [s[ and look at the document, and I ask if you prepared it? (6) A: If I - m MR.TAYLOR: You want us to answer the [e[ question today? [s[ THE WITNESS: It looks like it probably is hol a copy of a report that was issued from me, yes. p,[ BY MR. SHONKA: [+z[ Q: Ms. Burrows, a little earlier, a few [s[ minutes ago we were talking about a report that you p4I spent some time preparing, and the question is, is this [+s[ report the final product of the research that you l+s[ undertook? [,fi A: I believe it probably is. [tel 0: Do you have any reason to doubt that it is? [+N A: No, I don't. [xl MR.TAYLOR: Again, she hasn't analyzed [z+l each and every page of this. I would hope you wouldn't [zzl need for her to do that, nor chcck it against whatever rea[ she might who knows what to check with. rNl THE WITNESS: I wouldn't know how to tell tzq you word by word under any circumstance. Page 174 [+[ 0: 'By not attracting its fair share of 18 m year old smokers, IZiR yielded a .5 point ingoing share t3[ advantage to P' M in 1983." Let me stop there. (4) PM is a reference to Philip Morris? [sl A: Yes, (s1 0: Continuing, "Marlboro and Newport, the only m true younger adult growth brands in the market have no lei need for switching gains. All of their volume growth le: can be traced to youngeradult smokers and the movement [+ol of 18 year olds, which they have previously attracted [+q into older age brackets where they pay a consumption [,zi dividend of up to 30 percent.A strategy which appealed [+ai to older smokers would not pay this dividend." 1+41 Does this paragraph mean that switching is [+al not a cost effective way of attracting new customers for t+ei a brand? lol A: I wouldn't have thought in terms of cost [ia: effectiveness in those days. It could still be [,e] profitable to attract switchers at older ages, I Cq believe, not really knowing any numbers at this point. tzll Q: I want your reference point to be 1984 when [m you wrote the document. psi MR. TAYLOR: Then you need to ask the C:at question.You asked what it means and not anything to t2sl do with a reference point, so - Page 171 - Page 174 (18) M9n-U-Scrip" For The Record, Inc. - (301)870-8025
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ATTACHMENT B TECHNICAL SUPPLEMENT SUMMARY AND CRITIQUE OF THE NBER MODELS and Coate of the National Bureau of Economic Research developed two : <W": ~.grie'e of models relating cigarette prices (and other factors) to reported ist~iQence, rate per day, and "total demand" (incidence times rate). ~: h2thaugh reported rates understate true consumption, the models would still be Yelld;if the under-reporting was constant across the other variables -- peogzaphy, age, sex, etc. We ordinarily use this assumption ourselves. ~pch,studies were weakened by assuming that prices in all locales/outlete in a~ atate were similar to the statewide average reported by TMA, plus local tax. , ` This may be why both models hed low adjusted R-squared values (.11 or less, ~ but still significant). ~ Oth,ef aspects of the NBER studies are critiqued separately below, since each ~ a different data source, time period, and methodology. ° •' - 'I'qigi::?bVER-20 MODELS ~ a 60~URC-E: "The Potential for Using Excise Taxes to Reduce Smoking," Working ~? Papei No. 764 of the National Bureau of Economic Research, by E. M. Lewit and ~ p :snd D. Coate, September, 1981. : z This ordinary least squares model used data tapes of individual responses to ~ ehe,liealth Interview Survey of 1976. It expressed tncidence, rate, and "total 7B demand° of respondents over age 20 as a linear function of: ; • Retail price, defined as the TMA - reported average in the respondent's state, adjusted for any local taxes. • Family income and size • Sex • Marital Status • Health status (perceived) • Region and city size of • Race • Working woman or not ~ Ue.ing the full sample, price was not found to be a statistically significant factor in incidence, rate, or "total demand". Coefficients for most of the other variables were significant (at the 5% level) in a direction consistent with our consumer research findings. ~ ~ - w OD ~ ~+ N Dss/ch - !0/6/82 RFfOpp;i__
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RJ. REYNOLDS TOBACCO COMPANY MATTER NO. D09285 Page 207 (il is much like what we have labeled as CX-8 are younger (z( adult smokers important was the attachment to CX-77. (s! MR. TAYLOR: Which is CX-8? What's our PI number? (sl 181 MR. SHONKA: Burrows Exhibit 29. MR. TAYLOR: Which is? m MR. SHONKA: The are younger adult smokers (et important. t91 MR. TAYLOR: The question to you is, does (+ol she believe that 29 was? l++l THE WITNESS: Was the attachment to Exhibit nr! 31. (1a! MR. TAYLOR: Without reference to whatever (u) it was represented to you, I would rather you ask her if (isl you thing this is that. (+e( THE WITNESS: I don't think anything (+n similar to Exhibit 29 would be the attachment that I nel would characterize that way for Exhibit 31. 1191 BY MR. SHONKA: po1 Q: The next paragraph says, "Note that the R 1 driving motivation is getting strokes - positive if (z21 possible but negative is better than none. In fact, teal some people can only handle negative strokes.Thus (se1 rebellion as a reason for smoking, can have double (zsl payoff: negative strokes from parents, school, etc. and, Page 208 (i perhaps, positive strokes from other rebels among peers. (z( This fits your idea that social permission to smoke, !s! (e.g., by schools) is likely to discourage rather than (q encourage smoking." (si A: I see the paragraph. (6) 0: There is a reference there to Mr. Nordine's m idea. Can you elaborate on what he told you his idea lej was? te! A: The general drift. (io! MR. TAYLOR: Do you have a recollection of (ii what he said without guessing? (+zl THE WITNESS: I think I know what I meant t+si by this sentence. I don't specifically recall words Mr. (+41 Nordine said to me about his idea. vs) MR. TAYLOR: As long as you are - as long vsi as the record indicates what she is responding to, prl that's all I care about. [is] BY MR. SHONKA: (+c1 Q: What did you mean by the sentence? (2a( A: What I meant by this, the idea that I lzq believe I was reflecting by this sentence was that Mr. iztl Nordine held the idea that telling people to not smoke tnl might, in fact, encourage them to do so if they were of lxq a rebellious bent. tzst Q; Then in the last paragraph you make a DIANE S. BURROWS VoL 2, June 3, 1998 Page 209 * reference to the idea of "congruence discussed in the * journal of advertising research" - I will read the Pi whole paragraph. (4! 'The second section (on Transactions) could is( relate to the messages delivered by advertising as well (sl as between individuals and may not be as pertinent to m the phase of the project as later on except for the idea (ei of congruence discussed in the Journal of Advertising m Research article you've already seen." (+o! What project were you referring to in that (+11 paragraph? (+z! A: From the timing and so forth, I would say (+al that it referred to this follow-up younger adult smoker na1 project, (+s! Q: Then you said "except for the idea of (isl congruence discussed in the Journal of Advertising (i7i Research article." Does that ring a bell? (,e! A: I have no earthly idea about the Journal of (,s! Advertising Research at this stage, nor what congruence (io1 was. (z l MR. SHONKA: I ask the reporter to mark (nl Burrows Exhibit 32. (sal (Burrows Deposition Exhibit Number 32 was (zai marked for identification.) 1251 BY MR. SHONKA: Page 210 (i! 0: Burrows Exhibit 32 is a multi-page document m that begins on bates number - it has previously been pl marked as exhibit CX-404 in the underlying proceeding (+1 and it bears the bates numbers 503020443 through (s! 503020540. (6) Ms. Burrows, do you recognize Exhibit 32? m A: Some portions of it look familiar to me. (a) Q: What do you mean by that? M A: I mean it's a big document and I don't know (,ol about every bit of it. I see portions that look (+9 familiar to me as I look at them. (+r1 Q: Did you write portions of this, of Exhibit r31 32? (<( A: I drew portions of it, and I'm sure I (+sl participated in the writing or development of some of (is) this material. nrl Q: Could you tell us what Exhibit 32 is? [,e] A: It appears to me to be some version of the (iei kind of presentation at least that was the culmination (zom of this phase two or follow-up younger adult smoker (z+l work. trz( Q: Do you remember when - let me represent to (ni you that a Reynolds database, Charlotte database, (z.l indicatesthatthisdocumentwaspreparedonNovember8, Rs! 1984. Does that sound right to you? For The Record, Inc. -- (301)870-8025 Min-U-Script® (27) Page 207 - Page 210
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DIANE S. BURROWS VoL 2, June 3,1998 R.J. REYNOLDS TOBACCO COMPANY' MATTER NO. D09285 Page 203 (+I presentation, Could you clarify. Would you clarify, m please? Page 205 (+I marked as CX-77. It is a memo from Ms. Burrows to R.C. m Nordine dated September 17, 1984. I ask the witness to pl A: I didn't mean one session. I don't (sl take a look at the document, to read it completely, (4] remember what date the presentation was first shown to (sl people outside the work group that had worked on it. (4) please. (s) Have you read the docuinent? ' (s( Q: And that would be Dick Nordine's group? (s( A: Yes, I have. m A: Dick Nordine, yes, right. I think it would rr( 0: That is your signature on it? (sl have been, yes, Dick Nordine's group. I don't remember M the date. I could take sort of a guess at it if you (s( (s) A: It looks like it. Q: The first sentence refers to an attachment. t+o1 wanted? (+ol It says "Attached is a summary of basic transactional (++I MR. TAYLOR: I instruct you not to guess. (nl analysis structure and tenets." (+zl MR. SHONKA: You don't need to here. I ask u21 A: Yes. (+3l the reporter to mark as an exhibit, Burrows Exhibit 30. (,al Q: Do you know what that refers to? (ul (Burrows Deposition Exhibit Number 30 was (+s7 marked for identification.) pq (,s) A: What the attached thing was? 0: Yes. I+sl BY MR. SHONKA: (+n Q: It is a two page document with the bates pel numbers 507545611 and5612.Ms.Burrows,haveyouhada (+a( (+n I+sl A: No, I really don't. 0: Do you have any idea? A: Well, I know what transactional analysis (+al chance to look at Exhibit 30 yet? rrol A: Yes, p9 Q: There is a reference in here to a FUBYAS, (zzl F-U-B-YA-S, presentation. Is this the presentation (za( that you were referring to when you say you gave your (zel presentation at the end of the second phase? (zsl A: I believe it would be.That was a common (+ol meant.I have no idea what the summary or document or reot something was. R+1 0: What does transactional analysis refer to? arl A: It was a pop psychology thing that was, I (zsl guess, popular around that time, and I had gotten (zat interested in the pop psychology. (ze) 0: I didn't ask you your educational Page 204 (+t nickname for that presentation. re( Q: And FUBYAS stands for what? pl A: First usual brand younger adult smoker. [<( Q: What does that mean? (sl A: What does that mean? That term I think was (sl defined in Exhibit 24.Those smokers who are younger m adults 18 to 24 and have not yet formed a very strong rol brand loyalty. (o( 0: I had earlier asked you if there was a (+ol difference between first brand and first usual brand, (++I and you said not intentionally in reference to one (+xl exhibit, and then - or words to that effect. Is there po( a difference between first brand, first usual brand and (ul a first usual brand younger adult smoker? (+s7 A: Well, the first usual brand would be a (+sl product, okay, pack of cigarettes or a brand name.The (+l first usual brand younger adult smoker is a person. (+e( 0: Who smokes the first usual brand? (+iq A: Right. (zaI MR. SHONKA: If you take a look at - I'm R+1 going to mark the next exhibit. [zzl (Burrows Deposition Exhibit Number 31 was (nl marked for identification.) lzq BY MR. SHONKA: (xs) Q: This Burrows Exhibit 31 has previously been Page 206 [n background. Did you ever take any psychology courses? (zl A: I expect I had one in undergraduate school. (3) 0: But no postgraduate work with it? (<I A: I think maybe that group dynamics course I (sl mentioned as personal enrichment might fall under (sl psychology, but I'm not sure it was the psychology m department or not. te( 0: What you are saying is you developed an (a( interest in psychology or pop psychology in 1984? [+ol A: Yes. nv MR. WILLIAMS: Objection, characterization. [121 MR.TAYLOR: That's probably not important (+31 but that's not what she said.You said she developed an (+q interest in 1984. She never said when she developed an [+sf interest. (+sl BY MR. SHONKA: (+n 0: And you had that interest in 1984? [,s( A: Yes, I recall that that was something I was (+al interested in. rm 0: And so transactional analysis refers to an re+l article that you had appended, do you recall? fnl A: I don't really recall what it was. It tnl could have been an article. t2q 0: Let me cut through this. At one point some Ixsl months ago it was represented to us that a document that Page 203 - Page 206 (26) Aliln-U-Script,s For The Record, Inc. -- (301)870-8025
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R.;(. REYNOLDS TOBACCO COMPANY MATTER NO. D09285 158:20, 21, 23; 169:2, 3; third 126:6; 157:20; 172:13; 189:21; 202:8 164:24; 173:9,22; 177:16; talks 190:5, 6, 8,10,13; 180:13 198:21 though 137:5; 175:12 tank 156:4; 194:21 thought 118:5; 128:21; Task 145:7, 8, 24; 146:16, 137:17; 138:10; 141:3; 19, 25; 147:5,19; 148:4 154:17;169:8;174:17; taught 190:18 176:8,11;184:17;185:2; 202:17 tax 121:14, 23;156:8 three 126:2 21; 129:16; TAYLOR 117:15,19; , 131:24; 138:11; 173:12; 120:4 9;121:6 18; , , 175:10, 21; 177:4; 180:12; 122:15, 20;123:1, 9,13; 200:11 124:5, 24;125:14,17, 22; 126:1, 6, 11, 14; 127:5, 10, throughout 183:24 15, 25;128:1,19, 25; thrust 180:24 130:1; 132:14,22; 133:13; Thus 173:13:207:23 134:12, 24;136:7;138:3, tightly 187:14 19;141:8 14 25:142:11 , , , times 127:19; 179:2; 22; 143:13; 144:24; 146:6 , 202:24 9; 149:9; 152:5; 156:25; timing 209:12 157:23; 158:6, 16; 159:17, 21; 160:2,5,11,18; 161:3; title 139:13;151:16; 162:11,13; 163:21, 25; 171:19; 188:25; 212:4 164:6,14,24;165:5,8; titles 144:18 167:7; 169:8; 170:1; Tobacco 131:10; 132:20; 171:21; 172:1,7, 20; 174:23; 175:3, 12; 176:4; 179:16; 181:23; 182:2, 17; 183:16, 21; 187:11; 190:12; 191:17, 19; 192:4; 194:3; 196:2,5,17,21; 197:3, 5, 21; 198:18; 199:3; 201:22; 202:19; 203:11; 206:12; 207:3, 6, 9,13;208:10,15 teacher 190:16 Teague 145:16; 148:12, 16 team 200:7 technical 138:7 technically 140:14; 148:25 telling 208:22 ten 166:4, 5; 167:13 tenets 205:11 tenures 149:3 term 140:9; 171:3;180:2; 183:23, 24; 184:5; 190:7, 11, 12,17; 191:16, 19; 192:1;194:12, 20; 195:7, 12; 204:5 terminology 140:8 terms 129:15; 143:10; 168:7; 174:17; 175:16; 182:20,22; 183:18; 189:5, 8; 193:2 testified 116:6;143:14 testify 202:17 testimony 143:4; 178:10; 199:14 testing 150:24; 151:25 Texas 152:1 themselves 176:8 theoretical 180:23 thereafter 178:17 therefore 164:4 133:5,19;134:1,10; 188:25; 212:4 today 116:12, 20; 122:21; 123:2; 129:21; 139:2; 143:10;156:7; 167:6, 8; 170:1;172:8 together 146:24; 156:8 told 137:10;188:16; 208:7 Tom 165:17 took 184:18; 189:24 top 151:15;159;12; 169:24; 170:4 topic 189:19 totally 126:15 touched 155:6;162:8 traced 174:9 Trade 142:10; 212:10 tra nsactional 205:10, 18,21;206:20 Transactions 209:4 transcribed 142:4 transcript 142:3, 8, 9; 143:6,9;212^,8,19 translate 186:18 transmit 180:8,15 transmitted 134:9 trick 142:20, 20; 167:9 tried 157:21; 182:11 trip 185:13 true 174:7 try 146:25;163:21; 180:13 trying 142:15,16; 148:22; 159:1, 2, 3;167:9; 176:19 turns 137:19 Two 126:4, 5, 8; 128:13; 129:15; 143:3; 155:8; 163:7; 164:17; 166:9; 179:11, 22; 182:16, 20, 22; 191:23; 203:17; 210:20 type 161:4, 5;164:4; 168:15 typed 161:7, 17, 18; 163:4; 164:3 typical 148:19 typically 140:10 typists 153:17 U ultimately 118:16; 119:5 unartfully 167:10 unattractive 177:13 unavailability 142:4 unclear 132:6 undefined 183:6 under 1i6:16;132:6; 159:2; 172:25; 206:5 undergraduate 206:2 underlined 160:7 underiying 161:16; 175:23; 186:25; 198:9; 210:3 underscored 179:22 understands 187:23 undertook 172:16 unfair 130:2 unfortunate 137:15 unit 139:18 unlike 152:7 up 126:20; 141:6; 148:4, 6; 154:16; 156:5; 164:7, 25; 171:1;174:12;175:23; 180:13;186:16;189:2; 190:2, 5,15;191:21; 195:18 uphill 173:18; 177:20; 178:4 upon 118:2;162:8 upper 157:9; 198:10 upset 130:11 Upside 194:3 use 146:23; 147:2,4; 178:17; 183:24; 190:7; 193:13 used 140:15; 190:7 using 176:11 usual 178:15; 180c3; 183:3; 204:3,10,13,14, 15,17,18 usually 152:8, 10; 195:10 V vague 140:24; 156:12; 175:9; 183:6 vaguely 169:14 variety 148:19 varlous 132:5; 182:20 version 163:19; 170:12, 14; 210:18 versus 145:25 vice 185:18; 186:3,7,12, 18 view 138:9 virtue 177:12 volume 174:8 W wait 125:5; 134:23 wants 149:12; 195:24 warbles 127:19 waste 142:16 way 121:2; 124:13; 130:4, 18; 142:25; 143:8; 146:20; 153:1;156:9; 161:10; 162:13; 174:15; 176:20; 180;25;182:1;185:14; 186:18; 195:15; 201:1; 207:18 ways 160:20, 21 Weber 156:17 week 117:21, 21 weeks 117:15;189:15 well-developed 180:6 Westwood 200:17 What's 117:21; 127:12; 167:5, 8;184:15;198:20; 207:3 Whereupon 116:3 whichever 118:14 white 194:12,19, 24; 195:1; 201:21 whole 121:22; 176:4; 209:3 WILLIAMS 121:16; 123:14; 124:15; 125:2,12, 16;126:5,9;127:21; 128:10; 129:24; 132:10; 133:7,10; 134:23; 136:1, 9; 137:17,21;138:5; 140:24;141:10,16;143:2, 18; 150:11; 151:1,3; 152:10; 156:12; 157:2; 158:4; 159:22; 162:2,16; 166:10, 22; 168:22; 169:1, 5;173:21,24;175:9; 178:9,12; 183:4; 185:21; 187:19; 193:24; 195:2,21; 197:7, 11; 198:15, 17, 21; 200:22; 202:9,16; 206:11; 211:4 Winston 137:13 Winston-Salem 133:6, 17, 20, 23;134:2;137:18 wish 127:7 withdraw 180:11 whhin 147:10, 16; 148:18; 170:8,9; 178:18; 189:21 without 119:17; 130:19; 161:5; 163:4; 169:19; 171:22; 207:13; 208:11 witness 116:5; 117:18, 22;120:20;121:9,21; DIANE S. BURROWS VoL 2, June 3, 1998 122:24; 123:4,15; 124:7; 125:19; 126:4,25; 128:13, 20, 24; 129:2; 130:8; 131:12;132:17, 25; 133:14; 135:1; 136:11; 138:7; 140:25; 141:22; 142:17, 22; 143:19; 145:2; 146:8, 11; 149:13, 14, 16, 23;150:15;151:5;152:13; 156:13; 157:4; 158:11, 19; 160:14,16, 20, 23;161:7; 162:19, 23;164:20, 23; 165:7, 10; 166:12,24; 167:11;170:3; 172:9, 24; 175:5, 16;176:6;178:13; 179:18;182:4, 21, 23; 183:7; 184:2; 187:23; 188:1; 190:14; 191:24; 195:4; 197:14; 199:8; 201:1; 202:2,13; 205:2; 207:11,16; 208:12 wonderful 165:4 wondering 175:24 word 158:8; 164:8, 9; 167:10; 172:25, 25; 175:22, 23;184:10 words 127:16; 143:19; 152:24; 158:8,12;166:12; 168:7,19; 169:9; 170:19; 171:5,5:176:8,11; 183:21, 22; 199:25; 204:12;208:13 work 137:10; 139:16; 140:2, 19, 22;143:21; 144`.3;145:6;147:1,8,19; 153:22; 156:17; 178:13; 189:10, 17; 203:5; 206:3; 210:21 worked 146:16; 147:8; 148:17,18,25; 153:13; 154:6; 168:10; 199:12, 18; 200:8, 11; 203:5 working 140:7,8,14; 144:3, 5, 22;153:3,18; 154:2 world 180:23; 188:21; 194:20 worse 125:17 write 166:11; 210:12 writing 160:8; 162:10; 190:6; 210:15 written 121:19; 201:12 wrong 142:15 wrote 157:12; 162:20; 174:22;175:4;176:2, 5; 182:18; 183:25; 197:19 (A X N r+ co X 142:2 ,p r Y 0 m Y 142:2 YAX 191:15,19, 22; 192:23; 193:8 For The Record, Inc. -- (301)870-8025 Mia-U-Script® (9) talks - yp,g
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itJ. REYNOLDS TOBACCO COMPANY MA'PI'ER NO. D09285 positions 138:11; 140:11;148:19;176:17 positive 181:6; 207:21; 208:1 possibility 119:10; 181:16 possible 146:2; 169:18; 170:4, 7;175:22;178:18; 181:6; 207:22 possibly 147:1 postgraduate 206:3 practice 118:3,19, 25; 119:9,14; 134:17; 142:5; 152:8; 171:5 precedes 179:14 predicated 142:14 predict 146:23 preference 179:7 prepare 169:15; 194:6 prepared 150:7,14; 158:14; 161:2; 168:16; 169:17,18,21; 172:5; 199:6, 10; 210:24 preparing 172:14 present 123:3 presentation 190:4; 201:13,14,14, 15, 16,17, 25; 202:1, 8, 9, 10,18, 21; 203:1, 4, 22, 22, 24; 204:1; 210:19 presentations 189:23; 190:3. 20; 191:4, 11; 195:10 presented 160:10 presently 160:6,12 president 185:18; 186:3, 7,12,18; 188:24 pressure 182:7, 10,13 presume 130:19; 150:16 pretty 183:8;189:2 previously 116:6; 119:21;145:13;150:1; 159:10;161:15,19; 163:13;174:10;186:24; 192:9; 193:20; 196:14; 198:8; 199:17; 204:25; 210:2 price 120:15, 20, 25; 125:11; 131:11, 25 primary 200:5 principally 153:19, 20 printing 162:9,17 priorities 166:4,15,16 probably 138:11; 154:21; 155: 1; 161:12; 172:9,17; 184:18; 186:14; 196:4; 206:12 problem 125:12; 126:7 procedure 145:25; 168:3 proceeding 119:22; 145:14;150:2;159:11; 161:i6; 186:25; 198:9,10; 210:3 PROCEEDINGS 116:1 process 154:15,18 produced 168:24 product 153:20; 172:15; 204:16 profitable 174:19 project133:25;145:6; 147:13;148:2;190:1; 191:9, 12,12,12, 22; 199:21, 23; 200:2, 4,14, 21,22, 23;201:8; 209:7, 10,14 projecting 146:2 projects 1532;191:15, 22, 23; 192:4, 22; 193:6, 8, 10 promised 142:20 promoted 189:13 promotion 138:24,25; 139:5,11 pronounce 122:9 proofread 212:19 PROOFREADER 212:17 proposal 151:16 proposition 181:5 provided 127:25 provides 173:14; 177:5 psychology 205:22, 24; 206:1, 6, 6, 9, 9 punctuation 212:20 Purely 140:17 purpose 129:25; 142:19 purposes 168:8 push 195:22 put 143:8; 156:8; 169:9; 170:11,14 putting 171:5 i Q qualitative 150:24; 151:24 quantify 183:11 quick 164:9, 9 quite 201:2,4,9 quotations 164:10 R 135:10 R.C 163:16; 205:1 R.J 156:16; 212:4 raise 139:13 ran 201:8 range 143:23 rarely 190:10 rate 128:8 rather 137:2; 141:5; 182:2; 207:14; 208:3 re-addressed 129:11 read 124:24; 125:2,5, 23; 126:10;128:10;132:25; 141:24; 143:14,15; 144:25; 152:16; 157:4; For The Record, Inc. -- (301)870-8025 158:12; 159:18; 166:12; 175:11; 177:18; 185:1,16, 16; 186:6; 197:9; 198: 16; 205:3, 5; 209:2 readable 163:24 reading 125:20, 25; 128:11; 142:3; 145:1; 193:7 Ready 116:14; 125:6 reai154:8;156:3 really 117:22; 123:23; 124:1; 131:1; 132:6,17; 134:16,19; 140:8; 149:8; 155:11;159:21;165:25; 171:8;174:20;184:7,17, 24;188:12;193:3;194:10; 205:16; 206:22 reason 118:12, 15; 120:18; 124:18; 129:21; 130:2, 6; 148:9; 172:18; 186:4; 207:24; 211:2 reasonable 161:11; 211:1 reasons 119:12 rebellion 207:24 rebellious 208:24 rebels 208:1 recaii117:24;119:13; 122:19; 123:5, 7;124:6, 9; 127:2;130:9,11,12,13, 18, 24; 133:24; 135: 10; 137:3, 5;138:25;144:12, 21;145:8; 148:6, 9;149:1; 152:14,21;153:3,9,17; 154:11, 24, 25;156:3,13, 24• 158•14• 166•15; 184:9, 141:9; 142:7; 143:15; 149:22; 151:14,19; 159:9; 160:17; 163:12; 173:1; 181:18,19; 187:22; 208:16; 211:6 refer 140:16; 166:2; 205:21 reference 135:21; 157:19; 158:2;165:12, 16; 168:19; 174:4,21,25; 176:24; 180:10; 181:20; 182:12,13,14,19;187:24; 188:5; 192:22; 203:21; 204:11; 207:13; 208:6; 209:1 referenced 140:10; 170:25; 182:17 referencing 128:21 referred 160:9;165:14; 209:13 referring 135:9; 168:4; 170:17;187:21;203:23;209:10 refers 157:15; 205:9,13; 206:20 reflected 137:6 reflecting 208:21 reflection 169:20 refresh 121:2; 146:15; 152:17; 158:9; 192:25; 193:1 refreshes 157:25 regarding 124:10; 166:17 regular 155:8; 179:12 23, 25;185:1, 5, 6, 7; regularly 185:4, 6; 188:19;194:24;199:13; I 200:11 200:15; 201:1, 9; 206:18, relate 209:5 21, 22; 208:13 I related 139:22; 140:11; recalled 124:18; 129:3 ~ 144:6; 147:20,22;177:2; recalling 139:17 receive 156:9,10 received 142:8; 162:25 Recess 149:18; 173:3; 196:7 recessed 211:7 recipient 121:5 recognize 131:18; 150:4; 157:8,10;160:1;161:1, 25; 162:10,22; 194:9; 197:1, 15; 198: 1; 210:6 recollection 120:18; 121:2, 6, 7;124:4;128:25; 137:9; 139:2,6; 144:23, 24;145:2;146:16;147:17; 148:8; 152:18; 154:1,9; 156:4; 157:1,3,24,25; 158:9; 162:25; 167:6, 8, 11;191:14;193:1,9; 200;10;208:10 recommend 128:17, 22 recommendation 127:3, 6,16,18; 128:16; 129:7 recommended 128:5 record 120:13,24;121:4; 122:6; 125:5; 131:8; Min-U-Scripta 190:1; 191:9; 199:21 relating 190:20, 25; 197:16 relation 191:11 remarks 171:22 remember 129:2; 138:4; 148:5; 155:7,11,12; 157:7;158:6; 161:10; 184:11; 189:19; 194:11; 202:7, 23; 203:4, 8; 210:22 remind 193:4 reminded 130:8 report 152:21,23;154:6; 155:4; 158:3,18,23; 159:13;161:2,11;162:7; 163:1, 3;165:14;166:20; 167:1, 5, 8,11; 169:20; 171:17;172:10,13,15; 176:5;182:18,19;184:2, 16, 22;185:16;187:15,17, 21,24;188:5,14;189:7, 16; 190:6,21, 22, 23; 191:1, 5;199:16; 201:11, 12 reporter 119:23; 124:20; 145:10; 161:13; 163:7; 167;15;171:10;181:21, DIANE S. BURROWS voL 2, June 3, 1998 (7) positions - right 24; 182:3; 186:22; 193:15; 198:3; 203:13; 209:21; 212:1 reporting 139:3; 144:12 reports 168:10; 189:24; 194:19,23 represent 117:6;120;6; 127:13; 135:7; 161:17; 163:14,18;164:2,17; 210:22 representation 117:10; 120:5,11 represented 206:25; 207:14 request 130:25 research 131:25; 135:14, 15, 24; 137:25;138:8,12, 17; 139:15,18,20,22; 140:3, 4, 7,11,13, 20; 141:4, 4; 143:21; 144:2,3, 6, 8,16; 145:6; 147:10,11, 16; 148:18,20,22,23; 149:1; 154:21; 159:13; 171:17; 172:15;185:25; 186:1, 10, 13,15,17; 209:2, 9,17,19 researchabie 168:20 researcher 140:20 resort 138:2,3 respects 117:8 respond 143:17; 176:7 responding 208:16 responsibiiities 139:3, 10; 189:14 responsibility 139:24; 200:5 responsible 139:21 rest 146:5; 197:19 restaurants 137:18 restrict 187:15 restricted 187:18; 188:14 result 139:11 resuRed 202:1 returning 162:6 retyped 163:19,19 reverse 130:1 review 118:21; 119:1; 121:1; 146:15; 192:25 reviewed 127:8 Reynolds 116:21; 122:1; 123:22; 124:11; 128:16; 131:3;135:12;136:6,16, 22, 23, 24, 24, 24;138:1; 142:9; 143:11,22;150:10, 11,13,14,16;153:3; 155:16, 23, 24;156:10; ' N 165:23; 167:17; 169:23, 25;170:4, 9;171:15; 00 176:14;182:20; 183 :24; N 185:19; 189:9; 194:15; 195:7; 200:11,12; 210:23; u 212:4 a+ Richard 156:16 right 142:18; 148:3; 158:8; 164:9; 179:18;
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iLJ. REYNOLDS TOBACCO COMPANY 24; 137:25; 138:8, 17; 139:15;140:3,10,11,13, 16,17; 144:1, 16; 14 5:5; 151:15; 185:19,25; 186:4, 7, 8, 9.12,17,19; 192:11 marketplace 179:2 marks 160:8 Marlboro 173:15; 174:6; 176:14; 177:6 married 183:10 MARTIN 212:25 match 164:5 material 118:20; 129:9; 156:8;171:2; 210:16 materials 154:20; 168:6; 190:25 matter 141:1 matters 140:23 mature 128:8 may 129:18; 131:24; 133:7; 137:8; 138:16,22; 146:5, 9.12; 153:16; 155:25; 178:17; 199:7; 209:6 Maybe 125:25;134:8; 167:10; 201:2; 206:4 MBER 120:25 McDonald's 132:5, 8 MDD 151:16,18; 167:18; 169:12,15;183:16 MDIC 192:11 mean 122:20; 136:24; 147:6; 150:11,13; 155:5; 160:2, 5;161:3, 5;162:17; 163:3; 166:9; 168:20; 174:14;175:2, 3, 7,11,13; 176:7;181:9;184:5; 190:3, 4, 11; 191:16, 19; MATTER NO. D09285 VoL 2, June 3, 1998 interest 121:14, 17,18; 146:21; 206:9,14,15.17 interested 121:23; 178:20; 205:24; 206:19 interesting 155:3; 156:2 Intern atio nal 131:10; 132:20; 133:5,19; 134:1, 11;135:21;136:25 interview 156:3 interviews 155:22, 23 into 130:18;1322; 146:12;151:24;169:9; 174:11; 190:17; 201:3 involved 185:24; 200:3, 10,13, 20 Involving 181:21 irritating 181:12 issue 119:16; 182:4,5, 8 Issued 172:10; 194:18 Issues 121:14 items 131:24 itseif 167:1 J J.D 156:17 J.L 187:2 J.R 187:1 J.W 122:11 Jersey 151:25 job 138:9, 23;139:1, 10; 144:9 jobs 144:19 John 137:20; 173:23 Johnston 122:11; 123:21 joined 148:20, 21 jokes 137:10 journal 209:2, 8,16,18 Jovan 197:16 Jr 120:14; 122:8; 125:9; 163:16; 187:1 judgment 119:1 jumped 164:11 jumps 164:7 June 135:25; 212:5,12 junior 118:20 justify 193:12 K keep 195:18 kept186:10 key 151:24;168:7,19; 168:7,19- 170:5; 175:23; 183:21,22 kill 180:11 kind 147:14, 18, 23; 148:7; 171:1; 182:4; 194:21; 210:19 kinds 147:24 knew 136:11; 137:11 knowing 174:20 knowledge 121:20, 22; 124:4; 132:9. 11; 133:12, 13;171:9, 23; 183:8, 25; 195:4: 212:10 knows 151:2;172,23 L L 212:15 L.M 122:8 L.P 145:15 L.W 120:14;122:8; 125:9; 163:16; 187:1 labeled 122:12; 125:7; 159:12;167:18; 179:14; 201:20; 207:1 lack 121:16;151:1; 158:4; 166:10, 22;176:16;178:9; 187:19 language 182:25 large 137:16;194:20 larger 200:9 Larry 184:25; 185:3; 186:3 last 130:23; 137:22; 142:3, 8;145:23;177:4, 10; 180:5; 196:17; 198:15, 17, 18, 19, 19, 20, 24; 208:25 late 153:2,4 later 117:16; 178:8; 191:9. 12; 209:7 lawyer 165:22 leading 178:9 leaping 201:6 leaps 195:11 learn 147:1 learning 146:22; 147:16 least 117:9; 157:22; 210:19 leaving 130:23 Lees 171:19 left 136:21; 148:21; 149:2; 168:3; 198:10 legible 163:15 less 147:12; 154:11, 14; 177:23; 178:13 letter 187:21 level 132:3; 138:10,13; 140:23, 25; 141:5; 146:10 librarian 136:17; 149:1; 154:23 librarlans 170:22 library 118:11; 148:22; 149:2;154:21;155:9,12; 168:2, 3, 4, 7, 8,10,12,16, 18; 169:23; 171:3 light 175:7 liked 156:6; 164:8 likelihood 121:2 likely 155:12; 181:5; 208:3 limit 120:11 limited 137:3, 8;146:18 For The Record, Inc. -- (301)870-8025 Ilne 120:24; 131:23; 183:8; 188:7; 197:7; 200:8 164:4, 8; 165:13: 179:21, March 187:1 22; 180:5 margin 172:2 lines 154:11;164:5; mark 124:20; 145:11; 168:13 161:14; 163:7; 167:16; links 175:23 171:10;172:1; 186:22; list 126:13, 17;137:18 193:15; 196:8; 198:3; Ilttle 156:7; 172:12; 203:13; 204:21; 209:21 177:1; 179:16 marked 116:19,24; located 132:20; 134:5 117:4; 119:20,24; 122:1, fogical128:7 3;124:23;131:2, 6; 145:13 19; 149:20 22; long 153:22; 171:18; , , 150:1; 151:10 12; 156:14 187:10,14;188:19,22; , , 20;159:4 7 10;161:15 201:2, 9; 208:15,15 , , , 22; 163:8,11 13; 167:21; longer 137:14 , 171:13; 186:24; 187:4; look 117:2, 3; 120:3; 192:8, 9,14;193:18, 21; 131:12, 23; 145:21; 146:4, 196:11, 14; 198:6, 9; 12;150:3.16;151:21; 199:17; 203:15; 204:23; 154:15;162:14;164:22; 205: 1; 209:24; 210:3 171:7; 172:5; 173:8,12; ma rket 128:16;138:11; 192:19;194:5;201:24; 143:21;144:8;147:10,11, 203:19; 204:20; 205:3; 16; 148:18, 20, 22, 23, 25; 210:7, 10,11 167:2; 174:7; 176:13; looked 146:11; 150:17; 177:22, 25;179:5, 23; 152:16; 155:11; 165:10; 180:21; 186:1,15 184:2 marketing 125:10; looking 117:2; 131:15; 128:17;135:13,15, 20, 20, 154:12,19, 25:155:13; 159:25; 161:11; 162:24; 170:23; 193:6 looks 117:12, 16; 122:15; 123:17;125:14;126:14; 127,20;129:20;161:10; 165:1; 167:25; 172:9; 196:21, 22, 23; 205:8 loses 177:8, 12 lost 176:15 iot117:19;123:18; 141:13; 181:19; 201:3, 5; 202:24 low 166:5;167:14 lower 180:18 loyal 178:2 loyalty 128:9; 178:18, 19, 23; 179:4; 180:7,14; 204:8 M M-a-b-e-e 145:16 M.L 171:18 Mabee 145:15 main 137:11 mainly 200:10 mainstream 181:6 maintain 180:19 maintaining 195:19 major 178:25; 189:6 making 120:4; 188:20 male 126:23 males 128:19 man's 200:17 manager 135:20, 24 many 126:2; 142:24; 170:5; 176:12,17; 178:2; Min-U-Scr3pto DIA.r-E S. BURROWS 201:15.15;203:3;204:4, 5; 208:19; 210:8, 9 meaning 166:13; 183:21; 190:23,25; 194:12 meaningfui 154:17 means 158:11; 174:24; 177:8,21; 192:5 meant 175:20; 176:2,5; 177:12;180:16;190;14; 205:19; 208:12, 20 measurement 183:7 meeting 145:24 memo 121:3; 122:11; 123:16; 124:10; 125:7, 8; 128:17,24; 130:20,21; 131:9; 135:2; 137:2; 147:7; 157:7,18; 163:14, 16; 186:25; 205:1 memoranda 134:9 memorandum 120:14; 122:7, 12, 22; 128:4; 145:14, 22;157:15 memory 127:19, 19 memos 147:25 mention 136:12 mentioned 180:1; 185:3; 191:8: 206:5 merely 173:20 messages 209:5 might 119:4, 7, 7;152:25; 155:3:158:9;171:1; 172:23;188:10,25; 195:12; 198:25; 206:5; 208:23 mind 146:20;1473; 154:13:175:24;176:10; 180:11; 182:15; 185:15; 195:11; 199:25; 200:16, 18; 201:6 mine 120:23; 125:12; 126:5;128:1;196:17,18 minute 117:1; 134:23; 173:2; 191:8; 196:6 minutes 172:13; 180:2 mis-spoke 148:20 mis-stapled 125:13 mischaracterization 178:10 misread 120:23 misstate 142:17 misstated 151:18 misunderstood 141:7 model 147:20, 25 models 120:15, 25 moment 126:12; 146:4; 151:20; 176:2,24; 181:20; 201:6 moments 131:12 momentum 173:15; 177:5 Monahan 187:2 month 145:3 months 153:23; 189:22; 201:2,8;206:25 192:1; 193:11; 195:17; 1 Moore 121:3, 4;187:1 (5) interest - Moore
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DIANE S. BURROWS voL 2, June 3, 1998 Page 179 t+l A: In my opinion, yes.Therc have been m different opinions at different times in the marketplace t3l and so forth and so on, but my opinion for the periods (.t of cigarette history that I studied, was that loyalty is (sl the driving force of the market in that at some stage (s1 most smokers that I was aware of adopt a brand as my m brand and will give strong preference to that brand over I9 others, so they wouldn't switch. rol Q: That's helpful, thank you. If we go t,ol further back in Burrows brhibit 24, there is a page with (111 an Arabic number two. pz A: Is that the regular numbers? (131 0: Yes, I'm sorry. If it helps you, the page pq that precedes that is labeled section one, the (1si importance of younger adult smokers. nel MR.TAYLOR: This little number here is (fn 1526. (fel THE WITNESS: I think I'm on the right ne] page. pm BY MR. SHONKA: (zfl 0: I draw your attention to the line, rza underscored line that begins with the number two near (zal the bottom of the page and it says market share, dash, a (z41 first brand advantage. tzsl A: Yes. Page 180 Ifl 0: And by first brand - you mentioned this m term a few minutes ago, also - is there a difference t31 between fust brand and first usual brand? (q A: There should not be. Is( Q: On the next page, the last line says "Once (sl a brand becomes well-developed among younger adult m smokers, aging and brand loyalty will eventually le( transmit that strength to older age brackets." (ol A: Yes. tml Q: Is that a reference to your earlier answer 1„I - kill that question, never mind, withdraw it. 1121 Is the sentence at the bottom of page three t+sl - back up. I will try it a third time. t1•1 Where you say aging and brand loyalty will (f s1 eventually transmit that strength to older age brackets, (fal would you tell me what you meant by that? (1n A: If my brand has a 60 share among 18 to 24 pal smokers and a lower share among older groups and f+o1 continues to maintain a 60 share among 18 to 24 year old pq smokers,eventuallypeoplewhohavebeen18to24inthe ¢fI past will fill the market and my brand will have a 60 rm share. p3l It's sort of a theoretical world, but that (2q was the thrust of it. tm 0: If we could just go all the way back to RJ. REYNOLDS TOBACCO COMPANY ' MATTER NO. D09285 Page 181 UI page 40 of the document which has bates number p1 501431572.The bottom full paragraph above the bullet t31 point says "If RIR achieves first entry with a social (4) acceptability brand, younger adult smokers are more (sl likely to adopt it if the brand proposition is as lel positive and mainstream as possible." m Do you see that? tel A: Yes, I do. Iel 0: What do you mean by social acceptability (to1 brand? t+fl A: A cigarette that in some form or fashion (+zi would help smokers avoid irritating others with their [131 smoking. We had an example that not everyone (ul appreciates being around a smoker and a social (f sl acceptability brand would somehow offset that pel possibility of confrontation or offense from smoking pn near others. nel 0: So the record is clear here, since I think (f ei a lot of what happened yesterday was off the record, teal your reference just a moment ago was to an incident 121] involving some discomfort by the court reporter mi yesterday with cigarette smoking? ri31 MR. TAYLOR: I would say rudeness by the (zq court reporter. [2sl MR. SHONKA: I don't want to characterize Page 182 (1] it that way. (2) MR. TAYLOR: I would say rudeness rather (3) than discomfort by the court reporter. (4) THE WITNESS: That's the kind of issue that (sl (el m 18l is a social acceptability issue, yes. BY MR. SHONKA: 0: What about peer pressure, is that a social acceptability issue? lal (1~ A: No, a social acceptability brand would have nothing to do with peer pressure or peer acceptance. U+1 Social acceptability is as I tried to indicate. (i21 0: Just for my own reference here, there is (131 sometimes a reference to peer pressure and sometimes a (1!l reference to peer behavior. fr 115) N In your mind, is there a difference between 1, 00 If el the two? 0 (171 MR. TAYLOR: Are you saying referenced in a A lfel (191 1-r report she wrote? W MR. SHONKA: Not in reference to the report - W rpl at aI1.I have seen two terms in various Reynolds (zn documents and I am asking for the witness'understanding tnl as to the two terms only. tzil THE WITNESS: I'm not aware there is any tz.l specific definition associated with either one of those tzsl other than common language. Page 179 - Page 182 (20) Min-U-Sc,ript® For The Record, Inc. -(301)870-8025
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DIANE S. BURROWS VoL 2, Juae 3,1998 more 128:8; 141:5; 143:11,22;146:12; 147:12;154:11,14; 164:23;166:4;168:17; 169:15;181:4; 189:17; 199:15,19; 200:7 Morris 174:4 most 179:6 motivation 207:21 moved 133:1; 153:7 movement 174:9 moving 143:10 much 154:5; 168:17; 183:8; 207:1 multi-page 149:24; 210:1 multiple 158:14 Musk 197:17 must 145:3; 146:24; 147:15;173:19: 177:12 myseif 118:2 N name 148:12; 165:14; 186:9, 11; 200:16,17,19; 204:16 NBER 120:15; 125:10 near 128:5; 179:22; 181:17 necessarily 144:19 necessary 118:23; 144:7 need 134:8; 138:1,12; 172:22; 174:8,23; 197:5; 203:12 negative 207:22, 23, 25 neighborhood 185:14 net 173:19 new 126:22; 148:12; 149:1;151:25;164:11,25; 165:2; 174:15; 193:8 Newport 174:6 newspaper 132:25 Next 121:25; 138:1; 143:5; 144:12;145:11; 167:16; 180:5; 189:13,15, 20;196:1, 8;198:4; 204:21; 207:20 NFO 155:19 nickname 204:1 night 137: 10; 142:3,8 nine 128:10,12;129:12 Nobody 130:10 N08REGA 212:15, 25 none 207:22 nor 172:22; 209:19 Nordine 144:13, 22; 153:8,11, 15;154:10; 156:6,16; 163:17; 184:24; 188:17; 189:10; 200:2; 203:7; 205:2; 208:14, 22 Nordlne's 153:8;194:18, 23; 203:6, 8; 208:6 normal 118:3; 171:7 North 142:5 notation 157:9; 168:13 notations 160:13 note 118:6; 121:4; 122:6; 135:221,149:10,10; 156:23:162:8;164:6; 194:3;207:20 notes 212:8 nothing 152:19; 156:2; 182:10 notice 183:18 novel 185:1,16 November 135:16; 145:3,15; 149:25; 154:3; 210:24 number 116:21, 23; 119:24; 122:3; 124:22; 127:12;129:16; 131:3, 5; 137:21; 145:18; 149:19; 151:11,16,19;156:19; 159:6; 161:21; 167:18, 20; 171:12; 179:11,16, 22; 181:1; 186:24; 187:3; 192:10,13;193:17; 196:10, 16; 198:5; 200:9; 203:14; 204:22; 207:4; 209:23; 210:2; 212:3 numbered 126:21; 197:15 numbers 122:2; 145:12; 163:10;171:16; 174:20; 179:12; 193:23; 194:2; 197:10; 198:13; 203:18; 210:4 numeral 151:18 I ~ 0 212:1, 17 o'clock 195:22; 196:3 O-r-I-o-w-s-k-y 122:8; 171:19 oath 116:17; 159:3 Object 121:16; 140:24; 143:3; 151:1; 156:12; 166:10; 175:9; 183:5; 187:19 objected 141:17 I Objection 127:5; 132:10; 1 143:18; 158:4; 164:12; 166:22; 178:9,12; 206: 11 objections 141:13,15 obligation 141:16 obviousiy 139:21;164:4; 172:1 occurred 142:23 October 117:20; 120:16, 19;122:7,13, 21, 22; 123:22; 125:8; 126:16,17; 131:9; 135:15 off 137:9,12;144:25; 145: 1; 149:22; 173: 1; 181:19; 184:18; 188:25; 197:9; 211:6 offense 1.81:16 offer 118:19; 155:3; 171:1 office 185:12,15 offices 133:6,11,19, 23; 134:1, 3, 3;170:9 official 133:20 offset 181:15 often 140:15 Oil 197:17 old 167:3; 170:22; 173:14,16; 174:2; 177:5, 7, 23, 23;180:19 older 174:11,13,19; 180:8,15,18 olds 174:10 Once 180:5 one 118:4; 127:16,17; 128:2,21; 129:17; 130:23; 133:19;135:5;136:8,10; 137:19; 138:7; 143:3,4, 24; 149:12, 15; 163:7, 8; 164:23; 169:15; 170:23; 171: 1; 177: 18; 179:14; 182:24; 183:18; 184:24; 185:3; 191:17,18, 22; 195:14, 17; 196:18, 22, 23; 199:15,19; 200:24; 201:3, 15,15, 16, 17; 202:25; 203:3; 204:11; 206:2, 24 ones 152:7 only 124:17;130:5; 134:10; 142:19; 146:14; 148:1; 149:10; 150:15; 162:13; 169:14; 174:6; 176:20;182:22;195:14; 197:14; 201:15,16,17; 207:23 onto 170:12 opinion 178:13;179:1, 3 opinions 179:2 opportunities 152:22; 158:18; 159:15; 171:20 opportunity 153:10; 154:7, 9; 156:1; 158:22 opposed 176:4; 190:6 order 188:24 ordinary 171:3 organization 132:3 organized 195:25 original 128:2;199:6 Orlowsky 122:8, 10; 123:24; 171:19 others 179:8;181:12,17 ought 158:8 out 124:13; 125:20; 126:19; 137:19; 167:12; 168:6; 184:16; 197:24; 199:5 output 158:24 outside 155:16; 200:12; 203:5 over126:7;128:9; 165:10; 179:7; 185:9; 188:21 overlap 148:1 overlapped 149:4 own 119:12; 129:23; more - position (6) M3a-U-Scripto S RJ. REYNOLDS TOBACCO COMPEINY' MATTER NO. D09285 130:3. 7,10; 182:12 P p.m 149:18,18;173:3,3; 196:7, 7; 211:7 pack 124:16,19; 178:16; 204:16 k I performance 166:5,21, 25 performed 144:6; 167:12 Perhaps 117:18; 118:18; 133:1;167:9; 194:21, 21; 208:1 j period 135:12;145:9; 149:2; 201:2 ~ periodically 155:2 pac age 140.12 i periods 179:3 packs 124:11;126:22; 1 permission 208:2 127:3;128:7,16,18; 129:8 ~ page 125:14,15, 17,18; 126:6, 6,19;128:6; 129:18;131:21;135:8,22, 23;151:23;159:13,18; 160:12;162:14;170:19; 172:21; 173:9, 13, 21, 22; 177:4; 179:10,13,19,23; 180:5, 12; 181:1; 186:2; 192:10,11,16,18; 196:15; 197:10, 11, 15, 25; 198:11, 12,19,20,24;203:17 1 a es 126:2 8 2 p g ; , , phill 174:4 159:18, 21;196:15;197:3, 1 p 6,7 1 picture 185:14 paper 144:25; 145:1; ~ piece 144:25; 145:1; 194:12;195;1; 201:21 ~ 190:15 papers 194:19, 24 I pieces 194:21;201:3 paragraph 126:21; 145:22;151:23;157:20; 164:7, 24; 165:16; 166:2; 174:14; 177:10, 17; 181:2; 187:9; 192:20,22; 207:20; 208:5, 25: 209:3,11 paragraphs 128:13; 173:13; 175:10,21; 176:3, Perry 131:9; 134:5, 10, 24, 25;135:5, 8,10,10, 11,13,19,24;136:3,4, 12, 16; 137:4, 11; 156:9 person 204:17 personal 132:11; 206:5 persons 147:11 pertinent 209:6 phase 202:2; 203:24; 209:7; 210:20 Phil 119:11 pinning 176:7 place 119:12;142:6; 169:24 placed 160:13 piain 186:15 Plan 164:25 play 183:3 5;177:3,4 Plaza 134:2 Paramus 151:25 I please 124:20; 141:24; 207:25 142:18; 151:21; 164:23; parents 167:16; 175:21; 177:1; part 121:24; 133:24; 199:23:2032;205:4 137:9,16;150:23;161:7; ~ plowed 156:5 186:13;202:11,12 Plural 192:4 participated 210:15 plus 125:11; 149:9; particular 139:16;169:2; 177:22 170:8;199:9 PM 174:3,4 parts 156:10 point 125:23; 127:17; passage 197:24 128:6, 18; 129:16, 17; past 180:21 133:21; 134:4; 144:15; pay 174:11, 13 174:2, 20, 21, 25;176:10; payoff 207:25 177:9, 11; 178: 1; 181:3; peer 182:7,10, 10,13. 14; 190:2; 206:24 183:2 pointed 167:12; 197:24 peers 208:1 points 173:16; 176:19; N pending 125:22 177:7,12 N penultimate164:7,8 pooriy167:12 00 people 118:20;124:2; pop 205:22, 24; 206:9 w 130:11,13;133:19:139:8; popuiar194:20;205:23 a, 147:7; 152:2; 153:16; portion 161:17,18; ~~ 155:23, 24, 25;168:5; 177:14 m 176:17; 180:20; 183:9; portions 210:7,10,12, w 195:25; 200:8,10,12; 14 203:5; 207:23; 208:22 position 123:22,24; per 177:7 136:17;137:25,25;138:9, percent 139:1; 158:20; 13;144:11,12;186:1; 174:12; 177:22,23 188:23 For The Record, Inc. -- (301)870-8025
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DIANE S. BURROWS VoL 2, Jtme 3, 1995 Page 195 t+: Exhibit 27 to be a white paper? t2t MR. WILLIAMS: 27? pi MR. SHONKA: Burrows Exhibit 27. [<1 THE WITNESS: From my general knowledge, I (si would think hot. [s: BY MR. SHONKA: m Q: Is there a term in Reynolds that would (si characterize documents that appear to have the style of n Burrows Exhibit 27? 1101 A: Usually our presentations.That's what t+ l leaps to my mind. nal Q: And is there any term that might describe a pai document like - tul A: The only one I can think of. p q Q: How are you feeling, by the way? tia7 A: Okay. n7] Q: I mean, if you want a break we can take one tol now or we can keep going.It's up to you. tisi A: I'm still maintaining some hope of tml finishing expeditiously. tz» MR. WILLIAMS: Are we going to take some tg break before 5:00 o'clock or do you want to push through tn: to 5:00. t2.1 MR. SHONKA: Whatever everybody wants.If t2sl people want a break we can take a break. I am organized Page 196 ni enough for my next block of questions. tn MR. TAYLOR: Should that take you to 5:00 ia) o'clock roughly? [q MR. SHONKA: Probably. [51 MR.TAYLOR: Why don't we just stretch a (s[ minute. m (Recess was taken from 4:15 p.m. to 4:30 p.m.) [a[ MR. SHONKA: I will mark the next exhibit ts[ as Burrows Exhibit No. 28. t,o[ (Burrows Deposition Exhibit Number 28 was ti +t marked for identification.) t+2l BY MR. SHONKA: [+sI Q: Burrows Exhibit 28 is a document that's [+4I been previously been marked as CX-21. It consists of i+s[ several handwritten pages that the first page does not t+st have a bates number on it. (171 MR. TAYLOR: Mine has 0907 as the last [,el four, Mine says 503570907 is my first one and it goes nst to 0949. tzot MR.SHONKA:0949? t2,1 MR. TAYLOR: Yes. I tell you, it looks ral funny because the one in front of 0949 looks like 0941 931 and the one in front of that looks like 0947. t2.[ BY MR. SHONKA: txsl Q: The question is simple, I think. Ms. R.J. REYNOLDS TOBACCO COMPA]VY" MATTER NO. D09285 Page 197 n[ Burrows, do you recognize the handwriting in Burrows m Exhibit 28? [3[ MR. TAYLOR: On any of the pages? [a[ MR. SHONKA: Yes. [sl MR.TAYLOR: You need to flip through the [e[ pages. m MR. WILLIAMS: How many pages is this (si exhibit? tnt MR. SHONKA: I don't know, We read off the [ ol page numbers. [+[ MR, WILLIAMS: The fust page, CX-21, does [,z[ that appear at the bottom? i a[ MR. SHONKA: Yes. [ia[ THE WITNESS: The only handwriting I think [ s[ I recognize is on the page numbered 503570934, which I [+e[ think contains some of my handwriting relating to Jovan [ n Musk Oil. [is[ BY MR. SHONKA: [ e[ 0: Ms. Burrows, do you know who wrote the rest teai of the document other than - (z l MR. TAYLOR: I think she already answered p that. [23t BY MR. SHONKA: tzq Q: Other than the passage that you pointed out tzst on page 570357 - Page 198 t,l A: I don't recognize any of the other [z1 handwriting. toi MR. SHONKA: I ask the reporter to mark as tai the next exhibit, Burrows Exhibit 29. ts: (Burrows Deposition Exhibit Number 29 was tsi marked for identification.) tn BY MR. SHONKA: (si 0: It's a document that has previously been M marked as CX-8 in the underlying proceeding, t o] administrative proceeding. In a box in the upper left t[il corner of the page it says question, and in the center tiz: of the page it says or asks are younger adult smokers [1a1 important.The document bears the bates numbers t++1 502996233 to 502996639. psl MR. WILLIAMS: I'm sorry, 6639 is the last? tisl MR. SHONKA: That is how I read it. tvi MR. WILLIAMS: I have 6317 being the last. tn] MR.TAYLOR: I have 6338 being the last. t ol 6338 is my Iast.This is my last page. tzo[ MR. SHONKA: What's your last page? tz,[ MR. WILLIAMS: 6317. It talks about brand t2z[ attitude. rr3i BY MR. SHONKA: tz.t 0: Ms. Burrows, what is your last page, if I izsi might ask? Page 195 - Page 198 (24) Min-II-Scripie For'I'he Record, Inc. -(301)870-8025
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Since the NBER models are bae•d on geographic differences in retail price at one point in time (1976), they do not translate directly to national changes over time: • The positive income elasticity suggests that, over time, price elasticity should be applied to retail price deflated by some measure of consumer income. However, the price elasticities are strongly age/sex specific and income measuree/projectione are not available by age/sex. Since consumer prices may continue to rise faster than income (especially among young adults), using the CPI as a deflator probably yields conservative estimates of the price impact. • Restricting the sample to eliminate "border effects" improved the model's applicability to the nation. However, it created some a regional bias -- Westerners rose from 18% to 29% of the sample while ~ Northeasterners fell from 24% to 11%. This may have made the price r elasticity more negative than the "true" national value, since = positive coefficients were associated with residence in any region ; except the West. ~ ~ ~.. .c Thuthe adult NBER elasticities are imprecise for national price changee, however, they probably give a reasonable idea of the groups most affected by }~ Oi~i~t~ and the orders of magnitude of the effects. = r TH£ TEENAGE HODEL L -' s:3i's^..,., $OURCE: y,.~oa. ¢~ L 7 "The Effects of Government Regulation on Teenage Smoking," by E. M. -~ D. Coate, and H. Grossman. Journal of Law and Economics, "scember, ~ L +r~ ~ i. Th.g#;g models used personal interview data from Cycle III of the Health .: .::: txamination Survey*, conducted 1966-70. Incidence and rate findings from HES 9 ,ft#> aeem reasonable, perhaps even a cut above most teenage studies. But it is 4 iibt recent. ~ A qqg;~or goal of this study was pre/post assessment of the Fairness Doctrine, xhle;h loaded television with anti-smoking Sommerciale from 7/67 through 12/70. Clther variables included: *In Self-Reported Health Behavior and Attitudes of Youths 12-17 Yeare, United States. HEW, 1975. RH000.7?j DSB/ch - 10/6/82 cArlP• s 1,
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October 7, 1982 TO: Mr. Steve Perry RJR Tobacco International FROM: Me. Diane S. Burrows RE: PRICE ELASTICITY ESTIMATES Here are three items which may assist RJR Canada in their price elasticity risearch. 1. A summary of RJR's model of the domestic cigarette industry, which yields an estimated price elasticity of -.32 for cigarette consumption. ~ 2. A special issue of the TMA Issues Monitor which reviews a number of : price elasticity studies previously published. " a S 3. A summary of the models reported by the National bureau of Economic ~ Research (NBER) in 1981 and their implications. These have sparked c interest because they are the first studies which have attempted to :~ analyze which age/sex groups are most price sensitive. f- _ ~ We have used the NBER results to estimate relative price ~ e elasticities for brands, by applying the age/sex elastictttes to each brand's smoker profile. The "gaps" between the NBER's 9~ elasticities for males and for the total market imply that there = 9 are non-zero elasticities for females, but the NBER did not report t them. Our estimates of the female elasticities which would account i for these "gaps" are: -.31 for females 18-24, -.17 for females 35+ t ort which estimated about a-.4 p ou the re ave lieve Rob Davis alread l b p y g y e elasticity for Oregon during its major state tax increase of December, 1981. ~ Diane S. Burrows ftARKETINC DEVELOPMENT DEPARTMENT Code: 5.35 cc: Mr. J. R. Moore (Memo and Item I only) Mr. J. R. Mribar " Mr. P. E. Calyan " Mr. R. A. Davis " N a~~`~ I i:4 ~ ~ATI~l~ R'v10007351
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DIANE S. BURROWS VoL 2, June 3, 1998 RJ. REYNOLDS TOBACCO COd1PANY` MATTER NO. D09285 Page 131 Page 133 (,i A: No, sir, I really don't. (» it moved to Geneva perhaps. m MR. SHONKA: I would like to have marked a M BY MR. SHONKA: ta1 document that is identified as Reynolds bates number pi 0: Where was it headquartered in 1982? (<1 503189845. (q A: I'm not sure. IS) (Burrows Deposition Exhibit Number 15 was [si 0: Has RTRTobacco International had business ts] marked for identification.) m BY MR. SHONKA: let 0: For the record, Burrows Exhibit 15 is a M memo dated October 7,1982 to Mr. Steve Perry, RJR pol Tobacco International from Ms. Diane S. Burrows.The p >l subject is price elasticity estimates. I ask the pzl witness to take a few moments to take a look at the n3i document. lu1 A: Yes, sir. t+sl 0: Have you finished looking at it, Ms. 1161 Burrows? hn A: Yes, sir. hs] 0: Ms.Butrows, do you recognize the document? l ol A: No.I don't. rni Q: That is your signature at the bottom of the p,l first page? rg A: It appears to be. rn1 0: I ask you to look at the first line where l2q you say "Here are three items which may assist RJR lzsl Canada in their price elasticity research." What is RJR [e] offices here in Winston-Salem? m MR. WILLIAMS: May I have the question - (sl had or have? le1 MR. SHONKA: Had at any time. hal MR. WILLIAMS: At any time have they had [++I business offices? (,zq MR. SHONKA: To the best of your knowledge? (,31 MR.TAYLOR: To your knowledge? (ul THE WITNESS: Yes. hsl BY MR. SHONKA: (s, 0: Were they ever headquartered here in h7f Winston-Salem? hel A: I believe so. I know there were some l ai offices forTobacco International people at one time in 12ai Winston-Salem. I am not sure where their official (zii headquarters was at any given point in time. p:A 0: Do you have any sense of the time when they (231 had offices here in Winston-Salem? [2ei A: The part I can clearly recall is when I did psi the brief consulting project that I think was in 1994 Page 132 l+l Canada? ta A: It was a - this is again getting into pl organization charts at the corporate level. I would (a1 assume it was the Canadian business of RJR or infer ls that, which was in various years called McDonald's or tsl under another company or not. I'm really unclear on m that. lei 0: Is RJR Canada and IZJR McDonald's, to the IsI best of your knowledge, the same company? pol MR. WILLIAMS: Objection. Does she have Ii+j personal knowledge? 1121 MR. SHONKA: Was that your understanding at pal that time? h<) MR.TAYLOR: In 1982, is it her psl understanding they were the same thing? Page 134 l1l forTobacco International, and I did go to offices in m the Plaza building here in Winston-Salem, so that's how r3: I know they had offices, some offices here at that [<i point. [sl 0: Do you know where Steve Perry was located tsi at the time you sent Burrows Exhibit 15 to him? m A: No, I don't. rsi 0: Maybe I need some help here understanding (e1 how memoranda would have beentransmitted fromyoufor liol Mr. Perry with only the address on it of IZ1RTobacco Inl International? [izl MR.TAYLOR: Ask the question. (13) BY MR. SHONKA: 1141 Q: My question is, do you know how that would js] have been done? ltst MR. SHONKA: No. 1171 THE WITNESS: I'm really not very good on nsi (,n A: Not really.The secretaries handled that. 0: Was it a common practice to send cn ~ psl the corporate structure. i,sl information to 1ZTR Canada? OD W l1y1 BY MR. SHONKA: lzol 0: Where is ItTRTobacco International located, t+o1 reoi A: I really don't know. 0: Did anyone ask you to send this information ~ ~ N Izil headquartered? tz» to Canada? ~ Iz~ MR.TAYLOR: Where is it now? rnl A: I'm sure they did. tnl MR. SHONKA: Yes. lxsi MR. WILLIAMS: Wait a minute. r1.1 Where is it now? rey MR. TAYLOR: To Steve Perry? Izq THE WITNESS: I read in the newspaper that fes7 MR. SHONKA: To Steve Perry. Page 131 - Page 134 (8) Min-U-Scrip io For The Record, Inc. -- (301)870-8025
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• TNA retail prices, adjusted to state coat-of-living and changes in the national CPI during the 4-year survey (an improvement over no adjustment, but still makeshift). Fairness Doctrine intensity versus cigarette advertising and amount of time apent watching TV Family income deflated by state cost-of-living Number of other children Parents' education Working mother or single parent Employment/allowance of youth respondent (detailed) Student status Age Sex • Race • Region and city size N.......`'Rq.Ta ge, negative price elasticities were found. The coefficients were stable :and statistically significant in all model specifications reported. The aCithpre suggest that these lar e elasticities ma incor orate other effects which the model did not include capture separately. They suggest that the &"e related variables may have failed to represent the youth's actual ;1#t.eqetiona:y income. NBER PRICE ELASTICITIES AMONC YOUTH 12-17 REPORTED REPORTED "TOTAL DEMAND" INCIDENCE R9TE (INC. x RATE) , 7"atal 12-17 - 1.19 ~ - .25 - 1.44 ,Thw 1:Fairneae Doctrine was also found to have an important negative effect ouring its first year (accounting for a 3 percentage point drop in 12-17 `,#~ 1iAence), but showed diminishing returne during its second and third year. 'Cigaiette advertising on TV was found to partially offset the Doctrine effecta. Thus, the absence of TV advertising after 1970 was implicitly a negative effect, but the absence of the Fairness was a larger implicit positive. 5 y J = DSB/ch - 10/6/82 RF100037=6
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DIANE S. BURROWS R.J. REYNOLDS TOBACCO COi4PANY' VoL 2, June 3, 1998 MATTER NO. D09285 III ON BEHALF OF R.J. REYNOLDS: (tl JOHN B. WILLNMS, Attorney (a) Colller, Shennon. Rill & Scott, PLLC (4) 3050 K Slreet, N.W., Suite 400 cs) washlng[on, D.C. 20007 (el (202) 342•6400 m Page 115 Page 117 [+I Q: Ms. Burrows, if you would take a minute to (zt look at the document, and in fact, while you are looking (,l at it, I would ask that you also look at an exhibit from (4( yesterday's deposition which we had marked as Burrows (sl Exhibit 8. (s) Ms. Burrows, I will represent to you that m Burrows Exhibit 8 and Burrows Exhibit 11 are in all (el respects, except for the caption and the date and the R addressee, the same, at least in the text, that the text (rol is. I will not make that representation for the CCs as t+a I have not compared them. (121 A: It looks sirnilar. t/31 Q: The question I have is why did you send (14) this Burrows Exhibit 11 to Mr. Hall? (,s) MR.TAYLOR: About what, a couple of weeks (+a( later, looks like eight, September something or another, (+>I September 20 something or other. (tel THE WITNESS: Perhaps 27th. [+al MR. TAYLOR: There was a lot of stuff on (zo1 September 27th on yesterday's and this is October 6th. tz+l What's that, a week and a half or something, a week. (nl THE WITNESS: I really don't know why. (z31 BY MR. SHONKA: (z41 0: Do you recall if anyone asked you to send tzsl the document to Mr. Hall? (el ON BEHALF t)F THE WITNESS: (el DANIEL R. TAYLOR, JR., Atlomey (10) FOlpalrlck Syockton LLP (1+1 1001 West Fourth Street (12) Winston-Salem, North CaroMa 27101-2400 [131 (336) 607-7330 (141 t+sl [+s] t+n (+~ (1el ' rom rotl tnl (231 (KI (25) Page 116 nl PROCEEDINGS 121 tal Whereupon - le) DIANE S. BURROWS (s) a witness, called for examination, having been rol previously sworn, was examined and testified further m as follows: (el EXAMINATION rol BY MR. SHONKA: (tol Q: Good afternoon, Ms. Burrows. (n( A: Good afternoon. pzl 0: How are you feeling today? pal A: Well enough, thank you. (1e) Q: Ready to go? (+s7 A: Yes, let's go. (+s) Q: You understand that you are still under nn oath from yesterda)? (wl A: Yes, l do, (tai MR. SHONKA: I would like to have marked as reol the first exhibit for today, Burrows Exhibit No.11, a tj+l document that has a Reynolds bates number on it of rm 514349111through 9113. tra) (Burrows Deposition Exhibit Number 11 was req marked for identification,) 1261 BY MR. SHONKA: Page 116 (+) A: I am sure I would have been asked to (zl because I wouldn't have taken it upon myself. I don't (31 know who specifically that was.The normal practice (4( would be that it was someone who saw the first one and [sl thought Mr. Hall should see it. (el 0: I note that Burrows Exhibit 8 is addressed (>M to Mr. Galyan? (e( A: Yes, very good. ro) Q: Thank you. It is addressed to Mr. Galyan [+o) and actually I see that it has no CCs. n+l A: Except the library. (+2) 0: Do you have any reason to think it was (+sl anyone other than Mr. Galyan who suggested or directed, (+41 whichever it was, you to send Burrows Exhibit 11? Itsl A: No, I don't. I don't have any reason to N (1c] think it was anyone other than Mr. Galyan or ultimately N (trl Mr. Galyan. OD ps) Perhaps it will be generally helpful to hs( offer to you some informa[ion.A common ptactice for tml junior people was to draft material for their immediate W tztl supervisor's review and it went no farther until the lsxl immediate supervisor deemed that it should or made (23) corrections or whatever was necessary. So I don't know (xq for certain about these documents, but that was a fairly (zsl common practice was to first address anything to your Page 115 - Page 118 (4) Min-iJ Scr4pt® For The Record, Inc. -- (301)870-8025
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DIANE S. BURROWS VoL 2, June 3, 1998 Page 187 Iq dated March 30, 1984 from L.W. HaII,Jr. to J.R. Moore, m EJ. Fackelman, E.N. Monahan, and J.L. Gemma. [3t (Burrows Deposition Exhibit Number 25 was (q marked for identification.) (st BY MR. SHONKA: (sl Q: Ms. Burrows, I ask you if you have ever m seen Exhibit 76 before? [e! A: I don't know. tat Q: Exhibit 76, the fust paragraph says Mr. (+o( Long again - (i II MR. TAYLOR: Exhibit 25. o21 BY MR. SHONKA: 031 Q: Exhibit 25, the first sentence says "Mr. tul Long again emphasized to me that we should very tightly (+st restrict distribution on this repon," and the question t+a) is, did anyone ever tell you that circulation of your (171 February 29th report, Burrows Exhibit 24, was being ps( restricted? (,ol MR. WILLIAMS: I'm going to object to lack Izo( of foundation. Why don't you establish first this (z+) letter is referring to her report. (x2( MR. SHONKA: I believe the record already m( indicates - the witness says she understands the (xq younger adult smoker to be a reference to her report, (xst but we'll go through the steps. Do you understand- Page 188 tn THE WITNESS: You could ask me about m Exhibit 24. t3( BY MR. SHONKA: (.1 0: Ms. Burrows, do you understand that younger (st adult smoker report is a reference to Exhibit 24, (si Burrows Exhibit 24? m A: It could be, but many other things could tsl have been called that, also. m Q: Were you aware of any other documents at RJ. REYNOLDS TOBACCO CO14II'ANY " MATTER NO. D09285 Page 189 PI something. (zt 0: But he was pretty far up the chain? (sl A: He was the big guy as far as I was (el concerned, (s( 0: In terms of your career, what happened le( aher- the first major thing that happened to you m after you finished your report? (el A: In terms of my career? pi Q: At Reynolds, yes. (+oi A: I continued to work for Dick Nordine for (+>> another year or something like that. t+a1 0: Anything else? (+al A; I don't know when I next got promoted. (+.( Q: Did your responsibilities change (+s( immed'tately in the next several weeks, say, after the ps( report was completed? (,7( A: I'm sure I was given some more work to do, (+a( which would have been a different assignment on a (+s( different topic. I don't remember what exactly came (xo( next. (z+( 0: Anything else, and I'm talking within the (z21 several months after? 1z3: A: I did several other presentations and (241 reports and whatever form they took while I was in his (zsl group.There was some further younger adult smoker, Page 190 (+i another younger adult smoker related project that came m up at some point afterwards. 131 0: What do you mean by presentations? (al A: That would - by presentation I mean (s( somebody stands up and talks you through either a deck (s( or just talks as opposed to writing a report. m 0: I think you use used the term yesterday (a( chalk talks. Is that - (sl A: I don't know where that came from. I (+o( that time that would have been called that or might have Ii+t been called that? Iwl rarely did chalk talks, l++l Q: What do you mean by that term? (12) (+a( A: No, not really. Q: Did anyone ever tell you that circulation (,zt MR.TAYLOR: Which term? (,s( MR. SHONKA: Chalk talks. t+q of your report was being restricted? (+<l THE WITNESS: Well, what I meant was where (+s) A: Yes. (+sl somebodystandsupatablackboardwithapieceofcha8t (+sl 0: Who told you that) (+si like a teacher in a school room, but I don't know why (+j A: Dick Nordine. (+n that term came into my head yesterday.That's not t,al Q: Did he tell you why? t+el something I have done since I taught school. (+ul A: He said, as I recall, Mr. Long didn't want (+e: BY MR. SHONKA: Imi everybody and his brother making copies of this and lzoi Q: Did you make presentations relating to the R+( running them all over the world. (zi( report? r+ai Q: Who was Mr. Long at that time? What [xa( position did he hold? rxl A: Something on the order of president of the pi tobacco company or I might be off by some title or tm A: To this report. (zat 0: This report, meaning Burrows Exhibit No. rNl 24? res( A: Relating to, meaning covering materials Page 187 - Page 190 (22) Mia-U-Sotipt® For The Record, Inc. -- (301)870-8025
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, . ,`'y. _ . ., ..y..~~ i .._~ -T -..~ ~4a~ .. .. n~... . . . ... -. , . . , . . . . .e. . .. , .T ve ..y...,i. C 0 N F I D E N T I A L October 6, 1982 •~BtV yD PRICE ELASTICITIES BASED ON NBER STUDIES Hr. L. N. Hall, Jr. ?M~,t Ms. D. S. Burrows ~ hB;y;~ developed estimated price elasticities for RJR/P?S and selected brands fromkthe age/sex elasticities of deoand found by the National Bureau of f6a{roic Research* and Tracker age/sex profiles for the first half of 1982. :~~ . ZLI ~ 1 h d i v 1 1 d ese c asticities are not er.act. T ey are presen,e to g e a genera ea ~ 0 of the brands which may be more or less price sensitive, according to the NBER's findings. 1:. C S * ~ 'fi10DOL0GY i2 0 kV'''3:;BF.R found statisticelly significant effects of price on demand as follows: a .~ ~ ELASTICITY w.t1..5 .. TOTAL e C V Tezns (12-17; NA -1.44 Young Adult i20-2:) -1.50 - .89 Ages 35+ - .66 - .45 Total 20+ NA - .42 A1;,tffugh no statistically significant elasticities were found among females, LhG;:;;Yotal elasticities for the 20-25, 35+, and total 20+ groups cannot be lu11y, explained by the effect on males. This inplies some effect among 'fem6Les. The effect on females is partially confirmed by noting the dips in <,... ~t*a~`~er's fesclle incidence figures following price incceasea. p .4gr,~fore, I have developed brand prict elasticities under two scenarios: 1. ONLY MALES uM er 25 or over 35 are assumed to be affected by price. This, in effect, says that the NBER's age/sex results are,more meaningful than those for total age groups. This acenorio depicts an overall adult elasticity of about - .33 (almost identical to RJR's industry model). 2. ri4LES AND FEMALES under 25 or over 35 are asa•.tiaed to be affected by price. Elastici*.ies for males are those fotnd by NBER. Female elasticities were derlwed so that the coobined male/female effect would equal the NBER pred!ction for each total age group. This scenario equates to an overall adult price elasticity of about -.41, close to the NBER's original figure. *These studies were discussed in my memos of 9/21 ('Estiaated Change in Industry Trend Following F.E.T. Increase') and 10/6 (`NBER Models of Price Sensitivity'). f Ul N H m U) aa r ro RM037643
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• November 16, 1983 Page 3 • ATTACHMENT E is a worksheet similar to Attachment C but with no brand apecific data. I thought this might be useful in working up other brands. (Danna can gei. this format to another secretary via word processing if other charts need to be typed.) I'll be glad to field questions in our 11/18 meeting or before. A-*-•.--A- Wftt(ne S. Burrows LMarketing Development , DSB:df ' cc:'° R. C. Nordine MDIC RM000247$
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November 16, 1983 Pe.ge 2 differ from the Tracker actuals, we can deduce that "other effects" were operating. The 'tietorical analysis (left half of chart) and future projections (right half) are handled the same except that, in history, we "age in" the actual Tracker SOS while,for the future,we age the projected SOS for the previous year. This,in esaence,says that where "other effects" have occurred we expect them to be permanent and also (on Attachment B) provides a means of deriving an annual average of "other effects." Two future scenerios are projected. The first assumes that the brand's younger adult SOS remains fixed at its First Half 1983 level for the next F' five years. (This is a "down side" for Newport, but may be the "up side" for other brands.) The second projection assumes that the brand's SOS among younger adults will follow the same "trend" seen from 1979-83. For f7ewport, that trend was roughly projected by assuming every year-to-year YA SOS gain would equal the average 1979-83 gain at .8 per year (treating First Half 1983 as a year, which should tend to moderate any steep trends). • ATTACHMENT B summarizes the results on Attachment A. In the historical section, "Aging Effect" is the difference between the projected SOS for a group and that group's actual SOS the previous year. "Other Effects" are then the difference between projected and actual SOS for each current year. The "projected" side is similar, using the "up side" and "down side" projections of aging effect and the 1980-83 average "other effects" to estimate future SOS. • ATTACHMENT C estimates the percent importance of persons who have aged into each age range since the prior year shown, versus those who have remained in the range. These estimatea are based on the latest available Census Bureau figures for the total population. By applying these percen[agee to smokers, we implicitly assume that incidence differences between incoming/ remaining smokers are insignificant. Historical incidence suggests that the actual importance of incoming smokers would be somewhat less (but Y+ithin 1 percentage point) of these estimates. Civilian population is used to be compatible with the Tracker sample. ATTACHMENT D calculates the historical/projected importance of each age range within the smoking population (18+), based on both population size end smoking incidence. Historical incidence is from M/A/R/C. Future incidence for the total population is taken from the PIDD External Forecast (which was left unofficial in 1983 due to uncertainities surrounding the effects of the FET increase on incidence). Incidences among 18-24, 25-34, and 35-49 have been projected based on an earlier, unpublished analysis I did on cohort incidence trends. The 19B3 incidence projections were adjusted based on the NBER price elasticities for these ages, assuming price affected only incidence among males 18-24, affected incidence and rate equally among males/females 35-49, and had no effect on incidence for females 18-24 and males/females 25-34. Incidence for 50+ was then derived by pulling smokers under 50 out of the total (since the NBER did not treat 50+ separately and this generated a reasonable looking projection). RM0002477
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R.J. REYNOLDS TOBACCO COMPANY MATTER NO. D09285 Page 127 [ ] BY MR. SHONKA: rn 0: Do you recall anyone suggesting to you that * you forward or send your recommendation for half packs p] to Mr. Hall? (sl MR. TAYLOR: Objection. ts( MR. SHONKA: An earlier recommendation that m we discussed yesterday. If you wish to go back, Ms. lei Burrows, to the document you reviewed yesterdaywe can m do that. (1a] MR.TAYLOR: Let's do that.ls the (n] question, did you - because I think they are different. u2l What's the exhibit number? pa( MR. SHONKA: I will not represent the (141 exhibits are the same.They are not. t+s7 MR.TAYLOR: I think the question is (1s1 different. In other words, the recommendation at one (trl point had to do with one thing and this is a different (ie] recommendation.That's where I'm going.That's my ( o] memory, subject to the warbles of memory at times. 1201 12+1 (221 This looks like it's Exhibit 9. MR. WILLIAMS: It's Exhibit 9. . BY MR. SHONKA: tb] Q: ' Ms. Burrows, do you now have before you (ze] Burrows Exhibit 9 as well as Burrows Exhibit 14? (zs] A: Mr.Taylor provided me with it. Page 128 nl MR. TAYLOR: Yeah, that's mine. (zl MR. SHONKA: Here is the original one so l31 you both have a copy. (<] In Burrows Exhibit 9 in a memorandum dated (s] September 27,1982 to Mr. Galyan, you recommended near lei the bottom of the first page the first bullet point, m"llalf packs are a logical size for beginner smokers. As te] mature smokers their rate will double or more. Brand m loyalty would carry this brand over to the brand's 20's? no) MR. WILLIAMS: You just read from nine? n+l MR. SHONKA: Yeah, I am just reading from na] nine. nal THE WITNESS: I see the two paragraphs. 14] BY MR. SHONKA: t1s1 0: In Burrows Exhibit 9 you did, did you not, tm make a recommendation that Reynoldsmarkethalfpacks? l+> A: The memo says I recommend marketing half t+e] packs because, and then the bullet point, yes, sir. (+el MR. TAYLOR: Younger adult males. Ceo~ THE WITNESS: In Exhibit 9 I was tz+] referencing.That's the one I thought you asked me, did tzz] I not recommend it in Exhibit 9. ras] MR. SHONKA: I did. (sq THE WITNESS: And the memo says I did. rm MR. TAYLOR: Do you have any recollection DIANE S. BURROWS voL 2, Jtme 3, 1998 Page 129 nl of it here. tzI THE WITNESS: Of it here, I remember when I rol saw Exhibit 9 yesterday, I recalled that I had suggested (<I such an idea. (s) BY MR. SHONKA: lei Q: And my question to you now is, did Mr. m Galyan ask you to send your recommendation to sell half (e] packs on to Mr. Hall? [s) A: I infer from this material that he did not (,o] doexactlythatorwhatwouldhavehappenedisFxhibit9 t++l would have been re-addressed or something to Mr. Hall. t+at Q: You are saying the text of nine would have n3] been the same then as 14 had that - ns] A: There are substantial differences between ( s] these two documents in termsof almost everythingexcept t+et the similarity between point number thtee on Exhibit 14 [+n and some similarity between that and bullet point one on (iel the first page of Exhibit 9.There may be other nei similarities, but almost everything I see before me in (zo] the Exhibit 14 looks different. [a+l Q: Sitting here today, do you have any reason res] to think that you sent Burrows Exhibit 14 to Mr.I-Iall on tnl your own initiative? [z<] MR. WILLIAMS: That's 16 years ago.What (2s] is the purpose of this? Page 130 (i] MR. TAYLOR: The reverse of that, it's sort [2] of an unfair question. Do you have any reason to t3] believe you didn't send it on your own initiative. (q Isn't there another way to get at what you want? ts7 MR. SHONKA: I'm not sure. I am only [sl asking her if she has any reason to think that she did Irf it on her own initiative. lei THE WITNESS: What I am reminded by your taI question to state is Exhibit 9, as I recall it, was on t o] my own initiative. Nobody ever asked me to do that, and (+( I recall that some people were upset with me for that. (+2l Exactly the content of their complaint I don't recall, n3] but I recall some people were angry with me, and beyond (u] that, I can't answer about Exhibit 14. [+sl BY MR. SHONKA: [+el Q: Just to clarify that, the anger was (+n directed at you because of Burrows Exhibit 9? t+e] A: I recall it that way or for getting into [1a( this without being asked or something - I presume it rm] was this memo, yes. t2+l Q: This memo being Exhibit 9? tm A: Exhibit 9, yes. m] 0: One last question before leaving the area. (sq Do you recall editing Burrows Exhibit 9 at Mr. Galyan's (ss( request to make it Burrows Exhibit 14? For The Record, Inc. -- (301)870-8025 Min-U-Script® (7) Page 127 - Page 130
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TD: Mr. L. ti. ~a i FkOM: Ms. D. S. 9urru., . " c n C ScNSIT . qE: hWFKETI4G ["NLICd.T10'i5== nc~~_ti^_F DULTS _ ~ OtiG F A". _ _----- o-;; nesezrch trdica,as L"ai ^• : ;. ~ . ~,.o. ...A study 7ub'-SsheC by L??e tiL_ 3esesu~'~, are h:ght;+ sensitive eo ^i3a^''!:z .. :7:e i; -:2I: (;e:a- E%ctse LaX C^.. ~.rwnfer adall . " ' " urea>e La ttit e , ...,._~ . . prtces." They _ed of s=o'<ers 1L;.. ~ . r.eSat?°e e:iec: ' fkely :o ^ ClgaieCleF Vd5 "a'.•: 3.0^y • r S.qG _..i,~..`. d:: . iL '_E r~-s:dered n asse`• . ;ullticg or ncL sicce B.JE LD?s ~ . ' ..._.. :J =nrL23• . - Srdust*y saL25. ~;115 ._.... ^.O: nowever, :.`.e :,... ariu:t c13lret.c cno!c 'nI : ,:a r: 2:LL•'~. --'-' _ v -~ar s^osers " f~- b 5._~e.a[cr. ectE^ .. _ ~ C a :. ~ '. ~. .. ._ .~., .. :o~ . J--. _•.a=_.Caee. appredc~nes _ ..._ .,:.`..., ..a5.+r,. .. n~v. . - .. . ,... -..,..:_:..- ._._~ ~ ' ' Wa:e brzr.d. ' ,.,:1^G /JUny2• :i:n,h vJ':.,3e A b.':.OQ , d i d ~ a. . .. ~,.i.. _ . _ .. . . . .... • ~Pshe? k CX-822 d:,Ses _a. o ^g1 . , l' 852: . . C:= .. .5C .,.. ....... . e:s 1013 .,.;^ ...4't, ~dir! s O..af~~.~~.+4... u... RM0000019
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DIANE S. BURROWS VoL 2, June 3, 1998 i26:13,17;127:12,20,21,'~ February 135:14; 24,24;128:4,15,20,22; ~ 156:15; 159:14; 163:15; 129:3,10,16,18, 20, 22; 167:19; 171:18; 184:14; 130:9,14,17,21,22,24, i 186:3,6;187:17;199:16; 25;131:5, 131:5,8; 134:6; I 200:25 12 18 136 4 137 1 6 8 , ; : ; : , , , ~ federal 121:14, 23; 22; 138:16; 145:11,11,18; 146:15; 149:19,23,24; 150:4;151:10,11,14,21; 156:15,19;159:5,6,9; 160:9;161:1,14,16,18, 20, 21, 25;162:3, 7;163:9, 10,13, 18, 20, 24; 164:10, 22; 167:16,17,20, 24; 168: 1; 169:4; 170:18; 171:11,12; 173:6; 179:10; 183:14;184:1,13;185:19; 186:2, 5, 23;187:3, 7, 9, 11,13,17;188:2, 5, 6; 190:23;191:13; 192:8, 13, 17; 193:1,6,16,17;194:7; 195:1,3,9; 196:8,9, 10, 13; 197:2,8;198:4, 4, 5; 199:17; 201:23, 25; 203:13,13,14,19; 204:6, 12,21,22,25; 207:5, 11, 17,18; 209:22, 23; 210:1, 3,6,12,17 exhibits 127:14 existed 136:8; 176:18 existing 126:22 exists 137:14;160:12 expect 154:22; 206:2 expedited 142:9; 143:5 expeditiously 195:20 expert 183:5 explain 175:20 expression 184:8 extensive 151:24 extent 146:18 eyesight 165:4 142:10;156;8; 212:10 feedback 184:20 feeling 116:12; 195:15 few 131:12; 172:12; 180:2; 201:4 figuring 125:20 file 169:23; 192:10 flled 168:7 fill 180:21 filled 168:5 final 153:20;172:15; 173:12 find 199:5 finished 131:15; 137:24; 159:25; 189:7; 199:16, 18 finishing 195:20 first 116:20; 118:4,25; 119:11; 122:12; 125:15, 18;126:6,19; 128:6, 6; 129:18;131:21,23: I 145:22; 148:2; 153:9: 157:15, 16,19, 22;158:2, ~ 21; 165:16; 173:15; 177:2, I 6,17; 178:6, 15,16; 179:24;180:1, 3, 3: 181:3; 183:3;184:15,17,19,21; 187:9,13,20; 189:6; 196:15, 18; 197:11; 203:4; 204:3,10,10,13,13,14, 15,17,18; 205:9 fits 208:2 ~ five 186:2 fix 164:9,9 flip 197:5 focus 150:23;151:17; F 1 192:20; 201:4 F 212:1, 17 F-U-B-Y-A-S 203:22 face 173:18; 177:20 Fackelman 187:2 fact 117:2; 142:22; 177:13; 207:22; 208:23 fail 173:17 failed 177:19 fair 142:5;160:19; 173:18; 174: 1; 177:19 fairly 118:24; 136:22; 176:9 fall 150:22; 153:1; 206:5 familiar 147:12; 150:20; 152:24; 169:12; 210:7, 11 familiarity 178:19 far 146:10; 148:13; 171:24; 189:2,3; 201:18 farther 118:21 fashion 181.:11 faster141:12 focusmg 176:1;177:15 folks 150:17 follow-up 209:13; 210:20 followed 119:13; 177:8 following 135:23; 200:24 follows 116:7 footnotes 155:14 Force 145:7, 8, 24; 146:17, 19, 25;147:5,19; 148:4; 179:5 form 167:19; 168:5; 169:16,17,18;171:7, 8; 181:11;183:14,15,16; 189:24 formal 201:11 format 199:6; 212:21 formed 153:14; 204:7 forms 169:12; 171:6 forth 179:3; 184:3; 209:12 forward 127:3; 145:24 foundation 121:16; 151:1; 158:5; 166:10,23; I 178:10; 187:20; 202:17 I four 141:11; 196:18 fourth 166:1 I frame 150:25; 151:5; ~ 153:2 ~ Friday 137:10 I friends 183:9 1 front 151:23; 161:12; 162:14; 196:22, 23 FUBYAS 203:21; 204:2 fu11170:12,14;181:2; 212:8 functlon 140:17 funny 196:22 further 116:6; 119:2; 160:5; 179:10; 189:25; 193:12 future 146:3; 147:14 G G.H 171:18 gain 176:14 gained 176:15 gains 173:19; 174:8 Galyan 118:7, 9,13,16, 17; 119:4; 128:5; 129:7 Galyan's 130:24 gave 137:17; 202:7,13, 17,24;203:23 Gemma 187:2 general 124:12; 143:20; 147:17; 171:4; 176:16; 195:4; 208:9 generally 118:18; 169:6, 7,13 Geneva 133:1 given 133:21; 148:7; 149:23; 189:17 giving 194:22 glean 193:5 goes 196:18 Good 116:10, 11; 118:8; 132:17; 137:10; 194:22 great 141:4 group 137:9,16;139:18, 2Q 140:4, 7,16, 20;144:4, 6;146:24;153:8, 8,17; 155:2; 184:5; 189:25; 193:8;194:18,24;203:5, 6, 8; 206:4 groups 146:22; 147:16; 150:23; 151:17; 180:18; 201:4 grows 173:15; 177:6 growth 174:7,8 guess 121:7, 24;124:5; 144:13;158;7;165:8; 199:3; 203:9,11; 205:23 guessing 208:11 guy 189:3 R.J. REYNOLDS TOBACCO COb1PA1VY MAITER NO. D09285 H H.J 171:19 half 117:21; 124:11, 16, 19; 126:21; 127:3; 128:7, 16,17; 129:7; 177:8 Hall 117:14, 25;118:5; 119:6;120:14,19;121:4; 122:8, 16; 124:3; 125:9; 127:4;129:8,11,22; 163:16; 184:25; 185:4; 186:3; 187:1 Hall's 121:14; 123:16 hand 173:17; 177:18 handing 119:23 handle 207:23 handled 134:16 handwriting 157:10; 161,25; 162:17,18; 197:1, 14,16; 198:2 handwritten 157:9; 163:4; 196:15 happened 129:10; 142:25;181:19;184:14; 189:5, 6 hard 176:6 Harden 156:16 hasn't 172:20 haven't 143:6 head 158:22;162:23; 185:10,15;186:14,16; 190:17 heading 171:3 headings 170:23 headquartered 132:21; 133:3,16 headquarters 133:21 heard 150:18; 184:8 HEARING 212:5,9 held 123:22, 24; 138:11; 208:22 help 134:8; 147:1; 156:10; 163:22; 181:12 helpful 118:18; 179:9 helps 179:13 HEREBY 212:7,19 herein 212:8 high 166:3 higher 176:17 historical 146:1 history 179:4 hold 173:20; 188:23 home 176:19 hope 172:21; 195:19 hour 149:9 hyphenation 212:20 I idea 129:4;150:7; 157:12;163:5; 205:17,19; 208:2, 7, 7,14, 20, 22; 209:1, 7,15, 18 ideas 154:13 identical 164:1, 3, 17, 18 identlfication 116:24; 119:25; 122:4; 124:23; 131:6; 145:19; 149:20; I .151:12;156:20; 159:7; . I 161:22; 163:11; 167:21; 171:13;187:4; 192:14; 193:18; 196:11; 198:6; 203:15;204:23;209:24 Identifled 119:21;131:3; 145:23; 161:19; 201:19 identifies 135:9 I identify 125:4;162:17 I Ignore 176:21 III 151:18 immediate 118:20, 22 immediately 189:15 Impetus 199:24 implement 147:12 Implemented 168:3 impiications 125:10 Importance 145:25; 157:21; 176:12,22; 1 179:15 1 important 198:13;200:1; ii 206:12; 207:2, 8 imprecise 149:3 ~ improper 141:18; 160:16 incident 181:20 include 154:20 I included 193:12 includes 165:16 including 159:18;171:5 incorporating 146:21 increase 121:23 indexing 168:4,7,10 indicate 182:11 indicated 135:4; 137:1; 141:3;168:9;199:12 indicates 126:17;135:8, 13,18,23; 138:16; 186:2; 187:23; 208:16; 210:24 individuals 209:6 industry 143:23 infer 129:9; 132:4 Influx 173:14; 177:4 informa1168:17 information 118:19; 134:18,20; 154:15; 193:3, 5 Ingoing 174:2; 177:11 initiais 192:3,17 initiative 129:23; 130:3, N 7,10 t, inked 192:10 OD Input 169:19 ko Inroads 151:24 P Instruct 141:25; 203:11 n intelligence 192:12 ~ Intention 119:5 Intentionally 204:11 exhiblts - intentionalty (4) Min-U-Script® For The Record, Inc. -- (301)870-8025
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DIANE S. BURROWS VoL 2, Jime 3, 1998 185:23;203:7;204:19; 210:25 ring 209:17 RJ 165:22, 24 RJR 131:9, 24, 25;132:4, 8, 8, 20;133:5;134:10,18; 167:12; 174:2; 177:8, 11; 181:3 RJRTI 135:20, 21, 25 role 146:25; 183:2 Roman 151:18; 173:8 room 190:16 rotated 144:9 roughly 149:2; 196:3 Rucker 165:17 rudeness 181:23; 182:2 running 188:21 S S116:4;131:10;146:1; 159:16 S.R 135:10 S.W 145:16;148:12 S.Y 145:16 Salem 139:18, 20, 21, 22; 140:12;144:3,5,7 same 117:9; 120:4, 8; 123:16;127:14;129:13; 132:9,15;136:4, 8,10; 143:18; 144:20; 147:8; 148:24; 161:18; 168:15; 178:12 saw 118:4; 123:14; 129:3; 156:7; 167:1 saying 129:12; 137:7; 147:5; 182:17; 206:8 school 190:16,18; 206:2; 207:25 schools 208:3 search 169:10 searched 169:24 searches 168:24;170:8 searching 171:2 second 121:10; 125:14, 17; 151:22; 164:23; 177:10,17;192:16; 200:22; 202:2, 11; 203:24; 209:4 secondly 143:5 secretaries 134:16 section 179:14; 209:4 seeing 123:7; 152:14; 156:24; 158:7 segmentation 155:1, 5, 9, 13,15 sell 124:11;129:7 send 117:13,24;118:14; 121:3; 127:3; 129:7; 130:3; 134:17, 20; 135:2 senior 124:1;138:17; 139:15;140:3, 20;144:1, 8,16; 145:5 sense 133:22; 140:15; 148:1 sensitive 120:25 sensitivity 120:21; 125:11 sent120:18;129:22; 134:6 sentence 152:16: 157:20;158:2;166:2; 177:3, 10, 16, 17: 180:12; 187:13; 193A7, 11; 205:9; 208:13,19. 21 sentences 166:9 separate 140:18 September 117:16, 17, 20; 128:5; 135:16,19; 205:2 series 150:23 session 156:18; 203:3 set 148:4, 6; 160:24 Several 153:23; 189:15, 22, 23;196:15;199:19 shakes 162:23 share 147:15; 167:2; 173:18, 20; 174:1, 2; 176:14,16;177.`?, 11,12, 20, 22, 25: 179:23; 180:17, 18,19, 22 shares 146:2;147:14; 176:21 sheet 122:21, 25; 144:13; 168:2 SHONKA 116:9,19, 25; 117:23; 119:19; 120:1, 6, 10, 22; 121:12, 25; 122:5, 16, 23; 123:3, 6, 11, 20; 124:8, 17, 25; 125:4, 24; 126:12,16;127:1.6,13, 22;128:2,11, 14. 23; 129:5;130:5,15:131:2, 7; 132:12,16, 19, 23: 133:2, 9,12,15; 134:13,25; 135:3; 136:2,14:137:19, 23; 138:6,14; 2 1; 141:2, 12, 20, 24;142:7,13; 143:16,25;145:4,10,20; 146:7, 13; 149:11, 14, 21; 150:13,19;151:2. 4, 6, 9, 13;152:11,15;156:14,21; 157:5:158:1,13.17, 25; 159:4, 8, 20, 24;160:4, 9, 15, 22, 25; 161:5, 8, 13, 23; 162:4,12,15,18,21; 163:6,12, 23;164:2,12, 16,2 1; 165:3, 11; 166:14; 167:4,15,22;168:23; 169:3, 7,11;170:2, 6; 171:10,14, 24; 172:3, 11; 173:1, 4, 22, 25;175:1, 6, 13,19; 176:23; 178:11, 22; 179:20; 181:25; 182:6,19; 183:1,12,17,22; 184:4; 185:221,186:22;187:5,12, 22; 188:3; 190:13,19; 191:18,21,25;192:7,15; 193:15,19;194:1, 4; 195:3, 6, 24; 196:4, 8, 12, 20, 24;197:4, 9,13,18, 23;198:3,7,16,20,23; 199:5,11;200:24;201:7, 23;202:4,10,14,20; 203:12,16;204:20,24; 206:16; 207:5, 7,19; 208:18; 209:21, 25; 211:6 shown 203:4 side 164:9 sign 169:19 signature 131:20; 167:23; 205:7 signed 123:17 simiiar 117:12; 146:23; 161:10; 191:1; 194:10; 207:17 similarities 129:19 similarity 129:16, 17 simple 196:25 simply 16o:i6 sincerely 142:14 Sitting 129:21 situation 185:11 situations 119:16 six 201:2, 8 size 128:7 slash 165:2 small 173:9, 22 smoke 2082, 22 smoker 153:10; 158:22; 163:17; 165:13; 178:7,15, 18,20; 181:14; 187:24; 188:5; 189:25; 190:1; 193:22; 199:13,19; 201:20;204:3,14,17; 209:13; 210:20 smokers 128:7, 8; 146:2; 150:24; 151:17; 152:2,2; 166:3,17;167:1, 3,13; 170:24; 171:2,20; 173:14, 16,18; 174:2,9,13; 176:13;177:5,7,14,20, 23;178:2, 5, 6;179:6,15; 180:7,18, 20; 181:4, 12; 191:6, 9; 198:12; 199:22; 200:1; 201:4; 204:6; 207:2, 7 smokes 183:10; 204:18 smoking 149:25; 181:13, 16, 22; 207:24; 208:4 sociability 184:5 social 181:3, 9,14;182:5, 7,9,11;183:19,23;208:2 somebody 150:14; 171:1;190:5,15;193:13 somehow 181:15 someone 118:4; 135:1; 147:15; 149:12; 169:18 something 117:16, 17, 2 1; 126:11; 129:11; 130:19; 136:13; 154:10, 16; 155:3; 156:2,5; 163:21,23;166:24; 168:13; 169:10; 185:16; 188:24; 189: 1, 11; 190:18; 192:5; 205:20; 206: 18 sometimes 119:13,15; 165:14; 182:13,13; RJ. REYNOLDS TOBACCO COi11~ANY • MATTER NO. D09285 194:18 ~ studied 179:4 somewhat 194:20 I studies 155:1, 6, 8, 9,13 somewhere 150:16 ~ study 125:10; 155:5, 15; soon 178:17 i 202:12 sorry 120:23; 125:2; 126:9; 141:18,22;151:18; 162:4; 164:21; 175:10; 179:13; 184:18;194:1; 198:15 sort 130:1; 138:22; 144:2; 168:4; 169:10; 180:23; 203:9 sound 152:24; 166:13; 185:23; 210:25 sounds 155:12; 185:3; 211:1 spanned 201:2 special 185:13 specific 141:6;143:24; 157:24; 158:8; 160:24; 182:24 specifically 118:3; 151:22;208:13 spell 162:19 spelling 212:20 spent 172:14; 201:9 spouse 183:10 stage 179:5;209:19 stamped 159:12;161:12 stand 162:4 standard 152:8; 171:8 stands 190:5,15; 204:2 start 154:12; 162:14 started 154:2 state 123:3; 130:9; 160:16 statistlcal 136:13 statistician 135:14,16 stay 136:15 stayed 136:18 steps 187:25 Steve 131:9; 134:5, 24, 25;135:5;136:12;137:11; 156:8 Steven 135:10 still 116:16;136:23; 144:8; 165:24; 173:5; 174:18; 176:8; 185:25; 195:19 stop 137:12; 174:3 stopped 137:9 strategic 159:13; 171:17 strategies 152:22; 158:18;159:15;171:20 strategy 174:12 strength 180:8,15 stretch 196:5 strokes 207:21,23,25; 208:1 strong 178:20; 179:7; 204:7 structure 132:18; 140:18; 205:11 stuck 185:10,15 I stuff 117:19; 123:18 style 195:8 subject 120:24; 125:10; 127:19;131:11;156:17; 157:21;163:17;165:13; 170:23, 24; 171:3; 191:5 submitted 168:11 substantial 129:14 substantive 165:9 substantiveiy 164:18 successful 173:15; 177:6 suggest 142:24 suggested 118:13; 129:3; 145:24; 149:16 suggesting 127:2 suggestion 124:10; 154:12; 155:1,14 suggests 192:5 suitable 169:20 suits 149:13 I summary 205:10,19 ~ superb 157:13 supervise 139:7 supervisor 118:22; 119:1,17; 153:15 supervisor's 118:21; 119:18 supervisors 144:15 suppiier200:13,15 suppliers 155:17 support 143:24 sure 118:1; 124:7; 126:15:130:5;133:4, 20; 134:22; 135: 1; 139:1; 141:14,17; 142:14,16,18; 143:19;146:7; 152:25; 154:9;157:6;158:20; 160:14,18,19,23; 167:14; 169:20; 170:13; 186: 1; 189:17; 200:16; 202:16; 206:6;210:14 surprised 137:2 surrounding 186:10 Susan 148:15 switch 178:3; 179:8 switchers 174:19; 176:15,19 switching 173:19;174:8, 14; 175:2,4,11,13; 176:15; 178:8,21, 23 sworn 116:6 system 170:12 systems 135:20, 24 T e-a-g-u-e 145:17 talking 135:11; 152:25; ut N ro ko ring - talklag (8) 1Kiu-u-script® For The Record, Inc. -- (301)870-8025
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ATTACHMENT C ~ "~u RESZDEM`'"4I~E~AIT' U. S. YOP,11IaiTION ~ . 7- ~ "~"°~ ~g $ Ceus 8i=teau €L"sticmates Irrojec2lens (000) ESTIMATED 1979 1980 1981 1982 I983 Ages 18-24 28,957 29,250 29,325 29,246 28,933 Ages.25-34 35,547 36,926 38,289 38,753 39,507 Age 25* 3,946 4,056 4,094 4,213 4,236 X of 25-34 11.1 11.0 10.7 10.9 10.7 Ages 35-49 36,079 36,624 37,199 38,871 40,292 Age 35* 2,899 2,883 2,847 3,837 3,600 Z of 35-49 8.0 7.9 7.7 9.9 8.9 Ages 50+ 58,299 59,149 59,735 60,240 60,767 Age 50* 2,251 2,337 2,269 2,158 2,175 z of 50+ 3.9 4.0 3.8 3.6 3.6 TOTAL AGES 18+ 158,881 161,949 164,549 167,110 169,348 Sources: P25 8922, 0929 * Ages 25-27, 35-37, and 50-52 for 1988. PROJECTED ** 1984 1985 1988 28,355 27,593 25,830 40,287 41,053 42,088 4,286 4,352 12,861 10.6 10.6 30.6 41,792 43,318 48,224 3,629 3,707 11,851 8.7 8.6 24.6 61,217 61,690 63,254 2,133 2,181 6,815 3.5 3.5 10.8 171,647 173,652 179,397 ** Census projections adjusted assuming military/overseas population size/distribution remains as in 1982. 1988 interpolated from 1985 and 1990 Census Bureau figures. Fifty-year olds estimated by aging 49, 48, etc., from prior years with mortality ratios (50-52 in 1988 estimated as 61.0% of 50-54 group, based on 1982). 0 0 0 N A OD 88 T V 6 8I Z 5 . 1'ndueed In Federal Trade Commit'sion pursuuM to suJrpwnn ~ ~-~ -- ~ dated June 6.1997. [h1l f9ZOS
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DIANE S. BiJRROws R.J. REYNOLDS TOBACCO COMPANY ' voL 2, June 3, 1998 MAT1'ER NO. D09285 Page 139 n1 I was in a job assignment. I'm not 100 percent sure of m that.That's my recollection today. pl 0: Did your reporting responsibilities (4) change? Is7 A: At the time of that promotion, my Is] recollection is they would not have. m Q: Did you at that time begin to supervise tel other people? m A: No, sir, lwl Q: Did your job responsibilities differ? n+] A: As a result of that promotion? nn Q: Yes. nq A: No, sir, I got a raise and a better title lul and that's it. tti] Q: As a senior marketing research analyst, did l+sl you work on any particular brands? hri A: As I am recalling it, I was at that time t+al assigned to the Salem brand research group or unit or haf whatever it was. Cp] Q: And the Salem brand research group was te+l obviously responsible for Salem brand? rm A: Well, for research related to the Salem ral brand, yes. tm 0: Did it have responsibility for any other (zsl brands? Page 140 m A: I don't believe so. m Q: Did you work for any other brand while you (31 were a senior marketing research analyst? Iq A: For any other brand research group or is Isl that- lal Q: Any other brand? m A: Well, working for the brand research group lel was not really working - well, this is a terminology ro] thing, the brand, when the term comes to my ears, that liol was typically referenced in marketing and these were I++I marketing research positions, so - but related to the (12] Salem brand that would come in the package. l+s] Q: It's marketing research, but it is not lu] technically working for the brand? hsl A: In a sense that the brand was often used to l+sl refer to the marketing group, yes. (171 hel 1191 Q: Purely marketing function? A: It was a separate structure. Q: Did you work then for any other brand rm research group while you were a senior researcher? R+] r4 A: No. 0: I take it you continued to work on tzq corporate level matters? lul MR. WILLIAMS: Let me object as vague. rm THE WITNESS: What is a corporate level Page 141 ' [+I matter? tzl BY MR. SHONKA: pI 0: I thought you indicated yesterday that some 14] of the research or a great deal of the research you had Is7 done was more at a corporate level rather than brand ` lal specific, and the question - let me back up. Have I m misunderstood you? lal MR. TAYLOR: She said what she said and ]s] it's on the record, but - 1101 MR. WILLIAMS: We are going to be going I„] four days. h21 MR. SHONKA: We'll go faster if you don't ha] make a lot of objections. pq MR.TAYLOR: Sure we will, but you will tnsl take advantage of my client if I don't make objections. l+s] MR. WILLIAMS: We have an obligation to hn make sure the questions asked are objected to if they hel are improper, and I am sorry, but it is our duty as liel attorneys to do so. Ipl MR. SHONKA: Thank you. Iz+l Can you answer the question? re21 THE WITNESS: I'm sorry, can you say it for Izsl me again. 1241 MR. SHONKA: Would you please read it back. 12s] MR.TAYLOR: I am going to instruct my Page 142 m client not to answer any questions that you ask her m whether or not she said X,Y, or Z yesterday based on 131 your reading of a transcript last night that was (4] transcribed and the unavailability to her.That is not is] fair, counselor. It is not accepted practice in North ie] Carolina and here it will not take place. m MR. SHONKA: So the record is clear, I did lal not have the transcript last night have not received it, lol Reynolds has an expedited copy of the transcript, the hol FederalTrade Commission does not. t„I MR.TAYLOR: I do not and I can tell you 1+21 that. hal MR. SHONKA: So the questions I am asking (q are sincerely predicated on wanting to make sure that I I+s7 am not going on wrong assumptions. I am not trying to t+sl waste anybody's time. I am trying to make sure we don't pn misstate things, and so I have asked the witness to (el please clarify things to make sure that I am right. tlel That is the oNy. purpose of the question. It is not a rm trick question.I promised not to ask trick questions tz+] yesterday. rm MR.TAYLOR: She is here as a fact witness lzal to be examined about things that occurred, as I tzel understand it, many years ago, and I would suggest that IA that's the way to ask questions, not as to what happened Page 139 + Page 142 (10) Min-U-Script® For The Record, Inc. -- (301)870-8025
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~1 W •+ F Q 47 ? / YOt;'I:I :'d`f I`;G Q ~ Fp~ X Wr'i 0 November 21, 1983 r , Q S .. CX-843 pLAMiFF'S EXFIIBrf ly RJM025529 83M01128
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Attachment 0 Ft$TI?t/tiVEly CL'itILIAN .•SMOKTNC P0lj0I:ATION .~ £STI1t4TED * PROJEr CED "* 1980 1981 1982 1983 1984 1985 1988 18-24 Population (M) 29,250 29,325 29,246 28,933 28,355 27,593 25,830 Incidence (X) 32.7 31.7 29.4 26.2 26.4 26.5 26.7 ' Smokers (MM) 9.6 9.3 8.6 7.6 7.5 7.3 6.9 Z Smokers 18+ 17.9 17.5 16.5 15.1 14.8 14.5 13.6 25-34 Population (M) 36,926 38,289 38,753 39,507 40,287 41,053 42,088 Incidence (X) 36.6 36.4 34.6 32.5 31.6 30.7 29.2 Smokers (MM) 13.5 13.9 13.4 12.8 12.7 12.6 12.3 Z Smokers 18+ 25.2 26.1 25.8 25.5 25.2 24.9 24.2 35-49 Population (H) 36,624 37,199 38,871 40,292 41,792 43,318 48,224 Incidence (X) 40.0 38.7 37.4 36.9 36.8 36.8 36.8 Smokers (MM) 14.7 14.4 14.5 14.9 15.4 15.9 17.7 z Smokers 18+ 27.4 27.0 28.0 29.6 30.5 31.5 35.3 50+ Population (M) 59,149 59,735 60,240 60,767 61,217 61,690 63,254 Incidence (Z) 26.7 26.2 25.6 24.7 24.3 23.8 21.9 Smokers (MM) 15.8 15.7 15.4 15.0 14.9 14.7 13.8 X Smokers 18+ 29.5 29.4 29.7 29.8 29.5 29.1 27.2 18+ Population (M) 161,949 164,549 167,110 169,348 171,647 173,652 179,397 Incidence (X) 33.1 32.4 31.1 29.7 29.4 29.1 28.3 Smokers (MM) 53.6 53.3 52.0 50.3 50.5 50.5 50.8 * Sources: Attachment A and MDD Tracker (M/A/R/C) incidence. ** Total incidence projections from 1984 MDD External Forecast. Ages 18-24, 25-34, and 35-49 were derived from ~ cohort incidence trends,'adjusted by NBER elasticities in 1983 for FET impact on males 18-24 and males/femalee ~ 35-49 (unpublished MDD analysis). Population projections from Attachment A. 0 0 0 N A tA N 68IV 68IZS + Pmduced to Federal Trade Commission pursuant to sutporna i dated June 6, 1997. I elttt E9zo5 ;
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P4 1T p~..J ~ November 16, 1983 TO: L. P. Mabee S. Y. Evans S. W. Teague E PLAII~ TIFFS EXEIIBIT ~ln y' FROM: D. S. Burrows SUBJECT: PROCEDURE FOR ANALYZING/PROJECIING EFFECT OF AGING ON SMOKERS SHARE f"'"'.ry ,,Ir, our last Younger Adult Task Force meeting, you asked me to forward a s"euggested procedure for analyzing the importance of aging versus other effects s;.on'brande' historical shares of smokers, and projecting possible aging effects in the future. Here it is. • ATTACHtfENT A is a sample worksheet on Newport which illustrates the heart of my approach. The basic idea is that, in any given year, an age group of smokers will consist of smokers who have aged into that group since the previous year and other smokers who have remained in the same age group. For example, in 1980, the chart shows that 11.0% of 25-34 year old smokers are "incoming" smokers age 25 -- in 1979 they were in the 18-24 group -- while the other 89.0% of the group remained 25-34. Similarly, 35 year olds moved on to the 35-49 group and 50 year olds were new to 50+. (The ~oethod of determining the percents incoming/renaining is detailed under Attachment C below.) To estimate the share change, if any, to be expected due to aging alone, I have assumed that all incoming smokers bring the brand SOS of their previous group with them. For example, Newport's SOS among 25 year olds is assumed to be 5.2Y% in 1980, the SOS Newport had among 18-24 year olds the previous year. "Remaining" smokers are also assumed to keep the brands they had the previous year, e.g., Newport's 1.7% of SOS of 25-34 year olds in 1979 is assumed to carry over among the "remaining" 26-34 year olds in 1980. Thus we can say that, if only aging affected the market, Newport's share among 25-34 year olda in 1980 would project to be the weighted everage of its shares among the "incoming" and "remaining", 11.0% x 5.2 .6 pts. due to "incoming" 89.0% x 1.7 1.5 pts. due to "remaining" 2.1% SOS among 25-34 This logic can be applied to all age groups except 18-24, where we have no data on "incoming" smokers shares and must rely on the current actuals or draw a scenario for the future. After the age group shares expe:cted from agin^ are estimated, they are combined at the bottom of the chart into a total projected SOS by weighting age groups according to their importance among total smokers. (Development of these weights is detailed under Attachment D.) Where our projections ^,e CX-842 RM0002476 ...-.-
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cci'.a';e A ^ : .c..t ^ . ciKnre!tr. (Otl,ervtse -.:v: ; CBitDnS, _..-VdCKS ..l:id ru.a.uCC 7C~..:'S!,: u: :.cncrl-a 2C's onlo o.re : ab:~~,. a •_. ._. . . • ~,nU tri;l' v,..u ~:,1 ../,i. .~ l.aa :. ~IJnd StlC.iCl^es tP.~~:: !u^~i: :f0.~_ C: :.drROC 54'r".: • No _,. .,^s • 'ia::-^I 'c r c-:J.:;> :., i,,,y :atk~~ ..r'.'.,! , , .~,I :.-;,,_ i M:ly , -.a'. . _- ~b~dlt;O: !. "P.iif" _tig.. :r'..:11:$r,• ,5u '.; / D. °_. ?~JfrO'.. !1RRc,.... . . n'crr Fr~u,. __ sx GSB cI, _C: Xr. ... ... ..., - ._ . Mr. :!. ... )t.'. E. _, r,lc,.e:-.-. V.: . ~'. ~. .r.?. •_. _ ...._:l .. . {. 4 .>de: S.?. ,.,-_- s, '.v..;. i: '.?s;. Tr.qy .it.::.'.' F .
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IyTRODUCTION ......................................... 1 HOW MANY YOUNG PEOPLE SM0KE? ......................... 5 Smoking Surveys: Can we count on them? ......... 5 What is being measured? ......................... 6 Who's being counted? ............................ 10 n Who can you believe? ............................ 12 WiiO SMOKES? .......................................... 15 Sex ............................................. 17 F O Homa Enviror„ ent ................................ 19 Social Class .................................... 20 a Ag`@ ............................................. 22 az~n. .......................................... Zace 23 U F r 0 .. =~ 24 p • 0~ V h oeftonality ..................................... <... ............................ ~ ~rugs and Alcohol 26 c ... r "~ ..................... 1p11N do we know? 27 .. ........... ~ WHY 00 K~DS SMOKE? ................................... 29 ~ U Parental Influences ............................. 31 ~ SPee Influences ...... ...•.•••••••••••.••••••• 37 ........................... Media Influences 43 ..... L3 ~ IN-SCHOOL SMOKING AND HEALTH ..................... .••• 51 Early Programs .................................. 53 A Turning ?oint ................................. 54 KHEP.E AAE XE NOii? .................................... REF°REVCES ........................................... 61 67 t M N N OD APPENDIX A ........................................... 74 r t0 N RJM0255s0 83M01129
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.S". t a wOr.,'.'w:1?.5s :°_. :-- -- --.c, .Jcal _1s:.•>Gs ~...' c'1.tural dif Eer=r.Ces C.a.Ke a cJC•:; a: L:-'1 OE 5:S1o.Kiny^ •De.^•3': Cor among nations ccnfusing. It is interesting, however, that the United States is currently experiencing one of the lowest smoking rates z:~ong young pecole of the nations where youth smoking has been studied. n This report, then, may be considerd a benc'.1mark review E ~ though it is not as scientific an exercise as that perfor-,>_g by Willia.:s in 1971 and Leventhal and Cleary in 1980. ~serl ~ Gt of this study should make full use of the references and th~ ~ scien40s who produced the work they represent. T:-1 m backgr,cund information not only would be useful in develic ~ u opin educational programs on the youth smoking issue, bu5 ~ A also 'n pening a dialogue that is absent in the literatureV 4 HJM025S34 83M01133
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De Q.) CI?. SOm2 fdCtL`.r3 .,....__. t4a'i otClersJ pt1°L _.,'_a-ions!1i.sr a CCTT.on ther:.e in a7o.'_S- cent behavior research, is perhaps better understood today than, say, the influence of the media on the smoking decision. Some within the acedemic and medical cemmunity !:ave, ~ attanpted to pu11 together the existing knowledge only tg Wy °ind t:°,eir attenp=s fr'.:strated by the researchers' widI z ~ :anye '~E stAGAar.~.3 dn3 S?3s1r9s. ..^.ey also decry the '_ac~ 9 of a_;,stera:ic method of rzsea:ch, and occasional fai:u~FrQ ~q to prcperly docu:nent research, that colors some work ~~ Indeed, frustration may be as high within this group al ~ within the tobacco industry. 9 s4oduse this report is a review of the research litera ture,,{.i;j is shaped by the factors in the smoking decisio that tftu--f been submitted for study. There are many factor •~sr that inl~uence decisions and they have not all been examine Sa.~ of the factors are not well snderstood and grosy about the :Iledia are made 'oz asslllil Yns artiCularl 3t]J [ , J , . j % y .~i exa-iple, all media influences, including use of cigarette~ ~ by actors on television, sampling and promotion of arts an~ ~ sporting events, are 1',~mped _ogether under the general mzdi ~ ~ u-mbrella. This report also covers only research conducted in thi F ini:.ed States, b'.]t that :s not to s'.]y^yest that youth smoking 3 RJM0255J3 r 83M01132
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1979 ACE GROUP SOS 18-24 Actual SOS 5.2 Projected SOS 25-34 Actual SOS Projected SOS lncomfng RemaIning 35-49 Actual SOS Projected SOS Incoming Remnlning 6,1 1_7 1,8 L 100,0 2,1 t1,0 5,2 89,0 1_7 8 .7 100_0 ,9 7.9 1.7 92,1 .8 50+ Actual SOS .4 Projected SOS Incoming Remalning TAl Actual SOS 1,7 + Projected SOS A 18-24 ~ 25-34 O O 35-49 O 50+ N ? J CD tctvel Is lst Malf 1983, ". :. 1 , t . .1'4 ' t~ic- At7AC1#1EHT A 1980 S IMP SOS . .4 1000 .4 4,0 -8 96.0 .4 1.9 100,0 2,0 17.9 6,1 25.2 2,1 27.4 .9 29,5 .4 ~MDDEL FORatO.iF~CTIr+GEFFECr-~OF Aflt$`t1R SRARE OFSIdOKERS I REKPOtT M IF MOLDS 1983 YA S OS IF YA SOS KEEPS 4-YR, TRENO 1981 1982 1983• 1984 1985 1988 1984 1985 198F S f i S S S S S _ S IMP SOS IMP SOS IMP SOS IMP 505 IMR SOS IMP SOS 1f4P 505 IMP SOS 1wP . 7.0 7,6 8.5 B,5 ± ,3 10,1 2_5 2,7 3.3 100,0 2.3 100,0 3.0 100,0 3,2 1 100.0 3,9, 100,01 4,4 100,0 5,7 100,0' 3.9 10',0 4.5 100.0 ~ 10,7 6,1 10_9 7.0 10,7 7.6 4 10.6 8.5 10,6 y8,5 30.6 8.5 10,6 17778,5 10,6 9.3 30_6 1' 89_3 1,8 89,1 2,5 89,3 2.7 l, 89;4 3,3 89,4 3.9 69_4 4,4 09.4 3. 3 89.4 3_9 69,4 `• .8 ,8 1,0 100.0 ,8 100.0 1,0 100-0 1,0 100,0 1.2 100.0 1.4 100.0 2,1 100.0 1,2 100.0 1,4 100.0 7.7 . 1,8 9,9 2.5 8,9 2.7 8,7 3.3 8,6 3.9 24.6 4.4 8,7 3,3 8,6 3,9 24,6 92.3 .7 90.1 .8 91.1 .8 91.3 1,0 91.4 1.2 75.4 1,4 91,3 1.0 91.4 l_2 75.4 .4 .4 .2 100,0 .4 100.0 .4 100.0 .4 100.0 .2 100,0 .2 100.0 .3 100,0 .2 100,0 .2 100.0 3.8 ,1 3.6 .8 3_6 .8 3.5 1.0 3.5 1_2 10,8 1,4 3.5 1,0 3.5 1,7 10.9 96.2 .4 96.4 .4 96.4 .4 96.5 .2 96.5 ,2 89,2 .2 96,5 .2 96.5 .2 89_t 2.2 2,3 7.6 100,0 2.2 100_0 2.4 100.0 2,_ 100.0 2.7 100,0 2.8 100.0 3,4 100.0 2.8 100.0 3.1 100.0 ' 17,5 7.0 16,5 7,6 15.1 8.5 14.8 8,5 14.5 8,5 13,6 8,5 14,8 9.3 14,5 10_1 15,6 lr 26,1 2.3 25.8 3.0 25.5 3.2 25.2 3,9 24,9 4,4 24.2 5,7 25.2 3,9 24.9 4,5 24.7 ~ 27.0 .8 28,0 t,0 29.6 1.0 30.5 1,2 31,5 1,4 35.0 2.1 30.5 1,2 31,5 1,4 35.0 . 29,1 .4 29,7 .4 29.8 .4 29,5 .2 29,1 .2 27,2 .3 29.5 .2 29,1 ,7 77,2 98 i D 6 8 T Z$ 1'n7du.vd [o Federal Tradr Committif..n pursuant In .nl>qmna _ _ dated .lune 6. 1997. 9}IlL E9Z0S
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YOUTH S>10KaG: It::3~DUCTION Concern about the extent of yc,th smoking in the United States is an old and tiighly e-,otiona: issue. Two generati?I s ago the cigarette smo:<ing boy xas the epitome of failuop Children contac.inated by the sx,c'<e cf the weed were cocs'dak t +~ cendenne9 to a life of roor :-.ea'_th and economic disas`_er. ~~ > F 0 '!onogra;hs, some of then a:tempt:.g to present serious :r.edifal x t5 research, circulated azong school ce.:.'^ers, juvenile counselo Bi pastors and some cor•nur.ity Leaders. Henry Ford enlisted hC~ aid of his friends to ba:~ cigarette ~se as•ong young boys. jhy~P oampaiga had the character and moral fervor of the campa~g aqains!•"~lcohol conducted by t;e Christian Temper ea~ Union,.,at)ich also coniem;:ed s.ro:<ing. ~ ~ a ToNy, the issue has be=_n elevated to a much higle; plane. Researchers have cc:lected a considerable body of eMiw dence tiRat helps explain why young people adopt the occasio~al or regular use of cigarettes. A profile of the young s-,o~42H ~ O F z is emer in g g. ~ But the issue is still c_a_9ed by missionary za 19 X 0 Sr,~o'<ing is bad and ccst of t.`,e researchers _;rbea ~ _nd sTCking aMong t! e yo,.^.y^ is ..-s,stgrous. The moral ':,vor- tones are abse'1t, but the of serious conseq.e1c°_s 1 RJM023631 83M01130
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ATTACHMENT E ~ MOPEI FQP PROJEr:j I NG ~TFECT QF AG/NCt Crt7 SHARE OF 5740{C' F"> AGE OtGOP 18-24 Actual SOS Projected SOS 25-54 Actual SOS 1979 1980 1981 f f SOS IMP 505 IW SOS IF HOEOS 1983 YA SOS IF YA SOS KEEPS 4-YR, TnE'+0 _ 1982 1983• 1984 1985 1988 1984 1985 1988 t f 1 S S 1 S S IMP SOS IMP SOS IMP SOS ItP SOS IMP SOS IMP SOS IMP SOS 1k/'_ u Projected SOS 100.0 100.0 100.0 100.0 100.0 Incoming 11.0 10.7 10,7 10.6 RemeIning 89,0 89,3 +9.1 89.3 89,4 35-49 Actual SOS Projected SOS 100.0 100,0 100,0 100.0 100,0 Incoming 7.9 7.7 9,9 8.9 8,7 RemaIning 92.1 92.3 90,1 91_1 91,3 50• Actual SOS Projected SOS 100.0 100.0 100.0 100,0 100.0 inComing 4.0 3.8 3,6 3.6 3.5 RemaIning 96.0 96.2 96,4 96,4 96,5 Actual SOS Projected SOS 100,0 100.0 100.0 100.0 100.0 18-24 17,9 17.5 16,5 15.1 - 14.8 25-34 25.2 26.1 25.8 25,5 25.2 35-49 27,4 27,0 28.0 29.6 30.5 50+ 29.5 29.4 29,7 29.8 29.5 tuel Is ist Half 1983. 100.0 100.0 10,6 30.6 89,4 69,4 100.0 100.0 8.6 24.6 91,4 75,4 100.0 100,0 3.5 10.8 96.5 89,2 f00,0 100.0 14.5 13.6 24-9 24,2 31.5 35.0 29.1 27,2 PnNlucrd tu Federal '1'radr <'on.mis.yion pnr.uanl to .ubpn'oa datld .Itlltr 6, 1997. 6h11 £9zoS @6TV 68ZZS 100.0 100.0 100.0 10.6 10.6 50.6 89.4 89.4 - 69,e 100.0 100.0 190.0 8,7 8,6 74.6 91,3 91.4 75_4 100.0 100_0 100.0 3.5 3.5 ta_e 96,5 96:5 M1,2 100,0 100,0 100,0 14,8 14,5 15.6 25,2 24.9 74.2 30.5 31.5 55.0 29,5 29,1 7),I
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still present. ~JC.2 in t~e res?3:Ch CoT-•..)^•:ty CCnC?3: feelings about the issue, but others clearly wear the co'_ors on their sleeves. Someti:es this appears to affect their interpretation of the data. For example, in an effort to reinforce their conclusion that cigarette advertising is pandering to touth, o California researchers stated' .r ~. unequivoca'_1y that ci?are_te ccm•pani>_s intantior•a11t ads a°O_c__ng aS.c<?rs ac3rad o:escent ciot'ing ^]n6 playing at kids' ya..,es! F~ d This report is a re'.:e.+ of the research reported in thl ~ professional and scientific jc,:rnals. it deals priT,arill with Ghe "who" and "why" of the youth smoking q.:estion~ ~ Ear1y'Kesearch concentrated on attempting to identify th~ ~ d 7ounq~sno<zr and to make correlational linkages to cc•mo~ ,~ 1 charaEtdtis`ics. For example, because young smokers cam Qq~ 0 ted ractice b ~ from f~}rnil paren%4k,~or parent aL in ies ' ere s.ckiag was older sib'_ic;s, the ea fluences .+e:e _'ne ca_Se. ' an accep rly 'work co p ~ ~ V y ncluded t:nab F y V W .fi :~ Later work used zore sophi sticated te . chniques an~' ~ h measures a fter it beca^,e apparent that many factors Wel p S into smoking initiation. 'his later work also began to conj centrate o n the young r•crsmoker in an effort to locate th "hiyh-r:sk" you`h 'oe= r=_ :a tried his first cigarette. ~` Ln F N The C25f?3LCh 23 511 in its formative s:.ag?s,_ r co , t0 dC"O:d:^Q :D t,^e 3ca~emiC research ciock. N'=ch Still is to ~. 2 RJM02S332' 83M01131
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12- ar.3 :_, ___ e_esasary .•i c. . . . . "3 the factors of ;• '<:::g _ i=iati_•. :n ?act, vans sug:e;ts that smoking may begin at even earlier ages today.(o3) Age also is important in interpretation of the data because older teenagers smoke at about 10 times the rate of younger teens. Yet there is no standard. Fishbein also warned about other sampling problems ~td generalizing from local reports. "Generally speaking," ;i.~t~ wrote, "the percentage of sT•okers varies as a function ~~ ~ place of residence (i.e., y=ograr:~ic region, size of cc:r_r,uni & p ! 0 q( and rural versus urban) ." Surveys have found, for exa-np2t:p that more young people in the northeast smoke than do those~~ the west. He might also have added a caution about gener ~ wiehin a communit izin U ~ $ Minnesota researchers found differences, large d0 iwmtt g y. .,x g 'I&L--;berenkTFY'; between one school and another within the !r+ ;-t ~977, the first Minne9otd team 4 year of their research reported that in the four junior under-study the percentage of smokers (students same ci F+ project, ~ high schoN U who said smoke4'1wet least twice a month) ranged from a high of percent to a low of 4.9 percent.(22) O m t~ `, 1lt 14 1 52 8 Fishbein concluded that "the various national surv3z conclusions about smoking, behavior that are based on these d must be treated with caution." have used nonconparable samples and different criteria. 11 83M01140 RJM025541 w
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mc.^.th$ closeiy f:,:io':in ^y :~°- aCz ..._:es of 20 smoK°_rs an.j [3 non-smokers in local high sc`:oo1s. One of their findings men- tioned that 'the incidence of smoking among young people was higher than surveys would indicate. The group least likely to be accurately represented in school conducted surveys was that of the 'popular' boys, These students were involved in sch4ial activities and athletics and felt that they would suffer ~khi i- greatest conse'y'7c.^.ces if :heir tdachers and coaches knew sm11iked."\ / / Some researchers ha•re atte:-.pted to control this t~e9~ aS~ Gt~ r a v~ report bias through the use of c.`._mical measures of smoki~i Evans aAd others have used mass spectrometic analysis of nioV tine,leF`saliva to measure present smoking. Students are s A, fi1Wdepicting the test and' then asked for saliva samolQs W .1 ;' . ra i~.hict~e then analyzed. "This results in significantly mIr~ ~ ,~~,,~ A reporof smoking." r6ftber investigators are exploring the use of chemiW v M indicll&rs of smokinq. However, using only direct chemi~a indic*Lors as the major dependent measures may be too or may only be recording present smoking. They adequately record smoking that transpired 3 or 5 previously. Clearly, this is an important area inv=_stigation."(57) 14 for 83M 01143 RJM025544
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EdCW MA.VY YOUNG PEOPLE SMOKE? Smoking_ Surveys: Can we cocat on them? n In early 1983, Dr. Edward Brandt of the U.S. Depar Tent-r W x K F of Health and Ha,naa Eesources anr.cunced that 12.3 percent ol~j z the nation's young reople the ages of 12 and 17 w=_rep~e o s k tri > mo ers. Using current population estimates, that means a a :norl ~ than 2.6 million young people fit the National Institute 04 .~ Crug Abuse (NIDA) definition of a smoker: Someone who ha rtl smoke&~*K least five packs of cigarettes in their lifetim~ aad has sKmoked at least one cigarette within the past month a^+~y srk. o 7~ health com~nunity greeted the news with optimism ~~~' After ~~period of increase in the reported prevalence o~ ~ t youth'iWking, the data indicated smoking rates were holdingy ~y ~ f a a .:.::M ... ~ H steady at the lowest rate reported in years. ~ W But was the picture a true reflection? Consider thi ~ following pro blems in interpreting th.s and other surveP C z data: ~ ~ * Definitions. While NIDA uses one definition of a[~ ~' s.-:oker, the National Clearinghouse for Smoking and ealt}~3 ~ Ln N (NCSY) •-,ses another, slightly different, meas,:re. F a;oung OD tb person who smokes live packs in his lifetime but quits the AM N ~ a 5 RJM025538 83M01134
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week before t':e ..,te:.._. :s co:-._.d as a smoKe: ~\_:).y ,9n' as a nonsmoker by VCSS. * Sam?Ling. Researchers can't agree on the age of "young people." Some surveys include 12 year olds, others don't. Some include 18 year olds in the sample, others make the cut at 17. The difference may be critical because younIf ~ people are much more 1i',ely to be smokers at 18 than at 12.,.4 .J z r ~p2113b11:tv. Young ;mckars don't always te:l th't truth about their use of cigarettes. Smoking carries social stigma among young people and it also can lead t(M ~ punisl:-,ent by parents ar,d school authorities. Both _ntro~ ~ duce bias to the interview. Some self reports on smo:tingo y ~~ have beea found to vary as much as 50 percent when othe r .ore zaliable, measures are used. s +Tteede proble s an3 others exa ined in this section not suggqst deception by the research community or a lack faith frrT•the 25 years of specialized and national studies youth..sinoking behavior. Rather, they reflect the variety opinioaafwithin the research coml:,~r,ity and are recognized pitfalls in the current work. They also highlight uncertainty that yet abounds in the question: Why do s.noke? X5at is being measured) "Care needs to te exercised when interpreting .`indi-_s of the studies reoor=ed 5:nce definitions of s-,_h 6 RJM02bb36 83M01135
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t•3r^ls as 'rez_a: s-,~'<-2r, , 'ex_er:T.e.^.tai smoker,' and 'nons-I o<er' vary fron one study to the next," said the warning in the 1979 .Smoking and Health report from the U.S. Surgeon General. From 1959, when the first significant study of young smokers was reported in the literature, to the present, ItIne - r~ definition of smoker has ran^ye3 from a youn3 person who snol~gc~ ~ z_ at least twice a^~nt5 to a`_ea°ager o tio consu~•~,ed more t`al ~ pack a day. One ^aa'9 s-.oKer ,as often another's expZrlmeaO. The variety of def!::itions are necessary because the p~ it tern of youth smoaing is so erratic. Restricted by paren~ ~ school regulations, and, in some states, the law, young smok ¢r don't-'h%'*e the oppor:unity to smoke at the same rate as adult~ss „. An adul;. who smokes a pack a week may be considered a castt~p~ ~ mokz*?u~The rate is cocsi3ere3 much heavier if the smoker~a Vi T'~t •ac ,y!y -1 f" Q F w a teaaaq,gr. KdA important, oerhaps, !s that youth is a time ~ ~ p~ =s exper3mentation with ci^yarettes, as well as with other ad~tiY' x-*n pasttiors• The :irst cigare:tes doesn't always lead tog Ir second though some researchers believe that four cigaretteskan important threshold (17). As a result, more precise re~ ~ ures are necessary. "S~noking has a lxg and complex developmental hist beginning we11 be'ore the f .rst cigarette is snoked extending sometimes cver 5 to 10 years to dependence," 7 kJM02SS37 83M01136
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And the r_523r~~":. l':_:eJ .., .... CJGL9xt Jt .,,,..',,..°1c research, is just beginning; it has suffered grcwi,g pains. What we have are fragments that appear to present a picture. Evans said the ability to identify potential smokers is an "elusive goal.' *No conceptual frazework or organized line of research has systematically guided the resear--h related to individu'~al~ ~ ^ F t`;e 1itell characteristics in the initiation of smoking, and ture reflects the (63) patchwork guality of the existing knowledgeS o F~ O 28 kJM025558 4 83M01157
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ATTACHNENT 8 FJErECTS°Of'::AGI7YG ON..:.SRiiRE..Cr ._5lqKERS ~~ HE1fPORT- M-~ ~ HISTORICAL 1st Half 1980-83 1980 1981 1982 1983 Avo. Chg. .18-24 SMOKER SHME 6.1 7.0 7.6 8,5 Change vs. Tr, Ago +.9 +,9 +,6 +,9 +,8 25-34 SNOKER SHME 1.8 2,5 2_7 3.3 - Change vs. yr, Ago •.1 +,7 +.2 •.6 +,4 Aging Effect +.4 +,2 +.7 +,2 +,4 Other Effects -.3 •.5 -.5 +,4 PIC 35-49 SHOKER SNARE ,7 ,8 ,8 1,0 - Change vs. Yr. Ago -,1 +,1 NC •,2 +,1 Aging Effect +.1 -,1 +.2 NC +,i Other Effects -.2 +.2 -.2 •,2 PIC 50+ SMOKER SHARE .4 .4 .4 .2 - Change vs. Yr. Ago NC NC NC -.2 NC Aging Effect Other Effects NC NC NC NC PIC NC PIC NC NC NC TOTAL 18+ SHOKETe SHARE 1.9 2.2 2.3 2.6 - Change vs. Yr. Ago +.2 +.3 +.1 +.3 +,2 Aging Effect 4.3 +.2 +.2 +.1 +,2 Other Effects -.i +,1 -,1 +,2 HC ' pROJECTEp e If Nerport were to hold Its 1983 shere of younger adults and continue to be affected only by eging. Its smoker share flv« years from now would be 3.4%. a gain of .8 polnts over 1985. ist Half PROJECTED 1903 1984 1985 1988 Aging Effect 18-24 8.5 8.5 8.5 8,5 25-34 3.3 3.9 4.4 5.7 35-49 1.0 1,2 , 1,4 2.1 50+ ,2 .2 .2 .3 Total 2.6 2.7 2,8 3.• Other Etfer•s - NC PIC PIC OVERALL 2,6 2,7 2,8 3.4 e If Newport were to Continue to getn among younger adults at the rate seen since 1980, Its smokers share could reach 3.85 by 1988. Ist Half PROJECTED 1983 1984 1985 1988 Aatn4 Effect 18-24 8,5 25-34 3,3 35-49 1.0 wer the'lest four years, Newport has gained nn average of .2 share 50+ ,2 olnts per yea, of total Smokers. . Total 2,6 !evport's long-term growth Is entirely attributable to Its t,a.dr,g.ce,,1 teady gains emong younger ndults, Gains In o1~bFd~N3Hgrvups Trade L'umnis~siun pu.frj~~l ~}}~1~}~1a - Opeer to be solely the result of aging, dated June 6,1997. OVERALL 2.6 L8TV 68i.ZS 9hll E9ZOS 9.3 10.1 10,9 3.9 4.5 6.2 1.2 1,4 2.2 .2 .2 .3 2,8 . 3.1 ~ 3.8 NC NC f4C 2,8. 3.1 3,8 i
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5ational scr:e s o[ y__.. >rc';L^g behavior ",a:e ,,_ reported any racial _isti-ctions. Personality Personality variables have long figured in the research of youth smoking behavior, but, said Williams in 1971, "the rela- tionships tionships between smoking and personality variables have offel been tenuous and occasionally contradictory. Even when rela statistically significantly to smoking practices, personal e; m variables have seldom been found to account for more than~~ percent of the variance in those practices, so there util;,,cz for prediction is liTited.•(54 ) This has not stopped researchers from completing ~~ profile of the smoker. ~ ~ ~ In 1969, Lieberman(56) reported these characteristics youth~ul smokers and non-smokers: 'Stnakers are more anxiety-ridden; non-smokers are cont 'Smokers are more experimental; non-smokers, more prud 'Smokers are more socially precocious; non-smokers, 1lFM+~~~ socially advanced." 'Smokers fight t'•e values of the Establishment; F+ Z ' smokers accept the values of the Establishment." ~~ Ten years later, the Stanford University research gr~ a wrote "although one must be cautious in interpretation number of measures of 'personality' characteristics are asshb- ciated with adolescent smoking. These include rebelliousness, 24 8:SM 01153 RJM02Sb54
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smoking early a.^..~. ,~t•_' car.y. •7~e'f 3id act >',.;tie C?'.V cigarettes, and t:^,=_y did not smoke for a long period of t:me. °ss A later study confirmed Green's report.(20) "A larger proportion of the (500) college undergraduates had experimented with cigarettes o•:er a period of years but did not smoke now. n ~ - m "This is an intr:guing discovery because it suggests t*t a z ~ < w many individuals msy _.-:.a11y experiment with cigarettes ~ a use them intermi`_tently _'.er the years -- and never bectt regular smokers. w"niie an assu^.?.tion of the field is Amf :,d^ a ~ those 'W~hp play with ci:arettes eventually become habit~}, users~ese data suggest that many who smoke irregulaa~}.~y~ y~m never e beyond t:iat point." , enthal and Cleary also cast doubt on the ea~ ~~ „qpnc ns. "?ndeed, the data seems to support the hypothe~I _ y p" W P ~ that 414 ake upwards of two years and possibly longer f&g V initries and occasional experimentation to arrive i~ O m ters' as smokers. The variety of definitions have he1FrE heavy, 'c nsistent smc:<ing." ~' ~ ~+ w , the survey reports would record these "experim 4 g researchers get a better idea of smoking patterns, but ttyx frustrate attempts to get an accurate picture of the extent smoking at any particular time. 9 83M01138 RJM0255s9 U i
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hH0 SMU'Kb'S1 Using labels high school students supplied, a University n of Michigan anthropologist divides high school students i8to two categories: "jocks' an3 "burnouts". ~ d Z r "hhe te_*'ls re.errej to seXes," Penelope Eckert '.r~A. Q in early 1983(49), "and are far br:ader than their re£eren~i t ~~ to sports or drugs would s_yge§~ Jocks and buracut p3s a distinguished by a.+ide variety of traits such as drat O (Burnouts wear bell-bottomed ;eans and rock concert tee shi whereas ~Jocks dress 'preppy'); participation in school acti ..~, ~ _~.es 17bcks do, Burnouts do not)s academic programs (Jo z take ~cc~llege preparatory courses, Burnouts take vocatiojp course5'M drugs (burnouts use them relatively openly, Jocks not); an~ cigarette smoking (3urnouts do, Jocks do not)." J . ,r o q Eckert's description of :!;e high school world is not ~d~F.I~ 4' ~ A from the profiles distinguishing young smokers that have a7b ~ H mained fairly constant since Daniel `iorn's study of Fortlaq}i8 t- z Oregon, high school students in 1958. w, Horn (1) found that smokers weren't involved in ex curricular activities at school,. weren't interested in ?.ursa t their education beyond high school and were low a:ade rftc achievers. _5 83M 91144 kJM02S545
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•T:]IS "Cd:r~ :°;'_=?1r 2 DOth ..3:{05 shewed a small increase in ha_:-;sc:<-a-day use, and fe:r,ales still remain slightly higher -- 14.7 percent vs. 13.1 per- cent. (At less frequent levels of smoking there is a somewhat larger sex difference, since there are more occasional smokers among females than among males." Many viewed the increase in s:r•o:tiing among girls alarm and speculated about the cause. Some buted the increase to chan:,es in social mores, pz. Lcularlyn 4 they related to the participati,Dn of women in society. G saw k4eincrease as a more honest report by girls due to l1A remo of traditional prohibitions of female smoking.(~3~ ~ The commissioned a study to +r~ ACS report said that 734 -tiove ent was not the culprit; -_t smcaOWand non-smoking girls. determine the cause. O 2 attitudes toward the wome~' d~ attitudes were similar I n They laid the observers at i? differences~t& o a rebe~sness, a personality trait that sharply divided th~s ~ v &M 0 two s. '"T profile of the teenage girl smoker counters the F y ia1. g. of the socially ill-at-ease youngster turning to cigarettes~al a means of being thought of as more sophisticated or a~ ~ needed prop for handling social situations. Instead, it is ~h~l y~.7 teenage girl smoker who is at ease socially, very put togethirpz and with full confidence in fierself. Parties and social H gathers are her -etier. Cne measure of both her sophistication la 83M01 147 RJM02Sb48 K
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- -~t` W3r'._. eserlt the Leve; of sr.c<:^g at _^'J p,::r.: .' _...e, they also t the public with an erroneous o[ 'ce!•,avioral change, ,axing under the label true chances in smoking behavior with increases in underreporting."(13) Others have challenged the national consumption rates. "While the reported declines in smoking rates noted 4n ~ (national) studies are encouraging," a group of uinnes4o H ~. researchers reported ia 1932, "w__ s:cgest that these stat~ ~ ~ tics may be invalid beca'.:se of -.:^.eir rei'_ance on self-rep~ls i data." (46) Q y ar~ T~Minnesota researchers could not find a reduction smokinc~~,mong the students they were working with that corx@-d spond ,~ o the decline reported in national studies. T~~ ~~~jjj a~ ~ ~ had expected a change because the community whgj said C?fey ~ working didn't have a"friendly" attitude tow ~as y " smoke~ Ordinances prohibiting smoking in public p.acell f C ~K ; plus q~r anti-smoking measures, had been in place for 44 ~ time. ~ w _ 1(~ they found that "the combined current regular current occasional smoking rates in the Minnesota sample consistently higher than in the (NIE) sample, by fact V ranging from 1.65 to 3.72. ° ra Problems with self reporting were recognized in eaz~yq ~ ~ research. In 1969, a University•of Illinois team spent niaj F 13 83M01142 RJM025543
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:.eVO..t.'. aI 3n(j ..._-_f "...._ 1:1 '-._.. _~70 sL:.;uT..arY ,,. ~^e smoking a:.d health research. (17) The time of experimentation--usually around the age of 12 or 13--is considered critical. Ear.y researchers believed that once a young person crossed the four cigarette threshold, the odds were strong that he would carry cigarette usage i-tf - ~ his adult life. ~ Fy 1.`tl "Ado'-escent experime^=aticn with smoking led to ad•:1 p ~ ~ ~ ~ smoking whether or not the yr.:ng had originally i-,`endef to become smokers." Data collected in the nid-1960's "s`•.ovm ~ 2: ~ , that 85 to 95 percent of _hose who smoked four cigarette1 °~O become regular smokers."(17) t+ ~ itec3nt studies challenge that assumption. Smoking amoni L~ g may be a sometime, on-again and off-again thing. . the youAm -,I TYAhe first longitudinal study of youth smoking behavio ..w .~„~ d among~L4 young people in the nation -- Green's report for th ~ ~ " Nationa2~,Institute of Sduca_ion interviewers locate~ ~ ? a! o m ~ y ouung.people who had been intervie.ed in 1974 and reinterviewedo ~ y them folft years later. Abou•_ 27 ?.ercent of the 1974 smokerl -- those who used one or more cigarettes per day or week ~ had become non-smokers. About 21 percent of the non-smokeri; z y "A comparison of the 1979 current __ smokers .+ith the forra A a ~ smo'ters," Green arote, "seems to '_ndicate that the for-,e l had become smokers.(58) smokers, on the w;ole, may not have been really ccx.*ni tted to smc[ing, but may be more like ex:eria.enters. They started 8 RJM025538 ~ z 83M01137
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an•3- hdr :3.--e S_ , ..='S:A :s =.h ? -___ t 43t ~: , _.._... a:ready had s~xua: relatio^;.' "Compared to teenage girls, teenage boy smokers `:ave changed less than girls in their attitudes, needs and feelings about themselves as far as these relate to smoking. With teenage boys, cigarette smoking goes together with social uneasiness, the need to be popular with the opposite sex, tAe urge to prove one's masculinity. It is an intrinsic part qfS adolescent boy rebellious-ess -- as it always has been." ~~ A later :omparison of male ar•d fem.ale smoking rates a.:.oggQ r~ > high school seniors found that ;ir1s are "overachievers' terms of cigarette smoking. They now are smoking at hich~r~ rates, and more heavily, than would normally have been prq-,, dicted using factors such as grades, truancy and religion.(61) ~ V F „t 8&e SaeiTonment R'~]ro ung person's home environment continues to provi~eo~ O ack a one of.,.fhe best predictors of smoking behavior. Teenage sm~-~ ~ kers a~e' twice as likely as non-smokers to come from ho:n ] where'smoking is accepted behavior. W This relationship has been found to remain constant farl .~ ~ the past 25 years. In his review of the smoking and healri literature in 1971, Williams repor:ed that "Parent'and siblivi ~ smoking habits apparently interact; in the 1970 survey ( z VCSH) the lowest level of smoking -.as found among teenagers E~ 19 V 83M01148 kJM02SS49
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:ie suggested using ot`er ,.,_as.:r_s per.aDs free from such biases to measure the extent of smoking. Who can vou believe? The University of Michigan's Institute for Social Research, which has conducted a study of high school seniqxs ~ every year since 1975, has reported a decline in smoking aa, ~ these people. The rate for those using cigarettes at a~ h dropped from a reported 38 percent in 1975 to less than ~0] percent in 1982. 0 4 More importantly, the Michigan research report sa "daily qigarette use dropped over the same interval from ~~ percenCdU 20 percent and daily use of half-pack-a-day ~ 5 percent between 1977 ~ had fa3~n from 19.4 percent to 13. .,. . ^} ~ ~ 1 ~ +Y..~4 ~ ~^/ YY rr fi^ -- hz l -- NIDA f ' " or exaTp ~ e her national surveys .~Wm ~~~ 81 _ ~ l:: `l'dim ~.~ ~~ shown'S`l~[ilar trends. But these reports may not be telling F Q ~se~ g ;~ O~ ~~ what woft~ink they are. ~ ~ dwyear after Fishbein's report, Dr. Kenneth Warner ~ ~ the Ui%Lersity of Michigan reported that if the U.S. DepaVn~ ~ ment of Agriculture's Economic Research Reports are to believed then Americans aren't telling the truth when asked they smoke. ~ ~ N Warner calculated the number of cigarettes reported smolc~dO in national survey data and compared that a.aount with the CS~A F+ reports of cigarette cons•lmptlon, a measure Fishbein had recor.,:nended. +iarner fou-d a 216 ..illion cigarette gap in 1975. 12 83M01141 HdMO2554z
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research tended to c....`i:m no-^'s economic status may be related. "Socioecononic status and youthful smoking are correlated even when the effects of parental smoking are held constant," a Stanford research group reported (15) . "Young people who do not plan to attend college are more t.`.an twice as likely r o smoke as are their more economically and educationally ad•Ja ~ -~z taged c_._e^,e_boa^d peers." 4Z " ~ Green reported in the lon^,it_dinal study for the V_TE tt~ ~ w . i- O young people who aspired to high_r educational goals, and lat~t m VI went on to college or post high school study, were less _ik(#z to smokb than those who dropped out of high school or did 8t~ contiattCti,their education beyond the 12th grade. there is some noise in the data, perhaps attributa trp ttwwwlf reporting biases mentioned earlier. The quencejl„if smoking in public and the stigma of being a may bav* kept some middle to upper class youngsters truthftfyllanswer to a surveyer's question. !4-a~6plication of Horn's 1968 study had a separate nent in which researchers paid particularly close a subsample of 40 students. They found that attention kbs M 8 the "popul boys, those who didn't fit the traditional description of s kers, kept their cigarette use private to avoid panis.`.-,__ Eckert foind the sa.^ie thing in her study of students Michigan high school. 21 83M01150 HJM02SbS1
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Snbseguect res_,._.. _. _`e ;'st [0 jears Gave :.es;:ed J~t that profile. In 1373, the National Institute of Sju=ation surveyed young people between the ages of 12 and 18 and con- firved many of Horn's conclusions, while adding more. Smokers also were more likely to have jobs after school, come from single-parent homes and, as Horn found, be P e children in a home where smoking is accepted behavior ;:4 ~ parents and older brothers and sisters.(58) 3 ~a Early researchers searched _hese de.mographic profiles B)t answers to the "whys' of outh smoking in addition to the 49 They regularly reported demographic and physiological corre~ ~ tions, with smoking be!=_•.ior, recorded reports of parenp.edt smokifiq behavior and som= __ personality variables. This fi~ rR,tep ~ the youth smoking research provided few definit .-0 ..onsweft;.? if any, about wy y young people smoke, but it estx% P lishe~3,base of information on who smokes. ~ 'Chfb important benefit of these studies,' Leventhal f v 1 ~ F~p Cleary'~rrote, 'is that _^ey provided us with a good deal f' u s~ descrf"•ive information a,~.out the factors associated with ~~ initiation of smoking. racamples of such variables are soc class, use of other drugs, the image of what a 'smoker' is ~~df parental smoking. z ~ "Unfortunately, the studies lacked an adequate conceptsfy3 l base, and thus their contribution to a truly effective scieree of prevention and intervention has been limited.'(17) Ti^.e early picture r_7.ains, nonetheless. 16 kJM029S46 83M01145
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sSioking is reL9te:1 to :hC l;Se Of 3:CT.3::; ;..'.a af..a. ':ar:- :3 other drugs. Por 2Xa.T.r^ie, a"long o1.leC ad7its, 71 ,ercent of current smokers report current alcohol use, in comrarison to 49 percent of non-smokers. Among young adults 43 percent of current smokers report current marijcana use, in comparison to 18 percent of non-smokers. ~ What do we know? ~ We know more about young smo;cers today than when Dan~e& Horn first began questions of teenagers more tnan 25 yefj ago. The characteristics that Horn identified he?ped shQp~ the <earch of the next 10 years. As research technijel becam~Pore sophisticated, so did the profile of the smok~ O J' U ~ some characteristics are difficult.to measure 0 the Mile of the smoker must be viewed against the soci in ws~I ~l}tl he lives. Tamerin attributed the increases in s ing to bias in reporting, nor to the influence of Iht medi; ut to change in society. F~ ~~ere are many signs that change has been occurring, an accelerated pace during the past few years in adoleselnll values, behavioral mores, and attitudes toward adults a I adult institutions," he wrote in 1973 against .the backdf0i of the Vietnam War. "These changes in value and behajo; patterns are in the s:nokers."(9) direction of those characteristics H ,J) 0 v f s ~ 27 HJM0i!5b57 ~ m 83M01156
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3ut an :T.pJrt3't _. _aJ Z_ t'.'e . ,. qster's ow 1 :Ar;.e ,- tion of where he stai..a.s :.'l the :oclal and economic Dec;Cing order. In 1969, Liberman Research, :nc. reported in a study for the American Cancer Society(56) that 'it is status orientation of the teenager himself -- rather than the socio-economic status of his parents -- which is associated with whether the teen- ager has the smoking habi*_." .4e Liberman fo.:nd in i?69 -':at the median age for a smoker's first cigarette was :2.(:6) But the smoking experl-I ence begins long before a yoa::,s*_er takes his first puff. "Chfldren develop attitudes abcit smoking and have iaagas~ of what' 4noking is like well before they try it. These atti-I tndes ~s ee n to be important in the development bsbit,"1'ii}ote Leventhal and Cleary. t" d, very young children are aware of smoking in the enviroAt~t at pre-school and first grade.(36) In a study tobac ~ wareness of youngsters, researchers working in Ha' ScranteW Pa., school found that 25 percent of the children first grade and a preschool class had already tried cigarette a 0 (Researchers warned against ge.n.eralizing from this urban sam?Le~7 ~ The kids also easily recognize3 tcbacco products -- cigaratty~a('s i and cigars -- and paraphe:::alia li'ce pipes. ~ ~ Most researchers in the Eie'<d seem to agree, hcwever, thA the opinions of adolescer s c':_n.ge ".1e:1 they move froa the 5th to the 7th grade. 22 83M 01151 kJM02Sbb2
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who 1ived in househo_is =:e _..ti parents were present, neither smoked, and where there were older siblings, none of whom smoked (4.2 percent.)'(54) in 1979, Green also found a strong relationship between smoking parents and children who smoke. 'Overall, it seems to make little difference which of the parents is the smoker,nif both parents are present in (58) the A;ain, tha igh_st rates of smoking among you::g people found in homes where parents, _nd older brothers and sistIt smoked (20.3 percent). whsther a family is intact Overalk:O, smoking rates are about twice as withodffftoth parents. (58) • "W :4it,,., "W u^- nt k(29) rece ror -•r 8 high in househo ~ t.~. ~ ~ d found household and only one smoke*A e+ p. .~ that young smokers' home 14 don't smoke. F.C1 ~.` "Students who repa~RG¢ p4 is di"41eent from those who 1?ygt•:, curren*cigarette use perceived unsatisfactory parenting prapi " tices;"-'aIe"lack of family harmony and respect and a general of emoti4na1 warmth in the home." Social Class ~ F The early description of young smokers fits the poput notion of the time: a Ja-•nes Dean style rebellious youth,Ua', g c little rough and tough a-d disdainful of the traditional hiI14 M school activities like pep rallies and sock hops. SubsequeA 20 also makes a differen~ ~ z 83M01149 R,TM025550
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h3Y D0 KI:~S SMOKE? Most teenagers believe that smoking is harmful to health. Most say their friends frcwn on heavy smoking and parents and teachers generally discourage yod+g=people-from smoking.i WIrn most states, cigarette smc'<ing ~y children is at least citly illegal. So, why do kids s-.:,,ke? No one knows for sure. "Qur review of the told the Federal Trade "made it abundantly clear that is ~ o ta F DeC G aw smoking literature," Martin Fiskbqin Co.~:mission in his 1977 report ~ V that, at the present time, the~¢ks 0 actually known about the basi ,{pr de`fezminants of) a given smoking decision. relati,j!z_ly little a smoki%~;,area have been unable to develop an empirically Os ~- F ported, systematic theory of smoking that can accountN 4)r _R ~t, that ~ias been conducted, theorists and researchers i Wrpite the enormous amoint of research on sm people's decisions to start, cont:nue, or stop smoking." I S LI Researchers appear to agree on three things: 4 O.1 different factors underlie the different smoking deci I f after Daniel Jorn's first study, the field is relatively wide open. (2) there are a large number of factors, and (3) these ~ tors affect diEferent people differently. In short, 25 F+ 29 83M01158 RJM025559
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soc:ai .,on:..._.,ze 3'] .__dran- e :..3 i~5:y^'-i`y, a.^.Xlet: 3^:d arousal-seeking, correlates.'(15) to be o:der and delinquency and its But Evans and later researchers have restated Wiliiams' earlier warning about the use of personality variables to predict smoking behavior. ~ 'The notion of being able to identify potential smo%ry: ri S N ~. has been an elusive goal for researchers. There are v~~ few investigations re:.sting pe:s--lality variables to tee; ~ smoking. There appears to be some agreement that personal~}E is more related to the amount smoked rather than to w~o w#~4 begin to smoke," Evans wrote. ~~ ~ This observation was confirmed later, in the RAY:S stfp at B~1ey. Researchers reported in November, 19E2, tf~~ .auny ;'of4".the "myths" about the personalities of smokers .1tA wU-4 non-s;pk/rs do not exist or are very future_~,Aoking behavior. "Our smokers and non-smokers w~~ U more S}~te than not in the importance they play on acceptarw~ F and independence from their family and friends," they t,R~ It ported to the American Public Health Association meeting N 11 Kontreal, Canada. In addition, they said, "one of smoking adolescents is that they 3ut, this research found that ~ weak determinants ~ ~ ~ the Z N F+ co„::onn myt` s ab ~ ~ 5 are low in self-esteenC ~ Q n~i _ smokers and non-smokers 3iff?~d5` J F little when measu:ed on a standar3 scale of self-esteem. 25 83M01154 r HJM02SSSS
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.:?'._ __... e:C2:_ _;at at grade 6..ce sh :Et awa: ron ..•~re -eyat.ve a•_t.,._des has started to occur," Canadian researchers wrote in 1981.(27) Evans(14) found in research with Houston school children that the "critical period of susceptibility to social influences to begin smoking is on entering the seventh grade.' n Most national s::rveys of youth smoking behavior are ~ w n S7 signed to record sToking in the early years of junior h students. What they Sa•:=_ .o~. .d is that as you: g peop,e g older, so does their experience ,•ith s:roking. < The 1979 NIE study found that about 3 percent of the °°°qqq~~~~. m to 14-year-old boys -.+ere smokers. Nineteen percent of the 27~ O and 1b-year-olds were srokers. -mong girls, just more that ~ percent of the 12 to 14-year oids were smokers while 26-2 p4Y~ ~ "0' c~nt o!'"°the 17- and 18-year olds smoked. - ~ ,y~y aar:w ~ Race %~z4 ~ rx~ ~ V YerY little data is available on racial or ethnic diff O~ ^~ ~~`F~~` ences"in smoking be`avior. ?reliminary field work for yyy'1jjj~j 1. . V Berkeley anti-smoking project -- Risk and Youth: Smoking( N u, N -- found ~+ little di°fere^ce between the smoking behavior 5V ~ N CO ko a+ wnites ana biacKs. iiowever, a11 out one or tne Cnicano s N N dents had tried s.,:oking and 40 percent of the sth gr ~ lll Chicanos said they c-rrently s^:oked. No Asian students re?orted smoking. 0 v m 23 ~ E3M01152 RJM025553 Ah -.,4 V
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.:1 :?'.;?'d,' _.._. 5_.~r -... .. ..... :3 a`_°_ .. 7'..3C adolescents (those w^:o r, ,t be _...._.ned to smo;ce) d':fer _-n_f slightly, if at all, from those who have effectively avcided the social pressures to smoke." J{fieri;ca% Cancer Society reported, "25 percent use rari;~s$~ regul"O compared to 3 percent of the non-smokers; 81 pe:c~'~s~ ~ of th&;Nokers drink and 32 percent drink at times to get 34f v r U '•il6ng teen-age girls who smoke," the 1976 study for Drugs and Alcohol Youthful cigarette smokers are more likely than no{s- R smokers to use drugs and alcohol. In fact, the fedepag N j.. ~ government has included usage of cigarettes in its st,:i;' ~ drug abuse in the ;;nited States. The association between ~~ two has not been a 2 ri:ary focus of the smo:ting resea2:29 community. Researchers, more often than not, have simil ~ included,_the use of drugs as another characteristic of c~~ arette..apokers. ~ ~ n 0 comparoeto 42 percent of the non-smokers who drink or 4 percoll ~~ who dria,I# to get drunk. ~ ~ .~ to use adult roducts like beer and wine while non-s^o't ~ P r P ~ were more interested in child products like gum and candy.( ~ b The latest data comes from the 1992 survey for the Nat:o. I F Institute on Drug Abuse. The NIDA report states that "cu::ent 26 Lieberman associated drinking with the smokers as j~ ~ another personality characteristic. Smokers were more incli~ ~ 83M01155 RJM025556
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the parents s.M oae, _.,__'_ran are c,,.-- _Lke1y to s-^':-2r ...r.n children who co:•ce fron homes where ;ar=_nts don't s^oke. Daniel Horn found this in his 1958 study of Portland, Oregon, high school students. "In the Portland study," Horn reported in 1960, "we found that first, and most important, is whether or not the parents smoke."(2) n~ Twenty years later, a national survey of youth stcoT[ijg M behavior conducted for the National institute of found the same relaticnship. k E Educ~iLon O ~ "In families where one or both parents smoke," wrote in 1979, "the respondent is more likely to if neither parent smokes. Among boys, parents„ smoke, 13.5 percent oE the sons one papqt smokes, hmmes•where neither 9.1 percent of the ~ 0 > C~e~n smoke ShIn in homes where i4h f Vy~ smoke; and in t~a~s 0 boys smoke; an parent smokes, 5.6 percent of the smoke.^,OComparable percentages 12.7 p„.Ugent, and 6.5 percent, Nq' 1! early for girls are 15.1 perc respectively." research showed some relationship the sex of the child and the sex ,1 * Green reported that, "Overall, it ferences which of of the parent who smote8, seems to make w little ~ a ij- the parents is the smoker, if both pargnts are present in the household and only one smokes."(58) But while the relationship has remained strong, and steady through the years, researchers haven't factors to explain it, 32 H3M025562 83M01161
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".y'.7o.esC•~nts w;lo 5 7 ':K-~ -.3':° .-:e'.ds who smoiCe , ?^'j those who do not smoke a::are^t_y assocl3te with non-smo<ers," Green wrote in 1979. 'That fact has often been cited as evi- dence for the contention that teenagers smoke because of 'peer pressure.' That is probably true when the group that the teenager sees himself as a sember of -- or would like to n be a member of -- embraces a lifestyle that includes smoki~tgw . ~ F as a norm. the t_e•^•ager who identifies wit "Cn _he ot~ er ha^d , group that normally does not e::gage in these activities ~s0 G 9 likely to feel little or no peer pressure to smoke cigarettel.* That is simply confirmation of the often observed phenomen qs~ rY N . ~ that people who have common interests and common goals te&Z to associate with each other.'(58) ;. p=~ o willlams observed that underlying dynamics of s:noki7agge~FFZj ~ - ~ ~ by peas. yroups are not clear. Why do some children choo Qp~ friends wfio do and some choose friends who do not smoke. ~~ o0 is un2ikeIy that individuals who do not smoke become frien~e ~ and then as a group decide to take up smoking; rather it 14 sM 0 ~ more likely that children with similar interests becor& N friends and that smoking is or is not salient among tho z interests."(54) ~ ~ 0 Indeed, other research has showa that smoking is b~ ~ one of the characteristics of a group. In a Min.^•esoCitP H study, iiurd said smoking went a'_ong with curiosity, adven- turous and precocious striving for adulthood.(22) 39 83M01768 HJM02bS69
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Sex Girls are more .ikely to be sr_ckers than boys/, are regular smokers as well as erractic and occasional users of tobacco, according to the NIE survey in 1979 (58). The study found that smoking among boys of all ages has been on the decline since 1974, after remaining steady betwraen 1968 and 1974. The same has not been true for girls. N ~. "Traditionally, smoking has been more prevalent among bjf6 a than zmong girls,' the st_dy said. "In 1968, for axs-ip~ey :t . nearly twice as many boys smoked as girls (14.7 percent ini s 8.4 percent respe:tively). By 1979, the girls has passed gh a boys, with 12.7 percent of the girls and 10.7 percent of Qh boys betliig classified as smokers." p~ RiMybkers, in this study, were people who smoked one aore fp.iWrettes per week or one or more a day.) Iffe overall difference," the report said, "is accoun T~.p.n ~for blar~ne age group, the 17- and 18-year-olds, where 2 - P perceftPP'of the girls smoke compared with 19.3 percent of I~hl boys.' The latest survey of teenage smoking, released by fiIDARiv 0 early 1983, ooes not present data separately for boys and qir~sy But reports on smoking behavior of high school seniors, f ~ ~ the University of Michigan study of youth, indicate there ~m N B ~ been no change in this trend. If anything, more girls ~e H smoking and smoking more ::eavily.(57) 17 83M01146 kJM025547
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v assu*ptions in _`.e ..___, -er . -=-s__re as aa .^s_ _.•ce of smoking tem_ tatica ra:e:y z.:.erZ.; ed. Seldom did teens describe being confrcnted by a gang leader or other dominant individual who insisted that the youngster smeke. 'Rather, scoking temptation and social pressures to smoke appears in far aore subtle contexts. These trends suggesird that the pressure to s:nc'te may originate withil the .....`-;,~ dual, as orposed :o 5e:cg c,an'_fested in blatant ?xte:,$ ~ i forces."i291 ~ ~ > The Berkeley s:_df also cha:ienged another con=cniy !:ff assumption: that s-.'c=_rs are more likely to conform than n~ smokers. Del ;,reco wrote that smokers were conforming ~Qd group eerrs at the expense of their own individual values ~~ U be acc'efted. . ~ ioWthe BerRele: y^roup found that smokers and non-smok ~ j4F ~ are b,oS~confocmists. They simply are conforming to diffzrFQ ~s~ standat~c and values. U 9 ; H p "Ackers are ma_ked by an adherence to independence acp NR, self-defer:niaation in their dea:ings ~.rith parents, yet `~ ~,~ interpersonal beliefs that led them to conform to thAj ~ friends' thoughts and actions. ~ z.7 "Conversely, non-s:nJ<ers believe systems were permea~.°dC 'Ay with a need for autono^y and interpersonal equity. Yet, as ~~ evident throughout their belief structure, non-smokers 4- formed, but for the_n% conformity meant adherence to parent's standards." 41 83M01170 RJM025571
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I;OTT0n,.1;'1C3 in C%aCt ..:J1 for this relationship is ~::certain a.-,d probab:y varies from case to case. It almost certainly includes identification with parents as role models, greater perceived or act.al per- missiveness regarding smoking, and increased opportunity for surreptitious smoking.'(15) ~ Anti-smoking programs developed for junior and se~}~r N ~.n high schools often include a cemponent to deal with parlt&l , influence. But aside from ide:tifying it as a^ . ..:'ue,1i little new n > was writ.ten in the 1970s lntil researchers 4cin c a to compare parental behavior with parental attitudes t&Ad smoking. ~ ~ F 8ocn noted in his early study that 10 percent of~ '._._ boys 1y*a;interviewed smoked despite parental disapproval. e e1testio0..was not pursued by others, perhaps under the assumQt ~~j . r '~ _G .~ ~ that #kftntal actions speak lcuder than parental rrohibit The rQ--.arch community also was more interested in the i[pf~tti ences'.e{i'peers than parents. ~ ~ In early 1983, researchers at Illinois State Cnive wrote, "While an abundance of literature indicates a relatac*- ship between parental smoking and youth smoking, less a44- tion has been directed to the importance of parental atti ~ toward smoking and still less to determining the rel4y importance of these variables'upon youth smoking behavigor:" F (51) 34 83M01163 kJM02bbb4
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!:edla :nfluences Why do young peop:e smoke cigarettes in spite cf their own acceptance of the reports about the hazards of smokingl The most commonly cited answer is that the pressure of parents, peers and the media "override the belief of ado;es- cents that smoking is dangerous."(34) Of these three factors -- and they are the ~ most wideU ^+ F accepted by the research community -- perhaps the le#,K Z understood is the influence of the media. .~ > Researchers have used sophisticated measures and powertj 0 computer techniques in attempts to unlock the secrets of de~ ~ adolescent mind, probing the pervasive influences of a chi'_i F friends~,and his parents. But mainly intuition, not scienti~ evideixa4' supports the inclusiorn of media as one of the -, tfiree:,inP)luences. "llp~re is no solid evidence that 1^ :vrN exerts-,q, direct influence on the adoption of smoking dur adolese:w'{ce," McAlister wrote in 1979. cantlyc cpntribute to peer pressure...by at least support the other factors cigarettes as a sign of autonomy and maturity. "It is hard to believe," McAlister said, advertising does not influence adoption of smoking."(15) In the mid 1970s, tobacco advertis V "But it may signit~ y supporting the use ~~ Evans and his colleagues at the Univei- ~ sity of Houston, were developing an anti-smoking prograa `_or i3 "that ti ~ s , a r r V) 0 k,IMd2S573 83M01172
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of many o_:ers, was dasi7ned _.._ sm.oking in*_erven._on rr~gra^s, rather than pure psychological research. While these studies have added much to the examination of anti-smoking programs for adolescents, they still have not produced a complete understanding of the why of the youth smoking question. "Most research on adolescent smoking,' Chassin and oTers wrote in 1981, "has focused on cross-secticnal s-,okers and r.on-smokers: di-:erences in attitudes, beliefs and ;.aer r_:sti ^shi?s. - W com.•pariso9i R)f personality "Hoae er, because differences between smokers an,d smokers may result from the smoking behavior itself -- is, to. say, once an adolescent begins to smoke, and the newly-acquired status of a smoker may that influence hi ir .her pexceptions and attitudes -- these studies do not pr r•c1edY tinderstanding of smoking initiation.'(39) _. ~ "Zw results of this next phase of research is beginning to make its way into the literature. Already 1# Q ~s has challenged some commonly held notions about the influ~n1pq F' ~ of peets and parents and help expand an understanding of t~(W. 0 For the most part, however, Fiehbein's call for a come understanding is unanswered. Parental Influences H ne of the constants in the youth smoking research js~ a O F strong re'-at'_onshi? between the smoking behavior of parents and that of their ciildren. in homes where one or both of 31 83M01160 RJM02SS61 beha.vf3~r
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A g;_,jp of put t`:e ;.._s=i-i - does advertising sell mor= ci;arettes or shift brands - to students in 28 junior and senior high schools in their state. Rather than compare gross cons:unption figures, a tea..~ from Pennsylvania State University examined teenagers' responses to both anti- aad pro-smoking messages received at school, at ~ home on television or in billboard and magazine advertising.~ W M '~.. They found that promotiona: cigarette advertising did n r appear to exert direct .-f1uen== on t~e adoption oE s.^..okingw during a3olescence.(30) F > A large majority of smokers and non-swokers said bilt* board and magazine advertise.r,ents made others want to s.^..oM F vk though larger percentages (81.1 percent for smokers and 86~4d1 O _ percenQ-:for non-smokers) said the: ads help pe)p1e choor brand~ s., r . 906aking of the influence of the ads on themselves, « ` 2 (50.4 Wcent) of the saokers and fewer than one in sev~Z a 3r (13.6 pRrcent) of the non-smokers said billboard and .,,a3azi$el ads mAde them want to smo)ce. ~ W u ~ The writers, looking partic'.larly at non-smokers, mia~-~{~y rn ~ mized the impact of the ads, but warned: "Promotional smokii0gp t advertisements on billboards or in magazines are very effec*_ille in depicting smoking as enjoyab:e or pleasant to teenager~y,~ and teenage smokers' desires to' s,oke is reinforced by the~M F advertisements.' 47 RJM025577 83M01176
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Earvard . ..:ers:ty's Sc~JO1 :: r_.,_._ ..]a:t'1 3e':e.or27 and put sophisticated rrogra`s schcol c_assrooms in t`:e late 1970s. Their fir.dings a.nd results were published at about the same time that Leventhal and Cleary were completing their survey and all of the later data may not have been available to the critics. What all would agree on is that just as there is fio ~ single identifiable cause of youth smoking, neither is thel~ ~ r;. a single program that has prodnced conclusiv e evidence :6 i;$ effectiveness. w e ~ Along their path of investigation, they learned m4i G 6 about young smokers and about scme methods that at least h4d2 some promise of success. But the building process is contirmtAg. Early Programs 8 ~ P}i#4 the 1964 Surgeon General's report as their stands a:~ ~~ t~fe early^ anti-smoking programs used a logical approach, de~d Q ing witlt youthful smoking on an intellectual level. The the was that~if the facts were presented, young people faced w ow possible serious illnesses in later life would refrain f~ smoking. The target audience was primarily senior high sch~1a N a+ ' students. ~ F C ~ By the late 1960s it was clear this approach did not woa Teenage smoking increased and the health warnings about smoki appeared to have had little effect. ~ d "It would appear that the remote theme which e.:~phasiz the long-term disease effects of cigarette smoking holds 53 83M01182 kJM025583
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The reszarch of :~e :3s_ .._ _ars has p:_;j.ed a waa:_h of ideas and hypotheses. A ycc-ysters' age, home environment, status with his peers, ;ersonality and involvement with drugs have been proposed as reasons. A young person's involvement with and standing in schooL, his after-school activities -- whether he works or plays sports -- make a difference. A .~ teenager's ability to deal with the trials of growing~ It , be coping with adolescent rressures `igure into the equation. ~ z ., ~ay feel a.xioss a^.9 inad equate a^d snok +a~ "Some mental activities with a close friend, and smoking o achieve social acceptince and be part of the gang," Leve4~t(~1 ~a and Cleary wrote. "Others may share a wide variety of ex*4- may s~aY one of the experiaental and risk-taking actions. `T1wse two sets of factors, defining the self as `.N --- ~ t0d ceeking social approval, are not likely to exhaust~ a~ attiti4gO that make up the preparatory stage (to s:noking)." c -~ F,~pm this garden of choices researchers have p1 ,..~ threet-4tasons that encompass most of the social and Iix#e F influonces that have been found c.ost relevant: the preso4s . N ~ of parents, peers and media. described as cigarette company also include television and the movies. Richard Evans quently cited The media is most ~iren N advertising, but some stA~6s z the appearance of cigarette smoking actor in of the Univer;ity of Houston is most ~ rE - F as the one smoking and health research to iden- tify these three do-.inant factors. But Evans' work, and that 30 h 83M01159 RJM0Z5S60
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'4ho's re~ ;q 1 o.:nted? Adolescence is a stage of hu.,,an development. Youth is a relative term. So who should be included in a measure of "youth" smoking? Furthermore, on the question of saa,pling, what can regional or local studies of smoking behavior tell us about national habits? It's hard to say. r~ "It is parti-u:ar:y Toossib:e to provide an une;iivoc~1n estimate of the percent of smo'Kers in the United States~ S k O Dr. Nartin Fishbein reported in his 1977 study for the stalfd of t` e?ederal Trade Co:,uniss ion (_ TC) . 6latfonal surveys not only have used a variety of defi4-u .(,• tionsYrtdk, categorize smokers, but they have .. Wpapulat.~ns for their sa.^iples. The results ,aYrikNE'g^differences. {y=075 study for the American Cancer reporEe3\that 29 percent of the nation's youth used differeb ~ sometimes .e-Gf O m just a year earlier, a NCSH survey of young people reportftd~; i that ottlJ 16 percent "smoked". One major difference was 52 5 The :ICSH used a much tighter deEinition of smoker. But anot ~ factor confounded the comparison even more. The ACS st H surveyed teenagers ages 13 to 17. The NCSH surveyed yo g~ people between the ages of 12 and L8. ~ I Researchers consider age a critical factor in the inder- standing of youth smokir.g. Accurate reports of =c.oking a:nong 10 What happened? the description of a smokdR.!' 83M01 139 kdM02SS40
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a5 tSFref::e s-- a:-ei, st._: .:. .dt .he i~ea of r_~.,,.^.g tobacco cons,sption by bann ing advertising has becom e widespread.' Warnberg examined the smoking experience in countries where advertising isn't permitted and found, as others did after him, that consumption continued to climb without it. n ~ 'To s.imroarize, there is no evidence to support the vi;ej~ N r that a ban on advertising would have a positive effect ~g O smoking habits. No e-.pirical resea:oh has been able to sQ S~ +t . that aggregate brand ad•:ertising lea3s to greater to~a~ G tobacc6011consttmptiont Nor has anything been found to suggFis~ that ~ajlyertising entices non-smokers, young people in ppr,ea , ~ 8 0 (66 9/tudy by Waterson for The Advertising Association conf~i Warnberg's cOSaTtents. Waterson examined consumpt~o~ ~ in de*Aries w';,ere advertising ba.n.s have been imposed Italy~dorway and Poland -- and found that consumption cInle a tinuAl~lo climb. Waterson also quoted Levitt and Kaplan, ~b3RI 1 ~ ` F y N ~ said)~4W their 1977 report on the effects of the televistok advertising ban, that advertising is one of the least signilil cant factors in youth smoking initiation. F z on The 1979 Surgeon General's report review of "N.ass Ne1i~ and Smoking' said, "As the cigarette industry has assert~d~ ZS the major action of cigarette 'adcertising now see.-es to belt ~ shift brand preferences, to alter market shares for a par- ~ a ticular brand.' ~ 46 kJM025576 83M01175
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N IN-SCHOOL SMOKING titi7 H°_ALTH PROGRA.MS Anti-smoking education programs in the public schools have come a long way from the moralizing sermons, threats jjf - +t m dire consequences and sure punishment that teachers orr~e- -~ t heaped upon their students. Tc-day, the 'teacher' could eas~.~ be another student, perhaps even an older teenager, an uncdal E ~ ventionAM and adventurous sort, who has been recruited Ob adult prZ~gram leaders to help younger students build defen~ ~ againsrEhe social pressures to smoke, or use drugs and alcohQi ~ Instmerely counseling students on, smoking, the sessi ~(Bia raight lude a healthy dose of advice on how to cope vitt~ W O ~ e'ifficulties of growing up ran . g of the old preachy programs inspired by the Christia Temperance Union may still exist. But a publi~at on of the National Cancer ferent lternatives to serve as Institute lists models for teachers, 9 O ~ home ~ rec l U administrators and others who work with young people. these don't exhaust the possibilities. The extent and number of the smoking and health progr is difficult to quantify. :!any ongoing research proje include training and education components. Private, n bn- profit groups like the American Cancer Society contribute 51 83M01180 RJM02SS(ii Q d~ w
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them a.d?eD sense of pro.hibi:iCn ?'•,a., in many cases, s"1.iCin..J was forbidden in the household. The experimental smoker feels neither the tight constraints of the strong anti-smoking family ethic of many non-smokers nor the perceived permissive- ness of many regular smokers, but instead falls somewhere in between.'(39) But, while this study found that parental attitudeS.^ ~id behavior ao play a part, family dynamics as a whole may nt~e as big a factor of the smoking de:ision for young m peopie at flias once thought to be the case.. w5en the California resear~~rs compared- smokers and non-smokers on 28 family items in t pI tr questionnaire, current smoking involvement accounted fort~I~~ss ~ W a then SJpercent of the variance. That ..Vf is, things other~*n ano)cingclwere influencing the young people's answers .-.ah ti~estionnaire. ~,. to the RA"arch by Chassin(38) produced similar findings. behaVOih11 intentions of young people -- their plans to -- d•rd n't show a strong or consistent relationship to parHal or sibEeng smoking stat.:s. One conclusion, they wrote, was parental influences are independent of other contrib~tIng factors. Acceptance of smoking in a home may sanction a person's own smoking, but the inclination for smoking from something else. A strong influence is one's peers. 36 w 1 g HJM02b566 83M01165
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Oorn r^~orte3 i2) _Lat w.'.3t 3?2.m 3 .^n~or`,.a.^.t :5 t'.13t smoking is accepted by the family as a normal and expected form of behavior. As such, smoking by the younger mem5ers of the family is part of growing up.' in addition, when family members smoke, cigarettes are already in the home and avail- able to young experimenters. Children don't have to runmthe risk of embarrassment or censure in parchasing their f*ryt~t cigarettes. In addition, role -odeling `_s early ad,plescence, Leventh,3-1, and Cleary tory $;*I~e strongest in the and before, and these are the reported, that are part of the of smoking, the time before a youngster takes first ~ but when his opinions about smoking are devel 4-17) =81 report on research among first graders and 4 schooad ound that, "Rnowing someone (usually a F q = parent) 14 smoke^garettes is significantly related to the smoke ~ This effect -was especially strong childt~ ldt~But, wrote Williams in his 1971 review ture, "Whether the relationship between a behavior and that of his family reflect mere for 12 8 child's smR{g availabi':it if cigarettes, modeling behavior, or even more complex an tification process, is not altogether explained . evidence."(54) 33 R,1 Me2S56 3 0 U . .. 83M01 162
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the ::ocstorn sc~~ol;. -,e p:o;:a-: .=s _`-si;ned to students before they n s:r:ck :^g by helping the.m 5:i1d defenses against the pressures to smoke cigarettes. In his preliminary fieldwork, Evans identified peer pressure, paren- tal pressure and media influence as the major factors affecting the youth smoking decision. Evans' source for these three factors was a small sa::.p~ of young people, school teachers and principals. It fs n14 -~ z ;is known exactly how lar3e a sample they used because Eva ~ describes the group di?ferently in three major research papeasa > published in the academic and scientific literature. o~+ In his first paper, Evans said the pretest sample w "175 school children and teachers in grades five throu$~hQ seven.•(20) In a subsequent paper published two years 1ate F ^ he said the preliminary field work involved "in-depth intei-~ q 4 aiews ~rfth a sample of 130 school children and their teache~s ~ and pciacipals."(14) A third description appeared three yeags,M later, near the conclusion of his study, when Evans said t~~ ~ O preliainary work involved "in-depth interviews with a sampQe~ t• ci of 120 seventh-grade students.'(341 ~ _ Despite this modest, and confusing evidence, Evans isl largely responsible for media influences being listed as o[tez of the top three factors of youth smoking in the resear~lhg H literature of the past six years. Prior to his report, t ea . ~ influence of the media was seldom considered and when it .ap, researchers reported it as a minor factor in smoking init:ation. 44 It 83M01 173 RJM02S574
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he_vi'_y in :ime and. ,.cey. fi.:t, .., :B9J, the feders. 3 .:_.,,- ment spent $10 r,illion to extend ki9-t,c-kid programs developed in Texas and California across the country. Two years earlier, one review of the program in schools around the nation mentioned more than 100.(17) Evans said literally thousands of programs exist.(57) "The programs are varied,' Leventhal and Cleary sai~, 'The most limited might include lectures by the school pria:g-s n cipal or a physician and posters displayed about the schoo~.z ~ More intensive programs add threat films, teacher particip~~? > tion (e.g. introducing material on smoking into science 4de' a~ hygiene classes) and student participation (e.g. planning et ~ munication content, poster construction, anti-smoking ess ~y 6~~ and group discussion)."(17) ~ _- U Ltaenthal and.Cleary said these programs have met w some Limited success, increasing anti-smoking attitudes fo time,"'but •it is conceivable that prevention programs merat ~ delay„the onset of smoking rather than actually reduce 4 proportion of youngsters who become smokers.' [0• y They said that while the studies and experimental aniOfewi smoking programs have added some understanding of the yoitl 4 n e, smoking problem, contributing some descriptive tactors, N N W have not dealt with the motivations to smoke. ~ ~ Others would dispute this view. Researchers such as x H N . ~ A Richard Evans of the University of Houston, Gilbert Sotvir~ of Cornell University's Medical College and Alfred McAlister of ~ U 52 ~ s 83M01181 HJMOESSB2
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concerned with 1^..')C'J'ia;.e a reGe3;csl te3J !r= _~'.e K University of Illinois con_1u'.ed in 1957.(7) In addition, not only did they have the wrong message, but perhaps the wrong au.iience. Instead of beginning with high school students, a third or more of whom already smoked, these researchers said the eight grade was the critical time. ~ Later work dropped the age even lower to grades four to six ~ u Research in the late 1960 and 1970s into adolescent 5e'.1a-k vior also was beginning to show that information alone was rs~ ~ sufficient to change behavior. h'•,i.e it could influence a"_ tudes, a behavioral change was byound the reach. a~ 'To teach a non-behavior (.^.on-smoKing),' the I11inU l study concluded, 'in the presence of models of the be`sav~ •_ (smoking) is a difficult task, especially when there is µ, ~ ppssi•Ciil•Sty that the behavior may be satisfying underly~ ~ .:-A W2 $ 6 psych" ical needs. is it practical to discourage a behav$V Ya ~ that 2t~y serve a purpose that is not fully understood? Un~ ~~ it ib>.Y#own why people s^oke, there is limited potential `,'.~rl H trying to stop this behavior.' N The decade following Daniel Born's signal study Z)j 00 n teenage smoking, which led to the opening efforts to redirAt ~ +- L N ~ the anti-smoking prograa in the schools ended on a sour not ~ ~ ~ ~ A Turning Point z In the early 1970s a group of doctors and others ~n< o Eouston were fighting tooth decay. Kore specifically, Dr. v 54 ;;, 83M01183 8jM0zb5B4
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?eer :nfluer.ce One of the most reliable predictors of a young person's smoking behavior -- even stronger a relationship than parental behavior -- is whether he associates with other young people who smoke. The 1979 NIE survey found that a..~ong smokers, "An overwhelming majority (87.6 percent of boys, 94 percent of ~ girls) indicated that at least one of their four best frnrs N ~. was a regular smoker, while only '_0.2 percent of the --b& s and 5.9 percent of the girls ind`cated that none of r 15 > four best friends smoked regilar:y. ~~ C .~. '!jn-smokers showed exactly the opposite reaccion."(581 ~ St~ng, consistent data such as this persuaded resevf ~- .1/ r >S ers shift attention away from parents to t5e concl that r pressure is an even greater factor in the siaokz ecision. Reasons given for smoking by young pIF .. gness to conform, go along or enhance their posM socia~ -- reinforced the survey results. ddition, other research has shown that peer prefsge ~a- is s~est in early adolescence when most smoking e4 ~ mentation occurs. ~ ~ n Despite "sparse' social science research into just and how much, peer pressure impinges upon teenagers(64), ife researchers cast which conformity these findings into a simple equatio~ and peer pressure conbine to lead y~ ng F l,eople into smoking. "One can .,onclude that adolescents 37 kJM0a!BS6i 0 ~ s a J 7 . 83M01166
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been I ...'. oC._6'.e1.0 rer,7.[ea t0:?: s-J,K:^.y =as2. :at°_s _'an those :ho had not been a part of the proyra^. Evans used a sequence of short videotapes, with young people as actors, that taught students how to deal with friends who ur;ed them to smoke, or parents who smoke and cigarette company advertisements that he said encouraged youthful smoking. Posters used in the program read: 'You don't have F-o - ~ smoke ;ust because your friends do. YoU can resist peoe pressure.' A.^.other dealing with a parent who smokes revflQ < ? 'Even if your parents saoke you don't have to imitate th*-; YOU can decide for yourself.' The Marlboro advertisement rmit m +~ a target with the coaboy figure shown offering a cigarette ~~ O a passing student. The caption read: 'Cigarette ads ar@. ~ rip-offl YOU can resist media pressure to smoke.• ~~ - F ~ Q -h- Tba program also included discussion groups, feedbtl ~ fK bessfdns'"and monitoring of students smoking behavior. Evg~A 0 ~ wanted~tp measure five thi:.gs: smoking information, smokFfbf attitnde'S, intention to smoke, reported smoking behavior an~ i V clinical test of smoking. lk basic principle of Evans project was that previous w had failed because traditional messages did not 'acq ua children with the social pressures h o H to smoke to which they & exposed and how they can cope with these pressures.' ~j ~ Others had begun to experiment with this new approa& M.cAlister's project, called CLASP (Counseling Leadership A.blat v 0 Smoking ?ressures) , was part of the Stanford University 8eart a f 56 83M01185 kJM025586
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Disease Prevention Pr~;r3r.. McA::s_er .^a:ied the r.,,1s_on w=;k 'one of the greatest adva.nces in research on the prevention of smoking' but said the program was flawed because it used video- taped messages rather than real people working with students. (15) McAlister recruited older young people -- and this was an important distinction. They were not young n people who usual$y u 9 were identified as "leaders.' They didn't belong to the hon z society, captain of the football team or otherwise qualify &ee the traditional leadership sca)es. They were, McAlister saiFa j those judged most attractive to the kind of young people smoke: 'Fonzie or Mod Squad types who are adventurous unconventional but Kc8lister(20) balf. Ft footnote not unhealthy in their behavior.• ~i " ~Ct reported cutting smoking onset rates 14 to the program;~ researchers said they trouble getting junior high teachers to accept the leaders chosen to direct the discussion groups. Dustng this same time, Sotvin took Evans' analysis the smoking problem a step further. 'The acquisition of smoking habit appears to be the result of both social 61N psychological factors. Psy.;hological factors such as Jp*. self-esteem, an external focus of control, H z and lack of sa11 W confidence have been associated with adolescent behavior.'(23) Botvin's Life Skills Training (LST) approach smokc~ ~ attempted,`to equip students with skills to resist direct pressures to smoke 57 3 ~ a s RJMOabSB7 83M01186
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The effect of the i-ar,e or __cestyies' a~:ert'sin.; ts the object of the one current research project examining the media phenomenon. Two UCLA Cancer Center researchers, Wong- McCarthy and Gritz, have propcsed that young people associate with the desirable characteristics displayed in ads and subse- quently want to smoke to adopt that image. n 'By any measure,' the two wrote in 1982,(47) "cigarette w Km advertising is an undeniably cor%-)on potential source of info~-F z mation and influence in the lives of Aymerican teenagers. Th+; are reasons for suspecting that cigarette advertising wo+~9- e m influence teenagers to adopt the smoking habit. One reason :5s, °'. ~ that theme advertising, while ostensibly peopled by adult (ov~r~ O 25 years old) models, often portrays its models as engaged lts~ activities and dressed in clothes that are_suitable only a adolescents. .; J "becOndly, the sheer ubiquitousness of cigarette adve;-Q ~ tisina =- in macazines. in newspapers, in sports actually Q a N magazines (TimeA,~ ao 0 f billboard; displays -- encourages the teenager to think b$ O smoking as a more popular habit than it arenas and Ls." The two supported their conclusions with a casual exa,rya-D cn nation of advertising content of nine popular Sports Illustrated, Popular Science, Glamour were the only ones the proportion Psychology Today, ~ W t identified). They reported th~t~ a G of "cigarette ads to all ads ranged from a lTjw~ of 7.2 percent for G1a-,our to a high of 29.1 percent r Psychology Today.' 48 0 ., 8 g 83M 01177 HJM02bS7B
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Today, it str'12_."::e3 e3:5 _~~..:onaD~<E ...._.^al iliportAncC' of the P3:?:1_... ._.9r" -ney wrote in the of School Health. Their findings indicated, however, that •parental atti- tudes may be more important' than parental behavior in deter- mining whether young people smoke. They found that if parents who smoked forbade or discouraged their children from sac*ing, ~ their children were less likely to smoke than smoking ?a~65ts F who didn't express disapproval. "'ihat is surprising is the observation that behavior increases dimension than the rate doubled while at a greater rate across the behavior dimensio.^.. The smoking holding the parental attitude Howeves, the youth smoking behavior is held constant." 'Ae impact of parents on the social ^thei~;~ildren, along with their own behaviors may ben'rtiore significant than we ; , YS ..CEber research supports environme~ 4 and formerly believed." the findings of the reseacth group. Parentai influences were researckers at the University of California's of Science. "This pervasive influence of behavior is reflected in yet examinet mby Lawrence ~F~ 11 ;; parental srt*idng v F of our idria: another aspect parental prohibitions against smoking minant of cigarette usage. are an important 4- "The smokers in our sample saw their parents tolerant of their smoking, while the non-smokers carried with 35 H,1 M02S56 g 83M01164
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should be the Lost s s e; '_' :e oezaise `_`at is the tiz: w.`•ei conformity to peer norms is the strongest. They found generally that social image was related to intentions to sWoke, bu*t the findings were ambivalent. But, they wrote, 'for the early adolescents, especially girls, the intentions were pri:*.arily related to more negatVe -~a aspects of the social image of s,oking.• Models were ptt? ~ ceived as less healthy, less 1i'<ely to do well in school a~as~ < w less desirable as friends ?:nong t:-:is predo-inantly Widd:e cltsf ~- o group of school children, which s•.1ggests a major question~C the effects of media advertising on the young. Usearchers have reported consistently that young peo~le. who smbltt do not subscribe ~ aost ten portrayed ~ Ahenr-AW they receive are U as thit Ibject TWe is no answer yet. I p O Q y M!~F Vi ~ V y C N y n V 50 of the to the middle and upper class val~ea U in media advertising. What messa~eg~ ~ from the pcpular 'lifestyles' poses t< !!l;G333~ current UCLA Cancer Center research. 83M01179 RJM029S80
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The .lO:is"_i: 3::=~!: , d.: ;. . h s, .:.Ca_ ,,.._ e Styles Training p:oyra= ~e':e::;ted G=.ne:1 University, is na avenue of possibility for the ind.:s=ry to advance the research at the same time educate young people about smoking. It would at least be a relatively neutral ground from which to open a dialogue and contribute to the continuing study of this issue. 66 83M01195 RJM029b96
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~c~<ert I o-nd t:^,at _'°:°_`_te 5'.J(1^.^y 'w•as 3'k°V S}M:.oi" that set groups apart in the :!:.:n:yan high schOo: where she researched teenage behavior. 'The symbolic value of smoking is apparent to even the most casual observer: dramatic crav- ing gestures frequently serve as greetings, and exchange of cigarettes is an i:nportant gesture of solidarity. Sharing ~ s a common way of soliiify'_ag ties within social groups art& R Burnouts (the label :,ive1 by t>?ns for the smoking gro a Y7 __^o 3G3 co?LTodlties s1ch as ~:a't6'ie share a var iet'y of :cSse_ : f~ r clothing, and informati.,n, with an intensity that Jocks (1VE C ~ c non-smokers) do not ehow. ~ ; "Cigarette sharing is partic'ularly intense, and quently''purely symbolic: cigarettes are often given but O~ ~ .. v F ~ omoke3'tintil later."(48)' ~ ~ ,:. 4KiW situations are varied and different and research v~ have AqE investigated all the combinations that might 1ead~ a~ p~4 ~ ~y .': ~~0 ` youngrpeYson to smoke. 0 TnYmany ways, the current interest in research is a reb~d~n to an.•n8servation made more than 10 years ago by Levitt t peer group status supports smoking, but it does not necessa initiate it.(6) His conclusions contradicted some of the p minent research of the tis,e, but work at the University H California's Lawrence ;ia11 of Science on the Berkeley ca-: tends to support his '_nitial findings. ~ In a study of 800 yo':ng people, aged 10 to 15 years, the California research `_e^ `o.:nd that 'contrary to working :P d 83M 01169 kJM025570
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Ric!:ard Evans, his ...__^a; a~. st _ ts, we:_ 3:'e=;;" . .,., develop an effective pro;ram of oral 1::3ie;.e when they ;,w,an to shift the social-psychological approach used in one health problem to smoking behavior a^.on.g young people. From their previous work, they had recorded certain conclusions from their work and others in the smoking field: * Use an effective pers_ader. In spite of a concerted ca*paig% F developed from the 1954 Sur,^e. n^e.n ;eneral's report, _eenag~ = ~ smoking increased. 0 ~ * Sm,*ing and health progr3_-ns were reaching young peopl~ ~ ~ too late ih their smoking career, if they were developing onekQ ~ Most ai#fc~tive smoking, they said, began before high schoolo I not afand to be effective a program should begin in th~ Q sedent~ade. ~ * i-smoking messages fell trap. MWvious efforts had smokirVwt n of fear -- warning of dire consequences -- was nott, into focnsed on Ca ~ a 'time perspectiv4 P I pF long-term effects cs3 o~ O young people were more aEfe~ted by smoking. •present-oriented• and could 4 ~C ~ ~ O the im.vediate physiological consequences CR m ~ a N F. 'innoculatin(A ~ ao * Social psychologist's approach, aimed at teenagers against the pro-smokir.g messages from 12 8 W peers, paren z ~ N and the media also was needed. Adolescents could be to recognize and cope with social The Houston project scored pressures to s;r.oke. initial successes. first report on the program, Evans said young people ~ train ~ -3 R y In hA who had ' 0 ~ 55 83M01184 kJMea!5g85 ~ ..
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:~e rC't1J._ C:~ Ce'~__s.._7 da:a tJ s25t how many a3oLe5Cents tal have seen t.`;e 345. The Audit 2':rea'1 of Research, readership standard for the publications ind'ustry, does not report adolescent readership for these magazines. As a result, there is no way to measure how many young people saw the ads in Psychology Today, the very upscale book -- economi- ~ ca11y and intellectually -- that led the sample. Again the argu.ment' was based more on intuition than ,Rrg N ~..I hard evidence. +;o data has been reported from the UCLA Carc~ ~ . S c t w Center a.d~vertising Stu3y. q ? Another group has probed the same question, though fro Qag different perspective. The results may have implicati~s~ toward an understanding of adolescents and image building. F ~ •If adolescent smokers are generally perceived ;sS U W ~ sophislicated, attractive and socially successful (the kinQ ~ o~ istaqes portrayed in cigarette advertising),' Bart ~o~I Chassin>and Presson wrote recently(40), 'then adolescents ~~+h ~ begin Ea smoke in order to attain these characteristics in the~`'own eyes and the eyes of their peers.' ?he authors hypothesized that a young person's bc$tt~ v F y intenti~A to smoke might be measured by how he responds to peer 2 q u, modq'gsl N ~ ~ ~ in smoking and non-smoking situations. Children who rated T'~~ , A various pictures and poses in a favorable way would be N q A U y F+ likely to smoke, they reasoned. DDp 0 ~ H 49 83M01178 KJM0tb979
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t-_--•-- f:om pee:s an_4 ot`.2rs, e,.~ to :aase st___.,_s' s='=e; to indirect pressures 3e•:=_'_ap greater a_`_ono_:, self-esteem and self-confidence. The program also helped stu- dents cope with anxiety, particularly that brought on by social situations. The program material included information about smoking, aids to improving self image, com,•cunication skills trainiT, , assertiveness training and social skills. It also inciuded; O component on advertising techniques. :i a m Botvin reported success, but not consistent across ~rE ~ . grades. While the LST program appeared to be effective w eight~ graders -- where none of the non-smokers report~~ smoking -- it was least effective among tenth graders. o ~ ant. Botvin moderated his initial success in a su5sequ1~t6 ~j ~ _.,,1purnh''article. In a followup study, he found thata jLfteruAMMW initial 'treatment' many students who initially abstaftid now were smoking, at least experimentally. 'M.this trend were to continue it is likely that ~ yQt 6'O~ ~l ~ O O ~n 0 expertnrental group would eventually catch up to the cont~,bl ~. groupq in terms of both occasional and regular smoking. Th~5 ~ v' ' N while the LST program appear"s to have a significant a 'A impt~N °D 0 N on smoking behavior, this impact seems to be one of inerP delaying the onset of cigarette smoking ratner tnan ventin9 it entirely ' Botvin wrote.(42) G Thirty-three months after the initial CLASP progr~, s a 5.1 percent of the students in the treatment group reported N a y 83M01187 RJMe2ssaa
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- °~~e wrl:er8 _..______. -.__2 _..3.1 5.'r0 _? pressure or rar_..:a! __La .od=___ , _s _n...-.•ed.• As Eckert found in her year :n the Michigan high sohcol, for young people who smoke, cigarettes are currency for coping, in this case, with "fundamental development tasks, while those who resist may be involved in a more well-balanced personal and interpersonal maturation process.' ~ But the California'research group asked, what then cauO ~ z some young people to sTio<°_ and others to resist the-te^ptati '`- E ~ a They found three factors _.^•at d:___ ng.:ishei their st::Cy grJO75 , r o ~ The first was a beiief by smc:ters that smoking hellet w thAm 1':v.* through the awkwardness of adolescence. rlso, ~ younqL.*bkers believed more than non-smokers that cigaretH gave JEft an air of sophistication, maturity and indeoenden W ~; belpe~iake them a more exciting person, and offered relaxalie ed, they wrote, these factors "are the most powerjUI 0 ~ _ ' ~r aAP31i ~ F a P ~~ discators of smoking behavior that we have uncovertff o r "Cl~ accoy^g together for al.nost one third of the variatior.s 9 ~o U . 0 1 actuaoking intentions."(39) ~ other two dominant factors involved information ab~tsI the risks of cigarette smoking and a tendency among s.mokersaf~t§ A "deny facts about the hazards of smoking and personal resp~z sibility for one's actions.' ~ j N ~ These two factors deal with images, information and mel. ~ messages, the third major influence as identified by Evans.F 42 V RJM02Sb72 83M01171
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3.SJ did not enter ir,to any of the three predictor sets,' E'.:g_ce Levitt wrote of this 1969 study of youth smoking. 'Ttiis is i.^n accord with the report by Le.2in that the brands of cigarettes smoked by British adolescents were unrelated to the frequency, duration, or number of homes reached by television coc^,mercials for the various brands. It sugyests that elimination of teI?- vision cigarette cor-nercials wo'i1d not materially a_'fgx e youthful smoking behavior.' Levitt attributed smo:King '_n'_tiacion by young people .5:f other factors -- peer and parental influences his conclusions soon became movedfrdm the broadcast . Whi'!e the m, !~e ,'.as u;a!*rtaken moot when F 0 mostly -- ~(9 °Ca cigarette co,-,-nerci s~0 to the print media after 1971. ~~ literature indicates that little solid reseal8fle during the early 1970s, the issue -edverftAng did not wane with the passing of $a 10 of cigaref televisiooiC ~ ~. F Q ~' largeylX,-%commercial client. The impact of advertising tinuea Vb be a very topical subject with the issue st `S-'y large4y unexamined. 4 'Iis easy to understand why tobacco advertising ~ ~ become a topic of major interest,' Warnberg told the 3rd .r'o ~¢` Conference on Smoking and Health in 1975. "It is the m~~ striking component in marketing efforts. One com.ron conc sion is that people smoked more than ~ they otherwise would,~ they can hardly avoid coming in contact with advertising <. I 45 RJM0z9S7b 83M01174
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who smoke are ^o;e l%_•^.er3b•_e to ;eer ,-e_;5'.re an•. )lave a higher level of confortii=y than non-s-.cking peers," accord- ing to Del Greco's report on the literature.(28) In 1979, McAlister(15) wrote: 'The power of peer influ- ences and conformity to pressure among early adolescents is , :J pretext of pressure to smoke appears tr be ~e- related to the way that smoking functions as a sign of W well known. The pendence from a3u1t w F" aa!;ority and of maturity. A you+ger a who ref::ses an offer of a .t m cigarette may be ca11e, a'cn:®iCQl' f~ ? and may even risk being excluded ship makes it safe to venture into F 0 £rc.n a gang in which c~e~bfr- ~ urban streets after darkI "The young person who accepts an offer of not oe2y gains greater acceptance from smoking also tRe appearance of being more 'tough,' 'coo1,' M &1td a&v"turous than his or her non-smoking peers." ~ftJ the questions may not be so clearcut. 4W{.~Z the ,19RiQ Surgeon General's report, wrote, "Peer widely''~--assumed to be a significant causal factor tiatsoa-.W of smoking. The strong influence of peer §r&p pressure is generally evident in young adolescents,' bui 1he ,, added, "the precise relationship of such pressure to~ e initiation of smoking is more difficult to establish." ~ H Therein lies the rub. As they found in probi:J re elements of parental influence, researchers so far Onave been unsuccessful in determining exactly how peer pressure affects an individ.:ai and the smoking decision. 38 kJM025568 v O V : 83M01167
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weekly sT~king v,_1e :4.9 r-~ ::•z-.t .: t`,cse .., t`.e _-.-•-- group reported weekly smoking. 6.:t researchers coc_d I ct say conclusively what led to the results. The social environment may have changed, as a result of the program, reducing peer pressure; there may have been a shift in general acceptance of smoking or the skills learned in the program may have produced the change. Evans and his colleagues reported qualified after three years of work. The full treatment group the lowest percentage of sxokers, but the differences not dram.tic. While these three projects have received the most tion in the academic literature and in the daily are a pumber of others »5l B°erke2~}, and a long study Wfiere Upiversity including the RAY:S of smoking behavior F i in Minneapot. of Minnesota researchers found no beneEit¢+'dn the use of . :N led progtams.(33) -N peer-led discussion groups over adu One of the latest r3, Chicago that involved parents. Using techniques and taki~ry some direction from the Evans and Botvin Qodels, the prog~„ ~ I" activities stress peer, family and advertising pressures have students to evaluate personal needs, values and feelin Parents received non-smoking materials, sent home e week with their children, that focused on the dangers Fof smoking and suggested ways to stop and at least cut down. "It 59 reports is of a school program Lig 8$M01188 kJM023589
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was inte.^.ded t`:af Che `arf iy a: _ _:-e st •dea: pro;:a s be mutually rein£orcing.'(52) This work concluded that family involvement 'appears necessary to affect students' attitades and, subsequently, their behaviors.• Overall, progress has been slow. M In a review of in-school programs, Evans said 'unforti-, n = nately the vast majority of such p:ograj.s are subject to (thj)z methodological shortcomings ... ;artic,:larly those related the adequacy of the research design and the availability ~f~ the dnplbentation necessary for even the most rudime.^.ta~ee y~ ,:. 03 evalugt n. ~, v !"'!~ appears that in school smoking prevention program~,~ ~~ the w ee is regularly reinvented, so to speak.' ~ ~ _ .~IF O \ F w V7 - = N AM OD %o ~ ~ < ~ 60 RJM0Z559m 15 M 83M01189
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~ .:... 9c;_?, influence, may be ?ne of the least :`::.ant factors. advertising may shape attitcaes, creati.^.g a-n attractive it doesn't move children to buy cigarettes. e ' The smoking experience is an on-again, off-again experiment. Researchers once believed that four cigarettes was the threshold, which when crossed meant a dependence on cigarettes. Later work indicates that the initiation ~ smoking may take two years or more before an occasional ot F experimental smoker beco_es a reg.lar smoker. -~ z ~ • While literally hu^3reds cf smoking and health pro,^raW < m are uncimMay in the nation's schools, most lack for:al evalo&-d ;~,, ~~ tion t~ ddtennine their effectiveness. Moreover, the in-schoflF to campas'Vfw~ to prevent young people from smoking is uncoordir,at~d~d and s met mes fruitless, merely delaying the onset of smok 25 years of research have confirmed some common~y~ 9 held npt3ons about smoking and dashed others. Many mo~e F Q ~ ~- C remaid~ be examined. Meanwhile, the research community sp ~ ~s turnipq re and more toward a holistic approach to smok g ~ ` O y - preve~tior. After all, smoking is just one item on an adole~ Q u ra cent' - enda. Drugs, use of alcohol, meeting the "rigI •: 7 girl, meeting expectations of parents and peers on any nunb~rF ~ of issues enter into the smoking equation. Rather than coE. centrate solely on smoking, some health programs deal with phases of adolescent development, attempting to help people over the rough spots of growing up. 64 y HjM02bS94 83M01193
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cosplete that gr34~er .D ;e=.,....t !"e s';.SL.^,q. St "eas: experimentally. * More girls smoke than boys, particularly at the experi- mental and occasional smoker stage, but some s-,spect that this may be more a reflection of society's acceptance of smoking of women. Girls may not have admitted smoking in the late 1960s suggested sexual promiscuity. .; m N t. * Soc:oeconcaic factors appear to play a role in a yo, Z e6 person's use of cigarettes; kids from broken 5on=_s, who h~vC : lower educational aspirations or who don't fit the 'popul~rt ¢ a mold in'school are more likely to smoke at an early age. ~(u a chiLd's socioeconomic orientation -- if he thinks his fut~gri when smoking among girls carried social consequences is sueti`sssful and full of promise -- rather than his backgrRnd may count more heavily in the equation. Air-Farental smoking behavior is a factor, but •, I reseu ~ indicates that parental attitudes toward UPhnd -m ~ hum~l~ ~ F C1 ~ smoking ~ag ~ count°0`&r more. In this case works -- prohibitions smokinr-- may count for more than actions. •.The influence of one's peers may support a young who has already taken his first puff, but it does not sarily initiate the first cigarette. A one of several 'key symbols" that distinguish the group. ~ C+ could also be the cut of their clothes, their taste in mus;c, O agai sj ~ 0 O 9 smo~eO necisl is m rG likely to find a smoking crowd in which cigarettes may be ~ y speech or other behavior patterns. 63 83M01192 young person kJM02b993 v c s J
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k"3 RE ARE WE `70W? After 25 years of study, researchers in the area of smoking and health say that the best single predictor of whether a young person will smoke is the answer to t~e question: "Do you intend to s=oke?' - w « X ~ , r ~ The simplicity of the q.:estion, perhaps obvious to aiY parent of an a..olescent, belies the complexity of ti:e issa~.~ ees While researchers may be able to target the young person w~o~ w answers 'Yes,' as 'high risk' in the smoking equation, th@y5 0 still don't know why. T::e factors that go question are varied. Y4ys,.are1 all of ~ueE tratioq,, within -, s them T`,ey affect into the s^oki91 different people differesto The confusion, and fru?t- are not known. the academic and scientific community may ;et a P akin t6"%omeone tasting a cake for the first time and '.A9t attemQtir to pick through the crumbs to identify z:. ingredients. Today, in the United States, we are experiencing thtg ~ G J t pep F ~~ tp z I tr, lowest rate of smoking among young people recorded in the laj two decades. The youth smoking issue has moved in and out the national spotlight, largely because of the e.-:otion politics associated with it, and.some claim that the atte::ti4 ~ devoted to anti-smokirg programs developed in the last decade play a part in the decline. sl HJM02SS91 83M01190
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CbST%BUDCIT: (PB Budget) Total $ $19,620 Facility/Recruiting $10,120 ModeratinR/Report S 9,000 + $500 CONCURRENCE: MarketinR Development Initials DAte N. S. Kaufman _ J. D. Weber E. J. Fackelman G~> SICNF.D DISTRIBUTION LIST: Mr. L. W. Hall, Jr. Ms. L. R. Kimmer Ms, K. S. Roser tIDIC NSK/djm 6/22/83 Brand Mnrketing Initials Date B. C. Dewey H. M. Sheridan S. A. M:icKlnnon =-sC-- ~Ylc~ ,--- C TI 7 v 0 N RM0003048 P N u'
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R:F'REti_" SS 1. Horn D, 'Cigarette Smoking Among High School Students,' A.oerican Journal of Public Health 49 (11) ; 1497-1511; 1959. 2. Horn D, 'Patterns of Tee^a;e Smoking,' Public Health News, 201-207, June 1960. ~ 3. Salber, FJ, et. al., •Reasons for Sxcking Given „~$~ Secondary School C:~ildren,' Journal of Health and Euf`ia2 Behavior 3, 118-129; 1962. 4. Zayona SV, Zurcher LA; 'An A.nalysis of Some ?sychosoc~a~ Variables Associated with 5-.:kiag Behavior in a Co110g6 Samp1e,' Psychological Repo:cs, 17, 967-972, 1965. o~ 5. Salber, PJ, Abelin T; "Smc't'^g Behavior of Newton Sc~o% Children -- 5-Year Fol:cwup,' Pediatrics, 40(3), 363- ~2~, Se te ber 1967 p m . 6. Levitt EE, Edwards JA; 'A Mu:tivariate Study of Correla Factors in Youthful Cigarette Smoking,'. Developme Psychology 2(1), 5-11, 1969. 1. Creswell WH, et. al., 'University of Illinois Anti-Smo Edvcation Study,' Illinois Journal of Education 60 27s37, March 1969. 8. Levitt, EE, 'Reasons for SccKing and Not Smoking Give School Children,' Journal of School Health 41 102 11 101-105, February 1971. F H 9. Tamerin, JS, 'Recent Increase in Adolescent Cigar Smoking,' Archives of General Psychiatry, 28, 116- ~ January 1973. H 52 10. Evans RI, 'Smoking in Children: Developing a So Psychological Strategy of Deterrence,' Preven Medicine,' 5, 122-127, 1976. h 11. harner KE, 'The Effects of the Anti-Smoking Car,paigt~ ~ Cigarette Consumption,' A:,erican Journal of Puffi1 645-650 1977 ~ 5 ' 67(7) Jul lth , . y ea , , 67 F 83M01196 HJM02bS97
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_ ....~ dence that has been or:,w_reJ so far. At the sa=e ti°e that the government has been involved in anajor anti-smoking cam- paign among young people, the nation as a whole has undergone a new awakening on health. In fact, some of the anti-smoking programs are components of much larger health education and awareness progrars. Also, public attitudes concerning smoking have changed since the early 1960s when half of adult AmeriSh W smoked. Today, only about a third do. So why have the trend lines in youth smoking continued to show a decline? No nne knows for sure. ha: n F -3 Z behav id2z•~ r~ > Some researche:s balieve that the trends may be tb,ev~ m result of inderreporting and misreporting of smoking behavio~.~ The research field is cluttered with surveys of smoking behag-~ O A i f bl f i ° sampl or that are not compatible because o pro ems o n§, ®aasurement and reliability. Reports of higher and high ~ cigarette,.:consuzri.ption .°rom the U.S. Department of Agricultuki do not jibe with smoking frequency reports from governmeF ~ p U health agencies. The downward trend may, indeed, have led M false assumptions abouft youthful smoking. Fj f~ N {d y Y But within the constraints and limitations of tQe;~ ~ ~ ~ research, this is what we think we know about youth smoking:4 z ' The anti-smoking ca.•r,paigns have succeeded to the exte -a E that young people enter the seventh grade believing t;t~tw ?S G ~ smoking is dangerous to their health. But at the time they w N N a 62 m 83M01191 RjMm25592
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CONFIDENTiAL DRAFTJ STRATEGIC RESEARCH -REPGRT .1.7,. _1984 Y.a YOUNGER ADULT STRATEGIES U n ~ AND OPPORTUNITIES ~ ~ 0 y« G ~ ~ LAINTIFFS EXHIBIT a u' N w W a N ~ ~ By Diane S. Burrovs a0 PUBLISHED BY THE MARKETING DEVELOPMENT DEPARTMENT R.J. REYNOLDS TOBACCO COMPANY, WINSTON-SALEM, N.C. 27102 CX-846 IUR7 Fenn )7" - 10,/tl RM0000899 v' 0 r J m CONFIDENTIAL W { l±.i:' . J
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66. wa`_erson ?4.J, 'Adc°_rt:5_.lg 1'.J C:gs:e:te CCns Stldy for The n..vertisiny ns<~.::atio~, 1981. 67. 'Smoking Programs for Youth,' Office of Cancer Coma.,nica- tions, National Cancer Institute, December 1979. 68. Borland BL, Rudolph JP; 'Relative Effects of Low Socio- Economic Status, Parental Smoking and Poor Scholastic Performance on Smoking Pso.^.g Bigh School Students,' Social Science and Medicine, 9, 27-30, 1975. 69. Bachman JG, Johnston LD, O'Malley; 'S:oking, Drinking and Drug Use Among American 9igh School Students: Correlates and Trends, 1975-1979,' aerican Jourr.al of Public Bea1tl~ 71(10, 59-69, January 1981. ,; 9 73 83M01202 I FAA RJM025603 U N al V1 M
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24. 3;a:_veit C, e^_ iat cn ar.d ze=tr:c_ :e !1-as,ces,' Ca-.a'-.an ,curnsl -. . 25. Pubiic kiea:th, '2, 4D6-4i0, =e:_c p r 1901. Farquhar JW, Ha,^nus PF, Hacc:)by N; 'The Role of Public Information and Education in Cigarette Smoking Controls,' Canadian Journal of Public Health, 72, 412-420, December 1981. 26. Williamson JA, Campbell LPt 'Evaluating the Effectiveness of a.n Anti-Smoking Program,' Journal of School Health, 51(3), 146-147, March 1981. 27. n Pederson LL, Stennett RG, Lefcoe NM; "The Effects of §4 Smoking Education Program on the Behavior, Knowledge aryli4 Attitudes of Children in Grades 4 and 6,' Journal of Dr~tg r E3',ication, 11(2), 141-149, 1981. j b 28. Del Greco L. 'Assertion Training to Prevent AdoleSCe `t a Cigarette Smoking,' World Smoking and Hea:_h, 6(2~,5 Su=er 1981. ~ 0. 29. D'Onofrio CN, et. al., 'Exploring the Dynamics of Adoleg-~ : cent Smoking Behavior: Preliminary Research Findings a~i~ Initial Anti-Smoking Curriculum Development Efforts 9fJ the Risk and Youth: Smoking Project,' Based on two pape~ ~ presented at the 109th Annuai Meeting of the American Pub1~ E<ealth Association, Los Angeies, Calif., November 1981.0 ~ 34, Monismith SW, et. a1., 'Opinions of Seventh. to Twel€1h 31. GeadRrs Regarding the Effectiveness of Pro- and Anti-Smoki MV sages, 'Journal of Drug Education, 11(3), 213-225, 1F G2aver ED, Christen AG, Henderson AH; "Just A Pin~ttg Betxeen The Cheek & Gum,' Journal of School Health, 51(6~1,~ U 415-417, August 1981. C o 32. oFF.. y Pederson LL, Baskerville JC, Lefcoe NM; "Change in Smokfpg - Siatus among School-age Youth: Impact of a Smoking-Awarene~s~ Curriculu.~o,Attitudes,Rnowledgeand Environmental Factors '~ ]merican Journal of Public Health, 71(12) , 1401-140l,g December 1981. !2 33. Arkin RH, et. al., 'The Minnesota Smoking Preventi~aa N N N Program: A Seventh-Grade Health Curriculum_Supplement " 00 _ Journal of School Health, 51(9), 611-616, November 1981 ~ ~ 34. Evans RI, et. al., 'Social Modeling Films to Deter Smoki N m in Aiolescents: Results of a Three-Year Field Investigg- ~ tion,' Jc.:rnal of Applied Psychology, 66(4), 499-414, 1181. 69 83M01198 J RJMd2bS99 0
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?5• _^---- STAti_. A? e- s__-. _: _ .._--.- ac_ _...r_ ... tee^a;e boys ar.d y: .. r-o ..:ka? It a;_:ears so. ]_ _s are scmeti^es .-_nsi~:ard pro...is:nous and ---'n a:;n~a is they smoke. so;s, wanw`.-1e, are ;cst :o:-g w)at toys have always done. Haw 3oes t';is difference shape s=xing and health programs? How does it figure into the dif- ferent rates of smoking reported by teenagers? Companion story to number 9, Teenage Girls: Smoking More? v W 81 83M01210 HjMOZSb 11
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T`:e researoh ,is i~ _^,e ear-. .-_rs ar.d _:-.ere :s s-' _L much to be done. The infLaences of peers, parer.ts, and possibly the media, don't compete the dossier of youth smoking. The results are still tentative and some theories about smoking are often supported by more intuition them em?irical research. The family unit remains a strong influence on childrgn T_ despite shifts in the last 10 to 15 years to challenges fr,q~ M •,wl outside the home. In fact, much cf what is being re:ealed Iy4 0 W the research is what a good conscientious parent would know iis they are close to their children. A footnote. The voice of the tobacco industry in discussion of youth smoking is non-existent. In fact, miscoaceytions about the industry's position on smoking, jWrpose"of cigarette advertising and the general 14,~ie la8ustry abound. While the i unfounded fear tactics -- once T discuis•iag the consequences of portrayed in frightful ways. The be coacerned only about profits, tising to lure nicotine. < 4 interests~ research come!unity part of the smoking, the fare eschee -- P a ~ industry ~ y~p tobacco industry is said $4 not young smokers into a r~ health, ar,d uses adv~ q 7 a life of dependence F Z ~ The industry's message that smoking is an adult p'ursul and that advertising is designed to persuade smokers to t~yp one brand over another, does.not reach the average 12-year-cid or teenager. 65 83M01194 k1M025595
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AP?E\DI:( A STORY IDEA.S The following list of story ideas is, for the most part, suited more for the print than the broadcast media. The n stories vary in length and some may be combined to form -~a;a N ~. series on a particular aspect of youth s:eoking. Soae wi)ztz take more research than others, b.:t almost all of '_`em wi14a i;t> re;uire personality and individual experiences to make thV~ O e. readable and interesting. The research literature should fp1 used as a skeleton to be fleshed out with the character aM F k personality of real people. ~ ~ ' 0 _ THa~:teport on youth smoking.touches on aTmost all of sebjects mentioned. The few that are not covered in t~ A 1 report-m --~ the Swedish experience, for example -- are report~ in the,•cesearch literature and available for use as back~~ ~v ' materir3. O ~ F 1. ARE SMOKI"7G RATES D°CLiNING? A review of the methodolt-W gical problems of accurately recording smoking behavio a The report should include an update of the estimates ra in the late 1970s. These estimates indicated a larglrt'i gap between cigarette consumption as reported by the U.A8 Department of Agriculture and cigarette use as reporto Z in national surveys. N 2. THE BASHFUL SMOKER. Perhaps a sidebar to number 1. `A~a adolescents and adults more reluctant today to ad.9it 4 they smoke7 This may be a' factor in the underrepor*_i6~ of smoking behavior, but it may also say something aba¢k the growing, social Stigma of smoking. The probie.w also confounds adolescent smoking research becaase it appears the •pop::lar" kids in school hide their use of cigarettes. 74 83M01203 RJM025604 f'
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3. SWITCHING OPPORTUNITY Young.•r adults are more likely to switch brands than any other smoker group, i.e., they are a concentrated switching target. Their very high ~ propensity to also switch styles within their brand suggests the latent t ti 1 9 hi h 9 b d i0 1.i o sw c n z p en a or even g er rates o ran g. remain loyal) can also contribute the major portion of their aging benefits, including increased usage, to their second brand. Thus, switching by smokers 18-24 can yield a significant part, but not all, of the share advantages associated with a +~7'flrst brand". Older switchers confer less, or none, of these benefits. •-PROBABILIT Y OF SWITCHING IN 6 MO. BRAND FAM ILY STYLE IN BRAND X I NDEX F INDEX 18-24 16.6% 126 21.5% 178 25-34 13.4 102 12.8 106 35-49 12.1 92 10.4 86 50+ 13.2 100 1:.1 92 TOTAL 13.2 100 12.1 100 Source: NFO, 1981-1983 (first half) . Younger adult brand switchers (who then ~0i ~tP ( , ' S'si, ? , ' ~ P . RM0000905 QZ~'~+A1CN~' SF S0 ~~ y So ~,...~ ks a~lta.~oar. 4 out~oos ;k•.oa ~"S 0. (QR.o _ _ . L~ -6- u ~~. CONFIDENt1Al U1 N 1, CD ~ N OW W
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!; ( tF (, ~ ~ n ~,t~lill February 17, 1984 TO: A. R. J. M. J. D. Curry Harden Weber FROM: R. C. Nordine SVBJECT: YOl1NCER ADULT WORX SESSION 1 In Monday's metting to discuss younger adult smokers, I would like to get your thought+ an the analysis we have been working on. More generally, I as interested In what you think it takes to lmprove RJR's perforaance in this group. I have attached the first draft of our analysis. It is based on a fairly stmple approech. First the historical development of successful younger adult brends 1s traced to help determine general factors that contributed to that succtss. These same factors are then considered in today's environment to generate potentlal strategies we can use to laprove RJR's performance among younger adults. gecause of the lmportance of this subject, we have not tried to avoid controversy -- at least not in the first draft. We would like your tnput based on pravfous research you have done, existing plans to address younger adult seWers, and your opinions. We need to identify points thatneed to be clarified, areas where qualitative research can lend further aupport,and conclustons ve may have overlooked. We would also like to know if you disagree with something. Finally, and most importantly, we vant your thoughts nn implicatt.ns -- recommendations on how to improve RJR's perfor.ance !n this group. Sorry ue uere nnable to get this to you esrller. Thanks in advance for your help. dU, c ird L"Rbrdfoq MarketlneDelopment Department RCN;df AtlArhront cc: F.. J. Farkc)man D. S. Furrovs PLAII T[7F'F'S EXpEiIB1T CX-848 84M00376
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12.- 13. Warner KB, '?ossible Increases in the Underreporting of Cigarette Consumption,' Journal of the American Satistical Association, 73, 314-318, June 1978. 14. Evans RI, et. a1.; 'Deterring the Onset of Smoking in Children: Rnovledge of ImW-ediate Physiological Effects and Coping with Peer Pressure, Media Pressure, and Paren- tal Modeling,' Journal of Applied Social Psychology, 9(2), 126-135, 1978. ~ ~ 15. McAlister AL, Perry C. Maccoby NM; 'Adolescent Smoki¢g E Onset and Prevention,' Pediatrics, 64(4), 650-658, Ap,ib 1979. a b 16. Kovar MG, 'Some Indicators of Health-Related Behav o Among Adolescents in the Jnited States,' Public Hea Reports, 94(2), 109-118, AIri1 1979. Q~ 17. Leventhal H, Cleary PD; 'The Smoking Problem: A RevL+~ Pis~)cr L, 'T`:ese Stade..ts ;,es'.gn .:,eir O•,a ~y L]uC3'_iOn ? rDgra.'_3 ,• ?+IIer,.L.l .,..^,g As3oc:atio;l B'lI letin, 63(5) , 2 - 6 , J~ne 1977. v of the Research and Theory in Behavioral Risk Modifi tioa,• Psychological Bulletin, 88(2), 370-405, 1980. 0 V ~L ~ 18. DtpOPA, et. al., •What encourages and discourages child~ r arac r s a in , en , i-e en e ics ...~ y a to gmoke? Knowledge about health hazards and recommen a tlens for health education,' New Zealand Medical Journ~l~ q 92;'.432-435 June 1980. 19 M lk' SA A11 DL 'D' f° l Ch i t' ti t 70 fsealth, (7), 19- 21, July 9. y J G~i 21. Perry C, et. al., 'Modifying Smoking Behavior of Teenage sa A School-Based Intervention,' American Journal of Pubyij Health, 70(7), 722-725, July 1980. ~ F 0 22. Hurd PD, et. al., 'Prevention of Cigarette Smoking it Seventh Grade Students,' Journal of Behavioral Medici e~ 3(1), 15-27, 1980. ~ y H 23. Botvin GJ, Eng A, Williaa.s CL; 'Preventing the Onset~o~ Cigarette Smoking through Life Skills Training,' Prevan- tive Medicine, 9(1), 135-143, January 1980. ~' r tice, 10(3), 43 - 0, . ~ 7 44 9 ~~a 20. McAlister AA, et.al., 'Pilot Study of Smoking, Alc ol aRf Drug Abuse Prevention,' American Journal of Pub@il 7 7 1 80 `" 80 ~ P a~ ' 1 Ad2J`lescent Smokers and Non-S~nokers ' Journal of P~~MtC H 63 83M01197 RJM025598
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45. bery ~tF,. _... s ^e . D f ieenage ;gs:_tt? _._ c=:> :a a ismokin; Catpa Journal of Cor~_ur.i_a:icns, 3;1), 76-E35, .L932. 46. Mittelmark MB, et. al.; 'Cigarette Smoking Among A:o1es- cents: Is the Rate Deciining?' Preventive Medicine, 11, 708-712, 1982. 47. Wo,^.g-McCarthy WJ, Gritz ER; 'Preventing Regular Teenage Cigarette Smoking," Pediatric Annals, 11(8), 683-639, August 1982. 48. Luepker RV, et. al., 'Prevention of Cigarette Smok4: TSree-Year Follow-Up of an Education Program for Youth;'ta Journal of Behavioral Medi_ine, 6(1), 53-62, 1983. ~ r 49. Eckert P, 'Beyond the Sta_istics of Adolescent S-okin Aaa:ican Journal of Public aealth, 73, 439-44'_, April g~l 3 > 50. Warner RE; 'An ounce of prevention, a pound of pro_otio Medical Journal of Austra:ia, 1(5), 207-210, March 19834 a zs 51. Nolte AE, Smith BJ, 0'Ro~rke T: 'The Relative Is.1orta'a of Parental Attitudes and Behavior Upon Youth Smokical ~ Behavior,' Journal of School Health, 53(4), April 1983. x 52. Sunseri AJ, et. a1., "Reading, Demographic, Social Psychological Factors Related to Pre-Adoles:ent Smok' Cd sa& Non-Smoking Behaviors and Attitudes,' Journal ~ Q School Health, 53(4), 257-263, April 1983. 53. Q.S: Department of Health and Human Services, 'Stud ~~ Drug Use, Attitudes and Beliefs, National Trends, 19 p 1982,' National Institute of Drug Abuse, Public Hea tt ~ a Service, Alcohol, Drug Abuse, and Mental Se Is ABministration. 1982. F ~ 54. William '1"4, "Su,=ary and Implication of Review of Litealture Relating to Adolescent Smoking," U.S. Department~ ~' Health, Education and Welfare, Health Services and Men Health Administration, Center for Disease Contrcl, Natior{~ Clearinghouse for Smo;cing and 'dealth, SeptembEr 1971. z~s a Z 55. Johnston LD, Eachman JG, O'Kalley PM; 'Studer,t Drug in America, 1975-1981,' National institute on Drug Abusal U.S. Department of Health and Human Services, PubM Health Service, Alcohol, Drug Abuse a.nd Mental He ta~ Administration, 1981. 12 F 71 kJM02S601 83M01200
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30 . NOV-:,i,':R.S13 G-T.'E=.;.:~.ti. _ --'S .- raise :3=.K the Swedish .7"1t1'SnDkL'q yeroy:i--, .`rom the tra'.n:n3 q iven expectant :others to in.prOgr3.:.s. Is this procran working a.^d what are the results so far? Can it work in the United States? 31. THE vUMSERS GAkQ. A 1980 survey for the Federal Trade Comr•,ission reported that more education on smoking and health is needed becaase adults and young people didn't 'accurately• report the extent of the hazards of smoking. Who arrived at the estimates used to measure the extent of the smoking health hazard and how did they cone up with the estimates of smoKing effects on lung cancef, heart disease and other ailments? Where did Daniel HolnW come up with the 300,000 figure of smoking fatalities o1F the 1960s and why is it still use9 as a measure of t z problev today? rR 32. CGMPA.3E. Compare various reports on the extent ®fs smoking? You can't. Why? 3eca.:se researchers usel-a0 variety of ineas.ires, sa=.rle com?osition and methodologj.a Why isn't there a cor.lmon measure of smoking after 25V years of research? How can we believe the nar.bers? 33. 3$NCBMARR. what do we know now'and what do we not kno~4w0~V abcqt the smoking experiences of young people? Some IR the "prominent researchers in the field should be willi j ~e t.~:jralk about the state of the research, where we've co F '~ f,m.q and where we're going. Some consider the resear ""' to still be in the formative stages, according to tDe '"l rk's'ftrch community's time clock. How much longer, a h/syomany more dollars, will be needed to develop a su fa6,jrent body of knowledge from which to make decisions? 34. HIS2tRY. Cigarette smoking among the young is a va 2ad!'n act and it always has been. Some of the o1(% literature on the cigarette smoking boy paints a fright-y ful picture of youth on the road to ruination and crimal Pro'1`. Harold Hill, in the popular musical "The Mus C°'-' Man,• sold a town on the idea of buying a band th~y couldn't afford images of boys led astray by puffing ot~' ~ cigarette. How has the youth smoking image figured in~o~ h d h l i t l i l ~ Amer e pe ape t can cu ture and, n arge par , s e present-day research? Smoking is an obvious act, that may say something more than .+e understood then, Dr now, about how young people think. 90 83M01209 RJM025610
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esteem, 1a.er work s~::,'w3 ::o ~:~-_°:unCe '.:th .. -smoi(e:6. $Olo•[ers are c311e'j cc~.•lforfll:sts, Z:_ non-smJiCe:s also m3y be conformists, only confor4:ng to a different standard. Smokers are said to be socially unsophisticated, awkward and dependent on cigarettes to pull then through when social graces fail. That may no longer be true. Smokers tend to come from lower class homes, but perhaps class orientation is the determining factor. Just who is today's young smoker? 15. PARENTS. What parents say may be more important than what they do. Researchers have largely ignored the influences of pa:ental attitudes and concentrated g~ parental behavior. Yet, recent research indicates th~k parents who saoke can influence their children not tio N 77 kJM025607 83M01206 74 This is corollary to t;e cext story. ~2 smoke. Parents also have the opportunity to shape a define the c.^.i1d's world to effect the smoking decisio 16. FMILIES. What do young people expect from their pare:l&p tobM# 1 Besides meeting the needs of survival, agel pareQts doing all they can or should do to help thekrv children today? The emphasis has shifted back to e~ fa4i~l.y unit, after a decade of independent attitud 6~e Are parents prepared to help when they are needed or erd l7. abrogating their responsibilities to teache ,~ 1 counselors or thei.r -children's friends and peer~ ~ --E• PRESSURE. The old notion of a child being ch ~ d into coughing down his first cigarette by membei$ favorite group is about to pass. It is more 1ik ~ smoking is just one of many things a group may eA ~ stablish its identity. What is the range of p Q ure today, and how does it operate in the smok ~ ion. Companion piece to number 4. i' 18. THE,,FIRST PUFF. The story can be written from the pKa siwtive of the scientific research or as a featu te " with the writer drawing on his own or experiences others to describe the feelings and evotions of the fi~ cigarette. Research indicates that boys and gi experiment differently with cigarettes. Girls are mW8 likely to be inside, perhaps with a friend, while b~t , N are more likely to be outside, usually with someone eJ ~ along. Have things changed so much when kids sneake 00 cigarette out of the house and carefully lit up beh~ the tool shed? 4 n~i r m %o
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MARKETING DEVELOPMEh'i PROPOSAL (MDD i83-'NII1I ) _ No. -U-.1._3y-4-vA- Dcddssirica!i-n _ TITLE: YOUNGER ADULT SMOKERS FOCUS GROUPS III BACKGROUND: Philip Morris's upward share trend is largely attributable to its strength among younger adult smokers. It has captured 54% of the 18-24 year old market primarily due to Marlboro (36x), Merit (6X) and Virginia Slims (6X). Contrary to this, R. J. Reynolds is underdeveloped in this segment, competing with 24 share point -- nine belonging to SALEM. , In an effort to make inroads into this key area, extensive qualitative testinRi was conducted in Paramus, New Jersey, Austin, Texas and Denver, Colorado to ~ better understand younger adult smokers as people, consumers and as smokers. ' Based on this research, NPI developed specific new brand ideas targeted at this group. This proposal requests the necessary funds to qualitatively test -zr these ideas among consumers. _ m a Additionally, Executive Management has requested that the Project Planning _~ Team pursue more information relating to clove ciRarettes. Hence, consumer r- familiarity and attitudes toward such products will also be explored In these E * groups. 5 OBJECTIVES: More specifically, the primary objective of this research is to: O p ~ ~. 9 • Evaluate several new brand ideas to determine which onea offer strongest T c ur er I concep[ re nement. ~ i METHODOLOGY: - Six focus group sessions will be conducted in Long Island, New York on July ~ 11-13. Each group will consist of ten respondents, representing a random r selection of brands. Sample composition is as follows: - appeal and to provide dire tion for f th fi CrouP 1 Group 2 Group 3 Group 4 Male Kale Female Female College H. S. College H. S. 18-21 18-20 18-21 18-20 TIMINC/RESPONSIBI LITIF.S: Recruiting Moderating Socrates Nicholas Topline FiDm Fin:l Report Socrates Nicholas CX-838 RM0003047 Group 5 Group 6 nun i N Mixed Mixed ~ College -H. 8; coi;Cc~e ,Q 18-21 18-20 N a July '.1-13 July 18 September 5
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35. C)r.r et. .._. , __ 33. _ _.e Sn=king a:.! Sct:oe_-hiidren . Fa-t3rs As3~~_iated with Smoki.^~g,' national Jour^,al of Sri3e~:o:.yy, :0(3), 223-231, 1991. 36. Shute RE, St. Pierre nFP, Lubell EG; "Smoking Awareness and Practices of Urban Pre-School and First Grade Children,' Journal of School Health, 51(5), 347-351, Hay 1981. 37. Luepker RV, et. al., 'Saliva Thiocyanate: A Chemical Indicator of Cigarette Smoking in Adolescents," A-•erican Journal of Public Eealth, 719(12), 1320-1324, December 1981. ~ 38. Chassin L, et. al, 'Predicting Adolescents' Intentions Wx r Smoke Cigarettes,' Jo,urnal of Health and Social Senavioa,Z 22(4), 445-455, Dece=y r 1961. <.) t m 39. Covington MV, et. al., 'Exploring the Dyna.•nics of Ado1e8--, cent Smoking Behavior: The inception of a Theory-Jrive ,p Research-Based Prevention Progran,' Paper presented at t~el annual meeting of the American Public Health Associatio~,~ Montreal, Canada, t:ovexber 1982. D'Onofrio CN, et. al., "The Prevention of Cigare4e;+ Smoking Among Young Adolescentso An Empirically-Bas5c>~ Anti-Smoking Curriculu.'a,' Paper presented at the ann ]A meeting of the American Public Health Associatio~,j Cj Montreal, Canada, tiove:nber 1982. 4 46. Barton E., Chassin L., Presson CG; 'Social Image Fact44 ~ a!°Motivators of Smoking Initiation in Early and MidcUea ~' ~ Jkdolescence,' Child Development, 1499-1511, December 1%176 41. Telch MJ, et. al., 'Long-Term Follow-Up of a Pilot Proj~gi V oa:• Smoking Prevention with Adolescentsr" Journal Behavioral Medicine, 5(1), 1-8, 1982. F+~ ~ o 42. Botvin GJ, Eng A; 'The Efficacy of a Hulticomooh I~n Approach to the Prevention of Cigarette Smoking,' Prev:= tive Medicine, 11, 199-211, 1982. ~~ n~i !J ' 4~ 43. Chapman S, Fitzgerald B; 'Brand Preference and Advertis ¢ ~ Recall in Adolescent Saokers: Some Implications for Hea~ h: Ir. Promotion,' American Journal of Public Health, 72(!D< N 491-494, May 1982. ~ v N a 44. New:r.an IM, Martin GL; •The role of attitudes and s.ciki norms in adolescent cigarette smoking,' New Zeala~d Medi:al Journal, 95, 618-621, 1982. 70 . 83M01199 HJM02b600
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- E"r:M;:. L A~: 2. MARKET SHARE -- THE "FIRST BRAND' ADVANTAGE D. LONC-TERM DIVIDENDS -- RATE PER DAY (Cont.) Thus, the 18-year-olds who were worth 1.6 points of smoker share in 1983 were worth only 1.4 points of market share, since their consump- tion was below average (index of 85). However, by ages 35-49 they will be worth 1.8 points of SOM -- a 30% dividend on their original market share value..-7his consumption increase is the difference between having smokers 35-49 and having smokers who will age to 35-49. E. EXTENDED BRAND LIFE CYCLE The combination of brand loyalty, aging, and increasing usage tend to provide "life insurance" for brands which skew, or have skewed, younger adult. For example, we have seen that Marlboro relies heavily on 18-year-olds for its share growth. But if from 1984 on no 1g ear-olds ever smoked Marlboro a ain a in could let Harlboro ol its mar et share or five more years. The left si e of the ta le below shows Marlboro's current smoker share by age group and what those shares would be in 1988 if Marlboro got no more 18-year-olds and merely moved smokers to older age brackets. On the right side of the table, the ' smoker shares are translated to market share, by factoring in rale per day. The bottvm line shows it is possible Marlboro could even continue to grow without 18-year-olds, but much more slowly than in the past. SMOKER SHARE MARKET SHARE VALUE 1983 1988 TRACKER PROJECTION 1983 EST. 1988 PROJECTION 18-24 41.2 <- 17.6 6.7 <- 2.4 25-34 24.7 28.4 7.1 8. 0 35-49 13.5 18.4 4.5 8.4 50+ 6.3 7.7 2.2 2.5 TOTAL 18.9 <--- 17.8 1 *20.5 21,3 *Jan.-Nov., 1983 MSA. iis Thus, even if a brand falls from favor among younger adults, the younger adults it attracted in earlier years and their increasing consumptioa can carry the brand's market share for years, signifi- cantly extending its overall life cycle. RM0000904 -5- a ~ coNFioENriaL o N
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2. MARKET SHARE -- THE "FIRST BRAND" ADVANTAGE C. MOMENTUM FROM ACING (Cont.) An analysis of Tracker shares from 1979-83 (see Appendix D) shows that, apart from short term fluctuations: a Incoming 18-year-olds and the movement of its existing franchise into older-age breokets can-explain all of Marlboro's smoker share - gains in the past four years. Among smokers 25+. ell of ttarlboro's ains ar -- switching appears to ave had no net long term effect. Even if Marlboro makes no further gains among younger adults in the next five years, it is likely to gain at least 3 points of smoker q share due to the aging movement of its present smokers (assuming e .~Lts switching is no-worse than in 1980-83). If Marlboro continues ~7 to gain share among younger adults at its present rate, its overall o ~ smoker share could easily increase by a total of 5 points, from 19% in 1983 to 24% by 1988. ~ a 0 • Newport's growth can also be entirely explained by its younger ~ a adult strength and aging. Over the next five years, Newport is a likely to gain .8 points of total smokers without any additional q~ growth among younger adults. If its younger adult gains also E continue, it could exceed a 4% total smoker share by 1988, a gain ° of about 1.5 points over 1983. V~ These examples demonstrate the momentum younger adults give a brand. ~~ Although a competitor could slow this momentum by attracting switchers, the "first brand" would hold the high ground of brand ~ loyalty in such a battle. $ D. LONG-TERM DIVIDENDS -- RATE PER DAY ~ o Government and RJR studies spanning several decades have shown that ~a If1kera inrrniag zhu<r rnnsumntien as they sitei The chart belowshows that smokers 25+ consumed 22% more than smokers 18-24 on average ~" Auring 198i-82. ACE 18-24 25-34 35-49 50* Tota7. 25+ TOTAL Source: RM0000903 RATE PER DAY (1980-82 AVG.) N X Increase Index N 00 Cigts• Vs. 18-24 vs. Total ko 26.2 85 ici N 30.6 + 171 99 ~ N 34.1 + 30% 110 31.2 + 19% 101 32.0 + 22% 103 31.0 ncidence/Rate Repo + 18% t, Year 198 100 . v 0 r v m P O O -4- CONFIDENTIAl
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young peorie w~o sz.::'<e~ at ie.s: [~cr ciga:e_tes :ere hooked °or life. Later u:~rR in-_':_ates that yoJtn is an on-again, off-again affair and young pecpie m.ay experiment with cigarettes for two years or more befcre they make a decision on regular cigarette smoking. This story might be sidebar to number 4. 4. REY SY!l30LS. Smoking may be a'key symbol' to many young people. They don't smoke as much for the pleasure or satisfaction or habit of smoking as much as to make a statement about the_.selves or their group. What does smoking mean these days and what does it represent to ~ those who smoke? What makes it different from other symbols such as dress, la:;g.:age, hot cars or ot`er ~~ behavior? ~ F a z 5. THE SM~iCINia ."~..~.{? ERIESCE. :.e`:_nt~'.al and Cleary report that ~i s~oking is not an i^stant act. Smokers make a series of A decisions about beginnir:g, csintaining and stoppiag ~ O s:nokingk what are the stages and what do psychologists < say about the act of smoking ~nd the need it fills in Q~ individual lives? m a 6. THE LEG.•;L AGE. A generic story, but one that may be part ~~ of a package on state and local laws on ssoking. Y~ Teenagers vote and serve in the armed services before ~ ~ thep,r_each the legal age of .a majority in some states. .0 What do the state laws say about smoxing,_who wrote these laws and why were they enacted? Are they enforced? If ~ _ 1 ast time a youngs er ~- not, should they be. w..en was the was_piosecuted for illegally buying cigarettes? 7. MERCiiANTS. A corollary to above. How closely do mer- ~~ p chants watch the sale of cigarettes to minors? Can a~~ ~ chi},d buy cigarettes with impunity? Research indicatesv, p thaet youngsters often get their first cigarettes from aF y frlend. But where do the friends get them? From stores? The laws vary from state to state and punishments mustb ~ k) ~ range across the field. Should someone take the trouble; to bring sense to this confused situation? Would it make~ ~ any difference in the youth smoking experience? is ~ YOUTH SALES: RESPONSI3ILITY. Who is responsible for policing cigarette sales to minors? Does the industry have a responsibility to warn young people of the con-U ~ sequences of violating state and local laws on sales tog p minors? Is it the re'sponsibiiity of the merchant? Is. ~ anybody doing anything now or are these laws ignored~ altogether? 75 83M01204 F1JM02S606 1
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9. ._Eti i,:. 5: 5, M~R?? A :e tee;a.:> y:rls s_oa.-7 than they once did or are ^ey just less relu=tant to au^:it that they saoke? T.is Y.:estion conFounds tll, e current research in an area of some sensitivity: The University of Michigan Institute of Survey Research May be a good source for this. The ISR's longitudinal study of h:gh school seniors has included reports on smoKing behavior as well as attitudinal and political changes among young people. Only one study -- conducted in 1975 by the American Cancer Society -- has looked at this issue in depth. That study concluded rebelliousness among girls was the reason. ~ 10. BOY S!!ORERS: ARE THEY DIFFERENT? Years ago, men jokej ~ they smoked two kinds of cigarettes when they were Ridst; x corn silks and Camels. Has the attraction of smokin~ Z c^,s g_3 among teenage boys? is smoking still one of th ~ rites of passage? This cou_3 be nostalgic piece, bu~ ~a with a :-nessage. a ~ a > 11. RESIONA.L DIFFERENCES. Smoking rates a.~nong young peoplg 0. vary from about 7 percent in the west to nearly 20 pera va, cent in the northeast. Why? What makes a teenager i lrew York City more likely to smoke than a kid from ~ urban ghetto in Los Angeles? Is it price? Culture ~d ~L'1ti-sC7king attitudes? 12. U3- 9l8. OTHERS. - The rate of youth smoking is reported t(d " be lower in the United States than in other countie~ Why? Compare smoking rates, and the youth smoking experi ~~ ence" in countries like Italy and Australia where tte yoW question is a hot issue with youth smoking ratep q ia•tbe U.S. Psychologists nay have answers based on t~~~ culture, adult smoking behavior or other reasons. p V 13. RACUIL DIFFERENCES. Very little is written about raciQ1 0 differences and the effect of race on smoking behavio4 N But what is known suggests some interesting contrasts. FA p recent California study found, for example, that none ~~ the Oriental children in.the sawple had smoked yet smof~- ing rates t-aditionally have been very high in China ar~ 1 Ln Japan. Whites seem to smoke more than blacks, thoug~t ~ researchers caution that cultural biases may interfet.e z ao with accurate reports. Are there others. Again, tlig ~ ° national ISR sample of high school seniors may be ~ ~ starting point. 14. CCtiT.RASTS. The once clear picture of the cigare*_tlr~ smoking youth is clouded by contrasts and contradictionl~ While yo::ng s:-okers once were described as low in self 76 0 ., :r. a ~ HJM029606 -' 83M01205
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19. B20REN HOMES. Divorce and broken ho:^,es appear to have contributed to smoking. Recent national studies have reported significantly higher teen smoking rates in homes where one or both of the natural parents are missing. Is this a function of the stress placed on young people adapting to a missing parent and what are some of the other manifestations of the problems kids face in broken homes? a&ertising? - -,... - 2~ MFftX+. BANS: DO.TSEY WORK? The experience in countrie whd~ cigarettes advertising is banned shows littl e0~c on cigarette consumption. What is to be gained i tlfi country by imposing a ban on cigarette ads? Shoul t o be singled out or should all products deems h$tWl to health be included in a ban? Who writes th enomrages youth smoking? What are the influences o 20. AGE. Some in the smoking and health community warn that kids are aware of cigarettes and smoking, and trying cigarettes, at earlier ages. The reports are difficulp, to quantify because survey data is not available for tht very young. But psychologists and some researchers ma '~ have some ideas and smoking may be just one of th~ F 'ad11t' pursuits that kids are trying at an earlier age~ ~ Is this a passing phase or long-term trend? ~ Q 21. CIGkRETTE ADS. The research literature, though woefull Sg; incomplete on the subject, appears to conclude that cigae a rette- ads don't encourage kids to smoke. They areQ ~ instead, messages to people who are already smoking~ ~ Even some school children say that ads encourage peopl ~ to switch but don't lure them to take up use of tobaccoo What evidence do critics have that media advertisini ~ 1i5t And where do they draw the line? R 23. C&LIFORNIA GOLD AL4YONE? Marijuana has never been adver p tifai'' but it is a billion dollar business. What doe; W ' this say about banning of advertising of products con13 sidered harmful to health? A sidebar to number 22. ?~ p e . y ? Y cars driven by Burt Reynolds? without his fedora, overcoat and dangling cigarette. D~ ~ cigarette companies promote•the use of cigarettes in thp, a to have their ho~ mov°es the sam ~+a auto com anies movies and television? Do writers and directors us cigarettes as props as frequently as 40 years ago whe RuTphrey Bogart would have been just another pretty fac 24. SMOKING ON THE SET. How widely used are cigarettes i~ Z. 78 RJMO'c+b608 83M01207
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56. 'T,'ne Teenay'er. At l,::Lr?t_e S M _D •ti-Cy',' CerC.df1 Resea:ch Zr:c., S.:rvey cond_.tez for the ;,an.:er Society, Septenmber 1969. 57. Evans RI, et. al., •Current Psychological, Social and Educational Programs and Prevention of Smoking: A Criti- cal Methodological Review,' ;thereosclerosis Review, 1979. 58. Green DE, "Teenage Smokin3: Immediate and Long-Term Patterns,' Chilton Research Services, U.S. Department of Health Education and Welfare, National Institute of Education, November 1979. n 59. U.S. Department of Health and Human Services, 'Natio~a~ Survey on Drug Abuse: :!ain Findings 1982,1 Public Hea,,^t,~R Service, National Institute on Drug Abuse, A=cohol, Dgu; Abuse and Mental Health k'.-.i^istration, 1983. g' 4~ 60. Fishbein F!, 'Consuaar 5eiie`s and Behavior wLth nespQ to Cigarette Sm,oking: A Critical Analysis of the ?ubjiS` Literature,' A report prera:ed for the staff of jtf Federal Trade Com:.ission, May 1977. ~ 61. 'Teen-age Bols and Girls and Cigarette Smoking: A S.ip e~ mental Study,' Yar•kelovich, Skelly and White Inc., 5 ~u conducted for the American Cancer Society, February 1~64 ':..Study of Cigarette Smoking Among Teen-age Girls Young Woaen,' Yankelovich, Skelly and White, Inc., Suxfjl~ ~': ...,.,A....~nA Fnr hhe Lmorirwn CancOr SocietV. Februarv 1g~j 8 62. •A.+Survey of Adolescent and Adult Attitudes, Valt& Ba;havior, Intentions end Knowledge Related to Cigar Smoking,' Chilton Research Services, Survey conducted the Federal Trade Commission, June 1980. 63. Evans RI, et. al., 'Smoking in Children and Adolescentg4 Psychosocial Determinants and Prevention Strategiq~ ftoking and Health: A report of the Surgeon General: i U.S. Department of Health and Human Services, Natiqpa3 Institute of Child Health and Human Development. ~~ v~ F 64. Brown BB, 'The Extent and Effects of Peer Pressure ncw+rg High School Students: A Retrospective Analysis,' Jou§aj of Youth and Adolescence, 11(1), 1982. 2: g H 65. Warnberg K, 'Ban on Advertising--What Then?" Proceed ~ of the 3rd World Conference on Smoking and Health, ~ York, NY, June 2-5, 1975. H 72 0 J . 9 83M 01201 RJM02b602 ~
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THE IMPORTANCE OF YOUNGER ADULTS 1%Y POINTS ~ 7 ~' Though decreasing in number, younger adult smokers are a key market for RJR ~<Drcause improved RJR perforaeoce among.younger adults could contribute more to L long term profitability and positive share momentum than could be achieved ~tom gains in other age groups. nFM ToVo Sir~.ta~ ExE`eC~sF At*oU9aS•3y~STp 6ubs~AA7~1A~E, Younger adults are the only source of replacement smokers. More than a share point of "new" 18-year-olds enter the market every year. ~ These offer a significant growth opportunity and also shrink the share value of smokers already in the market. ~ 0 A"first brand" strategy has significant share advantages. 'e ~ ~ • Optimum ability to cap'italize on the influx of new smokers. This gave $ PM a .5 point in-going advantage over RJR in 1983. _~ ~ . • "First brands- compete from the high ground. They do not need E° switching gains to grow and can afford some switching losses. 8rands which rely on older smokers must achieve net switching gains to break even on share . V~ CC~ • Strength among younger adults will ultimately yield growth in older age • ~ brackets. Aging has been contributing all of Marlboro's and Newport's smoker share gains among smokers 25+. z Aging of loyal younger adults creates disproportionately large gains in $ market share, due to their increasing consumption. This does no ~t accrue from older smokers ains amon ~ g g . a • Younger adult strength, past or present, will tend to extend the lifecycle of a brand. w to 3. Younger adults offer the most concentrated switching opportunity. ~• ~ ~ • Smokers 18-24 are more likely to switch. e, N • Switchers aged 18-24 can provide more share advantage from aging/ Co increasing consumption than switchers 25+. Un 0 RM0000906 -7- V CONf1DENTIAI a CONFIDENTIAL r 0 0
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25. CENISCP.SS=?. ^e tias been ac_.;e3 „_ refusing to advertise in :ca.~.z:czs and other r.b:i:alicns if articles unfavorao:e to c:;e indastry appear. Is there any truth to the charge? Does editorial content mahe the difference for the ad a3ency placing the spot or is it circulation and rea_~ership that count the most? Is the industry the culprit or are nervous editors and publish- ers making decisions without an understanding of the industry's interests? ~~- sWnt on smoking and health programs and research? sQ thete a good measure of the success or failure of tht~s~ 1 work? Some critics say many of the in-school progr s p _~ simply reinvent the wheel. Is that verified in t~e~ V ~ Zecqjrd? Does anyone monitor the work? Who? 6ow doesp the expenditures for smoking and health compare wi',ti toney spent in other health areas -- alcoholism, drFgQ tions to promotion ca:~pai3::s for other products. 26. THE SELLING OF A SMOKE. What goes into the production of a cigarette advertising and promotion campaign? Take a recent new entry into the :narket and document the crear tion of the campaign, from choosing a name to selectifg, the models. What are the objectives and who are tyg s creators trying to reach? ?articular attention should F paid to adherence ef ad a;ency and company to serpli Z and advertising ccde stan~ards. Compare these restri e 2 a ;0 27. SMOKING A:NJ EIEA:.TR ?RCGRA!'S. The nation has a jungle ~i g p . g iving to children? Soa~ what kind of inessa es are t!:e y g 7 suokin and health ro razs But which ones work? efforts underway in our schools. Which ones do the be tg job and why? Also, what is a measure of success? s~ arettes to k_ds if ant oducin g ci g th e a isk of i t r n r es of the harshest critics of the state of the art are tho who have tried to make some sense out of the thousands smo7(ing programs begin at too early an age?' 26. c70VNMENT SUPPORT. How much money has the governmeA abvse? ~ 29. PROBLEMS OF ADOLESCENTS: EVERYONE'S CONCERN. Why sho*V ' ut N the programs be limited to smoking and health wtvn. ~ smoking is just one of the experiments that go into tibei OD ko growing experience? There are a nu.mber of other facto from drinking and drugs to Iearning to cope with ac Are any of the ind.,stries that are affected by t training participating in the programs, either as fin cial supporters or prograa..developers? If not, why n Is there a role for industry and what is it? FtJM02S609 83M01208
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I. THE IMPORTANCE OF YOUNGER ADULTS 7 4ithin five years, yo_un2er adults (18-24) will droe from 181 to 151 of the 1%viotal adult population (18+). They will continue to decline in numbers until ~~ ge group in recent years (see Appendix A). Allyhy, then, are younger adult smokers important to RJR4 e at least 1995, as the crest of the Baby Bubble pushes farther past age 25. s`~- - •-- - -- -- This shift in the population will cause tdqokers aged 18-24 to fall from 16% to i Ax of a11 smokers by 1988. Even 13% would not be surprising, since smoking incidence has been declining more rapidly among younger adults than any other 1. VOLUME y O « Younger adults are the only source of reolacemenj,gymokers. Repeated government studies (Ap;,endix B) have shown that; 3 C a a r_.ene than one-third of smokers (31x) st rt sfter a¢e 18. a c j • Only 5% of smokers start after aae 24. ,~ - Thus, today's younger adult smoking behavior will largely determine the I i ' trend of Industry volume over the next several decades. If younger adults C' ' m turn away from smoking, the Industry must decline, just as a population which does not give birth will eventually dwindle. In such an environ- °$ F s~ ment, a positive RJR sales trend would require disproportionate share ~ gains and/or steep.price increases (which could depress volume). $ MARKET SHARE -- THE "FIRST BRAND" ADVANTAGE ~ .g ~ A. ANNUAL GAINS FROM THE 'NEH" MARXET :Agy:.18-year-old smokers in the 1983 market were worth 1.6 ints~_ of total smokers.• By capturing half of these, Marlboro g.in 8-~nte ~ a of total smokers without needing to attract a iinZe b"can switcher. This gain was the equivalent of a successful two-style new brand u, N N with no cannibalization and no development/introductory introduction ~ , costs. ~ ~ As a company, Philip Morris held more than 60X of these 18-year-olds in 1983 versus RJR's 15-20%. yielding PM a.5 point in-going S0M advantage due only to "new" smokers. • This assumes 1:1-year-olds are 10% of the 18-24 group rather than a "fair share" of 14% because of population decline and the fact that some smokers start after age 18. RM0000901 -2- CO'; Ff DENT1A L
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YOUNGER ADULT STRATEGIES AND OPPORTUNITIES INTRODUCTION ~ BJR's consistent policy is that smoking is a matter of free, informed, adult ihoice which the Company does not seek to influence. However, in order to ~ plan our business, we must consider the effects those choices may have on the fvture of the Industry. Furehermore,-f.f we are to compete effectively, we ~ must recognize the imperative to know and meet the wants of those who are 18 ~ and have already elected to smoke, as well as those of older smokers. ~., Purpose ~ This report is intended to provide additional learning on younger adult smokers (aged 18-24) to assist RJR in optimizing its strategic position with ~espect to this smoker group.. While competitive issues, such as Philip Morris' continuing overdevelopment among 18-24 year olds, are a major focus of R the analysis, the broader perspective is on the overall business opportunity 0 which may be available to RJR through effective marketing to younger adult C smoke a ~ a There are five sections: ~ a Section I, "The Importance of Younger Adults," explores the potential ,1 , benefits/costs of "first brand" or switching strategies directed toward S° younger adults, in comparison to smokers 25+. Key elements include the impact o~ 4f "new" 18-year- olds on the market, the effects of aging on both smoker share and market share, and the degree of potential switching opportunity. ~$ :.These analyses are based on share trends from MDD Tracker, loyalty rates and F 9 core/fringe development from the 1983 Segment Description Study, NFO e svitching, and consumption patterns from Tracker and government studies. $ Section II, "Successful 'First Brand' Strategies of the Past", uses never- 3 r•:,•.'before-available information from the 1983 SDS to trace the succession of key ~ younger adult brands over the past 50 years. This allows an analysis of the ~ key factors which may have been important to their growth and decline, as a ~otential framework for RJR's present/future younger adult strategies. ° R;., ~'" "•$ectitn III summarizes the "Key Learning" which can be concluded from Sections v I and II on the importance of younger adult strength and the means which have successfully achieved that strength in the past. Section IV gives "Implications and Recommendations for RJR" which were derived by applying this learning to today's younger adult market. Section V, "Key Trend Detail," amplifies on key recommendations from Section IV. Appendices support the main presentations as referenced in the text. RM0000900 U O ~ V m a W CONFIDENTIAL °
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MARLBORO rnn rtM exu.o Anuoc Y.. t I w wcrr i.mni ans wo tm sa a c ~ .~ ~ 3.~ Efi'O 5 ~ t ~ Despite M arlboro's masculine positioning , it ep~ears to have been a dual_eex F 9 ~ y~b~ nd~ e~ ~na y~~~~onr ad ~l trc_ f om rha bgei nnin¢. Tlar ro skewed male to the g,,, same exte nt the total younger awrket did , but was al most equally developed ~ ~ ambng you nger males/females until after 1975. ~ ~ SHARE AMONC 18-YEAR-OLD SMOKERS ~De~ve~lopment Index C Total FIele ema e Marlboro ~ e 1955-65 8.5% 101 98 . . 1965-74 31.8 104 94 1975-79 40.6 1'A 94 1978-83 50.3 116 84 Source: 1983 SDS N O RM0000914 W m CONFIDENTIAL ~ : r N I
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Philip Morris may itself recognize Marlboro's vulnerability. Certainly the brand's rvitching losses among 16-24 year olds have been visible in the 1980's, averaging the equivalent of .3 share points of total smokers every ~ year. Wile Marlboro could not be repositioned after 20 years of the same campaign, some clues suggest PM may be usin other strate ies to protect Mdi'flboro's contrlkutinn to t ~g > r ' t Vir ini li d Mer o ortionate v tc tom M - h li Morris to keep 32% o Marlboro's net switching losses from 1980 to 1983 vithin the -~~orporate fold -- nearly twice PM's fair share (See Appendix H). This Y~ suggests that Marlboro might serve PM as a "feeder brand", capturing 714yosun er smokers who can then be channeled to other PM brands. ~ • Virginia Slims' performance as an 1S-vear-old "first brand' has lmnrrv"•+ '*ailt de -iv in rPPenLvears This may relate to its softer ~ aopr arh. in marketing recently (See Appendix 1) which is more 7' consistent with the younger Marlboro female's desire to not be "too I SOVirE'Q bold". , 1A^rNT 4AACh rIR61NIR St1nS ". e ~ ~ .,,., ... ~..o..,~..~ • The Merit repositioning seems to draw it closer to Marlboro, perhaps shortening the supply lines. r P a RM0000917 -18- CONFIDENTIAL ^
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But, Poll Hall became out of step with its times when the cancer scares of the mid-1950's created the filter.boom. Pall Mall might have defended itself with a filter line extension, but it didn't try until )965, when it had few younger adult smokers left to defend. &;~:~`e!{o-}d bolstered its market share for another 10 years. 11 After Pall Mall peaked, its younger adult franchise began to skew male. ~#ounger women -- the rising trend Pall Mall had captured -- moved on. But the brand loyalty and aging benefits of the younger smokers who remained with Pall PALL MALL 18-YEAR-OLD SHARE 194 'a 1950-54 1955-5 1960-6 1 6- Rey Points About Pall Nall: 4 Females 18 40 30 13 2 1 TOTAL 10 -> 26 --> 30 <-- 19 <- 3 " 0 Source: 1983 SDS ~ Males 9% 16% 30% C ~ a eZ ~ • Pall Mall's "extra length" was a product breakthrough in its day -- one '40' that promised extra mildness. It caught on right away with younger F. ~ adult smokers. ~ u • Pall Mall grew quickly among younger adult smokers because it was in ~ tune with the 1940's, when the major trend in smoking was the rising g importance of younger females in the market. ~ e • Psll Mall's younger adult strength was a long lead-indicator of its $ rapid market share growth in the early 1950's. d s Pall Mall's downturn among younger adult smokers was also a lead- indicator of the brand's eventual decline, although its market share Ln held for another decade due to the loyalty and aging of the younger r smokers it attracted in earlier years. oo to • Pall Mall became overdeveloped among males only during its decline. P N OD v RM0000909 -10- 22 CONFIDfNTIA9 '
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2. MAR10rT SHARE -- THE "FIRST BRAND" ADVANTAGE (Cont.) H. THE COMPETITIVE SQUEEZE This influx of 18-year-olds causes the pre-existing smoker market to shrink in share value: smokers who were worth 100.0% of the market 4Z b Thus 98 ear end a th l f 1983 h b i on . y y . , were wor y gr at t eginn e ng o brand which had a 10,(L%_smoker sbare going into 1983 end did not - ~. attract any IB-year-olds would drop to 9.9% even if it kept every ember of its franchise. This means that any brand/company which is ¢~ p nderdeveloped among 18-year-olds must achieve net switching gains just to break even. In contrast, a brand which is strong among 18-year-olds can have net ~ switching losses and still hold/gain share. The graph below shows loyalty rates from the 1983 SDS, i.e., the percentage of smokers wh ~~~!!!o smoked Marlboro at age 18 and still do, after one to twenty-plus years. ~ These loyalty rates show that Marlboro loses about 25% of its o " 18-year-olds by age 20 and another 15% by age 24 -- a total lose of 40% Transi tin this to share ~ d 24 18 h b . g etween ages an a over t e six years ~, points, Marlboro would be expected to lose .3 points of its .8 points ~ K~ "?t of 18 Year-olds between ages 18-24. This ie, in fact, about the annual a. ' total NFO switching loss found for Marlboro in recent years. (See E~ Appendix C. ) .~ " ~ 8 However, since Harlboro gained .8 by becoming their "first brand", it o~ C. MOMENTIM FROM AGING ~ W MMIadaI• can afford the .3 switching loss and still come out .5 points ahead. V" m nRRLBOROLOYRLTr RATE trw~.na.~war Once a brand becomes well-developed among younger adults, aging and brand loyalty will eventually transmit that strength to older age brackets. RM0000902 -3- C4A'FIDENTIqL ~ v F ~ Y ~ O ~ 0 ~ ~ a. c 0 0
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~~~.~:• ;Mildness is a Pleasute ; -Extra length" Pall Mall King entered the market in 1937. • Initially, it had a prestige positioning, but was soon ~ wlth Pai! Mall ~ ; 'P retocussed to emphasize mildness ~ easy" smoking. From the 0 inning, Pall Mall's development gbout twice as high among _ _ _ . ~.,younger females as males. This ,%qLyftured the rising trend of the Vnger market and also made good dYfategic sense for ATC -- Lucky W.~Ftr,ike skewed male and Pall Mall skgtred female. Thus, Pall Mall was tune with the demographics of f fhe times and its company's mix. a . ......'.~. _~-~ :r_ .,is.. • _.... r~...r QshYl,~p...fidl ..-..-.~..__~._ 1956 Wiing the 1940's, Pall Mall's share grew to 10% among all 18-year-olds, to 18X among younger females and was still rising. But since Pall Mall attracted fever older smokers, its market share was only 32 after a decade (1947). By L~e 1950's, though, the aging payoff was inevitable: Pall Mall's SOM soared to 15%. with a younger smoker share twice that high. PALL MRLL IPIt rGM M1111m R'/tUW( PrIR asuco. aRmi ssro ws usa ws RM0000908 -9- CONFfDENVAL
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February 28, 1984 TO: L. W. Hall, Jr. FROM: R. C. Nordine SUBJECT: YOUNGER ADULT SMOKER ANALYSIS Attached is Diane Burrows' analysis of younger adult smokers. We have incorporated the changes you suggested and have also used Tom Rucker's input. In many ways, I think we need to view this subject as something special. Like Brand Family Positioning, it is part of the foundation on which successful long term strategies are built. Perhaps the last thing we want is over-reaction to the short term. We should not radically adjust the 1984 Plan ending up with all of our new/~stablished brands zeroed-in on younger adult smokers and giving us a false sense that the problem is being addressed. What is needed in my opinion is a longer term effort to solve the problem. This is not likely to be achieved within the constraints of the present organization. After all, younger adult smokers have been high in the Company's priorities for ten or more years. Yet, our performance is at a ten-year low. We need a concentrated, full-time effort from our best people to develop the needed understanding of younger adult smokers to recommend a plan of attack, and to establish proper criteria to evaluate the success of strategies after they have been implemented. t'0uick fix ~~ solutions will not solve the problem and in fact are likely to be countero ,r+ivP, An additional copy is provided if you want one for Mr. Long. Richard C. Nordine Marketing Development Department Attachments cc: E. J. Fackelman D. S. Burrows
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In the 1980's, Newport started rolling out across the South Atlantic, where migration patterns of the 1970's showed Blacks had been returning. Tracker data during this rollout period tend to confirm that Newport gained among younger Whites as it gained distribution, but its fundamenrel ernxrh has been ~ due to vounAer Blacks. --1980 ACES 18-24 Black 18.6% White 4.4 TOTAL 6.1 NEWPORT MENTHOL SHARE 0F SM01QrRS lst Half 2nd Half 1et Half --1981 1982 1982 1983 -- -> 22.4% -> 25.2% -> 28.9% -> 36.6% 4.9 5.5 5.0 4.9 -> 7.0 --> 7.5 7.6 --> 8.5 r ~ Source: 1983 SDS _ z a G a The 1983 SDS results indicate that ew ort as become the alternate younger ~ ad ult identity brand or those who ' t o11ow t e or ._ il, acTcs, Tf~a to ay s a ternative to Kool; for Whites, it s an lternative to £- - - e a Y w~y ~ I+J~A"S'LS pt'~"4AC~1N4 ~Fh? ~oSaneAi~a°J? e ~ i v $ ~ ~ a 4 c a RM0000922 ~ O ~ J m -23- a coNFIDENfiIaL ~
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D. • VANTAGE may have an opportunity to compete more effectively for younger adult Marlboro switchers, based on its esteblished ?attern of switching gains from Marlboro. Positive Communication of Product Wants History suggests that younger adults are attracted to messages of product "jajdpPSS." and "s^kfne nleasure". To optimize its performance-versus-irounger adult product vants. RJR should obtain information to clarify whether these descriptors relate to specific positive product attributes, to the absences of specific negatives (e.g, hot/harsh), or are potentially beneficial copy strategies. C O M C TO uJ~. e¢ e}i's Q(,p vOR 'iS ?_ ~ 1P RM0000930 -31- CONFIDENTIAL
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SECTION I THE IMPURTANCE OF YOUNGER ADULT SMOKERS
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MARLBORO: THE "BABY BUBBLE" BRAND The leading edge of the Baby Bubble exploded on society as the younger adults of the 1960's. Over 30 was "out" and the younger set was driving fashions, polities, and the marketplace, sometimes violently.- And Marlboro would become their brand. S_Po ~ ioci._cc . rMarlboro had been quickly e siti ned + - catch the filter boom. -~'a~~~ftirt; as a second entry in ther 'taste/flavor" filter market, with no point of d fference but its box, it trailed WINSTON among both younger and older t`~sf~~okers. 1955-60 Market Share 18-Year-Old Share WINSTON 9% 11% Marlboro 4 3 ~ ~ ' li nnnitionin¢ was ly directed o~ lb oro a mascu ne Judging by its copy, Har @t the nonfilter markeLwhich had become overdeveloped among males as it .~ ~ declined. It took seven years of experimentation for Marlboro's permanent E 'cowboy" campaign to fall in place in 1962. Even then, the WINSTON V~ bandwagon" held Marlboro at bay. o~ But Ma*lboro_ through happenstance or design, f+r he~er and better as the pressures of the 1960's evolved. ~ u ~ • Marlboro was a mi~l_de product than WINSTON. S • Marlboro was positioned male during the only decade since 1930 when es~ les vere the arowth sector among younger smokers. 4° m l 9.),. Marlboro's in ns+ v fit the mindset of younger peoDlg in the 1960's. ~ • Marlboro tar eted ou than WINSTON* and, by the late 1960's, C a WtiY °~'/ younger meant t e Baby Bubble, the largest cohort of oeonle. and N . wnkera_ in hiatorv. R One way to see this is by comparing the percentage of Marlboro versus WINSTON smokers who had already started smoking at age 18. For example, among white male WINSTON smokers who turned 18 in 1955-70, 70% smoked by age 18; for Marlboro, that percentage was 87%. (Source: 1983 SDS) RM0000913 -14- CONFIDENTIAL a ~
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Once Fall Hall and WINSTON had turned down among younger smokers, there was no return. How, then, has Marlboro managed to hold, even recoup, among 18-year-olds in the 1980's? 1. In the 1983 SDS, we found that younger smokers were much more likely than other smokers to base their brand perceptions on the people they see usin the brand -- more than its advertising, package, or name. Thus, Marlboro's very size among younger smokers may give it an effective positioninR.ibat has nQthing to do with the cowboy, which is tFie ~os tion ng o its advertising. Marlboro's younger smokers are their own campaign, automatically in tune with the times. 2. The SDS showed that Marlborn's key im ¢ery was not masculinity, it was ~er td, ~_ a~~v~-- the brand for average younger adults, popular and acceptable among younger adult friends, not "too different'. 3. Marlboro is clearly seen as a quality product, even by younger smokers who prefer other brands: Marlboro smokers want to "buy the best" and they think that Marlboro is the best. 4. Marlbor~o h~ a t,hg "bandWa¢gn effect" still going for it. In fact, the trend over the decades has been for younger adult smokers to increasingly cluster behind one big "first brand", a trend that parallels the increasing pressures against smoking during these times. Cbi s Aro ¢flnsmQ1 a increas eed to I ~ 0 ~ 0 ~ c ~ .~ ' E ~ _ G6 09, • '~-f identify with tbeir smoking yeersP to smnke the "belonging" bran Nt ~ ipk SHARE AMONG YOUNGER HDULTS* /.rL t9utq P•wK E S ~~ ~`~~ pQA~c . w ~ ~ _ 7 ftiiL.A1tl 4 PA.L rsi.L 0. a \ / \. ut \ N a \ N \ co I \ / t0 / . A ^ ~ ~. . N P 1 17i1 Sied S E ~ 1B-YEAR•iti.D SMOKEIIS, 19BS SEwNT DiS(RIpTION STUDY -17- RM0000916 CONFIDENTIAL V a
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Key Points About SALEH/Kool/Nevport SALEM • In its early years, SALEM's appeal to younger adults was overshadowed by WINSTON. ~ained among~ounRer smokers of the 1970's esoeciallv Blarka__.hm -- s~ ~~~;¢ more effectto~~v-.gg nnt Kool, but never has become a true " . younger adult "first brand • Kool's growth, much like Harlboro's, hinged on demographic shifts caused by the antismoking 1960's. Kool was in tune with the rising importance of younger Blacks in the 1960's and the aindset of "Black identity". W tiy North Atlantic market by intense spending in out-of-home and Blacks. ~ y er Wtsite smokers Dy gaining = eined oun t has I th t N y g ewpor g t appears a distribution but its fundamental growth is among Blacks. Newport is the alternative younger adult brand -- for Blacks an a alternative to Kool, for Whites an alternative to Marlboro. It's for those who don't want to follow the'crovd. wky to osOkm ~ oR. NwQazs 4- Nc,r SqICT0% ? -24- RM0000923 • Kool gained "Black identity" by advertising to Blacks before its 9 competitor. • When younger Whites returned to the market of the 1970's, Kool was • Newport, when it was repositioned, essentially bought Kool's suddenly too Black to fit the younger market and became vulnerable. .2 Is Newport ~. a m CONFIDENTIAL ; N
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YOUNGER ADULT SMOKERS: STRATEGIES AND OPPORTUNITIES TABLE GF CONTENTS PAGE MANAGEMENT SUhCWRY i °' INTRGDUCTION y1. SECTION I: SECTION II: . SECTION III: PM€B L $ SECTION IV: SECTION V: tti...t~° a ' APPENDICES 1 THE IMPORTANCE OF YOUNGER ADULT SMOKERS 2 SUCCESSFUL "FIRST BRAND" STRATEGIES OF TNE PAST 8 KEY LEARNING -- SUMNARY/CONCLUSIDNS 27 IMPLICATIONS FOR RJR 33 KEY TREND DETAIL Pricing 38 Social Acceptability 40 Black/Hispanic Younger Adult Smokere 42 Female Younger Adult Smokera 45 "Moving Up in the iforld" 49 51 r RH00037'( i
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II. SUCCESSFUL "FIRST BRAND" STRATEGIES OF THE PAST what brand they smoked when they were 18 years old. By using these responses the 1983 Segment Description Study (SDS), smokers of all ages were asked rtepresent the younger adalt-market of the past, the rise and fall of key d 1 b h 1 fif be anal zed 8 linkin an t d y . y g y,ounger a u t ran y years c s over t e ast is section traces every brand which has risen to a 10% or higher share among rand today can be gained. fito the factors which affected those brands and might affect a younger adult ese brand trends in time to demographic/social/marketing changes, insighta !e~.VT8-year-old smokers since the 1930's. There have been only six, but they ~ &clude the major brands of the last half century -- Pall Mall, WINSTON, Marlboro, Kool, SALEM, and Newport. ~' e ~ 0 NACKGROUND 6 A}though their rise cannot be traced, Lucky Strike, CAMEL, and Chesterfield (iere the giants of the cigarette market during the 1930's. SDS respondents 8~ who turned 18 in the 1930's seemed to favor Lucky Strike, but no brand skewed g~ y,oung to the degree seen for the brands that would follow. ~j ' 1930's AVG. SOM 18-YR-OLD SMOKERS Share BDI Lucky Strike . 221 32% 146 CAMEL 27 30 111 Chesterfield 27 20 74 All Other 24 18 75 PALL MALL: THE BRAND OF THE 15'u0'S AND 1950'S. ~ The key trend for Pall Mall was younger female smokers, who were rapidly i!6ecoming more likely to smoke at age 18. The SDS showed that females rose in importance from 30% of all 18-year-old smokers in the 1930's to 44% in the Q{-.!1950's. This gain was large enough to create a 6% increase in the number of WAy '~kv,;,3rounger adult smokers between the 30's and 50's, even though there was a 15% decrease in the size of the younger adult population during that time. -8- RM0000907 CONFIDENTIAL .9 E F; L ~ a
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'_~. _ ! `` n ~i SE C Ri E T ,. No._L$L6_By Declassificalion STRATEGIC RESEARCH t ;:....... ~~'~~:5,........~.~... TOs ' Mr. C.. H. Long REPORT YOUNGER ADULT SMOKERS: STRATEGIES AND OPPORTUNITIES COPY LIST Mr. L. W. Hall, Jr. Me. S. A. MacKinnon Mr. C. N. McKenna Mr. J. T. Winebrenner Mr. J. R. Shostak Mr. E. J. Fackelman Me. E. N.,,Monnhan t...._ ... Mr: J. R.;. Moore J LDr. .7. L. Cemma Mr. C. Novak Mr. C. T. Baroody Hr. D. F. Pearson PUBLISHED BY THE MARKETING DEVELOPMENT DEPARTMENT R.J. REYNOLDS TOBACCO COMPANY, WINSTON-SALEM, N.C. 27102 IeT re.m 7308 - fa.t Mr. M. L. Orlowaky Mr. H. J. Lees 1
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p ~ N ~ N n
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SUCCESSFUL "FIRST BRAND" STRATEGIES OF THE w N PAST ' ~ If* w N _ a
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WINSTON: THE HIT OF THE 1950'S AND 1960'S. External influences in the 1950's contributed to the WINSTON o 9ortunity. ,~ 1. Thr rising tide of health concern which peaked with the "cancer scare" of 1954. Although 'modern` filter cigarettes had been in the U.S. market since 1936, their market importance was- almost nil until the early 1950's, when Viceroy sales quadrupled in less than two years. Reynolds, determined not to repeat its experience introducing CAVALIER against an already-too-well-entrenched Pall Nall, rushed WINSTON to market in March, 1954, near the crest of the health scare. . The spread of television. WINSTON was introduced on TV -- a"fad" that spread from 9% of all households in 1950 to 81% by 1960. Advertising dollars were a key advantage for WINSTON over its filter competitors, and the bulk of those dollars were used to leverage TV. "b'andwagon brand" among.younger adult smokers. Younger and older sookers alike responded promptly to WINSTON's positive ,a, ptoposition -- "WINSTON Tastes Good" -- its point of difference from other filter brands and the product deficiency non-filter smokers might suspect. k:SfNSTON let Kent and Viceroy sell the benefits of filters. ~- By.1958, WINSTON vas the Number One filter brand and still showing steady mazket share gains. In the early 1960's, its 18-year-old share reached some 30%, twice as high as its market share. WINSTON's effect on SALEM and tfirlboro during the early 1960's (as shown later) suggests that this 30% share L. was large enough to put peer pressure on WINSTON's side and make it a WINSTON rm 1tI111001ui R'/tM0[ a0K 1960 aMSCM .mat a.nl ale ual w RM0000970 11/0. 1910 JtG CONFIDENTIAL F O m
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a_ TITLEs Younger Adult Smokers: Strategies and Opportunities AUTHORt Diane S. Burrows DATE STARTEDt TYPE OF RESEARCHs Strategic ABSTRACT: Younger adult smokers are shown to be critical to long term brand/company growth in the past, preaent, and future. Younger adult performance of the six major brands of the last half century was analyzed to identify four common strategies/circumstances leading to their younger adult strength. They capitalized on: 1. Changes in external factors. 2. Growth sectors among younger adult asokers. 3. Out-of-touch competitors. 4. Product mildness, commun`_cated poeitively. NDD ABSTRACT FORM PROJECT . NUHBER~ None DATE COHPLETED: 2/29/84 SECTION HANA ER: R. C. Nordine 7 C ~ a e N C ? ~ ~ a .~ ~ c> ti V ~ L :0 F 9 ~ ~ ~ W 0 ~ O Key recommendations include: 1. Establishment of a separate younger adult smoker program/unit, with customized procedures/measures, improved information resources, and a less competitor-centered focus. 2. Attention to Blacks, Hispanics, females, social acceptability, pricing, and potential enhancement of product acceptability. „.P£> ~~:'"saa. s KEY WORDS y~1'~?ity k Younger Adult Smokers Pall Ha11 WINSTON Marlboro Kool SALEM Newport Blacks 8ispanics Women Social Acceptability Pricing 2/29/E4 Date RM0002927 ~
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Nev rt Newport was cqmolejelv redonP e• fign sampaign, product, package. When the "new" Newport went to market in 1973, it went only against the ~• U.$ , which had been a f,rr.:°1T /~_~f A1sr4 ~,1tnn growth ; throughout the s xties as Blacks left the south. flra[ mnntl+nl •n nennA~ef.n (.e.eew but r, Yne~f[ V8B [hP on the bottom lin ~ , e, ~ 'l '/°°;'Nevpart went after Kool- with dellars. From 1973-79, Newport's total ad w~ At i spending was only about 30% of Kool's, but it was concentrated in some 20% of ~e U.S. Half of Newport's budget was in out-of-home. ;,(~g W~ `=~re fonal s endin a ain ' 1{' ~6 en ng. Newport a picked Kool's prime market, with a size it could a f.9rd, and essentially bought it. The results among younger smokers, especislly younger Blacks, were immediate. ^S° 4~Won.v~p. t ~I. ~ SP l~l A T So C~u '' ~ ~~ t P ~' NoWl ~"`Y ~ l~'' SA:.•.: RM0000921 frrt 1910 eaUi.o.rSbwt wrat a..rfs awnt sarw as ua ma -22- CONFIDENTIAL °
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SALEH/Koo1/Newport SALEM r SAUM's product breakthrough was "light menthol", Kool nonfilter had been in fket since 1931, but it was advertised more like a cold rmedy,than a t €5 : ° garette and, apparently, tasted like it. When SALEM lowered the menthol and Q a filter, it cut sn 8% niche in the market. A~e &"first, younger smokers adopted SALEM as readily as older ones but, in the ;ly 1960's S~yg~r-ntd ~t,r. vPnt flat. It appears that this had more vTk INSTON than either SALEH or Kool -- the kINSTON `handy wa¢cn__ffect" P When WINSTON let goin the late 's, SALEH eould again attract its fair share of younger smokers. 1Rhough $ALEH became stronger among younger smokers of the 1910's, it never ~ lj~Ams ° rr~rrkt ,hranA". Afair share of younger smokers, though, is enough to keep market share steady for a long time. , ~ SALEM RR nM "ut" "rt11110C Pwlt r. araco"mntama.000 w 1 Younger Blacks of the Lq~to 1950's had basically gone with ver brand was big among younger vteCECry~ ee Appendix F). In the 1960's, o ~ v . W The key trend for e oun er Black smokers in the market. In the health-concerned 1960's, younger Blec s n t ac o from smoking to the extent that whites did. Because of this, their importance surged from 6% of 18-year-old smokers in the 1950's to 102 in ie 1 , RM0000919 -20- m COHFIDf'hlTIAL ~ v
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WINSTON suddenly lost favor with younger smokers in the oid-1960's. This was not due to any sudden changes in WINSTON or Marlboro ads or products. The ban on television advertising didn't hit until 1970. However, two major shifts in the 1960's environment tay have left WINSTON less in touch with younger ~ spokers. ~a.... 1. The heavy sntissoking activity in 1964-69 may have caused problems for f WINSTON: L. • WINSTON's positioning and its development were both slightly female, in tune with the younger adult smokers of the 1950's. However, the antismoking publicity in the 1960's had a disproportionate effect on younger females, so it changed the r~ demographic aix. Within only a few years, females fell from 44% to 38% of younger smokers and, for a decade, the rising trend was s male. Thus, WINSTON became out-of-tune demographically with the ~ younger market, because external influences had changed the marke ~~~t of the 1960's. ~ • The first FTC report, published in 1967, named WINSTON the highest ~ 'tar" non-menthol filter in the market -- higher than some non- a filter brands and 8 mg. higher than Marlboro. WINSTON's product- ~ centered proposition may have been vulnerable on this front among ~ younger smokers looking for mildness. r~ • The intense antismoking campaign on TV may have offset WINSTON's EEz effectiveness in this key medium. U~ 2. WINSTON's light hearted approach may have also become less attuned to °f T ~ the changing younger mindset of the 1960's. In the era of Vietnam, campus riots, and the Chicago Seven, Marlboro's intense, unsmiling ~ cowboy may have fit better. ~ s . ~ --- p,d ~•+on.. snn M+.. ~ ~.....~-~.~..+.w.~ -_-- ~=i -- 1MYMoo Usles pood. M. a*0_w_~! RM0000911 Come lo where the tlavor is. Come to Marlboro Country CONEIQENTIAL ! J P
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S 1 ~ F RH0003776
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In every sense, companies with strong younger adult brands hold the high ground, standing above the increasingly difficult and costly battle for ~. ~SICCESSFUL YOUNGER ADULT BRAND STRATEGIES OF THE PAST review of the five key brands in the last half century -- Pa11 Hall, dult smokers; RJR is losing about a point per year among this group. s,uitchers. Today, only ?hilip Morris and Lorillard are growing among younger NSTON, Marlboro, Kool, and Newport -- shows that each built considerable e in market f its u sur h d ll " p g o ea a rength among younger adult smokers we are. Their strategies succeeded almost invisibly, hidden from competitors ~~ ~~Sn the critical but low-volume younger adult smoker market. The positioninga of these brands have all been very different, but there'have been important similarities in the strategies they followed. While chance may have played a role in these past successes, the analysis indicates that the ker elements can be understood and purposefully leveraged if sufficient time, priority, and resources are invested. ep?iY'i's.. All of these brands took advantage of changes in the external environment that worked against or were ignored by their predecessor. The external changes included smoking and health during the 1950'e, the generation gap in the 1960's, and racial pride in the late 1960's-70's. These factors affected the mix of the younger adult smoker market ae well as its mindset. All of the brands capitalized on demographic shifts within the younger adult smoker market. Females were gaining importance when Pall Mall and WINSTON took off. Marlboro made its inroads during the 1960's, the only decade when younger adult male smokers surged in importance. The emergence of younger adult Black smokers has been pivotal to Kool and Newport. These brands succeeded by keying on the growth sectors without boxing themselves in, e.g., Marlboro was as well developed among females as males until recent years. In every case, the major younger adult brands have been succeeded by a brand which was positioned to be different from its predecessor and better "in-touch" with the younger adult smokers of the time. Me-too strategies tiave never worked. All of these successful brands have stressed positive product messages (as opposed to problem/solution) and have provided milder/smoother product delivery than their predecessor. I KH000377_' A
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Key Points About Pall Mall: • Pall Mall's "extra length" was a product breakthrough in its day -- one that promised extra mildness. It caught on right away with younger adult smokers. a Pall Mall grew quickly among you:ger adult smokers because it was in tune with the 1940's, when the major trend in smoking was the rising importance of younger adult female smokers in the market. • Pall Mall's younger adult strength was a long lead-indicator of its rapid market share growth in the early 1950's. • Pall Mall's downturn among younger adult smokers was also a lead- indicator of the brand's eventual decline, although its market share held for another decade due to the loyalty and aging of the younger adult smokers it attracted in earlier years. • Pall Mall became overdeveloped among males only during its decline. • Since Pall Mall was ATC's last major younger adult brand, its downturn was a leading indicator of ATC's decline.
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As WINSTON lost its hold on the 18-year-old market of the mid-1960's, its younger smokers dispersed to SALEM and Kool as well as to Marlboro. As with Pall Hall, WINSTON's younger women moved more quickly, leaving WINSTON overdeveloped among younger males for the first time. 0 . WINSTON 18-YEAR-OLD SHARE 1956-60 1961-65 1966-70 1911- 5 Nales - -- - -12Z ._ 31% 27% Females ~ 14 35 ~ 32 TOTAL Source: 1983 SDS 9 1 13 ---> 32 29 <- --- 13 <--- 5 When the TV ban took effect in 1970, the TV antismoking campaign also ended and younger females again became the rising trend. But by this time, Marlboro had become the 'bandwagon brand". There was an uptick in WINSTON's share among younger females when its Lights 100's were introduced in 1977,' well ahead of their Marlboro counterpart. But, overall, WINSTON's line extensions seem to have had no lasting effect on its younger smoker trend. Key Points About WINSTON: • WINSTON benefitted from the health scares of the 1950's, which created the filter boom. It used a positive position -- "WINSTON Tastes Good" -- to capitalize on a negative environment. • Favorable timing helped WINSTON. It attacked the filter market before earlier filter brands became entrenched. . Younger smokers were as likely as older ones to be early WINSTON adopters. . Younger adult strength was a leading indicator of WINSTON's extended market share gains and of its softening. Peer pressure --- the "bandwagon effect" -- seems to have worked for WINSTON in the early 1960's, when it had a 30% share of younger smokers. . WINSTON may have lost popularity among younger smokers because changes in the external environment made WINSTON less in tune with both the demo- graphics and the mindset of the 1960's than it had been in the 1950's. a WINSTON did not become overdeveloped among males until after its younger smoker share had begun to decline. • WINSTON's line extensions do not appear to have had any long term effect on its younger'smoker performnce, although WINSTON Lights 100's caused a temporary rise until Marlboro responded. RM0000912 -13- ,. mQ a CONFIDEP~TIAI~ 1976-8
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3. SWITCHINC OPPORTUNITY ~;~ss3i;,a<: Younger adults are aore likely to switch brands than any other smoker group, i.e., they are a concentrated switching target. Their very high propensity to also switch styles within their brand suggests the latent potential for even higher rates of brand switching. PROBABILITY OF SWITCHING IN 6 MO. BRAND FAMILY STYLE IN BRAND --X- INDEX ~ DE - - 18-24 16.6% 26 21.5% 1 7Z8 _Q 25-34 13.4 102 12.8 106 35-49 12.1 92 10.4 86 50+ 13.2 100 11.1 92 TOTAL 13.2 100 12.1 100 Source: NFO, 1981-1983 (first half),. Younger adult brand switchers (who then remain loyal) can also contribute the major portion of their aging benefits, includ:ng increased usage, to their second brand. Thus, switching by smokers 18-24 can yield a significant part but not eli of the ahere advantegee asaoeiated with a "firat brand". Older switchers confer less, or none, of these benefits. -6- t S
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IV. IHPLICATIONS/RECOHHENDATIONS FOR RJR )r E,. Younger adult smokers are citicial to RJR's long term performance and N,,=~-,z profitability. Therefore, RJR should make a substantial long term r commitment of manpower and money dedicated to younger adult programs. ~'z-.- 2. RJR should seek to understand and capitalize on the market conditions/ approaches which have successfully created younger adult strength for brands/companies in the past. A. External Factors • SOCIAL ACCEPTABILITY (Detail in Section V) 6' A price/value brand with a conspicuous second "hook" of quality/imagery/taste could maximize opportunity by reducing possible conflict between younger adults' value wants and imagery wants. - There may be an opportunity for RJR to capture younger adult brand loyalty through extended periods of ack ! ~;~VC promotion in closely targeted outlets, e. . cam us convenie ilitary. This would be an nvestment program. - Since younger adults with above-average interest in value are concentrated in the_ggnin•<c_ se°eqnt, there may be an opportunity for SALEM to capitalize on price. I N O I A breakthrough product which effectively addresses social o acceptability concerns could revolutionize the market as WINSTON did in the health-concerned 1950's. The ultimate size of this C opportunity will depend on younger adult acceptance. Thus, RJR ? ehn"ld rnnciAar Cr Developing a social acceptability product whose smoking benefits are adequate versus younger adult wants. Planning a emphasizes positives, second entry social acceptability brand which mainstream younger adult imagery and product avoiding connotations of "social concern". a .~ ~ E6 a F • PRICING (Detail in Section V) e ~ Pricing is a key issue in the industry and younger adults appear o to be price responsive. To maximize the possible pricing opportunity among younger adults, several alternatives should be r, id d ' cons ere : P Rnn00009za -29- CONFIDENTIAL a .
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10 , B. Growth Sectors Among•Younger Adults • RJR should make resources available to develop/improve its ca abilities to identif and track demo ra hics values/wante and brand performance rrithin the Younger a ult smo er population. These tools will be critical to the development and implementation of effective programs among younger adults. • Younger adult IHispanicsiand Blacks should be key RJR targets, since thev are ¢a n portance in the younAer smoker market. (Detail in Section V) recommended as lending broader creative options. Virginia Slims and Merit should be high priority competitive targets, since they appear to play a key role in defending Philip !lorris against Marlboro's traditionally hi¢h switching S losses. N~~(tp,NDS~ Kesources/manpower snoula oe maae avai.aoae to increase understanding of the dynamics/wants within these markets. ;jo~u ~ aq ~E How S hEs}. Heavy-up advertising in selected media are likely to be beneficial against younger Blacks, based on Newport/Kool history. - Competitive a'vantage could accrue from these special market programs, since Philip Morris has intensified its Black/Hispanic marketing efforts. •"Upward striving' needs have been identified as key among C. Out-Of-Touch Competitors Marlboro has become too strongly male to fully capitalize on the female growth sector among younger smokers. It's masculine imagery also appears to be less of a"hook" for the brand in the 1980's. Howev.r, Marlboro's users themselves provide the brand a strong positioning as an id in brand. Sinc rlboro is not likely to be preemptable on belong ng n strate e hold more romise at present. younger adults. This imagery need is likely to grow, since younger adults who follow the Baby Bubble are likely to experience limited opportunities for traditional success. They may aspire/relate to entre reneurial ns of "moving up" such s fame/succes v a t e oerforming arts. This may provide a new btan or repos tioning opportunity. Marlboro smokers are half of the younger market and, thus, encompass a diversity of wants. This implies that a successful ~attack on any key sector of the younger adult market is likely r to hurt Marlboro. Thus, a total market perspective is RM0000929 -30- CONFIDENTIAL
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• Youneer adult smokers have been as likely or more likelv than older o be 1UH A earl ado ters of brands which have ultimately as H younger a u t rst brands" over the last 50 yeara. • Patterns observed for WINSTON suggest that a'bandwagon effect" may Zfirst brand" which achieves an 18-year-old share near Whe^ n VINSTON's share reached this level, younger smoker growth was curtailed on both SALEM and Marlboro, until WINSTON's sh-are agai-n-fell below that level. The successful younger adult brands of the past have used strategies with many similar themes. In nearly every case, these brands hcve capitalized on: 1. F 2. Growth Sectors thin Younger Adults 3. Out-of-I9yCh Comet tors 4. Pos tivT' e Communicat,~one of Product Wants A. External Factors ~ a h ~ c ~ ~ a ~ C • PaAt periods of intense publicity on the health issue appear to .E 7 have played a key role in the succession of the major younger E adult "first brands." • - WINSTON capitalized on opportunities presented by the filter ~T boom, which gained momentum from the " alth sGare" F environment of the early 1950's. E u - Marlboro capitalized on the changing mix of males/females $ among younger smokers in the 1960's, which arose from their = different reactions to the intense health publicity of that ~ I Kool capitalized on the similar shift between Blacks/Whites ~ in the 1960's. Growth Sectors Within Younger Adults • Younger adult "first brands" have capitalized on subtle demo ra hic shifts within the oun er smoker market. Thei `formula or success appears to have been to target t e U UR ro ile o younger emokers, i.e., to be better developed among sex race/geographic groups which are gaining importance to an extent that reflects the group's rete: of growth. Pall Mall was strongly developed among younger females during the decades when their importance was increasing most o rapidly. . .~ ~ I. SUCCESSFUL YOUNGER ADULT STRATEGIES OF TIiE PAST RM0000925 c a _26_ N W CONFIDENTIAL
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• External factors of key interest are social acceptability, which could revolutio.iize the future market, and pricing, which has been critical in 1983. Both will require careful understanding and execution to reach younger adult smokers. a3 • The key demographic growth sectors among younger adult smokers are Blacks, Hispanics, and females. In terms of wants, the desire to "move up in the world" is likely to become even more intense, but expressed in more entrepreneurial ways. Based on history, these opportunities could be realized by brands with a balanced younger adult base as well as, perhaps, narrowly targeted ones. • The key out-of-touch competitor is Marlboro, which now relies more on younger adult identity/belonging generated by its own users, rather than on the "masculinity" of its advertising. Marlboro qs too broad (half the younger adult smoker market) to be addressed as a single competitor and should be attacked by a variety of younger-adult- centered rather than competitor-centered strategies. RJR should emphasize innovative points of difference from existing brands in attacking thq younger adult smoker market, using head-on/imitative el~orte primarily as defensive measures. Philip Morris may have recognized Marlboro's vulnerability and be using it as a "feeder brand" for Virginia Slims and Merit. This incroases these brands' importance as competitive targets. Among RJR established brands, VANTAGE has the beat switching performance versus Marlboro and may be able to maintain/enhance that performsnca. • Product wants of younger adult smokers, especially mild/smooth/less harsh delivar ehould be fully understood, reflected in action standar a or RJR s younger adult targeted products, and communicated with positiv copy. H o r ~ . -iv-
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Furthermore, entering 18-year-old smokers account for all of Marlboro's strength among total 18-24. Loyalty rates from the 1983 SDS (i.e., the ~crcer.ta8e of smokers who smoked Marlboro at age 18 and still do) show that Marlboro loses about 28% of its 18-year-olds by age 20 and another 14% by age 24 -- a total loss of 42% over the six years between ages`.18 and 24. Translating this to share poiits, Marlboro would be expected to lose .3 points of its .8 points of 18-year-olds before they reach age 24. This is, in fact, about the annual total NF0 switching loss found for Marlboro in recent years. (See Appendix C.) But since Marlboro gained .8 by becoming their "first brand" at e e 18, it can afford th .3 switching loss and still come out . pointa ahead. B. THE COMPETITIVE SQUEEZE This steady influx of 18-year-old smokers causes the pre-existing smoker market to shrink in share value: smokers who were worth 100.0% of the market at the beginning of 1983 were worth only 98.4% by year end. Thus, a brand which had a 10.0% smoker share going into 1983 and did not sttract any 18-year-old smokers would drop to 9.8% even if it kept every menber of its franchise. This means that an brand/compan which is underdevelo ed aoon 18- ear-olds must achieve net ssrltchintt gains just to brea even. As a company, Philip Morris held more then 60% of these 18-year-old smokers in 1983 versus RJR's 15-20%, yielding PM a .5 point in-going SOM advantage in 1983 due only to "new" amokers. The power of this advantage can be seen by the fact that RJR's total competitive switching gains have been twice as large as PM's during 1980-83 yet, during the same period, RJR has lost smoker share while PH has made significant gains (See Appendix D). Furthermore, PH's younger adult smoker advantage has been increasing dramatically: SHARE OF SMOKERS 18-24 AVERAGE ANNUAL 1979 1980 1981 1982 1983 CHANGE RJR 26.1 25.0 .24.3 23.5 21.3 - 1.2 PH 44.8 48.8 51.5 54.0 58.4 + 3.4 Source: MDD Tracher C. MOMENTUM FROM ACING Once a brand becomes well-developed among younger adult smokers, aging and brand lo alt will eventuall transmit that stren th to older a e rac.ets. 3 t u N fJ 00 ko ~ r . . w .. -3- a N . v Rr1UOO )119 I
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I. THE IMPORTANCE OF YOUNGER ADULT SMUKERS ;fkithin five years, younger adults (18-24) will drop from 18% to 15% of the total adult population (18+), They will continue to decline in numbers until I W40;'t least 1995, as the crest of the Baby Bubble pushes farther past age 25. L :a9his shift in the population will cause smokera aged 18-24 to fall from 16% to ~~~14X of all smokers by 1988. Even 13% would not be surprising, since smoking x~'l;ncidence has been declining more rapidly among younger adults than any other PMpp group in recent years (see Appendix A). . ~ y, then, are younger adult smokers important to RJR? Younger adult smokers are the only source of replacement smokers. Repeated government studies (Appendix B) have shown that: • Lees than one-third of smokers (31%) start after age 18. • Only 5% of smokers start after age 24. Thus, today's younger adult smoking behavior will largely determine the trend of Industry volume over the next several decades. If younger adults turn away from smoking, the Industry must decline, just as a population which does not give birth will eventually dwindle. In such an environ- ment, a positive RJR sales trend would require disproportionate share gains and/or steep price increases (which could depress volume). MARKET SHARE -- THE "FIRST BRAND" ADVANTAGE A. ANNUAL GAINS FROM THE "NEW" MARKET The 18-year-old smokers in the 1983 market were worth about 1.6 share of total smokers. ~ capturing half of these 18-year-old ,mokers, Marlboro gained .8 pointe_ of toca2 smokers without needing to attract a single brand switcher. This gain was the equivalent of a successful two-style new brand introduction, with no cannibaliaation and no development/introductory coets. ~ w N N N O M ~ -2- ft]']0003M r.-..r-.feKSN)iT
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Now50, =:~• R,RCILL A7oW ~A~{ f ~p0.Ty qo ;. : - - Kool found itself "too Black" in the 1970's as younger whites were rapidly regaining ma et importance. Marlboro's advertising/positioning seems to have become less in touch with the demographic trends within younger smokers of the late 1970's and 1980's and, perhaps, their mindset. Younger females were the key growth sector in the 1970's and 1980's. ---- -- Today, Marlboro's younger male smokers do nQr, have .n above AvCrava lnternot tn maUulinq ima~ry versus all younger males. ~ - Philip Morris may have recognized Marlboro as vulnerable. ~ Marlboro' is roportionate switching losses to Virgini 33Ea WV1y pG~V ~' Slims and it tend to feed Marlboro's losses back to PM. 00 The campaign c anges on these brands may shorten the lines h of supply. ~ D. Positive Communication of Product Wants • Throughout the succession of "first brands" younger adults smokers have moved to `mllder" products. Pall Hall promised "mildness" based on its length. WINSTON, as a filter product, would be seen as milder than nonfilters. In the 1960's, Marlboro was "milder", i.e., significantly lower in tar, than WINSTON, as was advertised by the FTC. Kool and SALEM could be seen as milder because of their menthol. Newport is perceived as milder than Kool. • Successful "first brands" have used positive product messages. 7 - WINS ON "Tastes Cood" despite its filter. - Pall Mall emphasized milder smoking "pleasure". - Newport speaks to smoking "pleasure". By omission, no brand whose product messages remind the consumer of product negatives has succeeded as a younger adult first brand, for example, any brand which has specifically advertised "low tar" (which implies remaining tar). -28- RM0000927 N 0 J J O . OCONFf pENTIAV . 1
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THE IMPORTANCE OF YOUNCER ADULT SMOKERS SUM.MARY a<~hieved from gains in any other age group. d+~:>a:;,>x3; ~~ 1: Younger adult smokers are the only source of replacement smokers. Hore than a share point of 18-year-old smokers enter the market every year. These offer a significant growth opportunity and also shrink the share value of smokers already in the market. mqyte to long term profitability and positive share momentum than could be ~b.,gcause improved RJR performance among younger adult smokers could contribute ~%ough decreasing in number, younger adult smokers are a key market for RJR • Optimum ability to capitalize on the influx of 18-year-old smokers. This gave PM a .5 point in-going advantage over RJR in 1983. . A "first brand" strategy has significant share advantages. •"First brands" compete from the high ground. They do not need switching gains to grow and can afford some switching losses. Brands which rely on older smokers must achieve net switching gains to break even on share. • Strength among younger adult smokers will ultimately yield growth in older age brackets. Aging has been contributing all of Marlboro's and Newport's smoker share gains among smokers 25+. • Aging of loyal younger adult smokers creates disproportionately large gains in market share, due to their increasing consumption. This does not accrue from gains among older smokers. • Younger adult strength, past or present, will tend to extend the lifecycle of a brand. Younger adult smokers offer the most concentrated switching opportunity. • Smokers 18-24 are more likely to switch. e%:, r~~ •, Switehers aged 18-24 can provide more share advantage from eBing/ increasing consumption than switchers 25+. -7- 1 u N N ~ aa ' w N . a fI A "0003,/g3 ._....~.+.rs.'~~F
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WINSTON was introduced when female importance was modestly increasing and was slightly better developed among females, but essentially a balanced brand. Marlboro was slightly better developed among males during the 1960's, when female importance dipped, but was essentially a balanced brand until after 1975. w% .o `bJCi- i~+ ? ; p,,~Aliv_ 4~oa a.y ~ r.. Kool was highly developed among Blacks and grew when their importance surged in the 1960's. Newport targeted Blacks in the Northeastern U.S., where the Black population was growing most rapidly in the 1970's, and has moved to the south, following the return migration. ~ • The dominant trend in the younger smoker market over the last 50 years has been the rising importance of younger females. Because ~ of this, the major "first brands" have been overdeveloped among y males only during their periods of decline. Marlboro has become g overdeveloped among younger males only after 1975, when its share ~ was softening among younger smokers. pe, • One key to Marlboro's success in capturing the Baby Bubble =~ appears to be that it attracted younger smokers than WINSTON, x 3 ~ within the younger smoker market. a C. Out-Of-Touch Competitors E E ~ U ~ In every case, the softening/decline of the major younger adult brands ~-2 seems linked to an inabilit " " well F nev_c9mDet tor can "start in tune with the_times" at its ~ introduction. The real criteria for being "in tune' are moet probably ~ the mesh between imarerv and/or product and the wants of younger ~ smokers of the t mes. Novever, demogriphics appear to be a useful s tool for identifying the likelihood of that mesh. ~ e • Pall Mall became out of touch with younger smokers' product wants ~ when it failed to effectively react to the fitro.rm of the 1950's. WINSTON fit those wants. WINSTON's light-hearted campaign fit well with the mindset of the 195 sOT`, but dld nnt ft an ++072 +++rti rtie rtaino tide o~' `^ P/IRP yn..n¢ rP~+P1R as Marlboro did in the 1960's. - WINSTON's campaign had a slightly female slant and so did its franchise. In the 1960's, y,ounger females were losing %~w Apo.-IPArP and younger males were gaining -- a better fit for Marlboro. Wd~W 1 ~, - WINSTON's o nA,.t may have become somewh rng "e`,ug a.`yr 1960 s tastts (and "tar" publicity). • WINSTON was the victim of subtle shlf.tfl which .ay have been transparent or seemed transitor~th time. r--- CONFIDENTIAL t RM0000926 -2 i-
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IHPLICATIONS/RECOFLMENDATIONS FOR RJR 1. Younger adult smokers are critical to RJR's long term performance and i fi bi11 Th E RJR should make a substantial long te-:m r t y, ere o e, pro ta commitment of manpower and money dedicated to younger adult smoker 2rograms. An unusually strong comsitcent from Executive Hanagement will be necessary, since major volume payoffa may lag several years behind the , implementation of a successful younger adult smoker strategy. This time lag can also magnify the penalties for wrong turns in the development and implementation of younger adult smoker programs. To prevent such problems: • RJR should develop ob~ectives planning procedures and marketability criteria for oun er adult brands/ ro rams which reflect their uni ue on term character. These may differ significantly from the approaches meaaures which are appropriate to established brands or to new brands addressing older smokers by, for example, emphasizing consumer-based rather than volume-based action standards. • RJR should make resources available to develop/improve its capabilities to thoroughly identify and track demographics, values wanta media effectiveness, and brand per ormanee within sectote of the younger adult smoker population. Theae tools vlll be critical to the development and implementation of effective programs addressing younger adult smokers. • Because of the sensitivity of the younger adult smoker market, brand development/management should encompass a11 aspects of the marketing mix and maintain a long term single-minded focus to all elements -- product, advertising, name, packaging, media, promotion, and distribution. Tactics which could negatively affect the integrity of the strategy should be avoided. 2. RJR should seek to better understand and capitalize on the factors/ strategies vhich have succeeded for oun er adult brands of the past. Since RJR'a processes tools have been better attuned to switehing efforts than to "first brand" strategies, time and learning will clearly be required to fully assess the opportunities available through these % avenues. It should be noted that the new/established brand programs in the 1984 Plan already address the major issues/trends identified belov, within the -framework of current knowledge/processes. These Plans should continue as a basis for RJR's 1984 marketing efforts, but should be enhanced by a full-time dedication of resources to ensure a solution to the problem. ~~ , ..• ° -- - ~ ~ . Ey e U:~ Y 2: RI-I000377: r
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MARLBORO n.t 'tM .xtiw ..c.wi ...+a IaVS[F P4We1A p/1. ~ 1W OI Despite Marlboro's masculine positioning, it appears to have been a dual sex brand among younger adult smokers froa the beginning. Marlboro skewed male to M,Ahe same extent the total younger adult smoker market did, but was almost equally developed among younger adult males/females until after 1975. SHARE AMONG 18-]tiAR-OLD SMOKERS Deve~l~~o ~ment Index Marlboro Tota7. ~le --Female 1955-64 8.5% 101 98 1965-74 31.8 104 94 1975-79 40.6 107 94 1979-83 50.3 116 84 Source: 1983 SDS .this balance was advantageous to the brand since the 1960'a drop in female mportance vas only temporary. If Marlboro's mastullne positfoning_had_ made_ it a heavily male brand, it would have positioned t e brand on a long term decfrning tren . -1'1-
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~ ~ CONFIDENTtAL I 1 T0: A. K. Curry ~==I .~~ pROtle R. C. Ibrdine pebruary 17, 198A r, SOWLCTt TOUNCdR ADULT yORR SESStpt ^~W N F In Monda)'s .eetioS to discuss younger adult asokars, I would like to p.t you~ ~ thoughts as the analysia ve have be.n working on. Mors &entrally, I ts W ®~ iAterested in what you think it takes to i.orov. LIR'~s~ w~rtormanee in this group. F O I h.n attaeMd the first draft of our analpsl•. It i• based on • f•irlp o~ ~ siqle apprAacL Tirst the hiterteai daveleA.ant of successful younger adulli branda ta traced to help deteftla• peneral factors that noatributed to that ~~ auccess. T6ae sar factors are then considered !A ted,v' .ndren.ent to p.~ {ener•te potsAti•1 strate=ies ve can Asa to t.pron RJR'• perforsance mad poonpr nblta. 5 ri lecause of tle isportance of this subject, wn have not tried to a-oid v F P~ W ooetroversp - at least not iA the first draft. We would like your input b••ed so previous research you have done, ucistin: plans to addre•s pouns.r ad.I:t esU.re, and po.r opinions. Ye ne.d to identiff pointa that need to ~S p ;JAjj}sdr aseau rh.r• itatire research can r•na urt r su eod F Q~ ooeclwi p av. over no . 0 1 7~ dis~ ~ a~ wftb so.ethiA{. piwlip, and .oet Seportantlp, w vant roor thoutktl+ Op on i.plio•t!•aa - rscorendetioaa on hov to i.prov tJR'a perforsence in tAi~ ~ group. Sorry w a.re unable to pt this to you earlier. Thanks in edvance for your ~ u~i help. F o N-~, d lichard C. tbrdine Marketing Denlop.ent Drpart•ent RCN:df Attacb•eat cc: 1. J. peckal.aA D. S. lorrovs CX-847 150,0 y (haRlb~o ~5PT ~ RJM047411 n 84M00277
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2. MARKET SHARE -- THE "FIRST BRAND" ADVANTAGE D. LONG-TERM DIVIDENDS -- RATE PER DAY (Cont.) 'sa Thus, the 18-year-olds who were worth 1.6 points of smoker ehare in 1983 were worth only 1.4 points of market share, since their consump- tion was below average (index of 85). However, by ages 35-49 they will be worth 1.8 points of SOM •- a 30% dividend on their original market share value. This consum tion increase is the difference between having smokers 3- and havLng amokers who will age to 35-49. E. EXTENDED BRAND LIFE CYCLE The combination of brand loyalty, aging, and increasing usage tends to provide "life insurance" for brands which skew, or have skewed, younger adult. For example, Marlboro relies heavily on 18-year-olds for its share growth. But if from 1984 on no 18-year-olds ever smoked Marlboro a sin a in eould le.t Marlboro almost hold its market ehare throu h e e t s e o C e ta e be ow 11016 t e contribut on eac age group makes to Marlboro's current smoker share and what that contribution would be in 1990 if Marlboro got no more 18-year-olds and merely moved its franchlse smokers to older•age brackets. On the right side of the table, the smoker share contributions are translated to market share, by factoring in rate per day differences. The bottom line shows that, even after seven years without 18 year-olds, aging could allow Marlboro's market share to hold within one point of its 1983 level. SMOKER SHARE CONTRIBUTION 1983 1990 TRACKER PROJECTION 18-24 6.8 <- 0.0 25-34 6.5 6.8 35-49 3.8 7.9 50+ 1.8 2.2 TOTAL 18.9 <-- 16.9 *Jan.-Dec., 1983 MSA. MARKET SHARE CONTRIBUTION 1983 1990 EST. PROJECTION 6.6 <- 0.0 6.8 7.2 4.6 9.6 2.1 2.5 *20.2 19.3 Thus even if a brand falls from favor among younger adult smokers, the younger adults it attracted in earlier years and their increasing consumption can carry the brand's market share for years, signifi- cantly extending ite overall life cycle. -5- M ~ N b Ln N r 00 W
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T The 1983 SDS showed that younger adult smokers are most likely to base their brand perceptions on the pcople they see using the brand -- more than its advertising, package, or name. Thus, it ts possible that WINSTON's own profile might have hastened its downturn aicong younger adult smokers. Whereas Pall Nall started vith fei+ older smokers. WINSTON started strong among all ages. Thus, by 1965, half of WINSTON smokers were over 35 and might have contributed to an older, "establishment" image for the brand. As WINSTON lost its hold on the 18-year-old smoker market of the mid-1960's, its younger adult smokers dispersed to SALEM and Kool as well as to Marlboro. As with Pall Mall, WINSTON's younger adult female smokers moved more quickly, leaving WINSTON overdeveloped among younger adult males for the first time. WINSTON SNARE AMONG 18-YEAR-OLD SEAKERS 1956-60 1961-65 1966-70 19 71-7 5 1976-80 Males 31% 12% 27% 16% 11% l - - - 35 14 ~ 32 9 I Fema es i - --- - TOTAL 13 -> 32 29 <- 13 <- S 00 Source: 1983 SDS and younger adult female smokers again became the rising trend. But by this . U a e c When the TV ban took effect in 1970, the TV antismoking campaign also ended CE k time, Marlboro had become the "bandwagon brand". There was an uptick in WINSTON's share among younger adult female smokers when its Lights 100's were introduced in 1977, well ahead of their Marlboro counterpart. But, overall, WINSTON's line extensions seem to have had no lasting effect on its younger adult smoker trend. (ffl N co 0 W W 01 ~ w • -14- W 1 ~ 0 i
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• . r .y' II. SUCCESSFUL "FIHST BRAND" STRATEGIES OF THF. PAST In the 1983 Segment Description Study (SDS), smokers of all ages were asked 0"what brand they smoked when they were 18 years old. By using these responses to represent the younger adult market of the past, the rise and fall of key younger adult brands over the last fifty years can be analyzed. By linking E~%these brand trends in time to demographic/social/marketing changes, insights &`into the factors which affected those brands and might affect a younger adult . brand today can be gained. This section traces ever brand which has risen to a lOX or higher share among 18-year-old smokers since the 1930's. There have been only six, but they include the maor brands of the last half century -- Pall Mall, WINSTON, Marlboro, Koo1j SALEM, and Newport. 0 Although their rise cannot be traced, Lucky Strike, CAMEL, end Chesterfield ' d BACKGROUND s. Smokere who turne were the giante of the cigarette market during the 1930 18 in the 1930's seemed to favor Lucky Strike, but no brand skewed younger ;; adult to the degree seen for the brands that would follow. 1930's AVG. SOM 18-YR-OLD SMOKERS Share BDI Lucky Strike 22% 32% 146 CAMEL 27 30 111 Chesterfield 27 20 74 All Other 24 18 75 decrease in the size of the younger adult population during that time. ~ younger adult smokers between the 30'a and 50's, even tlso there was a 15% +fR'.H..E~,Y 1950's This gain was large enough to create a 6% increase in the number of ~ importance from 30% of all 18-year-old smokers in the 1930's to 44% in the "4 becoming more likely to smoke at age 18. The SDS showed that females rose in The key trend for Pall ltall was younger adult female smokers, who were rapidly PALL MALL: THE BRAND OF T'.lE 1940'S AND 1950'S. -8- RH0003 78f
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~Key Points About WINSTON: WINSTON benefitted from the health scares of the 1950's, which created the filter boom. It used a positive position -- "WINSTON Tastes Good" -- to capitalize on a negative environment. : • Favorable timing helped WINSTON. It attacked the filter market before ;: earlier filter brands hecame entrenched. Younger adult smokere were as likely as older ones to be early WINSTON adopters. • Younger adult strength was a leading indicator of WINSTON's extended market share gains and of its softening. • Peer pressure --- the "bandwagon effect" -- seems to have worked for WINSTON in the early 1960's, when it had a 30% ahare of younger adult smokers. 00 6 WINSTON may have lost popularity among younger adult smokers because ' changes ir the external environment made WINSTON less in tune with both the demographics and the mindset of the 1960's than it had been in the 1950's. Its large number of older smokers may have contributed by linking the brand to the "establishment". on its younger adult smoker performance, although WINSTON Lights 100's may have caused a tempcrary rise until Marlboro responded. WINSTON did not become overdeveloped among males until after its younger adult smoker share had begun to decline. . WINSTON's line extensions do not appear to have had any long term effect • s . . W a
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C. MOMENTUM FROM AGING An analysis of Tracker shares from 1979-83 (see Appendix E) shows that, apart from short term fluctuations: • Incoming 18-year-old smokers and the movement of its existing franchise into older age brackets can explain all of Marlboro's smoker share gains in the pcst four years. Amon smokers 25+, all of Marlboro's gains are attributable to this aging movement-- switchLng appears to have had no net long term effect. If Marlboro merely holds its share among younger adult smokers in the next five years, it is likely to gain at least 3 points of smoker share due to the aging movewent of its present smokers (assuming its switching is no worse than in 1980-83). If Marlboro continues to gain share among younger adult smokers at its present rate, its overall smoker share could easily increase by a total of 5 points, from 19% in 1983 to 24% by 1988. • Newport's growth can also be entirely explained by its youngec adult strength and a in . Over the next five yeara, Newport is likely to gain .8 points of total smokers without any additional growth among younger adults. If its younger adult gains also continue, it could exceed a 4% total smoker share by 1988, a gain of about 1.5 points over 1983. These examples demonstrate the momentum younger adult smokers give a brand. Although a competitpr could slow this momentum by attracting switchers, the "first brand" would hold the high ground of brand loyalty in such a battle. D. LONG-TERM DIVIDENDS -- RATE PER DAY Government and RJR studies spanning several decades have shown that smokers increase their consumption as they age. The chart below shows that smokers 25+ consumed 22% more than smokers 18-24 on average during 1980-82. RATE PER DAY (1980-82 AVG.) ln N X Increase Index ~ A I AGE Cigte. Vs. 18-24 M vs. Total ~o 18-24 26.2 85 w 25-34 35-49 30.6 34.1 + 17% + 30% 99 N 110 ~ 50+ 31.2 + 19% 101 Total 25+ 32.0 + 22% 103 TOTAL 31.0 + 18% 100 0 0 Source: Incidence/Rate Report, Year 1 982. r r W ~ -4- P N 01 r-.
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YOUNGER ADULT SMOKERSt STRATECIES AND OPPORTUNITIES MANACEtME NT SUMMARY WrPOSE is is intended to assist RJR in optimizing its strategic position with y-Vie.spect to younger adult smokers (18-24) by clarifying their importance versus gk~~ i4ywkers 25+, identifying strategies which have been most effective against younger adult smokers in the past, and applying this learning to RJR and its current environment. This summary provides a broad overview of the most critical points and key ideas in the report. However, it was necessary to omit many important points in order to be brief, and readers are encouraged to read the entire document. ~#tE IMPORTANCE OF YOUNCER ADULT SMOKERS a Younger adult smokers have been the critical factor in the growth and decline qf everymajor brand end compa~ over the last 50 years. They wil_1 continue ``~0 lust as mportant to~randa companies in t_e uture For two' eim~e - ~ reasone: • The renewal of the market stems almost entirely from 18-year-old smokers. No more than 5% of smokers start after age 24. • The brand loyalty of 18-year-old i:mokers far outweighs any tendency to switch with age. V-year-old smokers. RJR yielded a.S point ingoing shara advantage to.pH in Wy€y;~:,~hus, the annual influx of 18-year-old smokers provides an effortless momentum to successful "first brands".* Marlboro grows by about .8 share points per ~` Xear due to 18-year-old smokers alone. ~WAN E,WP,Qn the other hand, brands/companies which fail to attract their fair share of )3ounger adult smokers face an uphill battle. They must achieve net switching ',,q ya;gains every year to merely hold share. By not attracting its fair share of 14983. !farlboro and Newport, the only true younger adult growth brands in the market, . P0'~4oungcr adult smokers and the movement.of the 18-yearolds which they have previously attracted into older age brackets, where they pay a consumption dividend of up to 30%. A strategy which appealed to older smokers would not pay this dividend. All of their volume growth can be traced to ' have no need for switching gains • i.e., those which appeal to 18-year-old smokers rather than switchers ages 19-24. . i n
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"Extra length" Pall Mall King entered the market in 1937. •-4nitially, it had a prestige positioning, but was soon zlrefocussed to emphasize mildness and •'easy" smoking. From the W;geginning, Pall Mall's development was about twice as high among ounger adult females as males. is captured the rising trend of he younger adult smoker market and ,~a.lso made good strategic sense for IC -- Lucky Strike skewed male and ~ all Mall skeved female. Thus, :`'Pall Mall was 1n tune with the ':y;temogrephics of the times and its company's mix. tI V a ' %1UiiSl !~ V VQ S 1956 tvring the 1940's, Pall Mall'e share grew to 10% among all 18-year-old ;~smokers, to 18% among younger adult female smokers, and was still rising. But since Pall Mall attracted fewer older smokers, its market share was only 3% 0;:~ifter a decade (1947). By the 1950's, though, the aging payoff was inevitable: Pall Mall's S0H soared to 15%, with a younger adult smoker share twice that high. PALL hRLL n+t rira nu:vo Rrtmot pwRt :-I 2 - ku~" swr teusCO WWl11 srA Ne up I01 -9- ~ J. ::Mildness is a•Pleasure :'. :-. ,.•kwith PalLMall:. , RH0003787 .w.Vt11~6~!'y..Vfi7
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s But. Pall Mall became out of step with its times when the cancer scares of the rid-1950's created the filter boom. Pall Mall might have defended itself with ' h i d t h 1965 a ev younger , v en t I a filter line extension, but t didn t try until ~tlult smokers left to defend. .,(l,fter Pall Mall peaked, its younger adult franchise began to skew male. S. okers who remained with Pall Hall bolstered its market share for another 10 oved on. But the brand loyalty and aging benefits of the younger adult punger adult female smokers -- the rising trend Pall Mail had captured -- PALL MALL SHARE AMO);C 18-Y6AR-OLD SMOKERS 1940's 1950-54 1955-59 1960-64 1965-74 Source: 1983 SDS Nales Females TOiAL 9X 16% 18 40 10 -> 26 30X 22 4 30 13 2 > 30 <--- 19 <- 3 ~~xr..;ATC's leading position among younger adult smokers, first with Lucky Strike and then Pall Mall, pushed it to #1 in the industry in 1940, when it passed RJR. However, since Pall Mall was ATC's last successful younger adult entry, he brand's downturn signalled the future performance of ATC as a company. AMERICAN TOBACCO 24 wi~ gI ri1S'CM "..:K h'.btX • !tict t+..'1 196o~irfo 'V 140 i+va nta saxss vrc_ W'a x.at' ss -10- 0 R14000 i : 88 r r
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~ a~k 5,,;~~~~~s v~FG~ ~y , S? ys-ra-a,~ p~ ~ oe?°~.+~'N-% ~ ~w * III. KEY LEARNING: SUMMARY 6 CONCLUSIONS ~ The previous two sections have discussed the importance of a strong position ip the younger adult market and the strategies/circumstances which have, in integrating the key points from these sections, several conclusions can be „ae past, allowed brands/companies to achieve growth among younger adults. By -WV~4eched. - --- -- - THE IMPORTANCE OF YOUNGER ADULTS • Strength among younger adult smokers is critical to generating sustained growth momentum for brands/companies. a - New 18-year-old smokers represent about 1.4 share points of ~ incremental volume each year. y e - A younger adult smoker who has been gained and retained 'E appreciates in value over time because of increased consumption. ~ Older smokers do, not. ~ a • The biggest cigarette brands of the last half centruy have derived e~ their strength from high younger adult development -- Pall Mall, .E ~ WINSTON, Marlboro, and Kool. Newport may be another such brand, but its size is limited by distribution. V' ° g In each case, F % Younger adult gains have been a long term leading indicator of ~ the brand's market share gains. Typically, major market share $ growth has lagged the brand's younger smoker growth by at least :~ five years. ~ Continuin loss of oun er adult stren th hae also been a 4~ ea ing in icator o market s are so tness a ec ine, although Y aging may bolster the brand's SOM for a 3ecade or more. ° ~ - Younger adults provide the most concentrated switching ~ opportunity in the market. While a switching strategy is ~ • Major performance gains can be made among younger adult smokers with very little effect on short term total market share. This means that competition may be slow to notice an improvement of RJR performance `~/ among younger adults and, therefore, may be slow to react. - A "first brand' strategy (vhich is necessarily younger adult) provides an opportunity for unique long term benefits. However, it is likely that at least two to three years of close tracking would be required to determine the success of a "first brand' effort. Short tera gains could be significant but are more likely to be minimal. pVJe inherentl less cost effective, it may be more feasible and may m also be sore likely to produce short term share results. m' ~'J baroY~ ` N ~ wea% RM0000924 -25- CONFIDENTIALN
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£xQ\A%,3 tM'S sucta3.S w;Y-N posA-;•k)x&w ~s a;scus65aJ wol Nuh6inL.S~ . ,i oo ~ ~L~4tiSpy Key Points About Marlboro 1960'a • Marlboro succeeded with a "first brand" strategy targeted to the VADy,)oleading edge of the Baby Bubble, who turned 18 in the 1960's. oMco Younger smokers have been a clear leading indicator of Marlboro's market share growth. • Marlboro was only a second entry in the taste/flavor filter market until it developed its image-intensive long term campaign/ positioning. This took eight years of trial and error. Marlboro's final positioning, set in 1962, was in tune with the mindset of the 1960's and also with the demographic shifts among younger smokers, since younger females dipped in importance during that decade. • The WINSTON "bandvagon" held Marlboro down in the a e Y ~ 0 early/m1d-1960's. _ ~• Marlboro's lighter, ryZj.ier nrnd,,Pr may have given it an edge over WINSTON among younger smokers. • Despite Marlboro's masculine positioning, "4 developed amona younAer males and females it was almost equally until aftir 1975. u,As;j' o, npsc.pe~;L~a 60- iNaeps~+aEt+tE~J_* c.. ' 1970- • Marlboro's younger smoker share softened in the late 1910 s, but _~ Younger Marlboro males' interest in masculine imagery is no V% ~~ stronger than the average younger male. had built enough aging momentum that its SOM trend slowed only slightly. • Certain evidence suggests that Marlboro's positioning has become less in tune with younger smokers than it was in the 1960's. - Younger females, not males, have been the growing sector among younger smokers. Marlboro has been losing strength among females. y S vj~ L,• Marlboro is a "bandwagon brand" today. ' - Marlboro users provide the brand's imagery todaye more than its advertising does. " Peer - Marlboro stands for "the average young adult. popularity is its added benefit. - Marlboro smokers believe in its high quality. Younger smokers' need for "hyrlaaaLttg" is strong and may be increasing due to social pressures against smoking. Marlboro .A,d,A provides a means of belonging. S M s,^'~ N RM0000918 • Marlboro suffers high switching between ages 18-24, but Philip Morris retains about twice its fair share of those switchers, via r Vi i 1 811 d M it a 9 T E T~ . . o, rg n ms an e CONFIDENTIAL
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~o S't'C~4 a ~ 1J f. t1e,a Sac4'~Q~t-~ J1e~u.n uy6a After 1975. Marlboro not nnly started ¢rip on rhe 18-vear-old matket-- • Marlboro's 18-year-old smoker share dipped in 1976-77 when both SALEM ,~ and WINSTON brought out Lights 100's styles and Marlboro feiled to ~'tD ~p yp ds75y, respond until 1978. This may partly account for Marlboro's increasing ~'male skew in the late 1970'e and, perhaps, for Marlboro Lights 100's Q~11y? switching gains versus WINSTON and SALEM in the 1980's. -to ~00,S N b ibbl M lb '"fi t brand' territo Ne t r o rs r w or t t • ewpor a y. p egan to n e a or s was a brand Marlboro was ill-equipped to compete against, because of its long-standing menthol weakness. This could be a reason for the strong emphasis on Marlboro Menthol in late 1982. • CAMEL and Virginia Slims each took a bite. These inroads on Marlboro's younger smoker stronghold in the late 1970's barely showed in the brand's market share because aging momentum from the 1950's and 1960's covered its tracks. But these may have been signals that Marlboro was becoming less in-sync with younger smokers over time. • Males were not the growth sector of the~vu~~fer marUAt!"-'ti- 1o'n'a- ~males were, reboundina from 38% importance in the 1960's to 49% of all 18-year-old smokers by the end of the 1970's. Z IMPORTANCE AMONG 18-YEAR-OLD SMOKERS o , 1 50'-$ s~- 1960'e 1970'e 1980-83~ " 'C i+ l M s 55 > 62 < 53 51 F ~ a e L Females 44 < 38 > 47 49 ~ ~ 0 Source: 1983 SDS G 0 aculine oeTcr'"sa apou seao u, ~,~-~+Va*aare "~a1._ But, Mar1bOT0'8 Oun er male smo~tera do not stress N ymasculinity any more [han o[her younger ma es. In act, younger sin es ~ who smoke other brands are somewhat more likely to want.the rugged, 0 traditional masculinity. ~ N ?hus, the evidence of share trend, demographics, and wants tends to suggest w that Marlboro's positioning may have become less in tune with the younger market during the late 1970's and 1980's. N O J ' ee ' -16- RM0000915 CONFIDENTIAL T , P ' W
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began to coalesce behind Kooi, which only had a 2% share among younger whites. It was time for $),yt,Ya *o build rhnir o4~q,~Q„in the 1960's, the heyday of Martin Luther King and "Black pride". ~" Kcpl apparently ca i of ' sim vertising oF Bl c . Kool ads were in Ebony consistent y roa at least 1962, when our records start. This was easy for Kool, since a r '-/!~,petM in amoainn ttra airAar ..~a_ and it-was effective. By the arle~v 1970's, L. Kool had a-~S6rX share alm~s gsg vounrer Rlarha -- it was the Black Marlboro' , jrjoS%Vt m ~ OG (1f.y _, .,. a~ , I ' Black rket rcem nt for ite whose importance was no longer booming. Kool was in a bind inlhe Black ;islite'ites were returning to smoking, leaving Kool with a 500 BDI in a sector KOOL SHARE AMONC 18-YEAR-OLD SMOKERS 1950's 1960-64 1 65-69 1970- 14 5- 9 1978-8 10% White 1 TOTAL 2 Source: 1983 SDS 12% 17% 56X 2 6 11 3 6 14 Like Marlboro, Kool capitalized on the shifts in the 1960's market. And, by the 1970's it was fa11ing out of sten with the trends of the times -- younger Koo1 was vulnerable and NewpQrr,_faQiralS.Pa ~n that vulnerabilitw.~ KOOL !M Ito IlllllUE IIKRK[ MRr ssuaas. awna ans M ua m RM0000920 -21- ~ ~ .d v m CONFIDENTIAL F m
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WINSTON suddenly lost favor with younger adult smokers in the mid-1960's. This was not due to any sudden changes in WINSTON or Marlboro ads or products. The ban on television advertising didn't hit until 1970. However, two major shifts in the 1960's environment may have left WINSTON less in touch vith younger adult smokers. 1. The heavy antismoking activity in 1964-69 may have caused problems for WINSTON: • WINSTON's positioning and its development were both slightly female, in tune with the younger adult smokers of the 1950's. However, the antismoking publicity in the 1960's had a disproportionate effect on younger adu!t females, so it changed the demographic mix. Within only a few years, females fell from 44% to 38% of younger adult smokers and, for a decade, the rising trend was male. Thus, WINSTON became out-o -tune demographically with the younger adult smoker market, because external influences had changed the market of the 1960's. • The first FTC report, published in 1967, named WINSTON the highest "tar" non-menthol filter in the market -- higher than some non- filter branas and 8 mg. higher than Marlboro. WINSTON's product- centered proposition may have been vulnerable on this front among younger adult smokers looking for mildness. • The intense antismoking campaign on TV may have offset WINSTON's effectiveness in this key medium. 1965 2. WINSTON's light-hearted approach may have also become less attuned to the changing younger adult mindset of the 1960's. In the era of Vietnam, campus riots, and the Chicago Seven, it seems likely that Marlboro's intense, unsmiling cowboy was a better fit. •..~. ~ ... .,.. -^..~. y1S8t!']H tgt!tt p0od_iba t dtw±. da.Y! -13- n Come 1o where the flavor Is. Come lo'tlariboro Country r• \ t /. .1f.•• . m i 0 r u I
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WINSTONi THE HIT OF THE 1950'S AND 1960'S. <External influences in the 1950's contributed to the WINSTON opportunity. :a "bandwagon brand" among younger adult smokers. , 1. The rising tide of health concern which peaked with the "cancer stare" of 1954. Although "modern" filter cigarettes had been in the U.S. market since 1936, their market importance wan almost nil until the early 1950's, when Viceroy sales quadrupled in less than two years. Reynolds, determined not to repeat its experience introducing CAVALIER against an already-too-woll-entrenched Pall Mall, rushed WINSTON to market in March, 1954, near the crest of the health scare. 2. The spread of television. WINSTON was introduced on TV -- a"fad" that spread from 9% of all households in 1950 to 87% by 1960. Advertising dollars were a key advantage for WINSTON over its filter competitors, and the bulk of those dollars were used to leverage TV. Younger adult and older smokers alike responded promptly to WINSTON's positive proposition -- "WINSTON Tastes Cood" -- its point of difference from other filter brands and the product deficiency non-filter smokers might suspect, s`WINSTON let Kent and Viceroy sell the benefits of filters and, perhsps, make themselves look like "sissy brands" to younger adult smokers seeking maturity, By 1958, WINSTON was the Number One filter brand and still showing steady market share gains. In the early 1960's, its share among 18-year-old smokers reached some 30%, twice as high as its market share. WINSTON's effect on SALEM and Marlboro during the early 1960's (as shown later) suggests that this ""30X share was large enough to put peer pressure on WINSTON's side and make it WINSTON rrn nr.awo anmt swt aOilt2~ Wnt11 am he 1M1 A -12- ~ ..;. : .- ~ c {_- ~ o ~ - / + 'e m a C RHOO0J79(~rt
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... YOUNGER ADULT SMOKERS: STRATEGIES AND OPPORTUNITIES ~ INTRODUCTION ?~~¢RJR's consistent policy is that smoking is a matter of free, informed, adult ~ choice which the Company does not seek to influence. However, in order to a~l~futureu of b the n Industry.us Furthermore thife we P are to o compete choices we on ust recognize the imperative to know and meet the wants of those who are 18 and have already elected to smoke, as well as those of older smokers. ~ eFu~se ~ This report is intended to provide additional learning on younger adult smokers (aged 18-24) to assist RJR in optimizing its strategic position with respect to this smoker group. Hhile competitive issues, such as Philip Morris' continuing overdevelopment among 18-24 year olds, are a major focus of the analysis, the broader perspective Is on the overall business opportunity which may be available to RJR through effective marketing to younger adult A ~., adult smokers. , e . "fSection I"The Importance of Younger Adult Smokers," explores the potential %;There are five sections: benefits/costs of "first brand"* or switching strategies directed toward younger adult smokers, in comparison to smokers 25+. Key elements include the ,impaet of 18-year-old smokers on the market, the effects of aging on both smoker share and market share, and the degree of potential switching opportunity• These analyses are based on share trends from HI1D Tracker, "loyalty rates from the 1983 Segment Description Study (SDS), NPO switching, and consumption patterns from Tracker and government studies. 1 Section II "Successful 'First Brand' Strategies of the Past," uses never- before-available information from the 1983 SDS to trace the succession of key `;Fyounger adult brands over the past 50 years. This allows an analysis of the key factors which may have been important to their growth and decline, as a `,N;K~"'~Mpotential framework for RJR's present/future younger adult smoker strategies. 3sX~ HSection III summarizes the "Key Learning" which can be concluded from Sections `I and II on the importance of younger adult strength and the means which have succe ufully achieved that strength !n the past. : Section IV gives "Implications and Recommendations for RJR" which were derived uy applying this learning to today'e younger adult smoker market. <Sectl.on V, "1(ey Trend Detail," amplifies key recommendations from Section IV. €:'sz~Appendlces support the main presentation as referenced in the text. "First braad" strategies appeal to 18-year-old smokers rather then switchers agse 19-24.
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5 .~~.~,.~„~~ 14 9NtNan3l ,1D III N0I133S ,
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SECTION IV IMPLICATIUNS AND RECOMMENDATIONS FOR RJR
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f
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MARLBORO: THE "BABY BUBBLE" BRAND ~ ''-Ihe leading edge of the Baby Bubble exploded on society as the younger adults ~ku~;~'of the 1960's. Over 30 was "out" and the younger set was driving fashions, » politics, and the marketplace, sometimes violently. And Marlboro would become 12heir brand. ~... ~ „#lfarlboro had been quickly repositioned in 1954-55 to catch the filter boom. ~;'"But, as a second entry in the "taste/flavor•" filter market, with no point of ~` difference but its box, it trailed WINSTON among both younger adult and older cmokers. : 01 ,,,> ~, ~ W 1955-60 Market Share 18-Year-Old Smoker Share IiINSTON 9% 11% Marlboro 4 3 at the nonfilter market, which had become overdeveloped among males as it declined. It took eight years of experimentation for Marlboro's permanent ...Judging by its copy, Marlboro's masculine positioning was originally directed r', ,.;"cowboy" campaign to fall in place in 1962. Even then, the WINSTON ~~°s~":"bandwagon" held Marlboro at bay. ~` 8ut Marlboro, through happenstance or design, fit better and better as the ,pressures of the 1960's evolved. • Marlboro was a milder product than WINSTON, but its emphasis on flavor kept it positioned as a "real cigarette". • Marlboro was positioned male during the only decade since 1930 when males were the growth sector among younger adult smokers. • Marlboro'• intensity fit the mindset of younger adults in the 1960's. • Marlboro's positioning was in tune with younger adult smokers' enduring want to express their maturity and independence through smoking. (The Marlboro cowboy is always shown as a mature, even older man.) • Marlboro acquired younger adult smokers then WINSTON* and, by the late 1960's, this meant the Baby Bubble, the largest cohort of people, and smokers, in history. `* One way to see this is by comparing the percentage of Marlboro versus WINSTON smokers who smoked at age 18. For example, among White male WINSTON smokers who turned 18 in 1955-70, 70% smoked at age 18; for Marlboro, that percentage was 87%. (Source: 1983 SDS) -16- ut N 1-+ W to ~ w w 00
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Opce Pall Mall and WINS?ON had tvrned down among younger adult smokers, there ,ss - 1SY sf0 sela . . .s13 . - noo • 1!•YUe•ha Sro.tes• 1983 8mt, Rsuvncr t+w. -19- ;~ s no return. How, then, has Marlboro managed to hold, even recoup, among 18-year-old smokers in the 1980's? 1. In the 1983 SDS, younger adult smokers were much more likely than other smokers to base their brand perceptions on the people they see using the brand. But, among all bra~ds younger adults were most likely to base their Marlboro perceptions on brand users. (See Appendix F). Since, in 1983, 70% of Marlboro users were under 3S and fully 36% were under 25 (8DI - 218), Marlboro's very size among younger adult smokers may give it an effective positioning that has little to do with ths ositionin of ita advertisin . Marlboro's younger adult smokers can e their own campaign, automatically in tune with the times. 2. The SDS showed that Marlboro's ke ima er was not masculinit it was ounger adult identity belonging -- the brand for average younger adults, popular and acceptable among younger adult friends, not "too different". This makes sense as the imagery Marlboro's users would convey, apart from the brand's advertising, pack, or name. Marlboro is clearly seen as a quality product, even by younger adult smokers who prefer other brands. Marlboro smokers want to buy the best" and they think that Marlboro is the best. This may reflect specific product performance, since in-market teat results over the last decade indicate that Marlboro King's smoother, less harsh delivery has been consistently preferred over the stronger WINSTON King. This was still the case among younger adult smokers in 1983 testing. (See Appendix G.) / . . C ! a ~ ~ q . .-. Z E `o • U t= r S~ ' Marlboro has the "bandwagon effect" still going for it. In fact, the WL e trend over the decades has been for younger adult smokers to increasingly cluster behind one big "first brand", a trend that parallels the increasing pressures against smoking during these times. ~~ his could mean that as social Dressures tend to isolste Younger adult smokers from their nonsmoking peers, they have an increased need to identify with their smoking peers, to smoke the "belonging" brand. ~ r SHARE RnONG rOUNGER ADULTS' 6•,06rui. •.wa 0.•
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After 1975, Marlboro not only started to skew male, it started to lose its grip on the 18-year-old smoker market: ~k • Marlboro's 18-year-old smoker share dipped in 1976-77 when both SALEM and WINSTON brought out Lights 100's styles and Marlboro failed to respond until 1978. This may partly account for Marlboro's increasing male skew in the late 1970's and, perhaps, for Marlboro Lights 100's switching gains versus WINSTON ard SALEM in the 1980's. • Newport began to nibble at Marlboro's "first brand" territory. Newport ( was a brand Marlboro was ill-equipped to compete against, because of its long-standing menthol weakness. This eoild be a reason for the I • strong emphasis on Marlboro Menthol in late 1982. CAMEL and Virginia Slims each took a bite. These inroads on Marlboro'a younger adult smoker stronghold in the late 1970's barely showed in the bran-'.'s market share because aging momentum from the 1950's and 1960's covered its tracks. But these may have been signals that P ~ m I Marlboro's masculine imagery was becoming less in-sync with younger adult `. smokers over time. • Males were not the growth sector of the younger adult smoker market in the 1970's. Females were, rebounding from 38% importance in the 1960's to 49% of all 18-year-old smokers by the end of the 1970'e. X IMPORTANCE AMONG 18-YEAR-OLD SMOKERS 1950's 1960's 1970's 1980-83 Males 55 -> 62 < 53 51 Females 44 <- 38 ---> 47 49 Source: 1983 SDS • In the 1983 SDS, younger adult males clearly still cared about being seen as masculine -- they don't want feminine imageryl Marlboro's 18-24 smokers also want masculinity, because the majority of the brand's smokers are male. But, Marlboro's younger adult male smokers do not stress masculinity any more than other younger adult males. In fact, younger adult males who smoke other brands are somewhat more likely to want the rugged, traditional masculinity. ' Thus, the evidence of share trend, demographics, and wants tends to suggest . that Marlboro's positioning may have become less in tune with the younger ; adult smoker market during the late 1970's and 1980's. -18- i ~ a ~ . a c n , N co ~ ~ w ~ ~ m a~- . ~... . .. i s x
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SALEM/Kool/Nev~ort > aiALEM ~:;,'~ALEM's product breakthrough was "light menthol". Kool nonfilter had been in ~. market since 1931, but it was advertised more like a cold remedy than a .'Eigarette and, apparently, tested like it, When SALEM lowered the menthol and ~ added a filter, it cut an 8% niche in the market. ~•. ~t first, younger adult smokers adopted SALEM as readily as older ones but, in ~1~e early 1960's, ite 18-year-old smoker share went flat. It appears that ~his had more to do with WINSTON than either SALEM or Kool -- the WINSTON ~abanduagon effect" was drawing 18-year-old smokers like a magnet. When WINSTON ~::»»€>:~et go in the late 1960's, SALEM could again attract its fair share of younger adult smokers. Althou h SALEM became stronger among yo_;,ger, adult smokers of the 1970's, it es never become a true "first brand". A fair share of younger adult smokers, though, is enough to keep market share steady for a long time. SALEM TIR~WI~MM~.'il "='The key trend for Kool vas the emerging importance of younger adult Black ~` "~mokers in the market. In the health-concerned 1960's, younger adult Blacks •<"~m oke rs ~ didn't back off from smoking to the extent that Whites did. Because of this, P `iounger adult Blacks of the 1930's to 1950's had basically gone with whatever brand was big among younger adult White smokers (See Appendix I). In the 1960's, they began to coalesce behind Kool, which only had a 2% share among younger adult Whites. It was time for Blacks to build their own brand in the 1960's, the heyday of Martin Luther King and "Black pride", the 1960's. their importance surged from 6% of 18-year-old smokers in the 1950's to 10% in 0 ~ s w M ~ -22 f ~ RH0003890 ~ ~ .
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In its early years, SALEM's appeal to younger adult smokers was overshadowed by HiNSTON. • SALEK gained among younger adult smokers of the 1970's, especially Blacks, by spending more effectively against Kool, but never has become a true "first brand". Kool'e growth, much like Marlboro's, hinged on demographic shifts caused by the antismoking 1960's. -26- • Kool was in tune with the rising importance of younger adult Blacks in the 1960's. The mindset of "Black identity" made it time for Blacks to adopt their own brands, rather than follow the general market. • Kool gained "Black idantity" by advertising to Blacks before its competitors. • When younger adult Whites returned to the market of the 1970's, Kool was suddenly too Black to fit the younger adult market and became vulnerable. Kool also splintered its heritage, positioning itself by style. Nawport • Newport, when it was repositioned, essentially bought Kool's prime North Atlantic market by intense spending in out-of-home and against Blacks. • It appears that Newport has gained younger adult White smokers by gaining distribution but its fundamental growth is among Blacks. • Younger adult smokers rate Newport as milder/smoother than Kool. • Newport users are the main source of Newport perceptions. It is seen as the alternative younger adult brand -- for Blacks an alternative to Kool, for Whites an alternative to Marlboro. It's for those who don't want to follow the crowd. i ~ w RH0003Rti4 A
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Kool apparently capitalized on this aspect of the 1960's by simply advertising to Blacks before its competitors did. Kool ads were in Ebony consistently from at loast 1962, when our records start. This was easy fot Kool, since its glYrly-60's penguin campaign fit either race, and it was effective. Kool became "cool" and, by the early 1970's, had a 56% share among younger adult Blacks -- ' #pz,~~ was the Black Marlboro. ~ KOOL S1VRE AMONO 18-YEAR-OLD SMOKERS 1950's 1960-64 1965-69 1970-74 1975-79 1979-83 Black 10% 12% 17% 56X 44% 34% White 1 2 4 11 11 5 TOTAL 2 3 6 14 15 8 Source: 1983 SDS LSke Marlboro, Kool capitalit?i on the shifts in the 1960's warket. And, by the 1970'a, it was falling out of step with the trends of the times -- younger idult Whites were returning to smoking, leaving Kool with a $00 BDI in a sector Kpose importence was no longer booming. Kool was in a bind in the Black ~arket, too, with SALEM suddenly spending about as much as Kool against Blacks. (a'ee Appendix J). Keol also splintered its positioning in the 1970's, advertising each line extension with its own thrust -- Kool 100 was "Lady Be ~~^i~Cool", Kool Milds was dual sex, upscale, etc. Kvol was vulnerable and Newport cspitalized on that vulnerability. F,401111i~l L KOOL p1 I ' ~ wuas wrnna tr. s w01s -23- ..r....~. _. RH000380 ] k _. . ,.~.,~
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wport Newport l s~° ? ,wport was completely redone between 1970-73 -- campaign, product, package. ~°~Ihen the "new" Newport went to market in 1973, it went only against the r northeastern U.S., which had been a focal point of Black population growth PMkroughout the sixties as Blacks left the south. wport was the first menthol to emphasixe imagery but, on,the bottom line, vport went after Kool with dollars. Newport's total ad spending in the d-1970's was only about 30% of Kool's, but it was concentrated in some 20% of NEuPORT rtn +u+.ur.o .n •rot .wat swcu WCOCu sm s ua sos -2c= OW1?Eba U.S. Half of Newport's budget was in out-of-home. By 1978, Newport's regional spending against Blacks equalled Kool's national Black market ~1ending. Newport had picked Kool's prime market, with a size it could afford nd essentially bought it. The results among younger adult smokers especiallI = younger adult Slacks, were immediate. I y RH000380: '
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In the 1980's, Newport started rolling out across the South Atlantic, where migration patterns of the 1970's showed Blacks had been returning. Tracker ~' dqta during this rollout period tend to confirm that Newport gained among Nt,,y0unger adult Hhitss as it gained distribution, but its fundamental growth has '°geen due to younger adult Blacks. ' r ftg.xi nificantl smoother milder and less harsh than Kool Kin (See Appendix .e ~ i h NEWPORT MENTHOL SHATE OF SMOKEKS 1st Half 2nd Half 1st Half ! ° 1980 1901 1982 1982 1983 ~- ~ J ACES 1B-24 Black 18.6% > 22.4% ) 25.2% > 28.9% > 36.6% White 4.4 4,9 5.5 5.0 4.9 TOTAL 6.1 ~ 7.0 -> 7.5 7.6 --) 8.5 Source: MDD Tracker All of Newport's growth has also been due to its King, which seems better ,0V dtituned to younger adult product wants than Kool. In 1982, younger adult smokers rated both as acceptable products but found Newport King was a crow or t want to just follow t rdl idi bd fhh d i„~Clsutenttyran,or tose woon.ID`°'"";~acks, it's today's alternative to Kool; for Whites, it s an alternative to ~':~0' - ~<:Marlboro. ~;wx` ~s,a9i~f ¢~'\ ~~~ 1A 1983. Thus, it is no surprise that Newport has become the alternate younger Er d F - h ' ~ g t K.) In qua itative work, Newport King is even described as a l low "tar") product, despite its 18 mg. level. ~ . ~ yti T`he SDS showed that Newport, like Marlboro, relies heavily on its users to provide brand imagery among younger adult smokers (See Appendix F). And, 3,.. .Newport has the youngest franchise of any brand in the market -- 53% were 18-24 -25- R}{0003$07
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;Key Points About Marlboro a1960's s? 1970- • Marlboro succeeded with a "first brand" strategy targeted to the leading edge of the Baby Bubble, who turned 18 in the 1960's. • Younger adult smokers have bepn a clear leading indicator of Marlboro's market share growth. • Marlboro was only a second entry in the taste/flavor filter market until it developed its image-intensive long term campaign/ positioning. This took eight years of trial and error. • Marlboro's final positioning, set in 1962, was in tune with the mindset of the 1960's and also with the demographic shifts among younger adult smokers, since females dipped in importance during that decade. • Despite Marlboro's masculine positioning, it was almost equally developed among younger adult males and females until after 1975. Overdevelopment among males would have disadvantaged the brand. • Marlboro's younger adult smoker share softened in the late 1970's, but it had built enough aging momentum that its SOM trend slowed only slightly. • Certain evidence suggests that Marlboro's positioning has become less in tune with younger adult smokers than it was in the 1960's. Females, not males, have been the growing sector among younger adult smokers. Marlboro has been losing strength among females. Younger adult Marlboro males' interest in masculine imagery is no stronger than the average younger adult male smoker. • Marlboro is a"bandvagon brand" today. - Marlboro users provide the brand's imagery today more than its advertising does. - Marlboro stands for "the average younger adult." Peer popularity is its added benefit. - Marlboro smokers believe in its high quality. It is seen as much smoother than WINSTON, but less strong. • Younger adult smokers' need for "belonging" is strong and may be increasing due to social pressures against smoking. Marlboro provides a means of belonging. • Marlboro suffers high switching between ages 18-24, but Philip Morris retains about twice its fair share of those switchers, via Virginia Slims and Merit. o , . .,. a u a a J -21- RH00037Q9
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Philip Morris may itself recognize Marlboro's vulnerability. (Certainly the ~' bt'and's switching losses among 18-24 year olds have been visible in the ' 19p0's, averaging the equivalent of .3 share points of total smokers every ~...,,,...3 ~ar.) While Marlboro could not be repositioned after 20 years of the same r" campaign, some clues suggest PH may be using other strategies to protect ",(lboro's contribution to their younger adult share strr.ngth: L ~• Virginia Slims and Merit have been gaining disproportionate switching ~; from Marlboro among smokers 18-24, allowing Philip Morris to keep 32% of Marlboro's net switching losses from 1980 to 1983 within the corporate fold -- nearly twice PM's fair share. (See Appendix M). ~ This suggests that Marlboro might serve PM as a "feeder brand", capturing 18-year-old smokers who can then be channeled to other PH brands. • Virginia Slims' performance as an 18-year-old "first brand" has improved markedly in recent years. This may relate to its softer, more casual executions, which are more consistent with the younger adult Marlboro female's desire to not be "too bold". YIRG141a SllnS w..1..r~ "./ • The Merit repositioning seems to draw it cloaer to Marlboro, perbape shortening the supply lines. -20- 9 ut N H OD U) A W N . , t. :
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a By omissiou, no brand whose product messages remind the consumer of product negatives or portray the brand as a"weak cigarette" has succeed4d as a younger adult first brand. For ex9mple, any brand which has specifically emphasized "low tar" (which impl:es remaining tar) has been limited to switching gains among maturing smokers. ~,~°X4',;`,n?f.# -32- Ln N N 00 uO 0 W
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• Major performance gains among younger adult smokers do not necessarily have a major efiect on short term total market share. This means that competition may be alow to notice an improvement of RJR performance among y`oungeca ult smo ers aan~, there~ore, may e slov to react. - A "first brand" strategy (which necessarily targets younger adult smokers) provides an opportunity for unique long term benefits. However, it is likely that at least two to three yea_ra of close trackin would be re uired to determine the degree of success of a"first bran effort. - Younger adult smokers provide the most .:oncentrated switching opportunity in the market. While a switching strategy La inherently less cost effective, it may be more feasible in the short term and may also produce more short term share results. Some switching appeal will be necessary to build enough early share for a "first brand" to hold the shelf. • Younger adult_smokers have been as likely or more likely than older smokers to be early adopters of brands which have ultimately succeeded as "first brands" over the last 50 years. Younger adults have not flocked to brands which were already large in the total market, possibly because the existing older franchise inhibits younger adult identification with the brand. • Patterns observed for WINSTON suggest that a"bandwagon effect" may accrue to a "first brand" which achieves an 18-year-old share near t e level. When WINSTON's share reached this level, younger adult smoker growth was curtailed on both SALEM and Marlboro, until WINSTON's share again fell below that level. SUCCESSFUL YOUNGER ADULT BRAND STRATEGIES OF THE PAST The successful younger adult brands of the past have used strategies with many similar themes. In nearly every case, these brands have capitalized on the following types of opportunities, which will be discussed in more detail. A. External Factors B, Growth Sectors Within Younger Adult Smokers C. Out-of-Touch Competitors D. Product Delivery/Communication -28- I i ~ M . ~ .~. S ~ ~C' F~'~ ~~ . ?L. , ~? .. a a. w u, r RH0003808
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III. KEY LEARNING: SUP4IARY b CONCLUSIONS ~ Ttie previous two sections have discussed the importance of a strong position ~fi the younger adult smoker market and the strategiesJcircumstances which r " have, in the past, allowed brands/companies to achieve growth among younger N=X#ult smokers. By integrating the key points from these sections, several L conclusions can be reached. TME IMPORTANCE OF YOUNGER ADULT SMOKERS a Strong performance axongyounger adult smokera is critical to °eneratiig sustained growth momentum for brands/companies_. - "New" 18-year-old smokers represent about 1.4 share points of incremental volume each year. - A younger adult smoker who has been gained and retained appreciates in value over time because of increased consumption. Older smokers do not. • The biggest cigarette brands of the last half century have derived their strength from high younger adult development -- Pall Mall,, WINSTON, Marlboro, and Kool. Newport may become another such brand, but its size is currently limited by distribution and lack of a broad geographical marketing effort. In each case, - Younger adult gains have been a long term leading indicator of the brand's market share gains. Typically, ma~or market share growth has lagged the brand's younger adult smoker growth by at least five years. Continuing lose of younger adult strength has also been a leedin indicetor of inerket ehare softness and decline, although aging may bolster the rand s SOH or a decade or more. These brands have been the flagship brands driving their companies' performance and each has been superceded by'a brand from another company. Thus, younger adult growth performance has been a leading indicator of long term corporate performance. At present, Philip Morris and Lorillard are the only companies showing steady younger adult performance gains. M1 . -2]- , . . _~.c. •.....; : P RH000380i i` -~i
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N>i A. External Factors e Past periods of intense publicity on the health issue appear to have played a key role in the succession of the major younger adult "first brands." - WINSTON capitalized on the filter boom, which gained momentum from the "health scare" environment of the early 1950's. - Marlboro capitalized on the changing mix of males/females in the 1960's, which arose frosi their different reactions to the intense health publicity of that time. - Kool capitalized on the similar shilt between Blacks/Whites in the 1960''s. e Based on the WINSTON experience, product "breakthroughs" which address external factors are more likely to produce short term share results than those based primarily on imagery wants of younger adult smokers. , B. Growth Sectors Within Younger Adult Smokers a Successful "first brands" have capitalized on subtle demographic shifts within the younger adult smoker market. Their "formula for success' appears to have been to target the FUTURE profile of younger adult smokers, i.e., to be better developed among sex/ race/geographic groups which are gaining importance, but onl to the extent that reflects the group's rate of growth. This "formula" will usually imply broad based, nearly balanced appeal rather than overemphasis on male/female, Black/White, or other factors. Pall Mall was strongly developed among younger adult female smokers while their importance was increasing most rapidly. WINSTON was introduced when younger adult female importance was modestly increasing and was slightly better developed among females, but essentially a balanced brand. Marlboro was slightly better developed among males during the 1960's, when female importance dipped, but was essentially a balanced brand until after 1975. . Krol was highly developed among Blacks and grew when their importance among younger adult smokers surged in the 1960's. Newport targeted Blacks in the northeastern U.S., where the Black population,was growing most rapidly in the 1970's, and has moved to the south, following the return migration. -29-
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C. Out-Of-Touch Competitors (Cont.) • Marlboro's advertising/positioning seems to have become less in touch with the demographic trends within younger adult smokers of the late 1970's and 1980's and, perhaps, thelr mindset. - Younger adult female smokers were the key growth sector in the 1970's and 1980's. - Today, Marlboro's younger adult male smokers do not have an above average interest in masculine imagery versus all younger adult males. - Philip Morris may have recognized Marlboro as vulnerable. Marlboro'a disproportionate switching loases to Virginia Slims and Merit tend to feed Marlboro's losses back to PM. The campaign modifications on these brands may shorten the lines of supply. D. Product DeliverZ/Communicetion • Throughout the succession of "first brands", younger adult smokers have moved to "milder" products. - Pall Mall promised "mildness" based on its length. - WINSTON, as a filter product, would be seen as milder than nonfilters. - In the 1960'e, Marlboro was "milder", i.e., significantly lower in tar, than IiINSTON, as was advertised by the PTC. Today, Marlboro is still rated milder/emoother than WINSTON by younger adult smokers and is preferred. - Kool and SALEM could be seen as milder because of their menthol. - Newport is perceived as milder/smoother than Kool. • Successful "first brands" have used positive product messages. - Pall Mall emphasized milder smoking "pleasure". - WINSTON "Tastes Cood" despite its filter. - Marlboro is "where the flavor is", although historically and presently smoother than WINSTON. - Newport speaks to smoking "pleasure". V M -31- w+. ,v:: ~..... u, N) co u) + RH000?811 , x
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r C. Out-Of-Touch Competitors (Cont.) s; - Virginia Slims and Merit should be high priority competitive g,..1: targets, since they appear to play a key role Sn defending Philip Morris against Marlboro's traditionally high switching losses. - VANTAGE may have an opportunity to compete more effeccively for younger adult Marlboro switchers, based on its history of switching gains from Marlboro. (Shown in Appendix A). . Product Delivery/Communication • Smooth, mild product delivery seems to have been a key factor in the succession of younger adult brands. Therefore: - RJR should ensure that product wants among smokers 18-24 are fully understood and reflected clearly in action standards for products targeting younger adult smokers. - RJR should give high priority to eliminating elements of harshness from its younger-adult-targeted products. • RJR should use copy strategies which emphasize product positives to younger adult smokers. Connotations of "weak", "concerned", or "low tar" should be avoided and elements of mild, smooth, rich, smoking pleasure should be emphasized. -31- cM
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IV. IMPLICATIONS/RECOHMENDATIONS FOR RJR Younger adult smokers are critical to RJR's long term performanr.e and profitability. Therefore, RJR should make a aubstaatial long term commitment of manpower and money dedicated to Younger adult smoker to rams. M unusually atrong rommitment frem Executive_Hanagement vill e necessary, since major volume payoffs may lag seversl years-behind the implementation of a successful younger adult smoker strategy. This time lag can also magnify the penalties for wrong turns in the development and implementation of younger adult smoker programs. To prevent such problems: • RJR should develo ob ectives lannin rocedures and marketabilit criteria for younger adult brande programs which reflect their unigueL lon term character. These may differ significantly from the approaches measures which are appropriate to established brands or to nev brands addressing older smokers. Thoroughness should be emphasized. Innovation, experimentation, and multiple approaches should be encouraged. . Rigorous, objective consumer-based action standards should be established to ensure that volume results will ultimately follow and that continuing Management commitment is warranted. ~<~ £,:::..3::;: • RJR should make resources available to develop/improve its capabilitiee_ to thoroughly identify and track demogrephics, valuea/vaote, media effectiveness and brand performance within sectors of the younger adult smoker o ulation. These tools will be critical to the development and mplementation o effective programs among younger adult smokers. • Because of the sensitivity of the younger adult emoker market, brand development/management should encompass all aspecta of the marketing mSx and maintain a long term single-minded focus to all element - product, advertising, name, packaging, media, promotion, and distribution. Taetica which could negatively affect the integrity of the strategy should be avoided. -33- RH000381 `
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/ B. Growth Sectors Within Younger Adult Smokers (Cont.) • The dominant trend in the younger adult smoker market over the last 50 years has been the rising importance of females. Because of this, the major "first brands" have been overdevelo ed among males only durin~their periods of 4ecline. Narlboro has become overdeveloped among younger adult males only after 1975, when its share was softening among younger adult female smokers. . • One key to Marlboro's success in capturing the Baby Bubble appears to be that it attracted more 18-year-old smokers than WINSTON, within the younger adult smoker market. That ie, it was clearly a "first brand", with relatively lower switching appeal. C. Out-Of-Touch Competitors In every case, the ea'or oun er adult brands have been succeeded by a competitor's brand positioned to be si ificantl different from tt+^ predecessor. The softening decline of the ma~or younger adult bra-,is seems linked to an inability to "stay in tune with the times" as well as a new competitor "started in tune with the times" at its introduction/repositioning. While the real criteria for being "in tune" are probably the mesh between imagery and/or product and the wants of younger adult smokers of the times, demographics are a useful tool for identifying the likelihood of that mesh. i A 0 E a F 9 • Pall Nall became out of touch with younger adult smokers' product wants when it failed to effectively react to the filter boom of v, the 1950's. WINSTON fit those wants. $?a ~ • WINSTON was the victim of subtle shifts which may have been transparent or seemed transitory at the time. - WINSTON's light-hearted campaign fit well with the mindset of the 1950's, but did not fit as well with the rising tide of intense younger adult rebels as Marlboro did in the 1960's. - WINSTON's campaign had a slightly female slant and so did its franchise. In the 1960's, younger adult females were losing importance and males were gaining -- a better fit for Marlboro. - WINSTON's popularity among older smokers may have made it difficult to maintain an exclusively younger adult identity during the 1960's, when that want was most extreme. a Knol found itself "too Black" in the 1910's as younger adult Whites were rapidly regaining market importance. -30-
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RHO06 +S? j
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APPENDIX A NUMERICAL IMPORTANCE OF YOUNGER ADULT SMOKERS Ages 18-24: 1975 1980 1981 1982 1983 % of Total Pop. 18+ 18.8% 18.5% 18.3% 11.9X 17.5% I Incidence of Smoking Smoker % of 18-24 Pop. 36.0% 32.7% 31.7% 29.4% 29.0X (P) y Index vs. Total 18+ 106 99 98 95 94 (P) ' .. ". X of Smokers 18+ 20.0% 18.3% 17.9% 16.9% 16.4% (P) ~ _ . i ; (P) - Preliminary Tracker Data c ~ , ~ t! Sources: Incidence and Rate Report, Year 1982, MDD Tracker, and Census Bureau opulation estimates l. p Ages 18-24 in 1988: High Side (1) Low Side (2) % of Total Pop. 18+ 14.9% 14.9% Incidence of Smoking: Index vs. Total 18+ 94 87 a F ~ r X of Smokers 18+ 14.0% 13.0% (1) High Side assumes younger adult incidence follows the same trend as the ~ total population (18+). ~ (2) Low Side assumes younger adult incidence falls more rapidly than among ~ total smokers, to the average degree seen from 1975 to 1983. RH000383' rs~a.'tt7
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2. RJR should seek to better understand and capitalize on the market condition3/approaches which have successfully created younger adult strength for brands/companies in the past: A. External.•Factors B. Growth Sectors Among Y3unger Adult Smokers C. Out-Of-Touch Competitors D. Product Delivery/Communication Since RJR's processes/tools have been better attuned to switching efforts than to "first brand" strategies, time and learr.ing will clearly be required to fully assesa the opportunities available through these avenues. It should be noted that the new/established brand programs in the 1984 Plan already address the major issues/trends identified below, within the framework of current knowledge/processes. These Plans should continue as a basis for RJR's 1984 marketing efforts, but should be enhanced by a full-time dedication of resources to ensure a solution to the problem. A. External Factors (Detail in Section V) SOCIAL ACCEPTABILITY A breakthrough product which effectively addresses social acceptability concerns could revolutionize the market as WINSTON did in the health-concerned 1950's. The ultimate size of this opportunity will depend on younger adult smoker acceptance. Thus, RJR should consider: - The need to develop a social acceptability product whose smoking benefits meet younger adult smokers' wants as well aa other smokers' wants. Planning a second entry social acceptability brand which could emphasize mainstream younger adult imagery and product positives, thus avoiding the connotations of "social concern" which would likely be associated with the first entry. Thus, RJR could enter its own "Narlboro" to follow the "WINSTON of the 1980's." e PRICING Pricing is a key issue in the industry. Some evidence suggests that younger adult smokers are interested in price, but unlikely to adopt a brand whose only "hook" ie price. To maximize the possible pricing opportunity among younger adult smokers, several alternatives should be considered: . -34- i .. 1
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A price/value brand would need a conspicuous second "hook" to reduce possible conflict between younger adults' value wants and imagery wants. The most saleable "hooks" are likely to be based on product quality, since these provide easy-to-explain public reasons for switching. Suitable imagery should also be used. Since ycunger adult smokers with above-average interest in value are concentrated in the Coolness segment, it is possible that younger aGult smokers might be responsive to an appropriately positioned value-oriented menthol entry. Tactically, extended periods of closely targeted pack promotion (B1C1F, sampling) in seleated sites (e.g., convenience stores, military exchanges, special eventa) could lead to brand loyalty from repeated trial. This should be considered an investment program, B. Growth Sectors Among YounRer Adult Smokers (Detail in Section V.) • Younger adult Hiepanic and Black smokers should be key RJR targets, since they are gaining importance in the younger adult smocZei market. Resources/manpower should be made available to increase understanding of the dynamics, wants, and executionel sensitivities within these markets. - Heavy-up advertising in selected media are likely to be beneficial against younger adult Black smokers, based on Newport/Kool history. - Competitive advantage could accrue from these special market programs, since Philip Morris has intensified its Black/Hispanic marketing efforts. • Females are continuing to gain importance among younger adult smokers and, based on their diversity, should afford a number of potential opportunities. - Since the continuing trends to working women and "new masculinity" imply greater commonalities between the sexes, a dual sex brand which appeals to, but is not limited to women may be "in tune with the times." - -"Style/Dresa" remains a pronounced interest among younger adult female smokers, but should be executed to provide a clear point of difference and not be "too bold." -35- i
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RH000382( 0
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Despite key differences in wants from younger adult males, younger adult emales tend to smoke dual sax brands rather than specifically targeted female rands, e.g., 34% smoke Marlboro versus 11% for Virginia Slims. a Virginia Slims was introduced in 1968 but appears to have gained appeal as a younger adult female "first brand" nnly in recent years. ,,.u.u 561n1 ~w. wr..- This may relate to ita gradual campaign evolution from heavy makeup and avant garde fashions to more friendly, casual imagery. This transition may have been speeded by the introduction of SALEM Slim Lights, which outperformed all other competitors in attracting switchers from Virginia Slims. VIRGINIA SLIMS SWITCHING AMONG FEMALE SMOKERS 18-24 NET GAINS NET LOSSES Prs, x pTS. x . SALEM - - -.14 45 Barclay - - -.05 16 CAMEL - - -.02 6 VANTAGE - - -.02 6 B6H - - -.02 6 Generics - - -.02 6 Marlboro +.26 39 - - Merit +.12 18 - - Newport +.05 8 - - %ent +.05 8 - - Parliament +.05 8 - - A11 Other +.13 20 -.04 15 +.66 100% -.31 100% Source: NFO, 1980-83 (1st Half) Avg. Per 6 Mo. ` Although base sizes are small, there is some indication that Virginia Slims younger adult core females are true Stylish segment smokers who desire to make a bold statement with their brand, whereas Virginia Slims fringe smokers N consider the brand to be nearly too bold for their tastes. Its key imagery is, 0 naturally enough, -today's voman". • ; -46- 0 i ;
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r 8. Growth Sectors Among Younger Adult Smokers (Cont.) •"Moving up in the :+arld" has been identified as a key enduring want among younger adult smokers. This imagery need is likely to grow, since younger adults who follow the Baby Bubble are likely to experience limited opportunities for traditional success. - Limited opportunity to "move up" within the establishment may lead younger adults to more entrepreneurial means of success, such as fame via the performing arts. This type of concept meshes with younger adultd' key activities/ interests, apparently represents an enduring want, and therefore may provide an innovativa opportunity to be clearly different from competition. - A"stetus symbol" brand may attract some younger adult smokers, as an affordable compensation for other luxury items, if it can be executed to key on younger adult definitions of "elass" and achieve clear difference versus competition. Out-Of-Touch Competitors • Based on history, RJR should emphasize competitive efforts which are clearly different from the target brands. Head-on or imitative strategies should be pursued as defensive rather than offensive measures. Thus, RJR should target younger adult smokers based on their inherent wants/differences rather than letting competitors define the market. • Marlboro has become somewhat out-of-touch in that it is too male to fully capitalize on the female growth sector and its masculine imagery is less of a "hook" in the 1980's. However, Marlboro's users themselves provide the brand a strong positioning as an identity/belonging brand. Since Marlboro is not likely to be preemptable on belonging and is not strongly profiting from its masculinity", other less head-on strategies hold more promise at present. - Marlboro smokers are half of the younger adult market and, thus, encompass a diversity of wants. This implies that successful attacks on any key sectors of the younger adult market are likely to hurt Marlboro. Thus, a variety of approaches should be developed to address the spectrum of oun er adult smokers rather than limiting creative options y e in ng the mar et strictly in terms of Marlboro. -36- N r oe U) RH000381 E _ ~
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Marlboro is the leading brand among Puerto Ricans and Cubans and recently ~appears to have intensified ita efforts against the Nexican scctor. In fact, p•Philip Horris appears to be increasing special market spending behind all of -44- WO its key brands, with special Hispanic campaigns recently appearing for ;Harlboro, B&H, and Players. (See Appendix L.) advertising spending. They appear somewhat more likely to be attracted to a brand which keys on their interests in "moving up" and style/dress and can achieve reasonable development in the younger adult general market. • Knowledge of the younger adult Hispanic market is extremely limited, although it is fairly clear that Mexicans are the key sector. Success among younger adult Hispanics is likely to require development of an adequate information base and extreme sensitivity to executional elements. • Philip Morris has placed much heavier emphasis on ethnic spending in recent years and evolved on-going Hispanic campaigns for Marlboro and Benson 6 Hedges. ~ Younger adult Black smokers appear to be highly responsive to effective Key Points • Blacks/Hispanics will comprise 20% of all younger adult smokers by 1990. ~ ! RH000382: g.~
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2 Younger adult males in the SDS were more likely than any other smokers to ~> have taken advantage of BICIF offers. Such pack promotions provide the ~` savings benefit without conflicting imagery but typically yield trial or occasional usage rather than a change in brand loyalty. Carton offers, on the other hand, tend to reach older smokers. But, if RJR could closely target pack price promotions to younger adult smokers over an extended ~ eriod of time,.brand lo alt mi ht be ceptured. This would be an investment program. Its cost e ectiveness would depend on how tightly ` promotions could be targeted to younger adult smokers via, for example, military exehanges/canteens, selected convenience outlets, etc. W . Any other price tactics on established brands could tend to undercut their perceived quality/value. An SDS profile of younger adult smokers who have more interest than their peers in a value brand, but lower confidence in generics, showed high Coolness Segment development. Although, as seen above, price behavior may differ from expressed wants, there may be somewhat higher potential for a menthol entry to appeal to younger adult smokers on the basis of value/price. Ke ointe ~ i d"hook" to make it aecon [ d ve a preemp a My prSee/value strategy ++ill nee easy for younger adult smokers to switch for a reason other than price. Product-based "hooks" are easiest for consumers to publicly express. a" e. Since younger adult Coolness smokers have somewhat above average interest in value, a menthol entry may warrant consideration. Tactically, closely targeted, long running BIC1F's may yield some younger adult switching (as opposed to trial). ~ 0~,: -39-
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PRICING ~•° opportunity An~sis ~, Pricing is a key issue because of the pressures of the FET increse and the i!nsuing surge in sales of generic/private label brands. The impact of price on younger adult smokers is a complex question, which is likely to require idditional learning, over time, to completely resolve. Studies by the National Bureau of Economic Research (NBER) were used by the bovernment as a rationale for the FET increase. These studies lndicated that price had a much stronger effect on smnking by younger adults, parti(ularly r.eles, than on any other age group, because people were less likel to start smoking in an environment of higher cigarette prices. us, over an exten ed peiiod of time, younger adult smokers would tend to become less price sensitive, since those who react most strongly would not become smokers. iowever, the NBER studies clearly imply that price influences younger adults, fo that Prlce/value may offer an opportunity for soae share leverage among current younger adult smokers. Strategic Alternatives In the 1983 SDS, younger adult males were more likely than any other smokers to say they would buy generics for any price differential, large or small. Yet they were least likely of all smokers to report a generic usual brand. The explanation is probably conflicting wants: - Younger adult males want to be seen as successful, someone who buys the best regardless of price. - They want to make a good impression on others, smoke a brand acceptable - to their They have friends. little interest in being seen as "smart shoppers". Field reports from the military market confirm this conflict. Generic sales were booming but none of the men were seen smoking them -- because they were putting the generics !n Marlboro packs. Younger adult females have a more average attitude toward cost-conscious imagery but are also unlikely to adopt generics, perhaps because of conflict with their own "upward striving" wants, such s style/dress. Thus, to maximize opportunity among younger adult smokers, a price/value brand will need a second "hook" to its ro osition to allow oun er adult smokers to switch on the basis o other,_more ecceptab e vants as we 11 as rp ice. ile magery wiITbe des ra e, pro abZy necessary, to ran3- success, the most likely second -hook" is product quality/taste since this is a more easily expressed public reason for adoption. Examples would be "computer technology produces better smoke at lower cost" or "pay for the best product, not the big brand name." e I I c ~ a .~ ~ ~ ~.. 9 L ~ ~ . E . y p • P a o+ W ut -38-
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APPENDIX D RJR/PM SWITCHING VS. SHOKER SHARE PERFORMANCE POINTS 0F TOTAL SMOIG RS 1980 1931 1982 1983 (1se Half) Avg. Change Per 6 Mo. Sourcee: NFO and MDD Tracker NET SWITCHING SHARE RJR PM RJR + .26 + .45 33.3 + .27 - .25 32.1 + .42 + .24 32.8 +1.00E + .36E 33.0 + .41 <-- + .18 - .1 ---) PM UI N N OD 0 ~ O w W w .., s W .i b~ ..ti i . "1 ` .. fv .. . ~.. . .
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- Females are increasingly opting to remain single during their younger adult years and to live alone. Z WHO HAVE NEVER HARR7ED Ages 20-24 1960 1970 1975 1981 Hales 53.1 54.7 59.9 --> 69.5 Females 28.4 -> 35.8 -> 40.3 > 51.9 YOUNGER ADULT FEMALES LIVING ALONE 1960 1970 1975 1981 Number (N) 110 282 501 752 Source: Statistical Abstracts, 1982-83, pages 41 & 44 These increasing lifestyle commonalities suggest that females will continue to be more attracted to dual sex brands which adequately address their wants than to highly targeted female-only brands. - Both younger adult males and females are more likly to say they 'associate with the new ideas of inen/women" than their older counterparts. last 20 years and are likely to continue to slowly gain in importance, unless external factors intervene. Key Points s Younger adult female smokers have greatly increased in importance over the Virginia Slims, or similar female-only brands, are likely to hold a niche in the future younger adult female market, but essentially dual sex brands which are attentive to female wants/concerns are likely to provide the larger opportunity. Style/dress remains a pronounced interest among younger adult females, but should be executed to provide a clear point of difference and not be "too bold". -48- 0 N F+ ~
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BLACK/HISPANIC YOUNGER ADULT SMOKERS f 0 ortunity Analysis ~ Younger adult Black and Hispanic smokers are dramatlcally increasing in ~Sportance and will, conservatively, comprise 20% of the 18-24 market by 1990. PROJECTED 7.5 3.9 > 52 NA 18.1 20.5 NA NA 17.5 > 9.9 5.1 52 24.7 19.6 Sourcea: Census Bureau; Hispanic Omnibus Study; "Projections of Hispanic Population for the U.S., 1990 & 2000" (Center for Continuing Study the California Economy); "Health, U.S., 1981". 0y. WhJ~~ BLACKS ~.. Slnte the Kool phenomenon began in the 1960's, younger adult Blacks have moved ~~~€'f3'Xncreasingly to menthol products, which have accounted for 90X of the younger ,,. adult Black market in recent years. In 1983, 72% of Blacks 18-24 smoked one of '"""'tfie 3 major Coolness brands, although the segment has been getting some 1980 Kool 34.6 Newport N 18.6 SALEM 17.2 Coolness 71.3 Menthol 88.7 Source: MDD Tracker SHARE AMONG BLACK SMOKERS 18-24 1981 1982 1983 Avg. Pt. Chg._ 30.8 27.9 21.8 - 4.3 22.4 27.2 36.4 + 5.9 19.2 17.3 13.6 - 1.2 72.8 73.0 72.1 + .3 89.9 91.5 88.9 + .1 r 1 W -42- ; 9WCK 1965 1976 1980 1990 °; ~t X Pop. 18-24 11.2 12.4 13.0 14.8 X Smokers 18-24 12.9 13.4 13.6 ---> 14.5 Index 115 108 105 98 HISPANIC X Pop. 18-24 NA 5.7 2 Smokers 18-24 HA NA Index NA NA ALACK 6 HISPANIC X Pop. 18-24 =3 X Smokers 18-24 '-ievmpetition from Stylish brands. Virile brands, even Marlboro, have virtually no appeal to Blacks. RI-I00038?( ----~~ ~
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Ar°ENUIx B YOUNGER ADULTS' IMPORTANCE AS REPLACEMENT SMOKERS ,;Yhere has been little data reported in Adult Use of Tobacco, 1970 and 1975, early 1900's started to smoke at later ages than men, difference in recent decades. Year of Birth Median Starting Age of Female Smokers 1900-1920 20.0 years 1920's 18.5 1930's 17.7 1940's 17.1 • More than two-thirds of male smokers start by age 18. Only 5% start after age 24. kIM.. hr ::.:,;.i ~x,:~..3~. s3r;q ; Current Male Smokers By Starting Age Cumulative X Start ByY Age Start After Age 12 9.9% 90.1X 13 13.4 86.6 14 20.8 79.2 15 30.3 69.7 16 42.9 57.1 17 .6- 46.4 Median - 16.7 years 18 ~ ~..~g. 7 : 31.3 19-20 84.0 16.0 21-24 94.6 5.4 25+ 100.0% ox.rs.SAarces: Average ,. of HEW e-01 Although vomen of the Source: HEV, Changes in Cigarette Stoking Habits, 1955-66.
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vsir<.w~ RH000383 c
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APPENDIX N NEWPORT USUAL BRAND SMOKERS Share ln Development OPPORTUNI'fY WLNERABILITY Demo. Index ^ INDEX INDEX Total'Smokers 18+ 2.8% -- 93 116 TOTAL SMOKERS 18-24 8.9 100 74 89 Black 36.4 409 57 109 lihite/Other 5.3 60 88 78 Male 7.6 85 80 103 Female 10.2 115 69 78 Beyond H.S. 8.4 94 50 80 H.S. or Less 9.2 103 89 96 Under $15H 10.5 118 86 85 Over $15H 7.8 88 59 101 Black 18-24 Male 35.8 402 59 131 Female 36.9 415 55 88 Beyond H.S. 48.6 546 45 80 H.S. or Less 30.6 344 67 134 Under $15H 33.9 381 80 98 Over $15N 44.2 497 18 122 White 18-24 Hale 4.3 48 102 88 Female 6.4 72 77 71 * Small base size. ~ N f+ OD 10 r RH0003854 ~
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Black White/Other Nale Female Tptal Smokers 18+ .~ hAL SMOKERS 18-24 Beyond H,S. H.S. or Lesa Under S15H Over $15H ~` "6ma11 base site. < APPENDIX N CANEL USUAL BRAND SNOXERS - Share In Deoo. Developaent Index OPPORTUNITY INDE% VULNERABILITY INDEX _ 4.5% 101 99 3.8 100 123 138 .8 21 A k 4.2 111 123 138 6.2 163 121 162 1.4 37 134 0 4.8 126 65 145 3.4 89 161 126 5.1• 133a 109* 109* 2.0* 75* 140* 189*
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r ` issue than older smokers, while younger adult nonsmokers are somewhat more concerned. 4uiing the 19 0's• It is possible that RJR will have an opportunity to repeat the uINST04 success in the 1980's environment. The long range impact of such products on the industry will ultimately depend on their acceptance among younger adult smokers,_just as the filter revolution did. At present, younger adult smokers and nonsmokers are becoming.polarized on social acceptability -- younger adult smokers show less concern with the ,p;.:4ocial pressures against smoking are high a.nd increasing. This negative ~ influence is somewhat similar to the health situation in the early 1950's. Therefore, it is possible that products which effectively address the perceived ~.nocial negatives of smoking and also provide adequate smoker benefits could ievolutionize the future market just as filters revolutionized the market F'' '*portunity Analysis ~.. • M: SOCIAL ACCEPTABILITY "In general, you are more acceptable to people if you don't smoke." X AGREE SMOKERS N0NSM010 RS 18-24 25+ Total 49.5% > 73.2 55.3 71•1 54.4 71.5 Source: 1983 Smoking Attitudes Study given younger adult smokers' keen interest in peer acceptanceJapproval, it is likely that younger adult smokers would be interested in a brand which effectivel addresses social acce tebilit and also rovides t e other smokin ene its they want. However, if that brand is positioned as socially concerned", younger adult smokers may try it as a novelty but are unlikely to E adopt it as a regular brand -- younger adults bho wish to be seen as e. Leoncerned" are more likely to choose to be nonsmokers. ;trategic Alternatives ~ Firet Entry Brand If RJR achieves first entry with a social acceptability brand, younger adult smokers are more likely to adopt it if the brand proposition is as positive and mainstream as possible. This was essentially WINSTON's approach to the health concerns in the 1950's. WINSTON let Rent and others sell "safer" filters, while WINSTON let people know it had a filter but emphasized the positive of taste. For example: • The added product benefit might be "enhances sociability" rather than courtesy (which implies potential disapproval from others). -40- C V . ~ V RH000382• V1
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APPENDIX F SOURCE OF BRAND PERCEPTIONS • Younger adult smokers are more likely than older smokers perceptions on other people they see using the brand. to base brand BASIS FOR USUAL BRAND PERCEPTIONS % of % of Index of Total Smokers 18-24 Vs. Smokers 18-24 Total (2627) (443) Product 87.5% 88.2% 101 Advertising 45.3 43.9 97 Package 28.1 28.7 100 Name 35.0 -> 41.1 117 Other Users 38.9 > 49.4 127 Younger adult smokers are especially likely to basis their imagery of Marlboro and Newport on other users. BASIS FOR USUAL BRAND PERCEPT IONS KEY BRAND IMPORTANCE AVG. U.B. MA IMPORTANCE AV RL. VS. G. INDEX MARLBORO (Base • 252) Product 83.8% -> 88.2% 95 Advertising 48.8 43.9 111 P k 20 9 --> 28 7 73 ac age . . Name 43.2 41.1 105 Other Users 58.4 C- 49.4 118 NEWPORT (Base • 79) Product 69.3% 88.2% 79 Advertising 35.0 _.> 43.9 80 Package 20.0 -> 28.7 70 1 Name 23.7 -~ 41.1 5 O h U 60 5 49 4 122 t er sers . . >• Significantly higher at 8U% confidence level. Source: 1983 SDS
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APPENDIX C MARLRORO SWITCHINC LOSSES -- ACTUAL VS. PREDICTED ?w •, NFO: Avg. 1980 - First Half 1983 . # Importance Of Age ~- ~ To Tota] Smokers * Wo ;:~ L ` 18-24 17.2% ~ 25-34 25.8 . 35-49 27.6 50+ 29.4 ~ TOTAL 100.0% ~ NFO gross switching losses within age converted to total and points of total by ioportance weights above. Avg. Ammal Gross Svitehing Loss ** Pts in Age utd Pts Of Total X Of Total -1.46 - 25 392 - .64 - .11 27 - .4 D - 11 17 - .36 - .11 17 - .64 - .64 100% i Source: MDD Incidence/Rate Report, Year 1982; 11DD Tracker, lst Na1f., 1983. o Predicted BX SDS Loyalty Rates nP.yLB0R0LOrPLTY RATE wam:4y ~-~ Marlboro 18-Year-Olda After -- X Remaining Loyal 0 Yrs 100% rr.~~r• 1 2 3 4 5 6 Yrs Yr s Ys Ys Yrs Yrs Average 76% - 72% 6BX 65% 612 58% 71% Since 71% remain loyal, 392 must switch over the six years, i.e., an average of 6.5% per year among the average 71% of the original group who remain. 71% x 6.5% - 4.6% average annual switching loss, Ma7lboro Tracker Share Among 18-24 Avg. Importance of 18-24 Value in Points of Total Smokers Average Annual Switching Loos Average 19B0-83 (1ot Half) 35.3X o M x 17.2X a• 6.1% r a x -4.6% m v -.28 Points a RH0003s3 ~
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APpENDIX N ~'otel Smokers 18+ " OTAL SMOKERS 18-24 Black Nhite/Other Male Female Beyond H.S. H.S. or Less Under $15H Over $15M Soall base eize. VANTAGE USUAL BRAND S`tOKERS Share In Demo. Development Index OPPORTUNITY INDEX VULNERABILITY INDEX 3.9% -- 110 101 2.4 100 147 129 .5* 21* * R 2.7 113 148 128 2.7 113 150 189 2.2 92 143 47 3.3 138 167 95 2.1 88 132 141 .9* ' 36* 136* 24* 4.1* 171* 111* 160* u ~ 0 Co .. %D { ' • . u *+ .. a 0 m N b
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Virginia Slims weakness may be that it fits not only a particular type of rfemale but a particular stage of life. The prototypical younger adult female :"'' Virginia Slims smoker is like its overall franchise -- she is from a family suggests that Virginia Slims somehow does not fit the married woman's lifestyle and thus, has limited opportunity as a lifetime brand. drop in Virginia Slims development among married/formerly married wooen with income over $25M (BDI * 160), has some college education (BDI - 130), is I employed as a secretary/clerk (BDI - 160), and is single or newly married. The VIRGINIA SLIMS DEVELOPMENT TOTAL FEMALES 18-24 FEMA7.ES Never Married 213 126 Married ( 2 Years 182 96 Married 2+ Years 77 77 Formerly Harried 77 48 Total BDI 100 100 Share 6.0% 10.7% Sources: 1983 SDS, 1983 Tracker • Noat younger adult females smoke a dual sex brand -- not too masculine (e.g. CAMEL), but not strictly female (Virginia Slims). While specially targeted female brands will undoubtedly play a role in the future market, lifestyle trends suggest that commonalities between younger adult males/females are increasing over time, so that dual sex wants are likely to remain prevalent. - Younger adult females are increasingly moving into the workplace, at a more rapid pace than older vomen. ( LABOR FORCE PARTICIPATION (%) AGES 20-24 1960 1970 1975 1981 Females 20-24 46.1 > 57.7 -> 64.1 -> 69.6 i t ' Index vs. Total Y Females 122 127 133 134 ~ u - Younger adult females have become as likely as males to attend N H college. to • ~ .. . ~ X COLLEGE ENROLLEES 18-24 1960 1970 1975 1981 ~ 0 ~ ..•. Nales 63% 57% 53% 50% Females 31 -> 43 -> 47 -> 50 W rxti- a ~ . J ~r.~ b .. ~ -47-
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APPENDIX K r NEWPORT VS. KOOL PRODUCT Competitive product test results showed Newport King and Kool King to be at parity on overall 7+ ratings among full flavor menthol smokers 1982. However, Newport was significantly more mild/smooth and strong/harsh than Kool. ages 18-24 in less KOOL - - NEWPORT (Base Size) Zf32) (Tb7) ' Overall X70+ Rating 51.6 56.4 Attributes More satisfying 4.16 4.33 Stronger 4.11 <- 3.79* More harsh 3.66* < 3.07* Smoother 3.91* > 4.40* Milder 3.88 ---) 4.17 More tobacco taste 3.96 3.71* More tobacco than menthol 3.96* 3.95* More menthol 4.16* <-- 3.86* Cooler 3.84* 3.83* Less good aftertaste 4.03 <- 3.67 Artificial tasting 3.94 3.77 Bitter tasting 3.58 G-- 2.95 Easier draw 4.80 4.87 Burns faster 4.04* 4--- - 3.81* ^ Interpretation Note: "'vx"''3FY>' The arrow indicates a significant difference between the two products with the arrow pointing towards the product which is more in agreement with the attribute on the left. An asterisk indicates a significant difference versus, the ideal. Source: tDD 82-21223, 82-21230 RH000385
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APPENDIX E EFFECTS OF ACING ON SHARE OF SMOKERS Method The charts in this Appendix summarize an analysis of the relative importance Wof aginge and 'other fsctors" (switching/quitting/starting) to changes in smoker share for Marlboro and Newport (menthol). The analysis assumed that a brand's share was flat within the Tracker age brackets and simply aged its smokers year by year, within or across these age brackets. For example, in 1981, Marlboro had a 34.3% Tracker share among 18-24 and a 21.9% share among 25-34. For 1982, we would estimate that, if nothing but aging occurred, Marlboro would have a 34.3% share among those who aged from 24 to 25 and still a 21.9% share among 26-34, who did not leave theif 1981 bracket. Since 25-year-olds were about 11% of all 25-34 smokers in 1982, a weighted average indicates aging would push Marlboro's share among 25-34 from 21.9% in 1981 to 23.3% in 1982, a gain of 1.4 points. 11% X 34.3 - 3.8 points from 25 year olds 89% X 21.9 - 19.5 points from 26-34 100% 23.3% share among 25-34 if only aging occurred Since Marlboro's Tracker share among 25-34 in 1982 was in fact only 23.0%, we presume the differences of about .3 was due to switching/starting/quitting among 25-34's that year. In addition to the historical analysis, possible future effects of aging were conservatively projected for the brands by assuming that younger adults would drop in importance from 16.5% of all smokers in 1982 to 13.6% by 1988. Upside and downside future trends were calculated for each brand,.with and without "other effects', based on the brand's history from 1980-83 (!st half). Marlboro D-1 Newport Menthol D-2 * Gains within the younger adult group were considered agiog contributions.
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- The TV series "Fame" appealed to younger adults and is returning via syndication. $jAtusic is probably the most popular mode of performance among younger adult smokers: e A special cable network, MfV, offers nothing but video renditions of ~.. popular younger adult music. • Younger adult smokers in the SDS were twice as likely to actively participate in musical activities (i.e., actually play or sing) as smokers 25+ were. s Younger adults tend to associate Marlboro with the occupation of musician. This was mentioned by 21% of smokers 18-24 rating Marlboro versus 14% of all smokers, the most pronounced difference found between older/younger adult responses. This is unusual, since Marlboro's only formal association with music has been some recent special events sponsorship. This suggests that these younger adult male Marlboro users may be characterizing themselves as they are or wish to be. Although "fame" is a concept rather than an opportunity at present, it would represent an innovative point of difference from any past/present brand and ~eppeara to be relevant to younger adult wants/interests. Key Points "Moving up in the world" is a key, enduring want among younger adult smokers and is likely to become of even higher importance as avenues for traditional success are increasingly blocked by the Baby Bubble. Younger adults tend to emphasize the image of success rather than "self improvement". a A"status symbol" brand may attract some younger adult smokers, as an affordable compensation for other luxury items, if it can be executed to key s'? on younger adult definitions of "class" and achieve clear difference versus competition. Limited opportunity to "move up" within the establishment may lead younger adults to more entrepreneurial means of success, such as fame via the performing arts, especially music. This meshes with younger adults' key activities/interests and apparently represents an enduring want applicable to both sexes and races. Therefore it may provide an innovative new brand/repositioning opportunity, clearly different from competition. L., -So- RH00038
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Hele feoale Beyond H.S. H.S. or Lesa Under $15M Over $15H Sma11 base t1re. APPENDIX N MERIT USUAL BRAND StiOXERS Share In Demo. Development Index OPPORTUNITY INDEX VULNERARILITY INDEX 4.9% -- 94 101 4.8 100 129 93 .5 10 * * 5.4 113 128 92 5.0 104 141 91 4.6 96 113 95 7.6 158 140 88 3.6 75 128 91 4,1* 84* 142* 108* 4.9k 102* 1270 91* P ' Ln N r to w W S R .~ W O
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1 1 APPENDIX L PHILIP MDRRiS SPECIAL MARKET PROGRAMS -0/l/i \...~..r.... ..~.~.. \.a. ~L.... ETHNIC SPEND?NO (SM) 1980 1981 1982 1983 Marlboro 28 31 1028 1127 8bR 618 821 2653 2888 Slims V 523 58B 2340 1945 . u 0 Source: Media Department r D W V U 0 0
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Total Smokers 18+ #N'4 TOTAL SMOKERS 18-24 Black White/Other Msle Femala Beyond H.S. H.S. or Less Under $1SM Over $154 Males 18-24 Black White/Other Beyond H.S. H.S. or Less Under $1SM Over $15M Femalee 18-24 Black White/Other Beyond H.S. H.S. or Less Under $1514 •Over $15M * Small base size. APPENDIX N MARLBORO USUAL BRAND SMOKERS Share In Demo. Developcent Index OPPORTUNITY INDEX VULNERABILITY INDEX 18.9% -- 77 97 41.2 100 42 112 6.1 15 163 95 45.8 111 43 113 49.0 119 44 121 33.5 81 39 100 33.9 82 42 127 44.2 107 40 103 41.6 101 44 130 41.2 100 40 96 11.3 27 219 189 53.5 130 45 126 48.3 117 43 149 50.3 122 41 106 53.1 129 41 133 45.5 110 49 105 1.8 4 113* 95* 38.0 92 39 96 32.5 79 41 99 33.7 82 38 98 30.7 75 48 125 36.6 89 28 85 t S e. u~ w M \O u r g ~
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r _ L• YOUNGER ADULT SMOKERS ARE THE ONLY SOURCE OF REPtACEMENT SMOKERS. TODAY'S YOUNGER ADULT SMOKING BEHAVIOR xILL DETERMINE THE FUTURE TRENDj2.F INDUSTRY vOLUME• • LESS THAN 31% OF SMOKERS START AFTER AGE 18- ONLY SZ START AFTER AGE 24• CURRENT MALE SMOKERS BY STARTING AGE CUMULATIVE Z 18 19-20 21-24 25+ START BY A. START AFTER AGE 68.7 _ 31.3 84•0 _16.~0 94• ~ 5 4 ]6 100.0% -- ' CONGIUEI" L . :JC_ :. Sources_ Average of HEW data F.'.1016312 r UTIit 6 8TZS ' r,e£E £OZOS
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APPEE:DIX N YOUNCER ADULT TARGET DEFINITIGN AIDS ~'`+~'he charts in this Appendix summarize demographic differences within the I~gounger adult smoker population which may be releva:it to brand target definition. 4or selected brands, the tables provide: • Brand share/development by sex, education, race, and sex within race c from MDD Tracker (Year 1983). Share and development by income level and for education within race/sex have been approxi©ated by applying the relative developcent found in the 1983 SDS to the overall develop- ment sho4n on Tracker. • Opportunity/Vulnerability Indices by demos, from the 1983 SDS. - The Vulnerability Indices reflect the proportion of the brand's franchise (in that demo) which are not core smokers of the brand and would therefore be relatively open to competitive appeals. - The Opportunity Indices reflect the extent to which the brand mi ght further capitalize on positive smoker attitudes (within the demo) by drawing more of its fringe into its franchise. Soth indices are relative to the Opportunity/Vul.nerability of the average brand in the total market. RH0003853
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YOUNGER ADULT FEMALE SMOKERS Opportunity Analysis Wft~ -"'~ d i f b hi d ind t wth o e n us r ra h i d b and, over time, spread in importance within older age brackets. rce y g ng .Younger a ave een a r v ult female smokers during the last half century as they have become more likely to smoke at age 18 X IMPORTANCE A.MONG 18-YEAR-OLD SMOKERS 1960's 1970's 1980-83 Males 62 53 51 Females 38 47 49 Source: 1983 SDS slowly gain importance, although external factors such as social acceptability and price may affect the outlook. >:;smoking among teenage girls, younger adult females are likely to continue to Based on government reports in recent years expressing alarm at increased Younger adult females are continuing to gain importance among younger adult smokers, due to their stror.ger incidence trend versus younger adult males. INCIDENCE AMONG YOUNGER ADULTS 18-24 TOTAL MALES FEMALES I X INDEX X INDEX 1980 32.7 33.7 103 31.7 97 1981 31.7 31.6 100 31.8 100 1982 29.4 28.8 98 30.1 102 1983 29.0 28.8 99 29.3 101 Source: MDD Tracker i Key differences in wants between younger adult female smokers in the 1983 SDS. *W ,;were identified .. „ Belonging/Fitting In ~ y Noving Up in World Powerlessness ;~ Style/Dress " Smoking Problems Savings/Value dealth/"Tar" New Male/Female Roles Social Acceptability KEY WANTS/CONCERhS 0F FEMALES 18-24 VS. TOTAL SMOKERS + +++ ++ +++ ++ + +++ + + -45- and other smokers VS. TOTAL 18-24 0 e u+ N N ao w a+ w J N RH000382' 9.~.
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"MOVING UP IN TME WORLD" "M i i h ld" i k w t on all rou s of oun er edult e n am ov ng up n t e wor s a y a y g g g P : smok!rs and the one which most distinguishes them from older smokers in the ;~ SDS. This is not surprising, given that they are in the process of developtng their education and/or career and estab7lshing their independence (which requires dollars). Dollars may well be the key measure of success to younger adult smokers, since the desire to move up decreases as their incomes increase. Blue collar workers „~~ twno are tne ntgnest earning younger aau.cst arc acse uy.+acu a~:,....a .~~o.~ average. Education makes no difference. Younger adult smokers are more likely than older to emphasize the "image" of success. They like to know important people and feel "there's nothing wrong with showing you've made it," regardless of race or sex. Over the next 10 years, younger adults' desire to "move up" may become more frustrating, since the peak of the Baby Bubble will ride just ahead of them, clogging the traditional avenues of advancement and success. This suggests that they may move to alternate paths as other "powerless" minorities have done in the past. • Some may compensate by seeking to acquire affordable status symbols, ~ it is not entirely However d b l i t ran . , ass c garette possibly a prestige/c clear that the younger adult definition of "elass" will entirely mesh with the status symbols prized by the older establishment, since they F~( seem to prefer designer jeans to couturier originals and flair "3C6/ individuality above elegance. B&H, the only established "prestige" L° - brand has attracted some interest among younger adult Blacks/Hispanics ,~ 42 ~s 1 but is underdeveloped among younger adult smokers as a whole. 5 One option successfully used by entrepreneurial minorities in the past ~ ; is to seek fame by exercising spacial talents in the public eye -- women • [a achieved visible success through the stage or screen (or by marriage), 4 ; Blacks moved up through sports and music, Jews became famous on the comedy circuite, 'poor boys" from Liverpool or Mississippi made it with rock and roll. The desire to fame, the fantasy of "being discovered", and "star ; worship" appear to have been common among younger adults for generations ~ in varying forms. Today's younger adults appear to be no exception: - In qualitative work, when younger adult smokers are asked to name their heroes, they tend to name performers rather than the sports figures (e.g., Jo Dimaggio) or political leaders (John Rennedy, Martin Luther Ring) who may have had more attention in the past. - The "Newsstand Veeklies" (People, National Enquirer, etc.) which o key on performers, are the most-read periodicals among younger . adult emokere (See Appendix N). s V -69-
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C U) ~ T[itS DOCUMENT IS SUBJEC! TO STIPULATION AND COUR"1' ORDER PATED APRIL 23, I997 AND SHALL NOT BE USED, SHOWN OR DL4TRIBUTED EXC@:PI' AS PRO\'IDED IN THE COURTS ORDER 8999 pppOS ~ c,0qy 68TZ5
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VOtal Smokers 18+ w TN. SHOKERS 18-24 Black White/Other M.ale Female Beyond H.S. y~s^='=ra H.S. or Less Under $1SH Over $15N Beyond H.S. >s~ U.S. or Less nh:. Under $15H Over $1SH '~t7hite 18-24 Hale ~'Aw ~ Female Small Lese size. %iSn r1 ~ . _ . ..- . ..._..~. r.-..s.a • ' ~ K00L APPENDIX N USUAL BRAND SMOKERS Share In Demo. Development Index OPPOP.TL'NITY INDEX VULNERABILITi INDEX 6.6% -- 89 88 6.7 100 83 94 21.8 325 63 99 4.7 70 95 87 6.7 100 63 124 6.7 100 99 63 4.0 60 95 88 7.8 116 77 97 8.3 124 83 110 4.4 66 82 77 24.1 360 58 110 19.9 297 69 84 17.3 259 59 126 25.1 375 65 88 28.8 429 50 124 12.1 181 100 22 4.7 70 66 133 4.8 72 115 38 C .. i •
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IMPORTANCE OF YOUNGER ADULT SMOKERS Ztfifi 68iZS ,.hE£ £OZoS ` CONFtDENT1AL - FTC DOCKE'T No. 9285 Pndutrd lo Federal Trade Commision pursu:ml to subMrnet dated June 6. 1997. ROO 16:" ^
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r) w. "k' a. .. APPQTDIX I bU1R/YRITt YOONCCR ADULT DEYLIAPl9:Nt OF KEY BRANDS, 1940-83 SHARE AM0R8 18-YEAR-OLDS 194 9 1950-54 1955-59 1960-64 1965-69 1970-74 1975-79 1978-83 PALL A/1LL Black - 16 38 13 - - - Yhite 10 28 30 20 5 2 - Total 10 26 30 19 5 2 - YINSTON Black - - 6 30 40 9 5 White - -- il 24 35 14 13 5 Total - - 11 25 35 14 12 5 MARLBORO Black - -- - 6 8 3 - Yhite -- - 3 12 21 48 44 56 Total - - 3 12 20 44 41 50 SALEN Black -- - 9 8 8 15 27. 15 White - - 3 3 4 8 10 8 Total - - 3 4 4 9 11 9 KOOL Black 5 - 19 12 17 56 44 34 Nhite 1 2 1 2 4 11 11 5 Total 1 1 3 3 6 14 15 8 NEWPORT Black - - - - 1 5 15 33 White -- - 1 2 3 - 6 9 Total -- '- 1 1 3 1 7 11 Source: 1983 Segseut Description Study 964T f6TOB Produced W Federal Trade Commission pursaant to suUpoena . da Une 6.1 06EL 68IZ5 • ~ . : , , . i I
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;,6ta1 Smokers 18+ OTAL SMOI:ERS 18-24 ~ ~AY+3'.. vti:4Y Black Hhite/Other h Black White/Other ~~. ~ Beyond H.S. H.S. or Less Male Female Beyond H.S. H.S. or Less Under $15.4 Over $15M Under S1SM Over S15M VIRGINIA SLIMS USUAL BRAND S!iOKERS Share In Demo. Development Index OPPORTUNITY INDEX 3.0% -- 116 5.4 100 117 3.5 65 153 5.7 106 115 .1 2 r 10.7 198 117 7.3 135 103 6.6 85 128 4.8 88 111 5.8 108 119 6.0 111 153 11.4 211 ' 115 13.7 254 103 8.8 163 128 9.3 173 111 12.3 227 119 APPENDIX N VULNERABILITY INDEX 82 94 108 88 . 94 93 94 77 109 108 88 93 94 77 109 ~ h+
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March 30, 1984 • LWH:gj C CX-76 To: Mr. J. R. Moore Mr. E. J. Fackelman Ms. E. N. Monahan Dr. J. L. Gemma From: L. W. Hall, Jr. Re: YOUNGER ADULT SMOKER REPORT Mr. Long again emphasized to me that we should very tightly restrict distribution on this report. Therefore, I suggest we make no more copies, that MOD Group Managers and Managers with a need to know read your copies, and that Market- ing Department personnel bew Director level read the copies already given to the Marketing Directors. G J PLAWiFF'S F.XHIBTf ay I N N M 00 to iP 0 ~ 1 R0019552
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i. . -~ . • NEWPORT'S STRENGTH CAN BE EXPLAINED BY ITS HIGH 1bUNGER ADULT SMOKER DEVELOPMENT AND THE AGING PROCESS.. ~8~ ~$1 18-24 SMOKER SHARE 6-1 7.0 TOTAL 18+ SMOKER SHARE 1-9 2.2 . 10 1ST HALF Ig$Z 1993 7-6 8.5 2-3 2.6 CONFIDENTIAL - FTC DOCKET No. 9285 Produced to Federal Trade Commicsion pursuant to svbpuena dated June 6, 1997. ~ - LiPV 68iz5 R0L-16315 25£~' E~ZOS `
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.. . ~, Newport is the growth brand among younger adult Blacks, yet it is not perceived aig particularly relevant to their key wants/eoncerns: "moving up in the ~~~tybrld," style/dress, and powerlessness. Effective spending appears to have ~• been key to its success, although product mildness versus Kool may have played role. ~ K~ol appears to have risen partly from sn emerging desire for Black identity, ~ut it is not clear that this want is as pronounced among y6unger adult Blecks i:3lsqday. • Although Newport is prominently advertised in Black publications and spends about 16% of its brand dollars against Blacks, 59% of its dollars go to 00H which is primarily general market. • In qualitative work, younger adult Blacks feel limited rapport with today's Black "leaders", e.g., Jesse Jackson. The SDS showed that younger adult Blacks were less likely than older Blacks to believe "it is important to remember uy roots." P Thus, Coolness strength among younger adult Blacks may continue to decline in ;" the future in favor of Stylish branda which key on Black wants but also have ~peal in the general market. His anics • Mexicans, Cubans, and Puerto Ricans form three distinct segments which differ in wants, lifestyles, even language. • Many Hispanics insist that advertising be in the Spanish language and The Hispanic market is very difficult to address because; Wwl that visual executions be perfectly attuned to their lifestyles, self . a image, and traditions. Hispanics are extremely literal. ~ • Illegal entry makes even population data difficult to obtain and tools for understanding/tracking the Hispanic market have been quite primitive compared to general market capabilities. kexicans are the largest and fastest growing sector of the Hispanic population apd also the sector in which RJR's performance is strongest. W~.p; Percent of U.S. Hispanic Population 1980 2000 Mexican 61% -> 64% Puerto Rican 14 12 Cuban 7 5 Other iB 19 o ' Source: Center for Continuing Study of the California Economy. -43- RI1000382' I?
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CEAIIEO REA9ERSRIP A11@rt' 1Ei-24 yEM OEO SnUfFRS TOTAL RAEE FEMALE WHITE BlAt3C REACH EFFICIEILT ' REACH EFFICIEMCF • REACH EFFICIEM.'T • REACH EFFtCIEVCY • REACH EFFICIEwCY ' M/1CAZURES (f) V5. TOF. /6. (f) VS. nAEE 18• (f) vs. FER. 1B. / s/ 9S. 1MITE le. !A rS. BEACR 18• t d V .kl V 73 104 64 100 61 /w 73 lob 7a 96 . y an wss t 7 ® 23 146 43 142 49 11/ f )Mn's O.n.ral 44 Mas V..kitrs 40 83 41 78 38 90 39 82 44 87 S.l.etiw Farlo 39 132 11 76 65 143 37 144 42 98 8 121 N 120 24 133 36 124 a9 113 R.ad.r Sports 3 t Vawnls B.narsl 38 75 B 39 63 69 37 80 43' 67 Runt/FISk/Outdoors 34 111 47 107 20 136 35 114 32 102 t A ti 33 160 -71 [ 54 166 13 168 I 34 169 24 Itl u au w Shaltar 32 72 16 50' 47 82 25 67 49 91 G.n.ral 29 89 27 79 31 . 100 25 04 46 103 Fss6lon 24 149 6 109 41 150 21 151 36 144 M.c6anleal 21 92 33 92 9 114 20 86 19 109 19 123 15 103 24 139 3 143 BB +oe Black 1.1 t.rary 16 111 19 107 13 122 15 120 20 55 )1or To 15 62 6 47 22 69 16 61 17 76 partletpant Sports IS 92 16 72 13 144 14 85 17 112 Buslnsss/Ftnane. 13 73 17 67 12 86 12 61 23 97 Epicurean 9 64 4 40 13 75 6 59 12 90 • Indot of r.adsrsAlp ronq 18-24 yroup vs. Indicst.d sniohsr total. r= ' Top 4.nqszlna utayorls bas.d on Raact, X Efflel.ney. Sources 1963 S.prnt Oseriptton Study . 009? •EbE08 . 56Eb 68IZ5 Pr»duard to Federal Trade Commiti~ion pursuant to suApoetw . ' . . - . . .. ... . . , . . .. . . . . . .
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. The name, package, and post-introductory advertising (once clear awareness of the point of difference was established) could emphasize supportable claims that the brand also provides a full measure of benefits of "old style filters" such as taste, satisfaction, draw, and imagery. Other advantages of the second entry strategy could be: • The strategy is equally viable whether RJR or another company hits market first with a social acceptability brand (assuming that product development timetables vill be similar between companies). • RJR could cover the bases by offering both a "concerned" and a younger-adult-oriented entry. If the first product is a satisfactory smoke, it could be used under both positionings, Line Extensions lf social acceptability entries catch on, RJR should be prepared to defend its established brands with appropriate line extensions. Although a mainstream second entry brand could, itself, be a line extension, this would dilute leverage of "the new way to smoke" versus "old style filter cigarettes" and allow competitive brands to.more easily respond. The least likely candidates for this type of line extension would be brands committed to "Virility" such as CA4EL and, hopefully, Marlboro. first entry must push the product difference. Thus, the first entry might automatically be viewed as "concerned" even if it went mainstream ., post-introduction, i.e., quickly repositioned itself. 1^., The opportunity may be greater for a second entry social acceptability zg brand to establish mainstream appeal among younger adult smokers, since the Second Entry Brand 14y Points t a- To be adopted by younger adult smokers, a social acceptability brand ahould: Products addressing social acceptability could revolutionize the market in the same way filters did in the "health scare" environment of the 1950's. The long range outlook for such products will depend on their acceptance by younger adult smokers. ,~ry, ,E,'S~Df. .G : 6~ 1. Offer adequate smoking satisfaction as well as effective relief from social pressures. 2. Be positioned positively rather than as "socially concerned", perhaps using essentially the WINSTON strategy of the 1950's. • A second entry social acceptability brand is more likely to be able to position itself in the younger adult mainstream. cz~ h Y O . o tr -~ -61- 4 N V U k
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;. . YOUNGER ADULT SMOKER ANALYSIS l'ONFIDENTIAL- FTC DOCKET No. 9285 Pnducxd to Federal Trade Cummis,ion pursuant to subpoena " i~asr.d .u ~r 6, 1997. R0O16308 Str££ £OZOS 0 It-ll 68 -ZS 7
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,.._..~ . _ {- PURPOzE OF THE ANALYSIS I- DEMONSTRATE THE IMPORTANCE OF YOUNGER ADULT SMOKERS I[- IDENTIFY KEY ELEMENT-S OF SUCCESSFUL YOUNGER ADULT STRATEGIES CONFIDENTI AI. - F"1'C DOC6ET N~o. 9285 Pmduced to F'ederal7'rade Commitision pursuant to s~bpuena If daled June 6. 1997. 4;OC16309 IISD 68TZS
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KEY ELEMENTS OF 'F1RST BRAND' CONFIDENTIAI. - FfC Dl)CKNTNo. 9285 Produaed to Federal Trade l'ammis.simi pursuanl lo su¢pnena datid Junr 6,1997. . ~ £Z4i+ 68TZ5 R0016321
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• IN RECENT YEARS, PM' HAS BEEN VERY EFFECTIVE IN BUILDrNG ITS SHARE AMONG 18-24 YEAR OLD SMOKERS. THIS HAS PROVIDED A LONG-TERM DIVIDEND BY INCREASING THEIR SHARE OF TOTAL SMOKERS. SHARE AMONG 18-24 SMOKERS SHARE AMONG TOTAL SMOKERS PM PM 1979 44.8 27.8 1980 48.8 29.2 1981 51.5 31.0 1982 54.0 32.2 1983 58.4 34.7 SOURCE: TRACKER LS££ £OZOS ZZ1+b 68ZZ5 CONFIllEN71A1. - NTC llOCKET No. 9285 Prnduced to Federal Trade (:anmtission pursuant to subpoena dated June 6, 1997. • ROU 1:i320
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.a TAB PLAN ATTENDING/ATTENDEDIGRADUATED COLLEGE SMUKERS 18-24 _ SMOKERS _ TOTAL SMOKERS ATTENDING T('tkL 18-20 21=24 25-34 l8+ 18=2N 25=34 t8+ 1824 25-34 18+ COLLEGE y F '1 F M F M F M F N F M F M F I NCOP¢ _ _--__50__14,999 515,000-24,999 , __ + 525,00!ti• - BLACK _TO:AL _ SMOKERS TOTAL SMOKERS TOTAL SMOKERS 18-24 I8-24 21-1s ]8+ IR-2- 25-14 1•• 18-24 25=34 18+ 18-24 25~34 18+ 18-24 25=34 18+ 18-24 25=J418+ TOTAL SMOKERS TliIS D(X UM1IENT IS SUUJE(.T TO STIPI.iLA'I'ION AND (.'Ol)R'I' ORDER UATEU APRIL 211, 1993 AND SHALL NIYI' BE USED, SHOWN OR DISTR18I1TED E`!f'EPI' AS PROVIDED IN TIIE 1199 non04 . (•OURTS ORI)ER 60Vb 6HTZS
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r {. • YOUNGER ADULT SMOKERS PROVIDE A"FIRST BRAND' ADVANTAGE -- THE 18 YEAR OLD SMOKERS IN THE 1983 MARKET WERE WORTH ABOUT 1.6 SHARE POINTS OF TOTAL SMOKERS• THE STEADY INFLUX OF 18-YEAR-OLD SMOKERS CAUSES THE PRE'EXISTING MARKET TO SHRINK IN SHARE VALUE- ANY BRAND WHICH IS UNDERDEVELOPED AMONG 18-YEAR-OLD SMOKERS MUSL,JRCHIEVE NET SWITCHING GAINS JUST TO BREAK EVEN• 'FIRST BRANDS' DO NOT NEED SWITCHING GAINS TO GROW AND CAN AFFORD SOME SWITCHING LOSSES- By CAPTURING 501 OF 18 YEAR OLD SMOKERS, MARLBORO GAINED -8 SHARE OF SMOKER POINTS IN 1983 WITHOUT NEEDING TO ATTRACT A SINGLE BRAND SMITCHER• Highest switching occurs between ages 1r8()N11*M'AjkZ¢10RAYWAb9iRes 422 of brand users in this 6 years, yet this still nets the ~$Y$4Yd~:'9~~~'2~r~it191NaY"j!!!iH'f§11dO~ (`!(!°!r9$) ~ dalid Junr 6,1977. £OZOS 5ibb 68TZ5 ~' "'163 1' OS££
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52'89 4392 L.661 '9 aunf Wlep _ - - ' 50113- 1697 'Alu6 .A6D1n0. s&iOUW • 0 W ~ ~ < '1961 Al*lo+l>wddo I1iva NN 1&1u@'J VLJON/OliwliY ViJOd 04 Dw11um AIIo1awsW aw Ou19imi6 liod•MI t310N t'•.11'YZZ 6'6C6'Ct t'4 1'9Z 6'OS Z'CLf'11 I'L Z'9C 0'9C L'ZC6'Cl t'L L'LC 9'lS (O.LI. 'l,30) Z'tC6'9l C961 9'06l'1tZ C'9l9'W C'• t'ZZ C'l9 Y'006'OI U'0 t'Z6 L'6Z 6'6/9'0Z l'L Z'S£ L'LZ 9'C60'L1 Z961 Z'LSt'40Z 6'60L'CS Y'L 0'9C L'ZC 6'ltl'Z1 Y'1 L'0 6't1t 9'£t6'Z 6'Y Z'CG 9'K Z'tZ9'ol 1961 I'SZZ'091 1'66P'CS t'C l'Ll 6'9t C'tuY. Y'L Z'LC 6'Z/ 0'9Gt'ZI t'6 L'Ct 0'ZZ 0'96Z'6t 0961 vx YN y/t yll WI tl11 9N 9M yll yy ylt yN YII YN 6L61 0'0C6'0t1 0'CC6'tZ S'£ 9'61 1'ZS 0'Ot6't L'6 9'K 9'9t 0'C99'Cl S't t''£Z L'tZ O'0£C'9 9L61 0'OL9'IZt 0'C9t'S1 S'Y i'1Z l'LY Ob£0'C l'L 0'LC Y'9Z 0'£69'L1 0'0 C'lt l'6C 0'OIL'4 LL6l 0'091'001 01096'61 6'Z C't Z'S1 0'016'Z 6'9 Y'£lp Z'9C 0'096'0 C'Ot L'ZC 6'6C 0'OlC'01 9L6t f'000'91 P'L00'OZ SY C'Zl L'9S 6'66f'Z L'11 L'M, 9'6S 0'CC6'Y 1'11 L1'Zt Y'6C 0'SCL'0 CL6l 0'SIO'l! O'CC6'61 6'• t'Ll 6'SS ' 0'KI'C ' ' S'Zl ' 6'St ' 9'Zt ' 0'ZCL'i ' ' 6'01 '1l L'YC 9'Ct l'9C 9'LC 0'L0L'L 0'9LZ'1 tL61 CL61 0't9641p9 0'069'99 6'Z Z'l1 C LY O CLO I 9 ll Z Ct S Lv lK 0 L Z 9'Zf£'S9 I'1SL'C1 L'Z 0'11 Z'6r L'CCL't C'Zt CbC L'Ot t'9l6'L 9'6 L'YC 6'IC 0'101'9 .ZL61 6'469'Z9 O'9L9'SI 9'1 C'Z 9't9 9'010't C'11 Z'IS 9'CC Z'111'L 1'6 C'It i'Ct 0'KL'G 91161 /'tS/'9 Nf6Z't 6'Z £'B1 6'L V'9£Z . 9'CC Zh2 C'I 0'VLZ 9'6 9'09 S'C O'19L .OL61 _ ~ I C f D~1 f~ i Du+O f fD~I t~ CDu~B f tDW S C fD-N 0 t At1t400ut LN3W3S S f 401. f s : 161s s : 1 s 4 _ a loq IOM LS.000'1 XI t1 V
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M EFFECTS-OF AGING pt~9W1E OF`9OKER" MAREBCRO 1980-83 1980 161 1982 let Half 1983 Annual 8va. Cno. 18-24 SMOKER SHNtE 32,4 34.3 36.3 41.2 Change vs. Yr. Ago N,8 +1,9 .2,0 44.9 +2,7 25-34 SMOKER 9H/wE 20.1 21,9 23.0 24.9 Ch•ng• vs. Yr. Ago +,S •1.8 •1,/ +1,9 +1,3 Aging Effect •1.2 +f.3 +1.4 +1,4 +t,3 Other Effects -.7 ..S -.3 +.5 HC 35-49 SMOKER S1WiE 11.0 11.4 12.0 13.3 Change vs. Yr, /go +1.0 +,4 +.6 +1.3 +.6 Aging Effect +.0 +.7 +1.0 . •1,0 +,9 O1k•r Elf•ets +.2 -.3 -.4 +.3 -.1 SW SMOKER S/YYIE 5.6 5.8 5.6 6.3 Change vs. Yr. Ago +,1 4.2 -.2 +,7 +,2 Aging Effact +.2 +.2 +.2 4.2 •.2 Oth.r Eff•Cts -.1 IIC -.4 +.S HC TOTAL 18+ SMOKER S/INtE 15.6 16.6 17,0 18,9 Change vs. Tr. Ago 4.6 •1,0 +.4 +1.9 4.9 ' Aging Effect +,7 +.9 +,8 •1.3 +.9 Other Effacfs -.1 , 4.1 -.4 +,4 fR.' Aq1nS Effect 1983 18-24 41.2 25-34 24.9 35-49 13.3 x O • Over the last 3 1/2 yers. Marlboro has gatnaden avrsg. of .9 shar• S0+ 6.3 O O w polnts per yar of total s.ok.rs. Total 15 9 00 t It l n ' . • N arg•. , Mnrlboro s long-t•rw grorth Is entirely attrlt ebi• to s w steady ga/ns a.ong younger adults. Gains In older snok•r groups Other Effects tCw.,l epp•ar to be solely tAe result of aging. rruduccd to FedCrabTWdeQ.1W1is.~9iQWDM-uant to subpoena 18.9 58EV 68TZS PftOJECTED • It Marlboro v.r• to .•r•ly hold Its 1933 shnr• of youna•r adults and contlnu• to be affected cnty by aging. Its s•oter shar• fiv yanrs fro+ nor .ould be nearly 22%. a gain of 3 full potnts over the first half of 1983, 1st Helf PROJECTED 1985 1984 1965 1988 Aoino Effect 18-24 41.2 41,2 41.2 41.2 25-34 24,9 26,6 28,1 32.1 35-49 13.3 14,3 15.4 16,3 S0+ 6.3 6.5 6.8 7.7 Total 18,9 19,1 19.6 21.9 Other Effacts (Cua.) NC HC HC OVERALL 18.9 19,1 19,6 21,9 • If Msriboro rara to continue to gain en+ng young.r adults at th• rata seen since 1980. It could achleve a 55% sher• a,o.g young•r adults and a 241 share of all ss.okars by 1988, 1st Hnlf PROJECTED 1984 1985 1988 43,9 46,6 54.7 26.6 28.2 33.8 14.3 15.4 18.5 6,5 6.8 7,7 19,5 20.6 24.2 19.5 20,6 24.2 r . ... .
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YANKELOVICH NONITOx ~ SELECTED "TIfEND M.WIFEJTATI(1N" bATA n [r. , Z MFASURED 1N_ MONITUR a 1980 1981 1982 1980 '+` CICARHTTE SPECIFIC DATA p ? 26.1 Cigt. UuRe -For EnJoyment' x x x m > 12.2 Seeking New CIRt• Brands x x x 26.5 Attitude Toward '1nv Ter" x x x 26.2 Acceptebtllty of Smoking x x x )/l..l 32.1 Smoking .u Fitness Concern Attitude Toward Smoking Restrtcttone x x x x x x d W 16 8 lntereet t Generlc Ci x ~ . g , ~ fRICC/FROMOTION F 20/21.1) Receptivity to Promotions x x x Z 20/21.12 ShopplnR/Prtce Practices to gconoatta X x x 16.8 Generic Product Interest x x x i LIFBSTYLg/VALUES ~ Z `~ ~ F's 31/31s.0 Realon For being Single X x ~Io 28.2 Confidence tn Authority Ftg.res 47.1 Interest in the ImAginary x x x 3/)e.10 Kethods of Forgetting Concerns x x x )6/16e.1 Meens of Soctellntng x x x )1/31e.6 How Avoid Sorfelittng x K x 22.1/22.2 Value of ColleRe ve. Vocation x x x y tl 12 4 Hov Flno hew Styles x x x ~ ~ . 12.5 Mov Find Nev tntettelnaent x n x a w . 36/36e.2 Ethnic Identt(tcetton K x lr ~ N tl r+ DD C ~ Ip IQ' F 0 Do RJMID30634 84M01032
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r ;. . • By 1988, YOUNGER ADULTS (1H-24) WILL DROP FROM 18% TO 15% OF THE TOTAL ADULT POPULATION (18+1- • POPULATION SHIFTS IN COMBINATION WITH DECLINING INCIDENCE WILL CAUSE THE PERCENTAGE OF YOUNGER ADULT SMOKERS TO FALL FROM 16% TO 14% OF ALL SMOKERS BY 1988- :. NIIMFRICAI IMPORTANCE OF YOUNGER ADULT SMOKERS Z OF TOTAL POP- I8• S OF SMOKERS 18+ 1915 i9$Q J.4u . . J3B$ 18•8X 18-5X 17.5% 14-9Z 20-0x 18-3X 16.4% 14-0Z . Why then vill Yo+m ger Adult Smokers continue to be important to the Tobacco Industry and.RJR? Sources: 1982 Incidence and Rate Report. M[A1N1ib)NWc»n•7tiy4_(iKSi1r4NatP*Spulation estimates. / ~ Pnduced to Federal Trade Cummission pursuant to subpoena . .. .. .. dated June 6, 199'L. . . ETbb 68tZS R0016311 ah££ £0Z05 ~ •
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j _ 52189 4391 L 9 aun4 paIOP ~~ • . . ei~(.S ul LuenuAd'uo~SSYw~J~ x c W ~ ~ < 0'MA'SC 9•CM'Zl 9•O L'SZ 0'06i SZ L•tzC'll 9•01 S'CZ G'Itt•OI C•t(L'60•Z( CCZ C'YZZ'Ol 6•019•9 6•Ct /'IZ vN VM VM Vk O'0B1•9 O'OLZ'C 0't 6•11 0•OtS'Y 0'OSO'C 1•f , Z'Ot O'S9S'L 0'Ot6•C YZ 9•t 6'6K'6 S'OI/•f Z•Z L•f 0•teL•9 0•6C1'C S'1 Z•C 0'>9S'/ 0•Ll0'Z 0 0 6'SZ9'C 9'S9Z'1 . 0 0 C•961'C 0•!OC'l 0 0 6'91t'C 1•9ZS'I 1•Sl 0•YC S S f WI s -;a5 1}flsn0(I 1N3K13s t s '186t 6161w1toAb 114~ MN W("rD r~1iw11V VIpM M leotiuM LISuIitestt9 fN OOIVmed6 a+od+M 330" 501143 1596 0 0 0 t'91 f 0'+~0 101 s (O.L1C •730) 9•S60'C 9'11 P•K 1•6 6'CYl•f L•C1 6'6C Z'6 1•vOY'mp CC61 C'LC9'Z Y'91 6•9C 0'9 1•9L1't 9'Lt L'6C 0'9 C'16t't• Z96t LbiZ'1 6'Zt 9•LZ C•Y 6•t1IK•1 Y'IZ L'9Y Z'P, 6•66l'Z 1061 0•ZZt'( L•Q 9•6C 1•6 C•629'Z C'R 0'6C L'C 9'69SeZ 0661 9[i VM VN VM VN VN VN LM VN 6L61 O•06C Y'YI 0'LC 1 * O.Ol2't 6'OZ l•IS L•C 0'019'l 916t 0•OlC 1'91 9'Ct t•/ O'LCC't 6•9l 1•9V 9'f. 0•S01't L16t Ob9l l'6Z C•9L 6'Y 0•00Z'Z Z'OZ t•6C 6•G 0'0C{'t 9L6/ YLOZ 0'9L 0'Sf. 0'Ot l'LZY'Z 0•6t Cbt C'9 0•9LL't CL6t 0•001 0'ZZ S•LV Z•L 0'/81'1 /'CZ C'6t [•L 0'SSS'1 K6t 0 6•6l 0'Sr S•S 0•B06 c•.z o•ss c•c 0•601't CL6t 0 0'6 0'SZ L•1 C•LZC 6'SZ Z•ll 6'1 t'YC6 ZL6l 0 0•Ct C•t1 L'Z 0'9LS L•zz L•SC C•C o•CZL IL6l 9•ftL 0•ZZ 9'OC 0'C 0•6LL 6'u t•Z t•0 f•ZC 0161 f f D~I t f-~;;S- t f P°J0 401 s f f O~l S f•~ S f PW0 aot f f M3lVf (5.00041 MI f) 9NIOL13dS 9119LL3 V
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ir ?/n.-¢i m "7s!~i"9'~:~.19,~ A,qiS~tq~l i ;;I'i~ : I . RM0008315
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.o.. ..~~.,,~ ..F YOUNGER ADULT GIFaWTH•PERFORMANCE HAS,ALSD-BEEN.~,{'LEADING INDICATOR OF COMPANY PERFORMANCE- EXAMPLE'-ATC ATC'S LEADING PQSITION AMONG YOUNGER ADULT SMOKERS, FIRST WITH LUCKY STRIKE AND THEN PALL MALL, PUSHED IT TO #1 IN THE INDUSTRY IN 1940• HOWEVER, SINCE PALL MALL WAS ATUS LAST SUCCESSFUL YOUNGER ADULT ENTRY, THE BRAND'S DOWNTURN SIGNALLED THE FUTURE PERFORMANCE OF ATC AS A COMPANY• fi7ERICHN TOBRCCO nx •c. -s.*m .•o.cc s..c £OZOc~ - 9c'££ TZiJ6 68TZ5 CONFII)f•:NTLV. - 6'1'C U(H'K6a' Nu.9285 PrA"WVlitjwwtvT1tlrnd"19fiimis'siun pursuant to subpwna . . tt:dtd ./unr 6.1997. R0Oi6319
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FxAMPLE--WINSI N FAVORABLE TIMING AND THE HEALTH SCARES OF THE 1950'5 BENEFITED WINSTON- YOUNGER ADULT SMOKER STRENGTH WAS A LEADING INDICATOR OF WINSTON'S EXTENDED MARKET SHARE GAINS AND OF ITS SOFTENING. CHANGES IN THE EXTERNAL ENVIRONMENT MADE WINSTON LESS IN TUNE WITH THE DEMOGRAPHICS AND .THE MINDSET OF THE 1960'S AND MAY HAVE LED TO ITS LOSS IN POPULARITY AMONG YOUNGER ADULT SMOKERS• UINSTON FIfE tCAU ROltbtD RYCR110F SIME . 10 1~~9,4~ ~y SO 1,60 1970 Produ to Federal "1'rade Commi~.ion pursuant to su4poena nSVE ,aZOS 6Ztv 681ZS dated June 6,1997. getACLL AmnL MITe ftW tsd soS tsG01631 7
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/ 8' a1) r"A oeL = FUB 'lAS a r_ aq U f,a," 4Q = S W! TC Ff EP,s RM0008313 I
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• THE MOST SUCCESIFUL BRANDS OF THE LAST HALF CENTCURY HAVE DERIM THEIR STRENGTH FROM HIGH YOUNGER ADULT SMOKER DEVELOPMENT. - /~-. SHARE OF 18-YEAR OLDS 1 39 0's LUCKY STRIKE CAMEL CHESTERFIELD 194D's/50's PALL MALL jg50's/60's WINSTON 1Q70's/80's 1'SARLBORO 32 20 30 30 50 • YOUNGER ADULT SMOKER GAINS HAVE BEEN A LONG-TERM INDICATOR OF THE BRAND'S MARKET SHARE-GAINS. CONTINUING LOSS OF YOUNGER ADULT SMOKER STRENGTH HAS ALSO BEEN A LEADING INDICATOR OF MARKET SHARE SOFTNESS AND DECLINE. I C(W.".•.+•x,.i;._"s.: ,.. pTC 1)(K'KE l' No. 9285 Pnduced to Commission pursuant to subpoena ' i . . lune6, 1997. • . £DZpS 8T46 68IZ5 6y4'~ ROO16816
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APPENDIX }I I DISTRIBUTION OF MARLRORO SWITCHING LOSSES A brand's or company's effectiveness at drawing younger adult smokers from Marlboro can be measured by: . . 1. The size (points) of Marlboro's switching loss to that brand/company. 2. The percentage importance of that brand/company to Marlboro's losses. 3. The brand/company percentage of Marlboro losses versus its "fair share-, based on its development among smokers 18-24. BY COMPANY During 1980-83 (1st half), Marlboro averaged a .36 point net switching loss ~° every six months among younger adult smokers. Other Philip Morris brands were :~ the beneficiaries of nearly'half of Marlboro's net losses, allowing PM to keep twice its fair share of these younger adult smokers. MARLBORO SWITCHING AMONG SMOKERS 18-24 Avg. per 6 Mo. 1980-83 (lst half) Marlboro Svitching vs: Net Points of 18-24 % Importance To Marlboro Losses Fair Share Of Marlboro Losses ATC - .05 11X 2% B6W + .10 18 Liggett - .01 2 1 Lorillard - .17 38 iS Phili M i 22 49 < 27 p orr s - . RJR .00 37 TOTAL - .36 10DX 100% Sources: h'F0, MDD Tracker BY BRAND . Virginia Slims and Merit were almost entirely responsible for retaining such a large proportion of younger adult Marlboro switchers within PM's corporate fold. Among RJR brands, VANTAGE was most effective at gaining 18-24 switchers from Marlbo o . r 11AItLBORO SWITCHING A.MONG SMOIO;RS 18-24 Avg. per 6 Mo. 1980-83 (lst half) Marlboro Switchin¢ vs: Net Points X Importance of 18-24 To Marlboro Losses Fair Share Of Marlboro Losses Vi i i 4 < rg n a Slims - .1 ® 9% Merit - .07 8 Other PH - .01 1 10 CA?EL - .04 5 S WINSTON - .05 11 VANTAG s E - .09 4 Other RJR + .18 17 A11 Other Brands - .14 46 Y U 46 b TOTAL - .36 100% looz 'W a, w I~.~ . W ' W RH0003846
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u)-t& 6&",L ~ "eat 7v-tt~ : Fv$ mS - `t~- rvsyAS ~ wITeS It Aq ~I 1, '~1di3t f~iS i 1Is 41 gjs 1~11Y RM0008314
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ENAMPL "MARI_R;R(l ~. . . '- MARLBORO SUCCEEDED WITH A'FIRST BRAND" STR7kTEGY BABY BUBBLE 1N fHE 1960'5• TARGETED TO THE LEADING EDGE OF THE -- MARLBORO'S POSETIONING WAS IN TUNE WITH THE MORE INTENSE MINDSET OF THE 1960'5• -- MARLBORO IS A'BANDWAGON"/PEER PRESSURE BRAND TODAY• t1F1RLB©RO IiK TUM R0.LEN0 RYEMqE Er1ME - tYWC[T 6HNRE - TOWCA IpULT SlMME e SS££ EOZOS_ i I i 1940 1yg~ 3960 19T7 7980 CONFIUENTGAL - MT(' DOCKN]T No. 9285 Produced to Federal Trade Commissiun pursuant to subpoena qftotQp re.n L MT/I M IYf] 11C:O1tcd Junc 6. 1997. 0Zb5 68TZ5 ROOi 6s 1 '.t
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l, l3Et~~UG~~1G . .... ..M . .I. ~ C.. r l. ., a ~ E ° 0 u s F p 9 `----r ` v ~:Jfilitlrai~:filisftll~{ ~~~1 RM0008316
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• SUCCESSFUL :YJUN_GE:R-~IINJLT. BR:E,NAS Hb1VE _CAPITALILED S)Li THE FOLLOM'.;N6 iY~PES .OF^Qp?ORTUNITIES: r . {. . . . -- -z . . -- EXTERNAL FACTORS • WINSTON CAPITALIZED ON THE ~HEALTH SCENE' _ ENV4'RONMENT OF THE 1950'5 -- GROWTH SECTORS WITHIN YOUNGER ADULTS • PALL MALL TOOK ADVANTAGE OF GROWING IMPORTANCE OF YOU GER ADULT FEMALE SMOKERS IN 1,940'5 AND 1950's~ • K00L CAPITALIZED ON THE IMPORTANCE OF YOUNGER ADULT BLACK SMOKERS IN THE 1960'S* • NEWPORT TARGETED AGAINST BLACKS IN THE NORTHEASTERN II•S• WHERE BLACK POPULATION WAS GROWING IN THE 19I0'5• .A " OUT OF TOUCH COMPETITORS • PALL MALL FELL OUT OF TOUCH WHEN IT FAILED TO REACT TO FILTER BOOM • WINSTON LIGHT-HEARTED/ESTABLISHMENT POSITION NOT FIT THE 1960's • KOOL FOUND ITSELF TOO EXTREME IN THE 19I0'S• DID -- PRODUCT DELIVERY OF MILDNESS • PALL MALL PROMISED MILDNESS • WINSTON'S FILTER SUGGESTED MILDNESS 2 £OZ05 • MARLBORO WAS MILDER R0O1632 65£f` CONHIUF.NTIAL - t-I C ll Ch ET 9285 • KOOL ~~L1VEf~ED MILDNESS THROUGH MENTHOL . ,~ZVv 6gTZS Pnduirod to F'ederal Trrde Commis.Y'~on pursuant tu suupuena - / datedJm% 6,W% P0RT IS PERCEIVED AS MILDER THAN KOOL IIncidence of younger adult female smoking went from 30% in 1930's to 447 in 1940's. .,ao vr.,m smoYin- nc .tl.t vhires in the 1960's, 18 year old blacks accounted for f
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COh'SLMEa RESEARCH PROP:3AL (MDD 184- yy jCt,j) TITLE: YANKELOVICH SMOKER DATA BACKGROUND/PURPOSE: The Strategic Research group has recently learned that Yankelovich hae the capability of producing custom runs from their Montto m data, including: .. ~ • Data reflectin g only respondents who are •mokere. ~ ~ z • Additional dem ographic detall/crosataba. ~ ~ ~ • Trends vithin smoker demos (1979-83). ~ ~ < s q e, This project would provide RJR with detailed trend data to assist in developing further insights into the lifeetylee and values of key amoker ~~ ~~ group•, including younger adult smokers. ! ACTION TO BE TAK£N: The Monitor data are expectad to form the basis of a~X Strategic Research report on values-based growth sectors within younger adr i. amokers and, potentially, other key smoker groups. Data on younger adult ~, ` smokers will also be forwarded to New Brands, who have lndicated that resuibt~ ~ may be useful on Projects DB and YAX. ~ a METHODOLOGY: Data will be tabbed for 48 Monitor "aocial trends" (1979-83)pe 800.0 I apectti'c attitude questions (1980-83) across 40 demographic celle. Lts~ o F of iteae (atube) and banners for the tab plan are attached, ~ z= O SUPPLICR: Yankelovich, Skelly and White, F 3 J v: p COST: $3,200 ($1,400 for trends; $1,800 for specific attitudes) F f TIMING: 'Socfal Trend" tabs w/o 4/23. Specific attitude tabs v/o 5/7. 6J '1. n m CONCURRENCE: Initials Date ~ Z -1 7~Yd.~1rL.- D. S. Burrowa R. C. Nordine ~n YAPA f#.ywwl f~.A•/wfdt ~ ~ a G ~n t? E. J. Fackelman J}t'f~ SIGNED DISTRIBUTION LIST: R. J. Harden L. Kimmer MDIC RJM030632 r 84M01030
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EFFECTS OF M.INO 01/ S14NE Oi SMOKERS NENpORr NEN11101. NISTORICAL 1st Nalf 1980-83 Annual 1980 1981 1962 1983 Avg, Chg. 1d-2t p/p(ER " E 6.1 7.0 7.6 8,3 CMngt vs. Yr. Ago +.9 +.9 +.6 +.9 +.B 25-3d SMOKER SNME 1.8 2.5 2.7 3.3 Changa vs, Yr. Ago 4.1 +.7 a,2 +.6 4.4 Aging Effact +.4 •.S •,S 4.5 +.S Other Effects -.3 +,2 -.3 +.1 -.1 35-a9 StUKER SNlYtE .7 .8 .8 1,0 Chang+ vs. Yr. Ago -.1 +,1 nC +.2 4.1 Aging Effect +.1 +.1 +.2 +,2 +.2 Other Effacts -.2 NC -.2 . NC -,1 30t S/IOKEA SHARE .4 .4 .+ .2 Changa vs. Yr. Ago Aging Effect NC NC MC NC NC I+C -.2 Iq NC NC Other Effects NC NC NC -.2 NC TOTAL 18+ BNp[ER SfW1E 1.9 2.2 2.3 2.6 Changa vs. Yr. Ago +.2 +.3 +.1 +.3 +.2 Aging Effect +.3 +.3 *.2 r,2 +,2 Other Effaots -.1 BC ^.' +.1 NC PROJECTED a If Newport .are to hold lts 1983 shara of y0ungar adults and contlnua to be affaet.d only by aging, Its total s.ukar shara 5 yaars from now would be 3.1E. a gain of .8 polnts ov.r 1983. 1st Half PROJECTED 1983 1984 1985 1968 Aolna Effact 18-24 6.5 8.5 6.5 8.5 25-3a 3.3 3.9 4.4 3.7 15-a9 1.0 1.2 1.4 2,1 S0. .2 .2 .2 .3 Total 2.6 2.7 2.6 3,4 Other Effacts (Cu.,) NC NC NC OVERALL 2.6 2.7 2,8 3.4 • If Newport were to oontlnua to ga/n aoong yaungar adults at the rat* saan since 1980. Its total s.okar sharre could reach a,1f by 1988. tst Nnlf PROJECTED 1983 1954 1985 1988 - 8aing Effaet 18-24 25-34 3S-l9 • Over the lost four yasrs. Newport has galnad an avaraga of .2 slhara 70+ points per year of total sw6kars. Total • Nwportfs long-tan growth Is aMlraly attributable to Its large, . steady gains a.ong youngar adults. Galns In older s.ukar groups , Other Ef facts tCu..1 E y IDg OYERAII appaar to be solely Yha result of aging, - 16 L • ~ Prrduced to F~edera 1 ratle l.bmmissm7n pursuant to subpoena 8.3 9.3 10,1 12,5 3.3 3.9 /,S 6.2 1,0 1,2 1.a 2.2 .2 .2 .2 ,3 2.6 2.6 3.1 4.1 . NC NC NC 2.6 2.8 3.1 4.1 ... .. • ~ ....- . • 1 98E'b 68'lZ5 . ~ 1
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YANKELOVICII YUhI'lUR TME 48 SOCIAL TRENDS COVERED IN MONITOR 983 (L/Sted aCcO/dinS to trend number) ALSO MEASUN(D IN MOr/1TOR 7IREN0 I/f1 111110 HU 111) I /ennnallfltlon % % % x le SOt,Y hureNNn % % k x 2 heyuul SeILEnnlncement x x x x ) PNYY(JI Fi{nnl end WdLlk'nl A % A x )1 Conurn About ManW WMI•Be-n11 le 4 F.rtwe neLM O"enunon SosullCu/lurY SNbE.anuon % 7( A t % .e 5 ConpKt/an Ctlu.e0on Ivnon.l 6utl.nv A e R % % A x x 6 Ektocu\ un MoMr A x x % 64 TW/yJ Inunp6/n  x x x 7 MeeMnsilu/ WwS \ R % ~ Iu 10 R..erence for klence He. Ror/1MIK11T x x x x 11 //IY01pKUOn % % % x 17 Ho.Mtv ena Uar+r % n x x 14 Elalum to N1twe x % K % 16 Ann•61"t A A Y % 70 LhIA4 Ew To61r S R x R 21 HifdOnleen 22 Anµ From SNr•ImorO,ement % % x x 24 Li6M/7 SIr Al1+lu0n \ x x x 7$ Mwnng o/ Ne Se.n x ti x % 76 AuepWKe ol pryp Y x % x :7 An11•Flypocnlv 7e RelKlmn of Autnor.t. a t R \ 79 7G/wuw lor CGea Yt0 (),arolr ~ 1l l 30 FenWe [Ueeh\r/l \ r ~ ) 1 A.e. Frorn Flmoblm l 4 C % )1J Neld for DrOenontlited Soc-e1 ReieUOnlnlpl \ l % % 71 Caxe,n About Ennronmmt r x x x )) Concern About hl.ur t . x 34 Tne Ne. Cfn/clvn \ \ l \ 36 kucn Ia Commonicq . \ \ )oa ] 7 Ev~nc O.rnuuon Conurn About /enonL S.Inr t \ t \ t ta A[(eGl.ncf of Iurpp/lnont \ \ t \ )Y (}/lo(1n On YpyN • \ \ u E/ouon o/ the h.cho/oFr of AlRuence ~ \ t Re.nlulemeEt of In/ SUtU~ ConlieLl \ . el Nerd la Ideoloyce! OrKnul'on . \ \ H {m1eL0/1 W'UN (IIGr, ~ \ \ \ e\ ),mop.6uuJn Tnrour TKnnaop t t \ \ W Lumm-lment to 9u\ Amrr.c.n \ \ r •/ RnOMY.enn1 W Flnyty c \ \ elf e4 Nrro /a Snl Sel4urnc. M.nrl IOr F/rlpnel {nd6ltl \ \ Su To.ud O.w.enrtt \ ~ q r G'lo ~ ~ v O t C C A IP B J P P RJM030633 0 84M01031
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e.r ks.-c. VS 5W ITCttEQ Yo dor ~ I ~Q~Iri;^.1;7'a%~RAt fi~~Ca?I~ s ls~: i}~ ~ 11: iut., ts~? i'v t trl6 E~liy ~,t 4D ul A 1r-F FP-L- N7- _ ~4 -- -y-L ~-~- 0 0
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f nrrer:nLx c V11n./1 1IAYI11 MPWMI e1, WJ.I Ilq )IrLIW .erl Ya. L L L L! LLt L L L li7 L /uMaY I I • I • • p M.111 • w/w.Olnt 1 1 • /,M1IIt YI MM/ // I I . •I~ IM1. 1111/1 YOIII t I ~Ir Nltr/.1 hutnY 11/l.uM y",M 1 W:Iq• ttU.[I /11Gq11 4m / IIt.M I lylt'q. llleitl n. MuM1Vt b.M.l Y 4nY.1 uu FVI. WWI uff rml. 1ut ttml. Itt1 wnq 16S t•oClu Ult ~r M14[1 W321 wltl IISI R01. {lu MWiI lul Mt. w Intu N• 1//1/61. WIM/ wWl WW1 11411411 • l[II F%I. PII tMm. l/11 Mqn rq 111111 lu/.. Mw1 wIUM.. MI .It1 ll oft MIM w nll w M. IMIMIU) IW/ WIVWn, kl IIMI t/ p IM M t/ll M Mw Y•/f 1MIMII) Yllllb 11q tI~111 MHYw.LI 1S. WaMY ttr rl I~rM(/° f..n wl. !LLL • 1C1 N1 L'11 101 2L'1 !M L( Mnul IqYI t.w. nnM •..IO t11 tINtM r' if II t/ /W41Y Mff tq. M.1 Ir.' tnarl ILIf IIn11 Yr Il1Tr Irf/1 IYII /nbyl Itltt Uu 111111 tMt1111H {il MMrIY1 IYW.If1 WWI Iw Ullu IYYt WWI IJM1I1n/ 11/•11 M YsI IW I1. 1r w lYM 1/1•I/ nY t1 q11S. fl 0 11111 uu qrn WWI {/r Ar iYil'q. 1YitMt ilu f uU1/ j nn. atflwn'w In•q KY l/ MIiS. /f t/l IYII I11.Y 11q l/ q{111fSDlq t1Rt /hllll. II III ltlr f{Ir r I/r OmII HIrlML /RII W rlalq r.yO~ L," vpwa. IWC.IY rwll rsatnlr• wl n•M tM111tIR M M u • M Y M r Imo s41 19.16 tM1111n q ---• Y wstl u!1 tweI1 y,t1a1 UItNt ttw(/111r^ Y Y .r /ltin . ti41 14Y •.11odo1 r•M. Wf M1./
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. ,..[. .r-. ~u txCliInU I RM0008327
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~]W8y BerNth7k~BR'6 J~' r SEE wHAT UTMiwS TNINK : r.H r.• . ; . ..• • . .. LH . `., ..:.• ~.r . w.r r. r . . ~.~ -..H • ..........r. . , .% .I w....~p) 7 L~~~~ ~( tfif3! ~s i~15 Sl i;vit:' L'•r 1'tlL RM0008319
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b ~ O 0 0 ~ w N ~ 9160 /Cro,. 086I SL6I V£V6 68:Z5 OL 61 S961 0961 Produced to Federal Trade Commission pursuant to subpoena dated June 6, 1997. SS6I SQj f861 =3:)a:1vs 0561 uS 01 SL r- C 2 -i z a
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13. M IJQ~~, ,3. UPwflpb STQiV,NG 1 p„~ FvpyRS. SUCCt)SfUL 1I f1 lfI~'.tiy U-1t~1 ; vM.,J i tt11a il) 1~IIItl6V RM0008322
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~, t3E~NC~ ~irFF~'eNT 6 e~,Ii es F~2E nrr~Ar~,S ~ F U8 Y4S ~........~.........„........~...... .~:...... «........~......._~........M........ .~ ~ ~....,,:.:: ~il~tilti~~ RM0008317 SOURCF: 1°") fw•rrtotlo•i S,udy I
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L1, L-YCITEnrtaj - " TNE E 6GE '/ A(;(;KL)) IY! RM0008332 t•. C ~ J -~ ! t:^;° 1 ~ ~ i{3frii5lti'' J
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I da. $eLVrv61ti-i, -)- J3UiNC brFr~-~euT a' ot. F v8 VA S,A--O ;V%VA 6uj,4s, z~'." ,V AT J;P E 4 ,I1C. de. 7-aa•deo j.,- ztp r.o.4f - 8EL~14 tjX7tc,~,~t o ~ ~~ l/ n 'a An ~.o. U . _. . -~ o ©,~. ~~-Q- 0 6 ll~~ N4.d, TN F(S PoCJP ) yj o-F s,.-. 0 julRaz,;.,..+.~/J ) v..~.ens-...c-s(J V . ~-~'"1 ., 1 .,x A , f n , .;: RM0008318
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~.. qDjN GF-P_ A A L)c-T SM aM e E..S 0 G(J~ k4A--,e.,Qo /)"~ Fko r- E6 oM _ e- ao,, ,A o%-t~ .o ,Le.Ac-Q - UA~14^e- Y-4~, L- A-e, , ea•-g ~ 6 rt~~ y~ ~.. uVez;t.. G.4~~ -~ ld-~ 4o irwm-,.u... '~~ '-r k-!' rAA~, -!?., " .,Q ~~~~~~~~o a ti 9 ~ 111///"'FFF~+++ r lJ i _ L .•- 7-Q-- --- d• ~ t ~ ~-~- ~~~ {- , ~~------ -- SAO-?- - (D U IJ ~ ka.,~ v CX-21 ~ RM0008312
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4. cYeITt ME+U1 -" TN& L= b( E ' kUL (,t.L, ~a........'......... ~ .........~ A......-.~~...l...... r__.r.~..~y RM0008334 I
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rrE mE7 lIT kaA-tl~ RM0008329
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/MLF ~Q(3 YAS ,v= ~u~o4---~ .t ~~ ,ze•--.-..6--~ zi, , ._ ,, A1 o T ,A-,Zt,- AU o ur~ ~.~ vot- ~ N w ~ ~ ~ a U A F'a ~ 9Y L lL ~ ~ 7 ~ ~ C. v c w U ~~hsl{:~.:iu,tCi~~+ilSlb7liill~ w R RM0008341
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~. ExcLIrEMf~,Vi -7- 7KE t-tDGc '~.t......... • 1aet7F,~:1:!„II~ FvFP'~ll!{ c .:..' . . RM0008330
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. q, CXe irt nIsA)T - ~T1tE ED~~ ------ - RS ~.a...:,_..r.,.:...~.... :ii ~ n,~a,•.~ s ! a ~ ?! 1~..! :...,i. ... _...:.~ .,;,:.~ tl~iliTILi RM0008333
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,S. Seu , r LoTS ~ - xz-~ A-0 s"C4..a.d. -kc / ANYTU~NG goea. a - " x~ A.,dx".. .r -?.44 A\°1-a.l 1.~mi~~ ~~ ~. I .a y/W,JI jJdWii I i11~'J I~:J~Ii;:S7~71r9~ RM0008337
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• -71-.- oa7acT~~~ ,~ ~ : ,~~ A.. a.~~...~~ ..~ 0 RM0008347
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3. UPWAQ i STbViNG ~ oe,ed HJ - _ TDm F vQ y+4s FfJuTas y " 7MA&iNAT/VN o H's- GoOd D a ~ r )qyS (PL- E ~ o R GJ ~ u $ RM0008324
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4. FuelrEme,u7) - " TNE Eb Gc " -4 s , a. Pw Zzk ~~:.~ Q sraNC; J)ur in n tki,uo .... .... .f-._ _. ..• ... U c 4 L. nn+e~^,~2~~1As~ e1'A?~w1I,1~~ ~ RM0008331
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•H,~c 9 00 p oL ,) DA VS Y~ dA-r--- Z Fvi3 YA5 --- ~9-ay 5.,~YI4,Q1 V$ 194 ~ G .v-( >e,( A..~_ 4" taq ~-~ : / 9 8/ -/ 9 g 3 RM0008326
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AUVEhTUkUUS I q+q!R971 .,iY~;f~`1~~~~iA~ ~ W RM0008335 ° y, c-xe ~rC MsNT c.=DG~ •, 4
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0 3, UPn/AQ6 STQrJiNG ,~, ~.~ . cv-k..,,edfl Fj)d t'AS MER-n1 w-k, )Zo (J~ 71 I ~~ ~ 7oDA Y S~-a~ .u Q.~,~ 7omoe~ev u/ Ft1a yJ}S VS SwiTCNEgi .~_....---- d.~.t _ A- ; '24~~~' U -.1 "~ U °-> ~ ~ : ' 411++'Vl. ~ Id .0 ~ ~ ~ ~ ea/L"i- € ,. RM0008323
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M q6iN,4riaN - 7~ t, " s..~ A~c- 117 0 *„"~ Pvay43 ~t°- a-ra 'a."` ~ A.o, "'" `~o,~,~ . ~ J.~.....~.~. V.~,.._ /o o~. ..S~So + ~{o "t' l98/-19B3 Ym.~~ a R ~-- e~ ,6-7 PWO I8-ay ~y J979-~9P1 l9 8r-l9~'~ Jo fo !8 ~ ~y ~ c RM0008325 ti 0
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J 1. j Z. BEIDNGING AND REING DIFFERENT • THE NATURE OF TNESE NEEDS FOR FUBYAS " BELONGING TO TRE FAMILY (SECURE) REPLACED BY RELONGiNG TO SELECTED PEER GROUP (NOT AS tECURE) BELONGING TO SELECTED PEER GROUP REQUIRES ff~M DIFFERENT FRon; - FANttY ' OTHER PEER iROUPE • FOR FUBYAS, THE 2 ARE INSEPARABLE I i
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J= 08 Y4 S SiDe.iw tr E' [Jocl? Sr'Ec)e uA1 r- J 3,~ s Tz.,X A A,~~ ,~.. Q M v ~~ ao 41-~ V_e. /L..o-~ v wC wl~nl iTo ,S vppc.~ ok1E- op -t.N t PrP 73der+A)~ or= 0-16.fiPE7-rZ!~-S. RM0008354
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ffm coHTIa0t1Rt OUESTION ARE YOUNGER ADULT SMOKERS IMPORTANT2' CX'O S ~ , a;ORR
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2. 9rlNG DlFrr.rrt • BUT THEY ALSO . . . ~w) ` ' ~ "Z FN IDY B IN. DI f R NT • BELONG/F1T IN l.llp BE DIFFERENT A SOURCE OF CONFUSION TO NON'FUB NINDS -- UNTIL WE LOOK THROUGH THEIR EYES RATHER OURS• I. ~ i I At,:'. `, '
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X- Fyf3 yQS Soe1aL (.,Qojp S?arrRu.N ~~Te~ME ~* 7 oca~'s S,<:oQ ~.'ol)FORMrT'j ~ ~ ~ ~ 0 0 0 00 " , o- ~ ~~...+ . , ~.,s~ Pa.~ 4:.oJ s V-~8 -= a r w NOn) CONFaeM1Ty • / d,41~J /u-c-q.1~AAbAd-tu Federal Trade Commission pursuant to subpoena ~ dated June 6. 1997. t96b 68IZ5
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2. STRONG PERFORMANCE AMONG FUBYAS tMOKERS It GRITIGAL TO LONG TERM SHARE IN THE TOTAL SMOKER MARKET, FOR BOTH BRANDS AND COMPANIES• It ALTHOUGH SWITCHING CAN BE IMPORTANT IN THE NEAR'TERN hARKET, LOYALTY AND THUS FUB SMOKERS, ARE THE DRIVING krM E OVER THE LONG TERM. 111" r1~~ aRANDS/COMPANIES WHICH ARE nVrRn v nP D AMONG FUBYAS fEEM r-~. A0 GAIN SDM EFFORTLESSLY YEAR AFTER YEAR, EVEN IF THEY ,k!~lkR DRAMATIC SWITCHING LOSSES (E•G., MARLtORO). G BRANDS/COMPANIES WHICH ARE UNBERDEVELOPED AMONG FUBYAS MUST CONSTANTLY WORK HARD TO ATTRACT SNITCHERS " TO MOVE THESE NEARLY IMMOVABLE LOYAL SMOKERS• . 8 S co N il kO ~ ~ S4%4.n 109(.
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EX ~ ~ $ VgS is,,~ ;Mc,,;. y,o, - a.t 7 W i C a.-O ..-~. ~.,.~. ~....~. {~ lj..Y *_-.'r~ l4z~ n.-, - 5...~ yo 70 ~ ~ i~-a 0 a 9 rS e &e•~ : l9 8l - l 98 3 .~ - e~y C C p~i UA 9q L L a r /~'~ e t n~'TL i~'ln~-/~L~G r~+N-r s ~ U~x A,6..,-K;L ~,7~ .lhta~- '"°,f Aw-- /<-I/ M"- ~' FUl3 y/fs, c RM0008338
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ARE YOUNGER ADULT SMOKERS IMPORTANT TO RJR? xanIO :Gy1
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q. 5 Ye 17 E' ptr-v T - "TItE `A9 C ` 44,c..c,;to ~ y r- e'Pa R1TraTE"S FvB~I/+S ,~.~,r. U i €~k ala v a ii .~-< - a ~ L EV t/~ /} G R l3[ ~ ~~ , r~+E sD~E t ~'4I.Co A S bS Fv13 Yoq5 GfJAAJGC 19gi - /983 ^, ^•I.I' ~ RM0008336
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: N0I1 CONFfvPNIT`,' m .LAIA.'e, 4-4./ CL- -9~ T SC4 , b ~ to Federal Trade Commission pursuant to subpoena dated June 6, 1997. t-- OF Tt+ 1 NGs' N . Yo-.~_ 7/-1/NGS 4,760 ! ;t ,1 ; Z9vv 68TZS
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FuVA3 Socrac. GrE'yyp SPEcrp ,~) A-4'-C .0-0 ~ µ^.`'~~.1,[n4~ I ~ ~~ . arlo ~ Lo .2 0 ~ +~ ,~oc~.,, ,e ~. A.rs. ztl-el s e za~ ~~- T- l G ~,.ao~;.a a.,.e RM0008350 .,.:.....,.,...,.~., ,e, . ,~1 ,
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IN THE YOUNGER ADULT OPPORTUNITY ANALYSISo WE LEARNED 1. TN R AR 2 DlST1N[T [ ASSES f1F YAS J ~ FUBYAS - THOSE YOUNGER ADULTS WHO ARE ALREADY SMOKERS •UT ~i••l HAVE REACHED THE STAGE OF CHOOSING A FIRST RLJ/d{. 94 BRAND. (FIRST USUAL BRAND YOUNGER ADULT SMOKERS) ~ SNIT ~ RS - YOUNGER ADULT SMOKERS WHO HAVE ALREADY CHOSEN A , ~NKpy FIRST USUAL BRAND• ~ ~ T h Ilmod ••• AND-T-NAT FUBYAS, NOT SWITCHERS, HAVE DRIVEN THE SUCCESS OF ~ r1 /11 TNE'KEY lRANDS OF THIS CENTURY. THEY ARE LEADING INDICATORS ~I V J Of l*110MTX AND DECLtNE• 4 PALL nAl .r N.~~rwrr.l NINSION . ;l~iU_n8y
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SHARE AMONG 18-YR-OLD SMOKERS 6-rtM RouIro nr[Mwt N W d 8
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THE TOTAL MARKET GAP TRACES DIRECTLY TO YOUNGER ADULT SMOKERS AND THE LONG TERM IMPACT OF THEIR IRAND LOYALTY. THIS YAS GAP HAS MUSHROOMED TO NEARLY 40 POINTS••• ~ SHAR OF CMOK RC 18- 4 1ST HALF ~ ~s 1ssQ is>~ is~ nu 1994 226.1 25.0 24.3 23•5 21•3 20.2 . 44.8 48.8 51.5 $4.0 58•4 58.6 ~ ~ -18.7 -23.8 -27.2 -30•5 -37.1 I -38•4 ••BUM-iME GAP AMONG AGES 18-21, THE FUBYAS, IS EYEN MORE ~ • PROoND... ~ \rI S O S 18-21 ~ . . . 1sT HALF V 19R4 ~ ~ RJR 17.7 17.5 r PM 63.2 63.9 ~ ~ GAP 45.5 46•4 ~ . •••SIMILAR TO THE OMINOUS PICTURE PAINTED IN THE SDS OF THE 1B-YEAR-DLD SMOKER TREND• N u 0 `•'°J?093
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F ~ ~r ~~,...~.~.. . . , a r~ LR r4 NT S Fy ~ ~. ~ o.~.. 3sr 18+ /20 A,y 78 3.0 100 « ~ ~ ~ ~ -rXn,Jb°`~-~ (~ , 5. ~ "Q'~ `~1l~A.a /Yot, ~ ~ ~'}'~A.//l~'./H.0 ! 1 /'_ r..< /~. T(t l4 QL.~4 e1..• +4f 7 Q K.7/ , .vt Lrx.t c Sr~.ts~ t'~ L l l°T ~` d1 aA'so vM k~-0L " ~ a.~. : • AA.I4-o*- -ai....e.: 9 . "V 11-r1 h ez „ I V RM0008339
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YOUNGER ADULT SMOKERS -- FUBYAS -- ARE A XEY tHALLENGE TO RJR SECAUSE 0 DESPITE STRONG SWITCHING PERFORMANCE YEAR AFTER TEAR... 5 YEAR NFDNET SWITCHIHG 18• 1979-81 gyERAGF RJR •.35 +.42 +.39 +.40 PM +.17 +•24 -.43 •.10 ~ •.18 +.18 •.82 ~. RJR~ . TOTAL SMOKER SHARE HAS NOT KEPT PACE WITH PM• '111y 4 •.30 l.r.j IST HALF ?R9S.5fR 18• 191g 198Il 19g1 1982 19153 _L9HL kJR-" 32.7 33.3 32•1 32.8 32.7 32•3 PM 27.8 29.2 31•0 32•3 34•7 34.7 GAP •4.9 •4.1 •1•1 + .5 -2•0 -2.4 ~ R 3 B s ~ f 1 ~ r+ N N 1 ~ %D fr4`10309,
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~„¢1 J Cze,TE1s?an1T' F=uB t'&s vs S w RC4eE'S - I9RvF FuA) "11`7t • FuBYAS FuN ~ Fvay~s svee~ss 8 M ,~, ~ ~Xer7~ eA,ME .1 t N E 'L-:i; rt 1 r, , , • S. Qaf'a~:~A qPXAa4 •6'.J7 ~~ • I AM,4~ -%. 010 a*1 Ju~ .Ct'r+4a~ s PuA1 W W . ?oDflY I THs MamBiuT RM0008328
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•AM7 TO GIVE INSIGHT INTO ACTIONS WHICH CAN IMPROVE RJR PERFORMANCE AMONG SMOKERS CHOOSING THEIR FIRST USUAL BRAND• OUR IDEA IS 701 SHOOT STRAIGHT ~ ~ COMMUNICATE ACCURATELY (MORE THAN PRECISELY) ~ h ri..:•._Ui047
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. Cl.a 4- s..U,~ ,~ 2,,...~ ~0'l- A/d-~ . _ -r: s4t~y~- &---" 14--o 14~~ s cLr-- FxPP- &-ss/V vt,-_ / i3q b8ES . A.,¢• FuN ` )'1 ~.R- ~ ~/ A~e1&-.c7..:- ~ Poi, civ G- s ro rv i E ;~ d4 ..-a-Z'"~,~/ . ~ 7- ~ ~_ o-.. ; r~, XLw ~ U C/ ~ w ~ T- .4-4~ W f1~1INfi H(JM l~~ ? aa. 1~rrt:: RM0008340
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SUCCESSFUL MARKETING TO YOUNGER ADULT SMOKERS r~w) ' t WE CAN DO IT (OTHERS HAVE)• ~ 1• NOM VE CAN DO IT• ~ 1o ,r• rA'$TART WITH BASIC PRINCIVLES •0y ft~ GETTING ON TARGET (DIFFERENTIATION) ~-~ F'-.. ' USING GROWTH SECTORS (LEVERAGEABILITT) ~ i~aa,KNOw THE TARGET INSIDE DUT ~ ' MARKET TRENDS ' MINDSETS • MAKE IT LOOK RIGHT TO YAS EYEs - 'SEGMENTS' YAS's KNOW ' CUES AND SYMBOLS 3- THE BoTTOM LINE ~o N ; itii03098 ~ N co %0
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TO IUILD ON LEARNING FROM THE YOUNGER ADULT OIrORTUNITy ANALTB1=• • TO FIND CONCRETE PRINCIPLES AND MODELS FOR SUCCESSFUL l J MARKETING ACIj,Qti• ~ rNAT vE cAN e0 T O MOVE FROM PROBLEM IDENTIFICATION 10 ~~ • AsOUT, 17, ~ ~ OVERALL STRATEGY .~ ~ RELEVANT ON-TARGET P0SIT10NINGS r1~ r K E%ECUTIONAL GUIDELINES r1il * pw 110x TO REACH THEM AND CATCH TNEIR INTEREST y qll!~ "Z .. ~ ~ M.+",Qf13095
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1- WE CAN DO IT -- OTHERS DIDI ~OP4 ~ BUDWEISER -- TURNING A •IG •RAND AROUND V rt ~./ P 1~.1 tvm~ ON+KI TWO EXAMPLES OF BRANDS THAT DlD 17 -- AND HDri: *uq, ?~,JACK DANIEL'S -- THE MARLBORO OF BOURBONS T pq • UNEXPECTED POSITIONING AND EXECUTION • CONSISTENT, LONG TERM MARKETING EFFORT t S 5 B ;1~Ha~n9~
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JD'S PDSTIDNING • JD 1S TO BE SEEN AS 'THE MOST CAREFULLY MADE, HIGHEST QUALITY, SUPERPREMIUM BRAND OF AMERICAN STRAIGHT WHISKEY ON THE MARKET•' (AA 8/4/80) "'ME HAVE HAD A FIRM POLICY OF NEVER DISCOUNTING OUR PRODUCT (JD EXEC QUOTED IN AA 8/4/80)• • A COMIANY DOCUMENT WRITTEN IN 1955 SAID THE JACK DANIEL'S IMAGE SNOULD REFLECT 'A SOFT'SPOKEN RESTRAINED PERSONALITY THAT ATTRACTS SIMPLY BECAUSE IT NEVER SEEMS TO TRY TOO NARDa• (AA 7/26%$`dl 'THEY MADE IT RIGHT IN THE GOOD OLD DAYSO 1TS AD CAMPAIGN CONVEYING THIS MESSAGE APPEARED IN 1954 AND ~HASN'T MOVED MORE THAN AN INCH OR TWO IN 25 YEARS•* (AD AGE 7/26/84) ~ ! ~ 8 w-N 103 )OJ
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c . 4,1-~ 4 U-~.4-e ~ 0 0 • w'x- a.a z, 4 ll--~ Aa, 11AO .0 -A~. 'A~ ov-. -X" 7 o Bt 6i F FE -L' E~UT ,4t%-e- ~^~ ,~"v e) E L- 0 N 6- a~ a s1jectsSJ EXd(7EJEtIr 6--.2 s~ x AIL~ eX... ~ ~ ~ zj ~ - ca~ a--a- „~t F eti X~ F v 8'1,4s ~ l..~.l~.-e-o e,PIrMAL co (n -. - u, a ~ S7s ,fl&v / w yaNd .3. Tl f E~ . ~.o -.~(,. ~ y. w~ RVE ~1~=jEQE~c1r a4-~di zt...r x4,a-h-te,4-~ a`lk- ~, RM0008342
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•'IN 1976, A-B REALIZED THAT T0 GET TNE 18-24 MARKET, THEY WOULD HAVE TO DEVELOP PLANS SPECIFICALLY FOR TMIS SESMENT.* IN 19171 ' A NATIONAL a TESTv COORDINATOR FOR COLLEGE/YOUNG ADULT ' FIELD-MARKETING WAS HIRED WITH A SUDGET OF S1MM• - THE DECISION WAS MADE TO CREATE SEPARATE YA VERSIONS OF BUD'S TV, RADIO, AND PRINT CAMPAICN. s EVERY YEAR SINCE 1977, A-B HAS INCREASED ITS YA COMMITMENTs WHICH REACHED 18 STAFF AND Z10MM •Y 1984. hN ~ ~ ~ ~ Ftl 3 N O N V O P N ~ ..r~ Ln tJ OD ~D P w W 0 S4M0Zi 11
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• ~~ ~f~wbs& rS ~JE~9LlNC WITH- L1FE /WITµ e~L~ n• Vr-P-Y Co,Us~Q vl~7i v~ T,&> OvTiP94Ebd5LY .. Q IE LlFEST~L'97 CcIE$ fj~~tJ(~ s'rA'18OLS a.,.~ ~+~o.pU ~ F a RM0008344
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• BUDvE1LER LOST MARKET LEADERSHIP TO MILLER IN I97S. ALTHOUGH THE HANDWRITING WAS ON THE WALL lY 1976. WHEN IT •OT A 4-POINT WALLOP fRON MILLER- pow BUDWEISER - MILLER MYM[ . IrIL, RCIOrY( YYI r • 17 WAS IN 1976 THAT AUGUST BUSCH DECIDED TO RITE THE lULLET ow AND GO TO WORK ON YOUNGER ADULTt ~ f 1 C ~ ,I . ' S -F.:II , ::.~ S 1 I
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U V IZI--C &IA" 4~=-~ - . ~~ -^A--L-k ktj~ .~:N. 8--,- OL- - ~Va 4S SociAL G,P0L-)P 5PGc-TpyM ~~ u~e F v13 YR s S.o u~o~.~d~, , c,~, ,,, ~J_ V U (+ 0 ~"" 0 a r,~.~ ~ vE n~ i'viE'?,4 tlJ I ti .zt-. e y~ ,.... RM0008353
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. Fvi3 yas SOCrAL GjevaaS sa ec~evnq ~ ~ 0 0 0 co W 4~. 00 (_-XTeF,IME CO iJ FD RM rT'~ -4' ~ J~...~--r . - a- Cu60 LS£OS to &I Pa,.,C~ \, ~1 .~j.rt.Cfya.Oi tiO.J~.G6 e ~~~ o ederal Trade Cummi~ion punuant to su tj 0 deted June 6.1997. T9bb 68TZS .A,-~ A-`~ fi/of~ r: ec ~ L .,~ ~.~.t,.~ Ees c T#F vFQk/ M&al-r ~~b6c
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JACK DANIEL'S &V4se r ru eeunoe awn 7ROE DAGS1'S T u,e < < < ~ Sourae: Maxvell Data (198) Estiuted) AGM AYS JACK DANIEL'S IS R TEDLY 'UND OR~U 8 MARKG IN ,' / , ONE OF THE CLEARESi EXAMPLES OF SUCCESSFUL A DECLINING CATEGORY•e c P tem 0 JD's SALES GAINS THROUGHOUT THE 1970's AVERAGED 15% CROMTH PER YEAR, MORE THAN TRIPLING ITS VOLUME OVER THE DECADE• D ROSE FROM E9 AMONG BOURBONS IN 1914 TO 02 BY 1979 AND HAS ~ SINCE RUN NECK AND NECK FOR M1 WITH JIM BEAM, THE LONG TIME 6 MARKET LEADER• JD MANAGEMENT SAYS THE BRAND WAS AFFECTED IN 19B3 eY PRICE ... SENSITIVITY 'NITMIN CERTAIN SEGMENTS WHICH HAD BEEN AN tn N EXPANDING PART OF THE BRAND'S FRANCNISE•* (LIOUOR INDUSTRY r CD MARKETING, 1964, P• 46) O N 10 A WE SUSPECT THAT THOSE 'E%PANDING SEGMENTS' WERE YOUNGER ADULTS• P CD y N • N 84v103]00
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lp MFDIA • JD IS A TOP SPENDER AMONG OTHER BRANDS• ITS 'SHARE SALES• AD EXPENDITURES (MAGAtINE/NEw=/00H) A.A *Lm DOLLARS (MM) SHARE OF BOURBON SPENDING SALES BOURBONS. BUT IS ABOUT MATCMED BY 2-3 OF VOICEa ROUGHLY EOUALS ITS SHARE OF 1982 1921 3Tg ~ 15•1 t 5.0 11 13 16z 16; 16z • JD EMPHASIZES MAGAZINES, BUT SPENDS MORE OOH DOLLARS THAN ANY OTHER BRAND• UNLIKE ITS COMPETITORS, IT HAS NOT TOUCHED NEWSPAPERS UNTIL VERY RECENTLY. r--+ ~ 1929 1990 1981 1982 1983 w + /A J• DANIEL S IAG. !YA /A /• OlA llmh l` ' ~ ~ <.~:% NEWS. A ~ r~. 00N 28 , 26 21 21 14 ~ ALC"BDLRBON MAG. 61 0 65 61 59 6 N ENS. ~ ~ 00H 26 1 1 13 14 29 24 ~ • JD DOES CUSTOM SELECT ITS BO OKS TO REFLECT BOTH ITS TARGET AND X= Ono ITS"l1tAGE• ~ wft -- YOUNGER ADULT ..e ' JD PUTS MORE 'PAGES' I N ROLLING STONE THAN ANY OTHER P RA~ BOOK (1982). ~ ' THE LIKES OF GAMf t, DI $, AND MOTHER FARTN NEMS, Sl QY E ., , , . WHICH OTHER BOURBONS R ARELY TOUCH. '- 'PP,EMIUM' DOUBLE OTHER BOURBONS' EXPOSURE IN BIG BUSINESS (E•G• FORTUNE) AND EDUCATED UPSCALE (E.G., lIA$EEBS, AI1d,IlLLL)• LQ-w EMPHASIS ON 'TRADITIONAL' BOURBON VEHICLES LIKE SPORTS ILLUSTRATED OR SOUTHERN LIVING. NO BLACK BOOKS• o`, a s ~ ~ Kayto;107 tn N ~ OD t0
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JVs TARGET - YA o JD TARGETS YOUNGER ADULTS, ALTHOUGH ITS ORIi1NAL IDEA IN 1954 NWAS INTENDED TO CAPITALIZE ON MIDDLE'AGED MEN't NOSTALGIA r 1 ~MOM'S APPLE PlE'• FOR _1 Ello ~ t IT'S 'MARKETING STRATEGY HAS ENA6LED JD TO DO EXTREMELY MELL • Fmkwt AMONR:.YELL'EDUCATED. AFFLUENT 18'34 YEAR OLD MALESO " ,^4,~+r ESPEClALLY COLLEGE MALES 'SY WHOM 17 IS PERCEIVED AS A srneps'sp (AD AGE 8/4/80) ' ~ elm . Sjwr STATUS 9
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to* ;:4 • MDD/MARKETING INPUT ' QUALITATIVE 'GUT FEEL' *7"DATA REV1Ex AND SOMETIMES RE'ANALTSIS DU T • ~ ~ T SIDE _fXPERTS FROM OTHER DISCIPLINES AND INDUSTRIES• R ~- 3 r„ ~ 1r1 • }oKi( /'- ! ~ / ~ ^J C.3 • rA sMORfiS a ~ __ GROUPS AND DEPTHS s V ~ - SAN DIEGO, MEMPHIS, NEV YORK ~ MKM ~ ~ PRIOM ~ -1 '. 84'v1O3096
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Y• TMEY.NEAVIED UP FIELD MARKETING AND PRGMDTIONS• • THEIR LABEL (A YA STRENGTH) WENT 0.N PILLDrS. T SMERTS. EVEN JEANS• PERLEPTIONS IS-24 W [L,111 R H. . MILLER LITE ATTRACTIVE PKG. ~- 26% 191 9 CAMPUS EVENTS, 6AR MtGNTd. SOFTBALL TEAMS AND STREET S`CEMES -- GIVING THEIR COORDINATOR AUTHORITY TO IMPLEMENT AS_.l1E SAW FIT (WITHIN GUIDELINES) TO CAPITALIZE ON A FIELD OPPORTUNITY ALMOST DVERNiGHT• • Y WENT WHERE THE YA MEREilN emw N •Ly SMALL AS WELL AS BIG vAYS• I S41Y11)3. 1 •
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i BUD ALMOST DOUBLED ITS "SHARE OF VOICE' IN THE INDUSTRY (ESSENTIALLY MATCHING MILLER FOR THE FIRST TIME IN 1982). BUDWEISER - AD SPENDIN6 (MAG/NEwS/ODH/TV/RADI0) A'(f ANARENESS 1B-24 PER SE wAt NOT THEIR PROBLEM VS. THEfR IR06LEM. N O REG. BRAND USAGE 1B-24 ~ 5 I u A. , 6UD ~ w h _w///J \, J ~ v ~ i A WHAT DID BUnD07 1- THEY APPEAR TO HAVE UPPED THEIR OVERALL ADVERTES1Nt. sNM I REER INDUSTRY BRAND!FA}[ILY Ij,Q IM 1M 1982 im ym ig82 BUDwEftt+ti 36.5 49.0 67.7 104.7 9.9 ->11.7 ->14.6 ->19.6 MILLEIt'~'! 59.0 76.0 84.4 109.0 16.0 18.1 18.2 20.4 AETMR1 T`~f IMP ~ouRCE`!IMPAET DATAROOK . p.1 'r F--., BUT'YOUNGER ADULT AD AWARENESS M1NQ AND NOT THE SOLUTION TO ,. ,. a MILLER ~ ~ H]CH Is r I ~ 4L1FE . ... .. . .~ . u . .. ~j d ~ 9 ,dl:i:;
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r U 6VA5 svCiaL 6,pv,,P5 sp&~Creogl 9 /17-tF.o w---e4.J CO NFDPM +N G F^ el ~f4-'C-L. nlau eanI Fo>4M1ti)6 Ao-r.7~ A1 o rJ C n n) FoPM,nl 6 . P Lo~ R C_on/F-o/2mI N~. ~ i 2 ] NA V E S I +OT• /I ~ C. ~ ~2 vV ( S ' - 7 a e ~} L a.~.~` ~r~~ nv p ,.f vw L ~,.r c,~-~..~ ~.,n ~JO CS U /Vd "„"""`"'l / u o~o~ cr eC .4~ ''4" wy""' `~ a f C W N ir ~ ~ ~ vs ~~titi9lhhl ~ V RM0008352 ~ ;t;--4 ~/,L~ I
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1% ON THE •OTTOM LINEi YA PERCEPTIONS OF BUD pJ,Q L!lANfil:- IN 1980, MILLER HAD THE KEY PERCEPTIONS ON ITS t1DE• • eLL PRODUCT PERCEPTIONS • & YOUTHFULa IMAGE • PEER PRESSURE i YA ?ERrmlnuc 1980 _au_ H1GL11EE IMAGE MASCULINE 62 <' - 57 REGULAR PERSON 66 63 SELF CONFIDENT 58 55 PRESTIGE NA NA > 63 MODERN/YOUTHFUL 54 PEEp_eR s"R POPULAR 11 > 66 PRODUCT SUPERIOR TASTE 43 > 65 SMOOTH TASTE 48 > 69 > 65 FULL-BODIED TASTE 50 LIGHT iASTE 33 > 59 > 67 HIGH QUALITY 56 VALUE GOOD VALUE 37 43 FREQUENTLY ON SALE 36 31 YA REG. BRAND SHARE 15 > 22 N !µ.M.03 ' _
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6. WlT4ln! 7k, Fv3YAS Gpo,)P • F vB YAS a^-f- -i,~ e.~ ~ " ~ ~, 0- • ~.- f oJ•.. A13 ,a.~.:,, ,4~ U~ dfl~ Fva y19 s F h D m W N ICN F(J 8+/Iq-S ~j Qq.trt~ ?NEI ~ ZD>~dJ~'!T ~ 13 v7 N-I 6N1- V c-/MFL E j} sw6 s cl o-0-~ t-,~ , 1-ha-c.e.. O•. e t.e ~(°-y ~ E(-0A1 ~' ! U 6~ ~ d e$~e, f, cw.e( ~~-o c,~ Ct.[ ~ a I. 0 Q ~J" _ n L rr.fis>>f~f~; 1 a~ RM0008343
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JD 15 AN EXAMPLE OF A v1ASLE POSITIONING, EXECUTED IN A *NON'STANDAROS BUT AUTHENTIC AND UNPRETENTIOUS WAYo WHICH REACHES TA CONSUMERS NOT ONLY THROUGH THEIR BOOKS, BUT BY CONYERTING YA'S INTO WALKING BILLBOARDS• TNEY STARTED WITH A 6000 IDEA AND STUCK TO IT. ~ ~ BUDNE~ 1N CONTRAST, IS A STORY OF /R,- MARKET-LNEN THE GOING GOT ROUGH. P= y~+l ~.-~ ~ ~ .. rr Lr HAVING TO RE-THINK THE YA I q N O N ~ P N O 1 a 1. 1oJ i U`.
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• DESPITE STEADFAST AND INCREASING COMMITMENT, ST WAS 1981 -- 3 TO 4 YEARS -- BEFORE BUD CAUGHT MILLER AMONG YOUNGER ADULTS- REGULAR BRAND USAGE AGE 18-2a ~ DID, THE m I .! • H 4 B 5 PAYOFF WAS !IG- 198Il 14u BUDWEISER 15 -~ 26 MICN LIFE 22 <- 9 P N V J r sUD MILLER NICN LIFE 1 • BUT WHEN THEY ~ 84M0311?
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IT PAID OFF MITN YOUNGER ADULTS AND IT PAID OFF IN THE TOTAL MARKET• . BUD~~E~iS~ER~ILER I~1 IT CAN Et DONE• '"'1 0100 JU DID ET• BUD DID )T " LEARNED TO DO IT• kE CAN DO IT. T00. HOM CAN WE DO IT? 1; r+ .. 8 I
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T, IT ES NOT DESIRADLE TO TARGET WANTS WHICH HAVE ALREADY GROWN 700 ~~ FAR OR 700 FAST FOR THE BRAND TO 'CATCH' TNE TREND RATNER TNAN FOLLOW ET• ~ ~ -4 9 84M03124
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S• THEY DIDN'T REPOSITION THE SRAND, THEY RE•EXECUTED ET FOR THE YOUNGER ADULT MARKET. THEY LEFT THE COPY AND CHANGED THE MESSAGE• • BUD PRODUCED SPECIAL TV SPOTS FOR YA'TARGETED SHOMS. STARTING ON SATURDAY NIGHT I,1VE WITH 'TASTE BUD• " AN lMPROMPTU'LOOKING AD WITH PEOPLE DRESSED AS TASTE BUDS IN A GIANT MOUTH, TOSSING BACK PIZZA INGREDIENTS WHICH WERE WASHED DOWN BY THROWING THE PRODUCT IN THEIR FACES- IT LOOKED LIKE PART Of THE PROGRAM• TODAY 'FOR ALL You DO' IN THE GENERAL MARKET 13 TREATED AS A STRAIGHT, EVEN INSPIRATION LINE• BUT FOR YA 'ALL YOU DdG!;.CAN MEAN ANYTHING• ^ •k'aAD10. THE BUD COMMERCIAL IS NOT A JINGLE SUT A ROCK 1014 " NOT A YEAR OLD, POPULAR ROCK SONG, !UT ONE FROM T7/El~ LATEST HEAVY METAL ALBUM " ON THE RIGHT STATlONS• ~ N O N r~r W W 10 ~ ~ P N O iP ~ O 1 J
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f >: U13 yAs ~~- - t ~k. ,,..~.._ I ztt:,~," - te-e- i"5z- 64"o " - 14~ Fva YA-S ,4-0 .x.o-f- '2- ' k- W 1 N 5 T D a-Y.~ *6 E`~ .,.~, ~, ~ -~-3 ,- v. ~ F vg y,4S ; _ W-- ~ .- ~V M~..C, RM0008345
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NON NE CAN DO li BASIC PRINCIPLES FROM HISTORY d7 IN THE YA OPPORTUNITY ANALYSISo WE IDENTIFIED KEY TMEMEi IN THE SUCCESSION OF MAJOR FIRST USUAL BRANDS OF THE PAST. IN ESSENCE* THESE TMEMES MEREt 1. BEING 'IN TUNE' OR 'OUT OF TUNE' A SUCCESSFUL FIRST USUAL BRAND BEGINS TO DECLINE WHEN ANOTHER BRAND BECOMES BETTER 'IN TUNE' THAN ITS PREDECESSOR WITH THE YAS WANTS OF THE T1MES. IN TERMS OF PRODUCT, POSITIONING, OR EX€QUf10N. l7r . EXAw,'9CE: MARLBORO'S UNSMILING COWBOY WAS BETTER ATTUNED TO THE REBELCIOUS, FLONER-CHILD 1960'5 THAN LIGHTHEARTED 'ALL AMERI'AN' WINSTON. *000 GROWTH SECTORS .ea/ BEC"lNG MORE (oR LESS) 'IN TUNE' HAS BEEN MORE A FUNCTION OF CM/tfltZS IN YA WANTS THAN CHANGES IN BRANDS• THESE CNANSES IN wANTf" HAVE OFTEN BEEN TRIGGERED OR PROPELLED BY CHANGES IN EXTERNAL FACTORS, WHICH: - DIRECTLY AFFECTED SMOKER WANTS (E•G•, THE RUSH TO FILTERS AFTER THE FIRST SURGEON GENERAL'S REPORT IN THE I9S0'S AND NINSTON) OR - INDIRECTLY CHANGE SMOKER WANTS BY CHANGING THE DEMOGRAPHIC MIX AMONG YA SMOKERS. EXAMPLE: AS MORE WOMEN SMOKED IN THE )940'5, 'FEMALE' WANTS BECAME MORE IMPORTANT AND PALL MALL ROSE ON 'STYLISH LENGTH', ALTHOUGH IT NEVER CALLED ITSELF A 'FEMALE' BRAND• THE SUCCESSFUL BRANDS WERE THOSE THAT 'CAUGHT THE RISING TREND' AT THE RIGHT TIME " EARLY- To FOLLOW UP ON THIS LEARNING, WE CAN CLARIFY THESE TWO IDEAS AND MAKE THEM MORE CONCRETE AS FOLLOWS: 8 ~ j ,/ '1 W r+ Q N .o O. D 8 -.% 1'J3 t l ",
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L~(TeEME (' O ti7 FORM ~T tJ SoerAt G,eoapS 7QVM _,~.~...~ h ~cr~-L E Y?A N3S o-.C CO/tJ7PAc 6 . F7cr~~M~ Non) CoNFOQINTY • /U---xc- • al1-~s~ ~ . T I.,- ~~ _ c1t-~R, r -~I -~-~ Q-. 2~., Pnoduced to Federal Trade Con4niasion pursuanttu subpuena D.. 114.__~ dated .Iund 65tiiP 68LZS 1A93
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OPTIMUM LEVERAGEAlILITY CAN IE ACHIEVED ONLY ON AN ELEMENT WHICH . DIFFERENTIATES THE TARiET• WE MUST FIND THE TARGET PRECISELY TO KNOW WHERE TO PLACE THE LEVER• ;0.4 emaA ~ ~ .ftk ~ . p~... 0=x R=44 NONSMOKERS 18-20 84M03122
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JA PROMOTIONS PROMOTIONAL MERCHANDISE, ESPECIALLY CLOTHING, 1S A MAJOR ELEMENT IN JD'S MARKETING PROGRAM. • PROMO ITEMS ARE MARKETED THROUGH THE %YNCHlURG HARDWARE AND T GENERAL STORE', WHICH IS HEADED !Y A CORPORATE VP. ExEC• VP BRAND MARKETING . 41 VP - BRAND ADYERTlSING , N . \ J VP - 'LYNCHEURG HARDxARE R GENERAL STORE. • THE *,LYNCNBURG STORE' RUNS ITS OWN SEPARATE, NATIONAL CAMPAIGN FOR xEARASLES• R -: JACt. UANU.L'5 FIELD TLSrLk SHIRTS I/M.e 4f rv51 Ne I/Y tl•1I5 DIO I1/6ete Irhl rsee le .a/ UI leune Int 0.111 I A..t Ine laarn lulwr 01 / bIt Uleat Ibe M 11.-0 11,11, c• lnT tMSI 4/pt yl )111 /Dn, e )DI DW/f51(1 Iet, .qn e/1/ .na Iny Innl Sn.Dr CWeI{ 11/Il.pl ..IE o-y.1r,411•t P oy11 a.1..Jt run•n/ Sm LS S 1/ L 11 31)00 te".e, e0 Yu..nl .un o/r r m Y.pu brna M~ MI YI~IM JC IN W I W~ 1. 1H /t\ /i/. , , t) Me,nSe. t.1ntHWrFTp D17L! JACK DANIEL'S FIELD TESTER CAP Tnls It t comlonlbfe soonemin's l11eE BaUmesnlultedraltnOtOusl cap able In /n. tlte nuE •IIn en ollKRl 'lus D+n'elt telD kskt' ptlcA on v,e Ilonl 6wllnleta lo sntee toul tses entl sl/ll 1 lol ol tonrtlleSlo/ls MI 5650 Dllce IncluOts Dosult Ind MnOlinE 4./1/.11 .N.1 /!e.1 . w. /..4q 1U•111 b1~1.1 e./rbN4N YIYy11HWq ~II M.'.. 1•~'{\\N•IIWrI\M.../111r r.4 . n. Y l i. t.q M IL M IrY \..vv..~..r..~.. ~ v t 8YNtU3108
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. ti 2. 1LSING GROWTH SELTORS ••OPTIMUM LEVERAGEABILITY• ' ODVlOUSLY, rE CAN LEVERAGE (OR TRY TO LEVERAGE) ALMOtT ANYTNtNO• ~ IKE KEY POINT, HOWEVER, IS HON MUCH EFFORT IS REQUIRED FOR NOM ~ MUCH PAYOFF• ~ how ~ INPUT > OUTPUT Z ~ TH0-TD A OF OPTIMUM LEVERA6EA11LITY IS TO MAXIMIZE THE CHANCE OF VOAYOFF AND THE SIZE OF THE PAYOFF• IGj-1F../ ~ 2 N O ~Jn N N ~i OD ~ N ~ V U7 P N P P m W 84T403121
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JD'S AGE PROFILE ALSO RESEMBLES MARLBORO'S AND SUGGESTS THAT THE ERAND'S GROWTH MAY BE A FUNCTION OF AGING AND BRAND LOYALTY, SIMILAR TO MARLBORO OR NEMiORT (WHEREAS JIM BEAM 1E RIDING THE HEAVY CONSUMPTION AGEE1• BRAND USED 'MOST OFTEN' (SMRB) 18-24 25-34 354m* ~ 184 JACK DANIEL'S SHARF BDl JIM BEAM 198.Q 19.u 191£Q 198i 8111_19BI 411 491 156 150 78 34 40 127 123 92 18 23 67 72 111 27% 322 rh~ r i ~ ^ ~ ~. ~~ 04,; ON A .10SHARE OF DRINKS' V • PW HEUBLEIN DATA SHOWS AN LEGAL AGE TO 34 35-49 50+ 100 100 100 RATHER THAN 'USUAL BRAND' BASIS, EVEN MORE DRAMATIC SKEW FOR JD• SHARE OF BOURBON DRINKS CONSUMED ]982-83 ~f_ Bl~l 52% 186 16 57 6 21 TOTAL 28% 100 L I R p
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THEiE 3 'FRINCIFLEi' DIFFERENTIATION OF THE TARGET UFtINUM LEVERAGEABILITY MEANINGFUL BRAND DIFFERENCE ARE TOOLS TO GUIDE, NOT MAGIC FORMULAi• ~ ~ ' J ~1~ 1000100 ~P~ ~ ~ Rai.[ F • 1r.M V To FUT TffEN TO USE, WHAT IS LEVERAGEABLE ~ AMONG YA SMOKERS TODAY? ~ .~. R4M03127
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ved by ~7 m` 1 }~~~ ~Y4 i ~ ~ ' k - ;F .r. k, ; _1 t*. .;: &. . C11 ~ W L CAN'T HLAME THE BOYS for having a water 6ght now and thcn. 1( you worked in Jack Danal's nckyard. ywd start one too. Looking aftcr a burning hard maple rick is a hot )ob. But it's one we cati t do without. You xc. we takc the charcoal that resuks and use it to help sm.xxh out our whiskey. That's done by seeping it down through huge vats packcd tight with this CharcOal. JUR a taTtC of Jack Dantcl's• we chink. md you'll agree it's worth a water fight or two. csURCVAt MELLOwED 6 DROr 6 •Y otro. 4.~.w ~M • 1a tw./ . O~/A wt R~~ t. twt aM tMtit tw.M~t Oti All tww.w NN IN.I~.waY..~I~V•.~' I/M.~~ I4a~ A•.M u.1O 1.Iwr O.r.ww • ITS PRODUCT IS 'CHARCOAL MELLOWED DROP SY DROt& FOR 'SIFPINr SMOOTNNESS'• U 1 /,I~1 ~~I L~1 ~ ~ ~~}L~ 0 • TME ADS 'SEEMED REVOLUTIONARY AT THE iI1 TIME -- THE LONG COPY WITH NO NEADLINE. `~ L,T `._j ~ ittHITE FNOTO.GFRACTIONALTIAGE SI2ER AND -- NOTHING ELSE WAS QUITE LIKE IT• OOR ADS LOOKED A!IT ODD AMONG THE BOTTLE-AND-GLASS AND DEAUTIFUL PEOPLE ADS.' (AA 7/26/84) • VISUALS AND COPY ARE 'DOWN MONE' AND NEIGHBORLY -- UNDERSTATED AND AUTNENTIC- 98t5 68TZS
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1. 1_EVFRAGF 1N MARK TPLACE TR N~c_ A. YiRiIE/FF • IN TERMS OF CIGARETTE CHOICE, YAS ARE BEST DIFFERENTIATED FROM OTHER SMOKERS BY TMEIR AFFINITY FOR FULL FLAVOR AND VIRILE SMOKES. FIRST HALF 1984 18 :29 -lB! VIRILE 50•4 37•5 FULL FLAVOR 50.4 43•0 ow 4 SOVRCE: TRACKER omq r 1~--FULL FLAVOR OR 'TASTE-, AS A CENTRAL FEATURE FOR A BRAND Ftm ._...DOES NOT APPEAR LEVERAGEABLE AMONG WHITE YOUNGER ADULTS, •. Pel "lNCE IT IS DECLINING. IT MAY, HOWEVER, STILL HAVE SOME < MENTUM AMONG YA BLACKS• l!~M 18-24 TRACKER SHARE ht M IM IM IM 1984,1LIL. TOTAL $3•9 52.8 50.9 52.3 50.4 -3.5 BLACK 66.2 67.5 71.5 76.9 76•3 •B.1 THIS FITS WITH THE GENERAL PERFORMANCE OF NEWPORT VS. NEWPORT LIGHTS AND MARLBORO VS• MARLBORO LIGHTS. I THE VIRILE CONCEPT STILL APPEARS LEVERAGEABLE, E%CEPT THAT ALL OF THE SEGMENT'S GROWTH COMES FROM MARLBORO• B 5 1 ~ 14 84M031?8
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MAXIMUM RESULTS WILL IIE OSTAINED FROM A PROPOSITION (LEVER) WHICH r 1 CAPITALIZES ON THE EXlST1NG DEGININGS OF MOMENTUM/OROMING ~ WANTS••• ~ ' .7 ~ ~ ~. ~ oak .•• UR AT LEAST POTENTIAL MOMENTUM (WANTS WHICH ARE LIKELY TO GROW IN THE FUTURE) Irl I~1 '_1 .~ ~ N O N r W N ~ ~ ~ A+ P ~ l7~ 4 0 O ~ s 84M03123
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LEVERAGING rANTE WHICH ARE iTA{LE (DIFFERENTIATING 9UT ILAT) REQUIRES EXTRA ENERGY (RESOURCES) SUT SEEKE POEfIDLL ••• Z .~ v ~ He hTwta DRAND HAS PREEMPTED THE POSITEON• =0 NO MEANINGFUL DIFFERENCE • NO MOTION. .U 5 y 84M03136
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BY 1983, BUD HAD ACCOMPLISHED 3 KEY CMANOESI 1• UIFFERENTIATION OF BUDfS SUPERIORITY AS A•EER WITH fULL' A21= TASTE (NO1E THIS IS NOT OPPOSITE TO 'LIiNT6)• 2• PRODUCT OUALITY PERCEPTIONS WHICH MEAN 'i00D VALUE' REGARDLESS OF PRICE• 3• THE SIDE 6ENEFIT OF PEER PRESSURE" 1980 19g3 _ CHANGF YA PERCFPTIDNS gU HIGH I IFF W HIGH I IFF $jjll, HIGN I IFO j.~ MAuNE 62 <- - 57 REGqLAM PERSON 66 63 00-, SELF CONFIDENT 58 55 ~ Ow`~ PREkttdE NA NA pw~ MDDE_pr/YoUTHFUL 54 -> 63 ~, PEER 1P~SSURE W~ Porul. 44 -> 66 ..K _ ~ P.1 Y.BGla.{St"", P= SUPERIOR TASTE 43 -> 65 ,r SMOOTH TASTE 48 -> 69 Nape FULL-BODIED TASTE 50 -> 65 ~ LIGHT TASTE 33 -> 59 pukq HIGH QUALITY 56 -> 67 VALUE GOOD VALUE 37 FREOUENTLY ON SALE 36 43 31 71 <-52 65 60 54 49 61 55 61 58 63 <- 52 58 <- - 50 50 -> 65 64 <- 49 33 -> 57 60 <- - 52 39 ~- - 30 35 30 (- 9 22 YA REG. BRAND SHARE 15 -> •19 +15 +14 •11
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yi r.~.'~r! ,~ A<<!4F'y~r'r ~¢~M~~ 71 _{~ .. R i - - - --•.._ - nLUnD o1= I InKD Mnl'Lr is a wclc.xnc sIght to our rickyanl manager cccau.c it cakcs a lot to rrortr/y smtmth out Jack Dinicl's. NciRhbors with a use for extra moncy can ctnrnt on our buying thcv hard maple. Yinr stc, it rakcs a hunch of wood to make cnouFh charcoal to fdl ,1NI ust onc of th ha al l rco c c rrxllowing vats wc sccr a+ARCOAt our whiskey through. Atruoweo Nuc the sirrhi smooth• a Door ntss it gives Jack Danitl-s 6 n wrll wonh all we J.. to RV urax icccr a gt>.,d surrly. IIIIItr.w w•r.-tln.r. mMIf rwM i.A 1111146410" ~+w~~.....w~..•..r iced by u-!o~ ~~'~,k-" ~1 JD'S CAMPAIGN GENERATES SOME OF THE HIGHEST 1 1 AWARENESS NUMlERS IN THE LIQUOR INDUSTRY (AA 1.1 \ `'7125r0aj: i p;] 1 ti ds FOR EXAMPLE, IN A FIRST-HALF 1984 STUDY, JD RECEIVED MORE MENTIONS THAN ANY OTHER lRAND WHEN CONSUMERS WERE ASKED TO NAME THE FIRST LIQUOR ADVERTISING THAT CAME TO MIND -- NOT JUST SOURlON (IMPACT 9/1/80, P• 9). THIS DOES NOT SEEM TO TOTALLY RESULT FROM SPENDING. lSL9 66ZOS l~ . . Ln cQ w ~Mc-m 8855 68:ZS
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1• IN TUNE • DIFFERENTtATION ' G TO {E IDENTIFIABLE AS YA TO YA'S, A&RAND MUST EM{ODY ELEMENTS ('MANTS') WHICH CLEARLY DIFFERENT_IAtE THE TARGET GROUP FROM ALL OTHER GROUPS• • THUS. TO TARGET YA SMOKERS 18-20 (FIRST USUAL BRAND SMOKERS), THE GRAND MUST TARGET WANTS WHICH ENDURINGLY DIFFERENTIATE YA SMOKERS IB'TO FROM ALL OTHER GROUPSt in" SMOKERS 21+ NONSMOKERS Y1• SMOKERS ZI-Y4 NONSMOKERS YI'T4 NONSMOKERS 18-20 ~ G r`D1VFERENTIATION DOES j{pj MEAN: ~y WANTS OF SMOKERS 18-20 WHICH ARE DETESTED BY OTHER GROUPS. THEY DON'T REALLY EXIST AND WOULD NOT ENGENDER ~ LOYALTY ANYNAY. TRANSIENT, FRIVOLOUS NANTS• ,F,~•NECESSARILY 'EXTREME' PROPOSITIONS. " F-^ THAT UNDIFFERENTIATING ELEMENTS •' UNIVERSAL WANTS CAN'T BE INCORPORATED T00• G DIFFERENTIATION =ES MEANt MORE THAN JUST w APPEAL AMONG YOUNGER ADULT SMOKERS•• BETTER DISCRIMINATION IN SELECTING KEY WANTS AMONG MANY WANTS, ON A MEASURABLE BASIS• i .w N ~ P N P N i
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IT It ALSO UNDESIREADLE TO LEVERAGE WANTS WHICH ARE DECLINENG• TNIS CAN BE NONtRODUCTEVE• ~ R>~ /w •Ray ~ ^ , ' , ••• OR ~ COUNTERPRODUCTIVE• ~ F-! FOR EXAMPLE, A BRAND COULD EARN YA RESENTMENT BY LEVERAGING AN ~1N' TREND WHICH IS ALREADY 'OUT' - PRESUMPTUOUSI B 8 s / $a41Uj 125
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c E6Z9 66i0L ~- ~ -- j ~------ ! ~i a, ,..j tf'1 CD uu ~7Dc.M OSST, 68TZS 0
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3• llPWARD STRIVING • MARKETING RELEVANtE • " UPWARD STRIVING MOTIVES AND THEREFORE CUEt AND •YMDOLt RELATED TO TOMORROW ARE NOT RELEVANT TO FUBYAS YANKELOVICN DATA SUGGESTS TWO FORMS OF FANTASY MAY SE IOTN DIFFERENTIATING AND LEVERAGABLEs • EscAFE INTO IMAGINATION ~ • ~ TNE GOOD OLD DAYS ~ ~ ~ ..r ~ ~ N ~ 84MU3137 I t .
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Y. EXCITEMFNI  •TNF FnAF• • *TNE EDW b1FFFpFMTI1TFe TNIS 6ROUp •.. " THEY LIKE TO RE SEEN AS LIKES TO TAKE R1SY.S WISK TAKERS••• 5 R 84M03143
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1. LEVERAGE IN MARKETPLACE TRENDS (CoNT'D) • AMONG BLACK YA, COOLNESS IS HOLDING ITS OMNo SINCE KoOI'i MASSIVE LOSSES ARE BEING OFFSET NV NEWPORT ••• TRACKER SHARE AGES 18-24 w" 19~~ 1381 1382 198~ 19$.9i1 `./ Kool 34.6 30.8 27.9 21.8 17.2 ~ NEWPORT 18.6 22.4 27•7 36.4 38.6 SALEM 17.2 19.2 17.3 13-6 15.9 Iry~~ Co 71.3 72.8 73.0 72.1 72.4 +20.0 ~ ~ M ANy MENTHOLS CAPTURE 902 OF THE MARY,ET, I•E•. DIFFERENTIATE ~ c'~'YA. eL ~ . ^r ~ ~ _ TRACKER SHARE AGES 18-24 J 1460 lygD. 1381 1~2 ls&1 lg$+1,o1 LnfL-- Pin# coo~iNe : 71•3 72.8 73.0 72•1 72•4 +1•1 1~y MENTHOL 88.6 89.7 91.5 88.9 93.8 •5•2 N I O N Ln N f+ 00 d tD 0. V P { W N W 84:VtOJ 1 ) l
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THOUGM NEVER A FORMAL PART OF JD"S ^'ARKETING EFFORT, THE BRAND NAS CENEFITTED kROM-ITS ASSOCIATION WITH CELEBRITIES SUCH AS HUMPHREY BOGART, SAM RAYRURN, AND EVERETTE DIRKSEN, wNO WERE SUPPOSED TO HAVE BEEN DEVOTEES OF THE RRAND• (AA 8/4/8U) s- hORE RECENTLY: 'nY TYO FAVORITE R TENNESSEANS -- JACK AND CHARLEY DANIELS-' L;44PUT OR ALLOCATION At TIMES, LENDING IT A "° - ` -"----•---'-- • ~HARD TO GET' IMAGE• (AA 8/4/80) OF TFIH L531 V(VES in Tcnncsscc, this wtt tn Mvorc County is particularly prizcd. • BUT JD HELPS THE MYSTIOUE• ITt DISTILLERY It's fcd• you scc, by an undcrRround, itOn- IS ADVERTISED TO RE: free spring flowing at 56' year round. Mr. Jack Danicl, a native of these parts, laid daim - NESTLED IN THE FOOTHILLS OF THE to the cave in 1866. And from that year lorward, its water has been CUMeERLAND f1OUNTAINS AT LTNCNt/DRi. TN uscd co makc Jack Daniel's ~ ( PoP- 361). Whiskcy- Of coursc, there MARCOAt 5• BECAUSE OF PRODUCTION CAPACITY, .ID HAS •EEN arc hOndr[dT Of UVtS jUSL 1S '"u~~0 - • . IN A DRY COUNTY (tNEREFORE tLL1C1T )• lovrly. But afccr a sip of DRa I Jack Danicl's, yoti II know ~1 p whythisontisvalucd ~ KDROP - 011 THE tl-S- NATIONAL REGISTER OF 'sohiyhly. HISTORIC PLACES- r...wwr.•~n.~•s..~rw..p Aew..wrr 1.-M. M1~. ~...1. tA~+r IM ~A tn.,,w vM OSZ9 66LOS v r~ ~ u1LijL.J ~m`m ~ LBVb 68TZS
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1. E 2. gP1eN[•IMG AND aE1NG DIFFERENT (CONT•) • MRRKETING RELEVANtE • -- FUBYAS' PEEN GROUP IDENTITY MITM IDENTIFIAILE SOCIAL GROUPS PROVIDES ~ l ~ ~ ~ ~ low •Ly • SPECTRUM " MINDSETS • SPECTRUM " CUES i EYMIOLi • WILL DISCUSS LATER IN DETAIL N O N ~ Ln N M CD d P N J d w A U N 01 84M031 r3
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1. a 2. BFIDNGING AND B ING DIFFERENT (CONT.) f,11flYdS VS• Sll1ILdEtS BELI314!'illl6l BELa1lGlNfu PEER GROUP IDENTITY A FEW CLOSE FRIENDS BFING DIFFFRFNTI " BEING DIFFERENT VIA THE GROUP WHO ARE WE A FEx CLOSE FRIENDS OPPOSITE SEX THE BROADER SOCIETY BEING DIFFERENT1 ~ BEING DIFFERENT AS AN INDIVIDUAL DEVELOPING SELF' IDENTITY (TRANSITION) WHO AM I N D N b b P U V 0 .. ~ 84M03133 rc .
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4. hrt~,TS~wswT • TME GRAPH SAYS YOUNGER ADULT SMOKERS ARE R1GMT MHEM THEY DESCRIRE TME REST OF US AS REING IN A RUT. EXCITING THINGS . 84M03140
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52189 4517 4 1' M--3m 1 rn cioLn r Ln ui~,, ~ v 50299 6260 a ,)ZUN Xq pamp()xi I ~I I ~ ~ LiI , ca er.err ......... - ...................... :.... ..... .:t: __ _ ~
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n q. FX[IIFMFNI • 'iNF FDGF' .. Af ACHIEVEMENT ORIENTED (IN THEIR OWN MAY)... w` ' 9 1~+ ~ ~ .,r $4M03146 ~ ~ N ~
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1. IEVERAGE IN MARKFTPIACF TRFNfIS (cONT'D) C. LOOLNESS/MENTHOL IN TOTAL, C00LNESS/MENTHOL HAS DECLINED SEVERELY AS A FIRST USUAL BRAND CHOICE SINCE 1977. r l NFO SHARE AGES 18-20 ~ j,QLS ]yjji 19]1191.@ 1913 j99Q 19$119821m _aGs r rm COOLNESS 32.9 33.5 33.1 30.9 29.7 26-0 24.1 20.7 18.7 ~ •u.4 • THIS DECLINE, HOWEVER, HAS OCCURRED p,= AMONG WHITE YAS. ~ TRACKER SHARE AG S 18-24 r---~ 1984 19.H1 1182 1M 199.9 :1 La_- 23.1 21.4 20.1 18.1 18.2 -4.9 71.3 72.8 73.0 72•1 72.4 •1•1 AMDN4"WHlTE YAS, THE•MOVEMENT HAS NOT FORM COOCNt58, BuT MENTHOLS IN BENERAL• V AMONG WHITE YAS, THE COOLNESS/MENTHOL LOSSES ARE GOING TO MARLBORO• IN THE 1983 SDS, 94% OF ALL 18-20 NON-MENTHOL SMOKERS ARE NOW SMOKING MARLBORO, USED TO SMOKE MARLBORO, OR LIST MARLBORO AMONG THEIR 3 FAVORITE BRANDS. THE LONG-TERM TRENDS ON NFO ARE MIRROR IMAGES (DISREGARD LEVEL). PON NH 198A 19.@1 1M 19U 19B9:1 Llsl-. ~ COOLNESS 23•1 21.4 20-1 18.1 18.2 -4.9 ~ MENTHOL 31.5 31.5 30.6 27.7 27.7 -3.8 ~ r pow oc;wi FWWA ONLY IEEN AWAY FROM TRACKER SHARE AGES 18-24 NFO SHARE AGES 18-20 122.5 192.6 14Z.Z 1°Z.8 1.913 12HIl 1.9.81 19.82 m COOLNESS 32.9 33.5 33.1 30.9 29.7 26.0 24.1 20.7 18.7 MARLBORD 34.3 33.6 32.6 34.8 36.4 38.4 43.2 46.7 50.9 3 8 t -// 1 1w 3 I ~ _IaL. -14.2 •16.G I 84%40;1=0
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1. I_EVfRAGE.iN MARKETPLACE TRENDS (CONT'D) AMONG WHITE YAS, FFLT HAS SEEN GROMING. BUT MORE SLOUCY IN RECENT YEARS• TRACKER SHARE IB-24 ~ 1913 1sBIl 19B1 1982 1M 14$9:1 O5_ ~ FFLT 37-1 39-3 39•8 41•3 40•6 42•4 *5•3 ~7~HIS FFLT TREND DOES NOT APPEAR TO DERIVE FROM CONSUMER ' O ~ PER SE. DESPITE CONTINUING IMPLIED ,~~TEREST IN LOV TAR P=EMPHASIS BY THE FTC. 1/4 OF BOTH TOTAL AND YA SMOKERS ?, RYE MOVED FROM 'AGREE' TO 'DISAGREE' ON THIS POINT SINCE ~-~OM TAR AND NICOTINE CIGARETTES REPRESENT A MAJOR STEP sSN THE DIRECTION OF MAKING SMOKING LESS HARMFUL TO THE '44EALTN' (YANKELOVICH) jr.~..'~MOKERS.~'~MOKERS AGREEING ]m 1m LMEtS < 41 -25 18-24 66 V 77 < 43 -34 18• ~ r M•1 AMONG YA SMOKERS, THIS IS CLEARLY CONFIRMED BY ~ PERFORMANCE OF THE MODERATION AND CONCERNED SEGMENTS- TRACKER SHARE 18-24 1913 1qBIl 19U 1982 U 19 11811~1 W . MODERATION 9.6 9.7 9.4 9.2 8.2 7.4 -2.2 CONCERNED 5•4 4.5 4.0 3.0 2•4 2-2 -3-2 •"'A SMOKERS WON'T BUY FOR PRODUCT NEGATIVES- -, I /' _i y u r -4~vtU ' 129
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y. FX[ITEMFNT • •THE EDGE' .. As ONE WHO STANDS OUT IN A CROWO"d cTANDS 007 IN CRO10? 84M03144
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1 4. [lT MCNT (CONT.) • M/1RKETING RELFVIN[i -- FOR toDAY's FUBYAS, EXCITEMENT IS NOT SIMPLY '7 GOOD T1Me . ~ -• IT is LIVING ON THE EDGE/THE l1MIT...oa, AT LcssT. ~ IMAGINING so. ~ ~ ~. ~ nl~c' . d.N ~ 84NtU31 42
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3- UPWARD STR{VIWfi • WHAT Do FUBYAS MEAN WHEN THEY TALK ABOUT THIS NEED FNRYAS SUCCESS RELATES To TODAY VS• SW1V.YEaS • SUCCEfS RELATES To TOMORROW • REALITY'RASED AND g ASPIRATIoNAL SU[[ftt FANTASY-SASED SUCCESS " REALITY'SASED--TODAY/ 'MAKING 17' JOl. CAREER SUCCESS ""I Ra96; ACNIEVEASLE ~~ GOOD, GREAT INCOME ~ " DEVELOPING POTENTIAL A DATE -' MEETING GOALS ~ /=vK - A GOOD PARTY -- NICE HOME IL~Z ` Y 00, - A'COUP' IN FRONT OF •' MANY 'THINGS' ~ ~ wJ THE GANG • ply FANTASY'SASED'-TDDAY/ UNA[NIEYARLE U THE MOST POPULAR /oo - - THE MOST ADMIRED "o - 'RIDING THE BIG WAVE' ++~\ ~ P /rl 20 84Ni03136
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3• IltNARD STRIVING (CONT.) • ESCAPE lwTe IMAGINATION (RESPONSIVENESS TO FANTASY) '- THE INCLINATION TO DEAL WITH LIFE BY ESCAPING INTO J IMAGINATION DIFFERENTIATES FUBYAS BOTH FROM OLDER SMOKERS AND FROM NON'SMOKING PEERS. ~ 1R-70 SMOKERS NET AGREEMENTI F~ VERSUS ~~ ~!~y ~ ~• SMGKERS P1~ r'-• ..,~ ~ ESCAPE INTO IMAGINATION F-~ , Poo •40 VERSUS SH-20 NON-SMGKERS t B= .,~ AND, 17 APPEARS TO BE PARTICULARLY LEVERAGEASLE BECAUSE IT W !S GROWING. J ~ ~ ESCAPE INTO IMAGINATION l070-1981 -- -~ IR-9O SMOKERS 1981-1983 S 91 SOURCE: YANKELOVICH 84M03138
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4. FX11MN1••THF fB.f• •• AGGRESSIVE.•• R 3 8 s ~ 6 ~ g4 Nt0Jl4'5
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]. j 2• ELONGING ANRfING DIFEERENT_ • SOURCES FOR SATISFYING THESE NEED11 A FEW CLOSE FRIENDS BELONGINO L. ' ^ • INTIMATE RELATIONSHIP, CHERISHED > BELONGING ~ B PEER GROUP IDENTITY ~ K. D R~IC Irl • ~n{ ~ • DIFFERENT VIA THE GROUP, NOT INDIVIDUALLY ~ ~ THEY ENJQY $~l!Ir DIFFEP NT )UT 1'A~ TO EEE HHA.T OTHERS THINK f~1~1 !L: ...1 V ,". ~ P ~ ~ II f~:n R EING IffERENT I w 5 irr 8dM031 3" w I 4
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4. EY[ITEMENT (CONT.) FURYAS VS. HAVE FUN IN EVERY WAY POSSIBLE AT EVERY TIME POSSILLE • AVOID lOREDOM, RUT. ROUTINE • BE SPONTANEOUS ~-,~~ "I" • "ND FUN • PARENTS • FUBYAS EUlL1,T ~UBYAS S1lSCFS,S EN,roY 10DAY/THE MOMENT ~ TO THE LIMIT a7a..uau.ar - HAVE FUN SELECTIVELY , • SELECT ACTIVITIES OF INTEREST • DEVELOP EXPERTISE • PURSUE IN ALLDCATED LEISURE T1ME SWITCHERS LU 1t A SIGN OF SNITCHERS SUCCESS -- SNOWS YOU'RE & MAKING IT' 84M0J 141
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S• S,EX LAST " SUT SURELY NOT LEAST• J FURXAS V$ ~ a LOTS OF DATEs ~ LINKS TO SUCCESS NEED ~ f- + ~ a rWF1WTNING GOES L1NRS TO EXCITEMENT NEED I CLOSER RELATIONSHIPS S WE'RE PARTNERS -- 50/50 fi4M03150 1. ,
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I S. SEX (CONT•) • MARK TtN• Il VAM " LISERAL ATTITUDES TOWARD SEX CLEARLY DIFFERENTIATE r 1 FUBYAS FROM TMEIR NON-SMOKING FEERS•••TNEY ARE TWICE ~~- AS IN TUNE WITH THIS VIEMFOINT• `~-y' 9 ~ ~j 1•"-1 NFT AGREEMENT/DISA[REEMENT ~ SMOKERS fJON'SMOkERS LIfERAL fE% ATTITUDES CP _11!~ 18-20 V N 18+ i••R SOURCE: 1981-1983 YANKELOVICH ~ I 29 17 15 -2 84M03151 8
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i iL . 3. UPWARD CTRIVING (CGNT.) 9 JME GOOD OLD DAYS (NEM ROMANTICISM) " THE DEGREE TO WHICH FUBYAS FIND ROMANCE IN TNE,F.ANIAIY Of 'TNE GOOD OLD DAYS' HIGHLY DIffERENTIATE{ TMEM fROM OLDER iMOKER9• *m~ -GOOD OLD DAYS* ~ ....i y Q' fmd SOURCOVAIYANKELOVlCN V ]1i-20 SMDKER NPT AGREE VS._1$• SMOKERt - _ - +29 i p 84M03139
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S• .SU (CONT.) •USE SELECTED ELEMENTS TARGETED,f 0 FUBYAS DNLY - FOR E%AKPLEI " T'SHIRTS ARE 50 POPULAR SECAUSE TMEY ARE FUN, SELF' EXPRESSIVE/BADGES. -' MUCH OF THE CLASSIFIED AD SECTION OF ROLLING STONE IS DEVOTED TO T-iHIRTi WITH 'LAYIMii.' A FEW TAME ONEtt 01030 • THIS TIME IT'i LOVE• NE%T TIME IT'S f Z0. 4 • HOV CAN I LOVE YOU WHEN YOU WON'T Lit DONN• Orl T kt • I THINK I COULD FALL MADLY IN iED WITH YOU• ~ Iflov •P.y TO TIE A LINE TO A RRAND NOULD, OF COURSE, TAKE A /~ HON AtOUTt . RELEVANT LINK U p_mg • FOR A CAMEL T'iMIRT -- WANNA HUMP? ^ -' ONE HUMP OR TM01 ;mw 11 ; ~`rM H pC ' co w ~ f1 lp~ { N W 7 1 O1 ,{ 84M031 > 4
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S. SFX (coNT.) ' ~ . ' .~ ~ ~ RRM/~ 1~1 USE THE LEARNING DEFENSIVELY, I•E•, EXECUTF RELEVANT MARKETING EFFORTS THAT DON'T APPEAR OUT-OF'EYNC NITM FUBYAS VIEMPOINT. .. • A MARKETER CAN SELECT AMONG 3 ALTERNATIVES TO APPLY TN(S LEARNINGI " GEAR THE TOTAL MARKETING EFFORT AROUND BLATANT SEX USE SELECTED ELEMENTS OF THE MARKETING NIX TO TARGET THE SEX THEME TO FUBYAS ONLY. i 84bf03152 l. ^ I
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DIFFFREM7fATING NITHIN 1NF FUBYAS GROUP rs~.`7 ~.I .i.i i.i • FUBYAS ARE AU ONE HOMOGENEOUS {ROYP TH1S IS GOOD NENS, BECAUSE THEREIN LIES DIFFERENTIATION AND OPPORTUNITY TqVZSEGMENTS THAT FUBYAS KNOW ARE THEIR SOCIAL BROUPS. TNESE ARAL RGE, LOOSELY KNIT BUT HIGHLY LABELED sua•SOCIETIES FROM WMin-FUBYAS DRAW THEIR IDENTITY, I.E., BY BELONGING To tHE 6 ON, VND USING THE GROUP TO BE DIFFERENT FROM OTHER YOUNGER ." &1h40i15 7
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4 I I I 52189 4529 ac-~Lt~n`Icpun ~ +~coI - S0299 6292 0 l.l I • 3jL?Ih?I iiq paanpo.id ~ . - 0
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S• $EX (CONT•) ~ 115F THE LEARNING DEFENSIVELY " KEEP IN MIND THAT SQUEAKY CLEAN LOOKS 6000 TO US " ~ BUT IS OUT'OF'SYNC WITH THE FUBYAS VIENPOINT• l P~~1 IT IS LIKELY TO BE SEEN SY THEM AS NOT SPEAKING TO TNEM4 .~ ~WOT UNDERSTANDING, NOT RELEVANT TO THEIR LIFESTYLE• ^ 1`~ O Lm 84M03155
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_S,QNF 1) rad u ceqRbjjjJR.TC ll1 EXTREME ToDAY'S SocIAL GROUa MAA'rCj'lNi A -0- EUREnE (BfLeNG(NG t BFING OfFFF RFNf) STRIVING Er[(TFwFNi S11 • GOODY GOODIES 'SUCCESS* IS ESTAD' DON'T GO NEAR AYO1D LISN/1ENT APPROVAL 'THE EDGEO sEX • PREPS AtIREC1ATE EDGE. LIEERAL • • GO's DISCO's EOT RARELY fART- tCItATE LIVE AT EDGE NORE • ROCKERS NOM AND TNEN ltlERAL • PARTY PARTIES • PUNKERS - 'SUCCESS' Is EsTAS- THE VERY NosT tifNMENT GUTRAiE EDGE LIBERAL • BURNOUTS Lu Liz IJ,J 3Itm p ~ 3fi5i+ 68IZS
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• CAliil9ll ~ ~ TNE INDIVIDUAL FUBYAS IS NOT A PERFECT STEREOTYF'E• NE/SME DOES NOT EXIST PURELY AS A MEMBER OF ONE. AND ONLY ONE, SOCIAL GROUP •' ANY MORE THAN A WINSTON SMOKER FITS THE VIRILE LABEL PERFECTLY ON ALL DIMENSIONS• NONETHELESS, THE FUBYASI OV1READILY CLASSIFIES OTHERS INTO THE GROUPS ~~ KNOMS WHAT HIS 'MEMSERSHIF' 1t 4= PRDVIDES ATTITUDINAL AND BEHAVIORAL SELF- DESCRIPTIONS r ok wHICH SUPPORT SOCIAL GROUP CLASSIFICATION• ~.F ~ ~ ~ ~ ~ / ~ ,/ f1 W r R4M03159
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4. FYC1T M NT -- 'TH DG '" • THE DESIRE 10 LIVE ON 'THE EDGE' 1407 ONLY DIFFERENTIATES FUBYAS FROM OLDER SMOKERS, 11 ALSO APPEARS TO !E A PARTICULARLY LEVERAGABLE IDEA, I•E•, 17 IS ORONIN{. ~ ~ FUB VS. SMITCHER FUBYAS GROWTH ~ 'TN~FDS•,~' DIFFERENCE Ig81-Ri PISun n ~ . EISL $m ~01100 ~KES TO TAKE RISKS + .61 1 + .61 1 F~I W,ACNIEVEMENT ORIENTED • .36 3 + .47 3 vENTVROUS (I 29 8 + + .42 4 ~ r R . 1,CSTAND OUT IN A CROWD + •31 4 + .3B 5 .- GENU1NE + .35 6 + .35 6 •P.y r • .27 12 + .34 7 ~NAM/ C - + .27 11 • .32 8 _, 'r "~ARGRESSIVE + .30' 5 + .26 9 V •'TNE EDBE' IS NOT LIMITED TO MACMO/1MYSICAL DANGER CONTEXT 'THE EDGE' IS AN IMAGE, AN IDEA, AND CAN APPLY TO CLOTHES, SE%. DRUGS, LANGUAGE, CARS, ANY WAY YOU CAN 'TAKE IT TO THE LIMIT.' SOURCE: SDS g4;,T03149 11 f" 1 4
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; 1H 081 [T1V IS 7 1 ~ • IDE TfFY THE ENDURING NtNDSETS BEHIND THE SOCIAL iROYPS• ~ fM4 US TH GROUP LABELS NOT AS TARGETS. BUT AS GUIDELINES TO HELP ia1 . It= EXCC4,TE RIGHT FOR TODAY. ~/. ~ R+~N LLL 3 B 5 l
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FUeYAS SoCIALSteQUeseECteIA • A FEW T'SHIRT LINES WHICH SEEM TO CAPTURE THE FEELINO OF THE r , SOCIAL GROUPS• vE9 gpc>•Ai_ GROUP I_TKLBLLLKE ~ GOODY~OODIES ' NONE (GOODY GOODIES ARE SORING• I ~1 r~l T'SHIRTS AREN•T•I ~ PREPf~ii ' IT't NOT WHETHER YOU WIN OR LOSE• Dlic It'E Now You LODK PLAYINO THE ~ SAME. ~ ~ ROCKERS ' IT'S IttPORTANT TO HAVE lELIEFS. ~ I SELIEVE I'LL HAVE ANOTHER SEER• PUNKERS ' IF YOU LOVE SOMETHING, SET IT FREE• IF IT DOESN'T COME SACK TO YOU, HUNT IT DOWN AND KILL IT. - TIME FLIES WHEN YOU DON'T KNOW BURNOUTS WHAT YOU'RE DOING• i r 1 f,-l;V4U3164
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S. SE1 ~ ALATANT SEX/ENTiRE MARKETING EFFORT FOR EXAMPLEt r ' ~w) l ~ ~ ~ •q1 4 IOVAN MUSK QIL FENALEj, "m lu 18-24 4.6 149 25-34 . 35+ 2•4 78 18+ 3.0 100 0" ~'QUDTING FROM Au51NE5S WEEK 10/22/79: Ntl;w ,- 0 AN...IS THE FIRST COMPANY TO PREAK INTO THE U•S• 'FRAGRANCE MARKET SUCCESSFULLY IN 15 YEARS• INDEED# '<.JOVAN'S NOVEL MERCHANDISING TECHNIQUES HAVE TURNEDTME *,MWUSTRY ON ITS EAR• " 11FfiLE OTHER COMPANIES MAY ONLY ALLUDE TO A USER'S SEX APPEAL, JOVAN SPELLS IT OUT WITH tD.P1. ON SOTTLES, PACKAGES, AND ADVERTISING DESCRISING MUSK OIL ASi • 'PASSION-AROUSING' • 'EROGENOUS' • 'ANIMAL•LIKE~ I OAPHRODISIAC~ AND JUST A PLAIN 'TURN-ON.~ 'THIS MESSAGE APPEALS TO TNE UNDER 25 CROWD,' SAYS AN INDUSTRY ANALYST. SOURCE: 1983 SMRB q P ~ 84M03153)
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FuBYAS SDCIAL GROUP SPECTRUM • WITH RE6ARD TO 'SOCIAL 6ROU1' PARTICIPATION, FUBYAS TtRD To LIVE IN A MOVIE -- THEY ot KNOW THE ROLEE KNOW THE SCRIPT KNOW THE COSTUMES KNOW THE PROPS • MEAtAHI TD SUPPLY ONE OF THE PROPS CIGARETTES THEIR BRAND OF r ~ N F+ r 00 ~p ~ P N 0 O a ~ 0 Ui ! . ,w,);16_ ,
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pjFFERENTIATING VITHIN THE FUBYAS GROUP • WHY AND How ARE THESE SOCIAL GROUPS POTENTIALLY USEfUL YO MARKETINB? " THESE GROUPS FORM A SPECTRUM RAm Mrm •ISy ~ z TO NEEDS, WE FIND THAT THE RESULTANT LIFESTYLE CUES AND SYMBOLS ARE ALSO DISTRIBUTED ACROSS THE SOCIAL BROUPS SPECTRUM ACTIVITIES Muslc DRESS PRODUCT/BRANC SELECTION • IN NET, THE SOCIAL GROUPS SEEM TO DIFFERENTIATE BETTER THAN DO DEMOGRAPHICS: -- FUBYAS MINDSETS TDNARD DEALING WITH LIFE/WITH NEEDS •- THE NAIURE OF THEIR NEEDS - THE RESULTANT 1.1FESTYLE CUES AND SYMBOLS • SPECTRUM REFLECTS ATTITUDINAL STANCES OR MINDSETS TOWARD DEALING WITH LIFE/W1TH NEEDS 000 ~ FROM VERY CONSERVATIVE To OUTRAGEOUSLY EXTRE.ME ~ ~ IN ADDITION TO PROVIDING A SPECTRUM OF MINDSETS RELATED f 9 y{;~X', 11 78
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produced by JUR.TC FNRYAS SOCIAL sROnPS ~SPFCTR~h . in EXTREME { ToDAY'S SocIAL GROUPS CONFORMITY I (B ELQHGING E BECNh~`` ~1 \ t 1~r ^ 1 X1 • GOODY GOODIES • THE LENGTH OF TNE SVECTRUM If IIQI CONSTANT OVER ttME--EXPANDS AND CONTRACTS • PREPS • G7s • DISCOS -0- • WHATEVER THE LABEL"TMERE 13 ALWAYS A GROUP VIEWED AS VERY NONCONFORMINC VON ITS GENERATION• • THE LABELS CHANGE OVER T1ME--tUT SLOWLY • ROCKERS • PARTY PARTIES AND THERE ARE MORE LABELf TODAY THAN SNORN--RUT TNEY REFLECT ftltTLE DIFFERENCES • THE LIFESTYLE CUES AND SYM/0L3 (WHICH YOU WILL SEE SOON) CHANGE OKR T111E j x ~ 0 i.~ ~ 0 ~Y • PUNKERS EXTRENE NONCONFORNITY • BURNOUTS _ SOL9 66LOS - ~ - IN 19405, LESS RANGE - IN 1960s, MORE RANGE - A110 CAN CHAROE RAPIDLY E_ ~~~.,U1~U4MIL-Im . I r `1 zvst gb"'
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fUHYAS SOCIAL GROUP SPECTRUM • WHY ARE FUBYAS SO WRAPPED UP IN FADS/TRENDS? • FADS Z TRENDS ARE VERY IMPORTANT TO THEM IN SEVERAL WAYS i THEY ARE CRITICAL TO EACH GROUP'S IDENTITY P-4 ~ SERVE AS CUES/SYMBOLS T fa DIFFERENT GROUPS HAVE CREDIBILITY TO START CERTAIN Not-/ TYPES OF TRENDS ~ '~ - NICE CLOTHES " PREPS ' REAL BD02E " ROCKERS I~t " FADS & TRENDS HELP SATISFY FUBYAS NEEDOi • To BELONG U THE GROUP • TO BE DIFFERENT YlA THE GROUP • FOR EXCITEMENT IN BEING J1 ON A TREND • FOR SUCCESS IN SNOVING YOU'RE IN ON A TREND c 8 S ' ~.040J ! '~.:1 M on
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EADS/TRFNDS (CONT•) 2. StREAIl • TO GROW/GAIN MOMENTUM"MUST BE PICKED UP NY LEADING EDGE IN OTHER GROUPS • CALLED CROSSING OVER Mrl PERHAPS SOFTENED, MODIFIED TO APPEAL eF~~.M./1 i Fk VARIATIONS OF THE MOHAWK, UPTOWN CELEBRITY ADOPTS ONE/MASA2INES SHOW TNEN THE FAD BECOMES THE FASHION • FINAL STEP • ADOPTION BY THE MASSES " MAKES IT IN KANSAS CITY " THE 'BUZ2' HAS MOVED ON. iuA-1,)3 17 :;
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ERDAD ,u,DE' miFn~,,~,1ntilAn¢~szi.n.~~J181(~iHEEat • ALL OF THESE KEY NEEDS ARE ENORMOUSLY INTERTYINED• " YOU HAVE SEEN THE INSEPARABLE RELATIONSHIP BETWEEN THE NEED To BELONG AND TO BE DIFFERENT " AND NON THE NEEDS FOR SUCCESS, EXCITEMENT AND SEX RELATE TO EACH OTHER• plum "~ TME NEXT SECTION, YOU WILL SEE NOM THESE LAST THREE "1: TIED TO BELONGING AND BEING DIFFERENT. ~ • oil" • A F~ ONCISE IDEAS CAN BE CAPTURED FROM THESE NEEDS AND THEIR INTERVLATIONSHIFS TO SERVE AS READY'REFERENCE GUIDELINES: 0~; FOR THE FUBYAS WHAT ts CRITICAL Isi I. TODAY, NOT TOMORROW 2• STAYING YDUNG/NoT IN THE RUT 3. ON THE EDGE, NOT THE MIDDLE GROUND I I SEE THINGS THROUGH THEIR EYES, NOT DURS• ' N N ~ b P N C ~' in N I N i co ...... kn A ~ W co 84M03156 ,• ^ 1 I
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BRaND ATTITDDF E18Il1IlLS I• VERY FEW SMOKERS 18-20 ARE AWARE OF CIGARETTE ADVERTTSING"NON J THEY ARE 'POS1T10NED'• BRAND PERCEPTIONS ARE MORE LIKELY 10 COME FROM USERS THEY SEE• ~ Z. ATTITUDES ABOUT CIGARETTE BRANDS ARE NOT EXTREME IN MOST CASES ~~ "YiUALLY THEY ARE NEITHER LOVED NOR HATED. THIS SEEMED TRUE EvEN F'OR MARLBORO. . ~ F--! MB~ ~~ 3• THE DNLY ATTITUDES THAT WERE STRDhG ENOUGH TO BLOCK A BRAND WERE Pm ~ K+•~ ~.-Sl USUAL~Y PRODUCT DR1vEN "'THEY ARE REALLY.ROUGH BECAUSE THEY~RE NOLElLTERED'. OR 'THEY TASTE LIKE STALE MARLBORDS'. OR 'TNEY TASIE'LIKE COTTON'• THIS MAY MEAN OUR PRODUCT PERCEPTlONS NEED T0~'~tE4TURNED AROUND -- AS BUDWEISER'S YERE• 4. THE MOST SENSITIVITY WHEN IT COMES TO IMAGERY IS LOOKING PNONEY " OF TRYING 70 BE MORE THAN YOU ARE, SOMEWHAT LIKE THE ROCKER0 S ATTITUDE TOWARD PREPS• S• RESPONDENTS TENDED TO ASSOCIATE BRANDS WITH THEIR GROUP STEREOTYPES AS FOLLOWSS •'PREP' BRANDS: PLAYERS, V. SLIMS, BdH, VANTAGE, NExPORT• •'ROCKER' BRANDS: CAMEL, WINSTON, MARLBORO, AND KoDL• 09vI0iiSLY, MARLBORO WAS 'PCCEPTED' lN ALL GROUPS. r Ln N , 1~ I ..~. r oo 1 ~0 .N ='.l1ii17- .
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1. IEYFRAGE IN dARKETPLACF TRENDS (CoNT'D) IN SUMMARY, ~0) • INERE DOES NOT APPEAR TO bE POSITIVE LEVERAGE AMON6 WHITE ~ YA SMOKERS ON EITHER FF ('TASTE') OR FFLT ('LON TAR')• ~ *ffm~ ~~ ~O'No COOLNESS/MENTHOL/FF PROPOSITIONS STILL MAY RETAIN SOME POSITIVE LEVERAGEABILITY AMONG IL&u YA SMOKERS• - ~ ~ P~ Poo ~ ~ pw ~ J R ~. -- N ~ 7 iN:1 111 1 Q:.
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FSBYAS SOEIAL GROLIPS SPFCT_RUM • MOM THE GROUPS FEEL ABOUT EACH OTME1_ -- GROUPS ON CONFORMING END OF iROUPS WITH DISTASTE SCALE V1EN NONCOMFORMIN6 ~ "AO CONFORMING GROUPS TEND TO RESENT CONFORMING GROUPS P-~ T, •~PHONET . THE 'HAVE'S' " DON'T HAVE TO STRUGGLE FOR THINGS GROUPS TEND TO ADMIRE THE MOST NON'CONFORMIND GROUPS • NOT WHAT GROUP DOES • BUT WHAT BEHAVIOR REPRESENTii '• THE 'GUTS' TO M0T CONFORM •• NOT BEING SADDLED WITH ANY SENSE OF RESPONSIBILITY A ~ M 0 N ~ ....~. N r OD kD P W r r iP W IP OD 9 d:`10 1166
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prod.i gpdm I y LURT(: EXTREME [ONFORM_1TY - 0 - TODAY'S SOCIAL GROUPS • GOODY GOODIES p MUSIC AS THE flIXED E • PREPS FASHION MERCEDES DRINKS • GO's LOOK Yowo L • DISCO'S BACKGROUND LIGHT BEER 0 - IZ00 CAMARO pEtNEKEN 0 (To. 40) - 'NICE' K OF TN! NG'. Mustc AS A • ROCKERS LIFE STATEMENT • PARTY PARTIES - IMMERSION - CONCERTS - PERFORMERS SELECTED FOR THEIR IMAGE • PUNKERS ANTI-FASNION USED CAR TO - FIXED UP OUTRAGEOUS - SOUPED UP - OLD BLACK YAN T-SMIRT PICK UP JUST - SPIKES ON WHEELS CLOTHES t HAIR EXTREME • BURNOUTS owR/1fa. ")nt I t 90Sb 68ZZS ~C-6130 .-i L11M Wl3aLm in ~I ~ ~ ~°" M JACK DANIELS BUDMEISER 7 H E F E E L OF TpU1G,
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fAne_/TREOS -- HON n0 THEY STARTIGROY7 • IyE DIFFUSION MECHANISl1," SEED AND SPREAD Poo o" •Ri.1 ~ STARTS WITH SMALL GROUP r BECAUSE OFt Ft ~ " ECONOMIC FACTORS SOCIAL CHANGE DEMOGRAPHIC MIX CHANGES INADEQUACY OF PRODUCT CATEGORY ALTERNATIVES DESIRE FOR THE NEW, THE DIFFERENT • AT THIS STAGE'-CALLED A BUZZ 9 ,r ,l • EXAMPLE: MOHAWK HAIRCUTS IN THE VILLAGE W MI 10 tn N H N 1 co b J/1, ko y /I ! I{. Ln lM H 84M03168 U ^
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hrod~~~CY~t CMIAl ~ennh'e e* ~faIRT(~ ~ ; EXTREME T -0- i7(TREME 6kA~r~ ~ JODAT'S Soc1AL • GOODY GOODIES • PREPS • GO's • DISCOS THEY TeLD Os... _ ,PREPf DON'T SMORE0 • ROCKER H/FH • OCIGARETTE TRENDS 110YLD • PARTY PARTIES START NITN ROCRER! 02 PUNRERio • PUNKERS I NJY CONFORMITY I • BURMOUTS ~ Z/C9 66ZOS C r - r ' ~ ~ al cto ~.j Ln 00 w 6VSb 68TZS
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MARKETING/MDD IMPLICATIDNS tl. STRATEGY AND EXECI1TiDN (CONT'D) THERE ARE SEVERAL 6ENERAL GUIDELINES TNAT SNOULD {E CONSIDERED IN ANY EFFORTS TO ADDRESS SMOKERS 18-20. • USE PULL STRATEGIES -- DRAW CONSUMERS TO THE BRAND• AVOID THE HARD SELL• FEEL FREE TO 6E A LITTLE IRREVERENT ABOUT THE lRAND• • PAT, INSTITUTIONAL ADS LACK APPEAL• BE CLOSER TO THE NWEbGE• DON'T CHASE A TREND THAT HAS ALREADY NAPPENED• G00D PRODUCT IS CRITICAL BUT PRODUCT SELLS DON'T WORK• 74VDID PROSLEM'SOLUTION POSITIONINGS• Th ~ •M'T •E PMONY• FOR EXAMPLE, ENSURE EXECUTIONS HAVE „biINTERNAL INTEGRITY IN TERMS OF PREPPY YS• ROCKER LOOKS pD ACTIVITIES. -q!`~iJ1~f~Y0ID PRICE DISCOUNTING TACTICS• 1> • - fiAKE THE MARKETING FIT • • • 1. TODAY, NOT TOMORROW 2. STAYING YOUNG/NoT IN THE RUT 3. ON THE EDGE, NOT THE MIDDLE GROUND SEE THINGS THROUGH THEIR EYES, NOT DURS• S4M03180 •, ^ I
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• JUNIOR LEVEL COMMITMENT 'ONCE AUGUST BUSCN REALLY SHOWED NE WAS COMMITTEO TO YOUNGER ADULT MARKETING, DOORS OPENED UP AND NO ONE WAS AFRAID TO COME UP WITH IDEAS• BEFORE TMEN# THE IDEAS WERE THERE NUT PEOPLE WERE AFRAID TO TALK A10UT TMEM. INE IDEAS FOR 1HIS MARKET OFTEN COME FROM JUNIOR PEOPLE• THEY'RE THE OWES WITH THE ENERGY TO PUT INTO FIELD MARKETING• BUT THEY DON'T NAYE THE CREDISILITY 10 SOMEONE AT A HIGHER LEVEL MUST SELIEYE IN THEM AND GET THE IDEAS TO THE TOP PEOPLE.' ~rw~ WE NEE"0?REMEMBER THAT 110 PAY'OFFS MAY TAKE 3 OR 4 YEARS TO ~ ,w ~ACHIEY ,F~TTOM'LiNE RESULTS• A SOLID STRATEGY IS NEED,ED AS WELL ^ AS THEI'IFEStiURCES TO IMPLEMENT IT AND MONITOR ITS PROGRESS. FOR 01 NE BUDWEISER PROGRAM HAS GROWN FROM ] MAN/f1MM TO 18 ~PINJ EXAMPLE`,I'~T ~ PLE/4~pMM. ,~ ~ ~~ ~ ^ *wol ~ ~ ~ B S I I IJ ft~ CO t0 I tl-INIG. 17b r~ f
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2. tEYERAGE_ IN BEMOGRAPHI[ SHIFTS (CoNT'D) B. }IS_YSs.roLLEitf. • THE GREATEST DIFFERENTIATION OF SMOKING AMONG YOUNGER J ADULTS APPEARS TO RE THE COL:EGE/NON-COLLE6E SPLIT• r RJR DATA IS NOT AVAILAlLE. RUT TWO OUTSIDE SOURCES l~l AGREE THAT IN 1983 THREE'FOURTNS OF SMOKERS 1R'2f1 WERE ~ EDUCATED THROUGH HIGH SCHOOL aR IEtf. ~ ~ 1983 1962-84 `!..'~.'~ SMOKERS 1R-74 S J ~f~ ~NKELOVI[N ~ r, , HS OR LE S 781 73I S - pZ P PAST HS 22 27 w ~ r.I ~ P1 3 8 5 B ~ ~ S 84\103184 0 /1 1
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MARKETING/MDD 1MPLICATIO S IJ. STRATEGY AND EXECUTION ICONT'D) 5. A PROCESS FOR DETERMINING EFFECTIVE STRATEGIES NEEDS To BE IDENTIFED• KEY PROBLEMS MUST BE OVERCOMEt • A SEGMENTATION BY DEMOGRAPHICS, SEGMENT, OR CATEGORY M,,,# -e ,v r-~ ~ IS NOT ADEQUATE BECAUSE SMOKER MINDSETS GO BEYOND THESE BOUNDARIES• POSITIONING AGAINST 'DRIVING MOTIVES' -- BELONGING, DIFFERENCE, UPWARD STRIVING, EXCITEMENT AND SEX -' CAN POSE PROBLEMS, SINCE THESE WANTS FORM A TIGHTLY KNIT BUNDLE TO 18-20 SMOKERG• IT IS SOMEWHAT R ARTIFICIAL TO SEPARATE THEM -- TO PICK ONE AND POSSIBLY VIOLATE THE OTHERS• •Fi.M i `.' THE HEART OF AN EFFECTIVE STRATEGY MAY BE AS MUCH THE MEDIUM AS THE MESSAGE '- FIELD MARKETING, SPECIAL pow* `--r EVENTS, ETC•, AS OPPOSED TO MAGA2INES• WE MUST CIRCUMVENT TME.PROBLEMS THAT MAKE BOTH RJR AND OUR ADVERTISING AGENCIES INCREASINGLY OUT OF TOUCH. As YOUNGER ADULT SMOKERS BECOME INCREASINGLY NON-COLLEGE AND NON'PREPPY, THE ATTITUDINAL 6AP BETWEEN MANAGEMENT (EVEN AT LOWER LEVELS) AND 18-20 SMOKERS IS LIKELY TO WIDEN. THIS MAKES 17 HARD TO BE CREATIVE AND IMAGINATIVE IN A RELEVANT MAY. 8 S , 9 9 N O N .0 ....i N N W W b P O1 i a V / 1 ~i vr1. 7 i,
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1• 8r~cn~1~ • BELONGING iS ENORMOUSLY IMPORTANT TO FUBYAS • AND TMis NEED DIFFERENTIATES TMEM FROM SMOKERS IN OLDER AGE GROU.S *m~ • M•M @,ELONG/FIT IN ~ ~ 3 34M03192 .G .1h,
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FADS/TRENDC (CoNT•) TNUS. THOUGH YOU WOULD NOT TARGET A IRAND TO PUNKERS, ONE /11iNT CONSIDER A NEW 1RAND IDEA IN LIGHT OF WHETHER OR NOT THERE IS AT r ~ LEAST ONE GROUP WHERE THE BRAND COULD FIRST 'SEED•' FOR AN ESTABLISHED BRAND, ITS ABILITY TO START A NEW '/UZZ' RAY ~ DEPEND ON THE BAGGAGE IT NRINGS BACK FROM KANSAS CITY. ~ ~~ 3 B S , 4 0. N O (.n N 4+ N 00 V ? ko P ~ N l1~ P W 1W NAOiI71 ~
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hARKETING/MDD IMPLICATIONS FURTHER RESEARCH IS NEEDED TO QUANTIFY THIS LEARNiNG• SPECIFIC ISSUES CAN RE IDENTIFIED SY END USERS• 6ENERAL ISSUES AREI 1. IMPORTANCE OF VALUES/VANTS (RELATIVE AND A6=OLUTEI ~M) 2. How ARE THEY EXPRESSED IN SMDKERS' LIVES ~ 3. PEqfEPTIONS OF SOGIAL BEGMENTS [ r• 4. ASSOCIATIONS OF SYMlOLS/LUES 5tEyEL/NATURE OF BRAND ATFITUDE6 r~---' ~ 6~.~ RAND LINKS TO ALL OF THESE r4, AScSNCE ViEM/TRENDS OFTEN ARISE QUICKLY AND SYMSOLS CHANGE, A pFU$ MONI~TOR IS NEEDED• IT WILL ALSO !E NECESARY TO MONITOR •::. ~ PROGRlii..AGAINST STRATEGIES ADOPTED• PINK Pao "Z rr.~
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MARKFTINf+/MDI] IMPI 1 ATiQNc THE ABSOLUTE 80TT0M LINE IS THE NEED FOR 1• COMMITMENT 11• IMAGINATIVE STRATEGIES AND ExECUTION• 1itE-F.OLLOrING QUOTES WERE TAKEN NE7K,';(ORK -- AND EVERYONE IN THE ~ .~ P MANAGEMENT COMMITMENT FROM TNE 'E%PERT MORKSMOP' IN ROOM SMILED AND NODDED• ~ '` ITHOUT HAVING SOLD AUGUST BUSCH ON THE NATURE AND THE ~1 ~ISKS OF YOUNGER ADULT MARKETING, WE COULD NEVER HAVE i~ . ]11RNED AROUND BUDNEISER• YOU JUST CAN'T DD IT WITHOUT THE ~ ~,UPPORi OF TOP MANAGEMENT•' ~~t~ ~ R MIDDLE MANAGEMENT COMMITMENT Aulk ,,we 'TXE PROBLEM WHEN YOU HAVE A GOOD IDEA FOR THE YOUNGER sm ADULT MARKET AND YOU HAVE TO GO UP THE CHANNEL FOR 1=W APPROVAL IT GETS WATERED DOWN VERY OUICKLY• EVERYttiooY WANTS TO TAKE RISKS AND BE THE ENTREPRENEUR• BUT WHEN THE BRAND MANAGER'S JOB IS ON THE LINE BECAUSE HE'S GOT TO SELL A CAMPAIGN TO AUGUST WHERE YOU'RE GOING TO THROM BEER AT PEOPLE " HIS PRODUCT, YOU'VE GOT TO KNOW AUGUST BUSCH " YOU START TO LOSE TNAT RISKING ABILITY INSIDE• THE IDEAS GET WATERED DOWN AND THE COMPANY FAILS AT YOUNGER ADULT MARKETING•' rJMi)31 74, ~F ~
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MARKFTING/MOD IMPLICATIONS 11 . STRATFGY AND EXECUTiDN THERE ARE MAJOR ISSUES/TRENDS THAT MUST BE CONSIDERED IN DETERMINING THE BEST DIRECTIONS. IN SOME CASES, FURTHER RESEARCH IS NEEDED. I• THE COOLNESS SEGMENT (AND MENTHOLS) SEEM.NEADED FOR INEViTASLE DECLINES iN SHARE. IKE 6USlNESS THAT IS LEFT WILL GROW INCREASINGLY BLACK. wow 2*-;PREPS DON'T SMOKE -- THE MARKET lS LIKELY TO BECOME ~~JNCREASINGLY ORIENTED TO THE VALUES OF NON'COLLE6E IS= SMOKERS, ROCKERS. THE SQUEAKY CLEAN LOOKS WILL 6E OUT• ,O, )0~04ARLSORO IS THE KEY TARGET WITH NEWPORT {EIN6 1MPORTANT OR MENTHOL PRODUCTS IN THE BLACK SUL6ROUP• W09TN MARKETING TO YOUNGER ADULT SMOKERS, THE CRITICAL REACTION IS 'HEY, THEY'RE TALKING TO NE.* THIS SUGGESTS ,THAT VIABLE POSITIONINGS AND EXECUTIONAL TNEMES MUST '--'MORE THAN JUST ~APPEAL' TO YA, THEY MUST APPEAL to YAS IN A WAY THAT 'DIFFERENTIATES8 THEM FROM ALL OTHER GROUPS AND DIFPERENTIATES OUR BRAND MEANINGFUL WAY. FROM ALL OTHERS IN A ~ R 3 a s ' 0 hi ul N 14 +rr co %O 1 P ~ Ul ~ ^
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Il1FFERENCES NIIHIN YA_f`ON KEY NEEDS • ITS MEANING AND NATURE TO FUBYAS • THE DIFFERENCE FUBYAS vt. SWITCHERS • RELEVANCE TO MARKETING E,JVE KEY NEEDS BELONGING BEING DIFFERENT UPWARD STRIVING EXCITEMENT SEX A t NI•N Y lNTERREIAtEt C 1.\i!.
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2. IFyF_RA. 1N D MO.RAPH1. SHIFTS (CGNT'D) B. HS vs. COLLFGF (CONT'p) • IN TERMS OF iMAGERY. U YANKELOVICN DATA INDICATE THAT COLLEGE 1E NOT A KEY ASPIRATION OF THE NS'EDUCATED SMOKER ANY MORE THAN THE NON-COLLEGE ROUTE APPEALS TO SMOKERS WHO GO TO COLLEGE. r ~ K;,•....+~ ~- R~ 22'16A. 'THE WAY FOR YOUNG PEOPLE TO GET AHEAD IN J 3 LIFE lf TO...•* A U *ENO jiD TG COLLEGE LEARN A SKILL ~ I~.l AAA"` .ShluCE ES ~ 16-20 TOTAL 441 55% ~ 18-24 TOTAL 42 57 ~ HS OR LESS• 31 69 ~ry PAST HS 68 31 u IN COLLEGE 65 31 1 'MAY INCLUDE HS STUDENTS MHO PLAN 10 ATTEND COLLEGE• SOURCE: YANKELOVICM MONITOR, 19a0-83 COMBINED• ~ 0 N ~ P V ' r II k':^1~~~ i Sh
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,JD'S POSITIONIu s JD IS TO BE SEEN AS "THE MOST CAREFULLY MADE, HIGHEST QUALITY, ON THE MARKET " I A • MERICAN STRAIGHT WH SKEY ~ww SUPERPREMIUM BRAND OF ~;„„~„ (AA 8/4/80) ""NE HAVE HAD A FIRM POLICY OF NEVER DISCOUNTING OUR PRODUCT (JD EXEC QUOTED IN AA 8/4/80). s ~ b A COMPANY DOCUMENT WRITTEN IN 1955 SAID THE JACK DANIEL'S IMAG~ SHOULD REFLECT "A SOFT'SPOKEN RESTRAINED PERSONALITY THAT - ATTRACTS SIMPLY BECAUSE IT NEVER SEEMS TO TRY TOO HARD`• (AA t 7/26/84) a A'S S Q.NCEPI .~ =t ~T 7 L Y a L .p "THEY MADE IT RIGHT iN THE GOOD OLD DAYS" _ J ~ ~ L 1TS AD CAMPAIGN CONVEYING THIS MESSAGE APPEARED IN 1954 AND 'HASNI T MOVED MORE THAN AN INCH OR TWO IN 25 YEARS•" (AD AGE 7/26/84) RM0003770
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111FFERENTIATIkG WITHIN YAS TODAYi FNBYAS VS. SW1T[HERS THROUGHOUT THIS NEXT SECTION, WE WILL RE TALKINB AROYTt 18-20 YEAR OLD SMOKERS • FUBYAS Y1-P4 YEAR OLD SMOKERS • SWITCHERS NOT ONLY NAVE 21 YEAR OLDS ALREADY CHOSEN THEIR FUB. SYTTCNING BEHAVIOR IS MARKEDLY DIifERENT• ' - ~ NFD NET SwITCHINO: 19I6-83 T w 19~2Q Zl~K TOTAL RJR -5•96 •1•39 ~ TOTAL P• MORRIS •7•82 '1•67 -11~ GAP -13•80 •3•06 BUT THEIR B R:}bql);190
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• JD'S AGE PROFILE ALSO RESEMBLES MARLBORO'S AND SUGGESTS THAT THE BRAND'S GROWTH MAY BE A FUNCTION OF AGING AND BRAND LOYALTY, SIMILAR TO MARLBORO OR NEWPORT (WHEREAS JIM BEAM IS RIDING THE HEAVY CONSUMPTION AGES)- BRAND USED "MOST OFTEN" (SMRB) JACK DANIEL'S SHARE _BD1 JIM BEAM 1au 1m 19$4 .lM BD1_19Y3 18-24 41% 49% 156 150 788 25-34 34 40 127 123 92g 35+ 18 23 67 72 111' 18+ 27% 32% 100 100 i 1007 6 ~ a • ON A 'SHARE OF DRINKS" RATHER THAN "USUAL BRAND" BASIS, HEUBLEIN DATA SHOWS AN EVEN MORE DRAMATIC SKEW FOR JD• SHARE OF BOURBON DRINKS CONSUMED 1982-83 __Z__ BIl1 LEGAL AGE T0 34 52% 186 35-49 16 57 50+ 6 21 TOTAL 29% 100 0 N W RM0003768
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l• WE CAN DO IT -- OTHERS DID! TWO EXAMPLES OF BRANDS THAT D1D IT -- AND b.QY: ~ $ ~ ~ ~ ~• JACK DANIEL'S '- THE MARLBORO OF BOURBONS ~ a • UNEXPECTED POSiTIONING AND EXECUTION i T I CONSISTENT, LONG TERM MARKETING EFFORT .! - 0 ~ -, 2. BUDWEISER -- TURNING A BIG BRAND AROUND l^ C W C O RM0003766 °- ~
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NARKEiINGiMDD IMPLICATIONS ~~. StRAtEGY AND EYECUTION (CONT'D) CREATIVE AND IMAGINATIVE EXECUTIOtlS WILL 11E THE KEY TO IMPROVING PERFORMANCE• RJR'S CHALLENGE IN ADDRESSING THIS ISSUE PROBABLY LIES IN ESTABLISHING TNE RIGNT PROCESS RATHER TNAN SIMPLY CREATING SPECIFIC POSITIONINGS AND EXECUTIONS• ~ A POSSIBLE PROCESSt ~« ~ ~ S-;TALK T0 ENOUGH SMOKERS TO ENSURE THAT WE FIND A g~~y `TARGET GROUP WITH A 'COMMON MIND-SET' WORTH PURSUiNG• ~+ E~DENTIFY SPECIFIC 18-20 SMOKERS WHO ARE PART OF TNAT~ MIND-SET dyp HAVE INSIGHTS AND JUDGEMENTS ABOUT PEOPLE •~ WHO ARE LIKE THEM• USE AS A PANEL TO HELP PROVIDE P~V4 'r- CONTINUOUS FEEDBACK AND DEVELOPMENT EFFORTS ... ~ tX4?VERTISING, PRODUCT PROMOTION, ETC• ra/ E~'I Rx<zLH00SE CREATIVE PROFESSIONALS (AGENCY OR OTHERWISE) WHO PIRO'f4LATE TO THE TARGET M1ND'SET AND CAPITALIZE ON GROUP ~ DYNAMICS BETWEEN THE EXPERTS AND THE PANEL• ~ S USE THE RESULTING SYNERGY T0 BE CREATIVE AND IMAG1NATtVE WITHIN RJR MANAGEMENT GUIOELINES• 8 / u / I i N '' ', W 0 N b b P W N I a ~ R4i1110311/ 9 ~• i!
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$$AND ATTITIIDE CONCLUSIDNS I• MARLBORO CAN BE ATTACKED. THEY DO NOT HAVE INSURMOUNTABLE r} STRENGTNS IN IMAGERY '• THEY SMOKE 17 BECAUSE EVERYONE ELSE DOES ~~/ AND THEY DON'T SEE VIABLE, ATTRACTIVE ALTERNATIVES• L_~ ~ 2. THERE ARE MAJOR OPPORTUNITIES TO USE NONTRADITIONAL CHANNELS TO *W^ EFP'[CTIVELY REACH THE iS-Y0 SMOKER MARKET " TO REACH THEM, SPEAK ~ INSTHQIR OWN LANGUAGE INCLUDING THE RIGHT SYMBOLS AND CUES, AND BE>u7EELEVANT. THIS IS THE HEART OF THE JACK DANIELS AND BUDWEISER Fm Fd . SUC,CESft STORIES N~DF-yi/NTI AND NO CIGARETTE COMPANY IS DOING IT " AT LEAST ~ op" W 3• WIA'POSSIBLE TO IMPROVE PERFORMANCE N1TM CAMEL, WINSTON, AND ;8~ SAEIERI BUT EACH HAS DIFFERENT STRENGTHS AND MEAKNESSES• P" • CAMEL -- TENDS TO RECEIVE MORE POSITIVE COMMENTS THAN OUR OTHER BRANDS ALTHOUGH ITS NON'FILTER HERITAGE IS STILL PROMINENT. IT'S STRONG VISUAL IDENTITY MAKES THE BRAND INTERESTING AND LENDS ITSELF TO SPECIAL PROMOTtON. PEOPLE NOTICE CAMEL. WHILE 1T5 NON-FILTER SUGGESTS PRODUCT NEGATIVES, IT DOES FORM A SOLID LINK TO AUTHENTICITY AND PRODUCT QUALITY " ITS ORIGINS IN THE & GOOD OLD DAYS' IS NOT A NEGATIVE• • WINSTON/SALEM -- IGNORED MORE THAN HATED• THESE BRANDS CARRY THE BAGGAGE OF BEING IN KANSAS CITY FOR SO LONG ... AND THE USER IMAGE ASSOCIATED WITH THIS- THE BRANDS ARE SIMPLY NOT VERY INIERESTING -- PACK, NAME, ETC. THESE ARE SEEN AS CLEAR NL3RANUS NITH PRODUCT NECAT'VES. N O N ~ e V ~ `d=! \4i)i ! ?4 » L1 I
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0 BUDWEISER LOST MARKET LEADERSHIP TO MILLER IN 1978, ALTHOUGH THE HANDWRITING WAS ON THE WALL BY 1976, WHEN IT GOT A 4-POINT WALLOP FROM MILLER- BUDwEISER - niLLER iMUE OF fft1 KrOb10C NtfJ 11 WAS IN 1976 THAT AUGUST BUSCH DECIDED TO BITE THE BULLET AND GO TO WORK ON YOUNGER ADULTS• RM0003777
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THE ADS -S.EEMfD RE{fOLipp'TONARY AT TNE TIME -- THE LONG COPY WITH NO HEADLINE, SMALL DRAWING OF THE BOTTLE, BLACK AND WHITE PHOTO, FRACTIONAL-PAGE SIZE -- NOTHING ELSE WAS QUITE LIKE IT- OUR ADS LOOKED A BIT ODD AMONG THE BOTTLE-AND-GLASS AND BEAUTIFUL PEOPLE ADS-' (AA 7/26/84) WE CAN'T BLAME THE BOYS for having a water fiRht now and then. IF you worked in Jack Daniel's rickyard, you'd start one coo. Looking after a burning hard maple rick is a hoc job. But it's one we can't do without. You see, we take the charcoal chac resulcs and use it to help smtroth out our whiskey. Thac's done by seeping it down through huge vats ~ CHARCOAL packed tight with this MEILOWED charcoal. Just a taste of DROv ~ Jack Daniel's, we think. BY DROP and you'll aRree it's worth a water fi};hc or two. Ymduccd to ~MIrYSSK IAwtM, ' 90 PIC0 • Qd+lA w4 %114E H IK\ D-rRf 0,110" ro~o. PnM. 11a.re 1. l.rrcrre..e 0e0 J6ll. re..wfx. 37157 P4reR.n rhn N.r.p+N Rbr+.w. MNr.ro-.r Mx.1 br rM Un~ S.N.$ r~~, t8y'b 68ZZ5 • VISUALS AND COPY ARE DOMN NOItE' AND NEIGHBORLY -- UNDERSTATED AND AUTHENTIC- • ITS PRODUCT IS OCHARCOAL MELLOWED DROP BY DROP FOR SIPPIN' SMOOTHNESS'- 'ivleral Trade Conuui.sion pursnant lo subpoena dated 3une 6. 1997. 6AA0 ZOfOS
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SUCCESSFUL MARKETING TO YOUNGER ADULT SMOKERS 2• WE CAN DO IT (OTHERS HAVE)- OW WE CAN DO iT• Y ~ ' n .-S 3 ~ • START WITH BASIC PRINCIPLES 0 a ~ ~ - GETTING ON TARGET (DIFFERENTIATION) E i? - USING GROWTH SECTORS (LEVERAGEABILITY) a ~ ` r m F ~ ~ • KNOW THE TARGET INSIDE OUT ~ - MARKET TRENDS r ~ ~ - MINDSETS 4 • MAKE IT LOOK RIGHT TO YAS EYES - "SEGMENTS" YAS'S KNOW - CUES AND SYMBOLS 3• THE BOTTOM LINE CX-404 RM0003765
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2. IFV RA+ IN 0 MO+RAPHIC SHIFTS (CONT'D) c4m) ~ ~ NE/[ F~1 THESE OUANTlFIA{LE RESULTS SUGGEST THAT CURRENTLY. TNERE ARt THREE KEY SECTORS WHICH MAY BE LEVERAGEARLE ANONG YOUNGER ADULT SMOKERS OF THE M1D'i9SU'SI 1. YA FEMALES, WHO ARE LIKELY TO EQUAL OR EXCEED MALES IN )MPORTANCE••• 0120 'WANTS' WHICH ARE KEY TO FEMALES, BUT MAY ALSO BE HELD BY MALES, SHOULD RE MORE LEVERAGEASLE THAN LAR6ELY MALE MANTS• NOT NECESSARILY 'FEMALE BRANDS' YA BLACK SMOKERS AFFORD POSSIBLE LEVERAGEAlILITY OF ~-+ .,PRODUCT BASED COOLNESS/MENTHOL/FF BENEFITS AS YELL AS t~~MAGERY ELEMENTS• ME NON'COILEGE SMOKER IS T.HREE'FOURTMS OF THE TOTAL YA TARGET, A TREND WHICH APPEARS TO STILL BE EVOLVING• THIS SUGGESTS TMAT WANTS, EXECUTIOMS, CUES AND SYMbOLS WHICH SUIT THE NON'COLLEGE IDENTITY MAY BE MORE LEVERA6EARLE AMONG YAS THAN THE COLLEGE'ORIENTED OPTIONS. LESS OUANTIFIADLE BUT PERHAPS MORE MEANINGFUL IS THE CONTENT OF YOUNGER ADULT SMOKER LIFESTYLES, ATTITUDES, AND YALUE6 " THEIR MINDSET IODAY. ~ 3 s~ L.F' I ~ 1"mby :S»%9031 97
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JD_' S 1_ ARGt: Tc YA JD TARGETS YOUNGER ADULTS, ALTHOUGH ITS ORIGINAL IDEA IN 1954 WAS INTENDED TO CAPITALIZE ON MIDDLE'AGED MEN'S NOSTALGIA FOR "MOM'S APPLE PIE"• IT'S 'MARKETING STRATEGY HAS ENABLED JD TO DO EXTREMELY WELL AMONG WELL"EDUCATED, AFFLUENT 1B'34 YEAR OLD MALES' -- ESPECIALLY COLLEGE MALES 'BY WHOM IT IS PERCEIVED AS A STATUS SYMBOL"• (AD AGE H/4/H0) RM0003769
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'FUSYAS GENERATION' vt. 'OLDER GENERATION' MARKETiN6 RELEYAM • NO REBELLION"t0 MUCH FREEDOM " SMOKING NOT RERELLION 1114 q4. K.LiK .V1Mtl1 nlo 1:..:t mt Sn S PARENTAL PERMISSION TO SN'OKE WNEN 18 411 1016 4u • NO REBELLION"NO GENERATION GAP " PARENTS' BRANDS OK n:f ou , Un N µ 00 O +~~f IA N 0 / A d I V1 P J ~1 u i µ M D l
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S ARAND ATTFTNDE THE ADILITY TO IMPROVE PERFORMANCE DEPENDS ON THE ATTITUDES AND BEL1EF5 TNAT SMOKERS 18-20 HAVE ASOUT CIGARETTE DRANDSt C4~ L, • DOES MARLlORO'S STRENGTH lN THIS SEGMENT MEAN THAT THEY 0 LOVE 1T', THINK THAT IT IS THE 'SEST •RAND'. OR DO THEY r~I~ly1R/K SIMPLY CHOOSE IT 'lECAUSE EVERYONE ELSE DOES' (WHY NOT?) •,PTHEY HATE WINSTON OR IS 17 SIMPLY IRRELEVANT? ~• r• r DO THEY LOVE OR HATE CERTAIN BRANDS? ~ /w 1-f . ..liRa1 F= •PifN1Ci TYPES OF THINGS TURN THEM ON OR OFF? 3 owl V ~ 5 0 ;0, ~ ~ ~ ~ 3 ,, AIN
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6 DESPITE STEADFAST AND.lNCREASING COMMITMENT, IT WAS 1981 -- 3 TO 4 YEARS -- BEFORE BUD CAUGHT MILLER AMONG YOUNGER ADULTS• REGULAR BRAND USAGE AGE 18-24 BUD HILLER HIGH LIFE I I •a / 07 a a1 aBUT WHEN THEY DID, THE PAYOFF WAS BIG~ <<: RM0003779 BUDWEISER 15 ---> 26 HIGH LIFE 22 <- 9
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DIFFERENTIATlNG YAS TODAY FROM YESTERDAY How FHSYAS SEE •TMEIR GFNF_RATIaN• VS. TME •nD R 6 N RATInNO • WE ARE MUCH MORE OPEN ABOUT EVERYTHING • NE HAVE So MUCH FREEDOM WE DON'T NEED TO REBEL GRON UP FASTER " MORE OPTIONS I'PRIVILEGEB•I LIBERAL ATTiTUDES ABOUT SEX DON'T GET MARRIED, MAVE BABIES AS YOUNG . (•RESPONSIBILITIES•) INTO DRUGS AND DRINK T00 MUCH NiRa ~ M~+1 r~, 1 UT W1TM FREEDOM, COMES STRESS '" RESPONSIBLE FOR CHOICES MAKE MISTAKES EARLIER 9,,A'UR GENERATION IS GOING TO HUSTLE FOR THE MATERIAL THINGS EXPENSIVE TOYS " NOT SAVE THE WORLD • BYWORD OF THE GENERATION • GDALS• WE DON'T RESPECT PEERS N/0 GOALS -- BUT ALMOST ANY GOALS WILL DO • THE 'OLDER GENERATION' IS IN A RUT• tr N r ~.... co I ~0 Lt 84M03188
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September 17, 1984 TTO: 4. C. Nordine FROM: D. S. Burrows SUBJECT: TRANSACTIONAL ANALYSIS Attached is a sumnary of basic Transactional Analysis (TA) structure and `~ tenets. It is bulky but easy reading. ~ Note that the driving .otivation is 'getting strokes' -- positive if poss~lfi but negative is better than none. In fact, eo.e people can only handl ~e negative strokes. Thus "rebellion' as a reason for smoking can heve a dot~1~ payoff: negative strokes from parents, school, atc. and, perhaps, posit ,~6 strokes from other 'rebels' among peers. This fite your idea that social ~ permission to seoke (e.g., by schools) is likely to discourage rather thelb encourage smoking. p~. The f econd.s.etion (on Transactions) could relate to the aessages dellve sar ~ w` ' h:Ps ai well as between individuals and may not be as p.rtinent to adYetttsing phase of tNer project as later on, except for the idea of congruence discu in the Joaped of Advertising Research article you've already seen. Diane S. Burrows Marketing OrVelopaent Depart.ent DSb:df Attechment cc; J. Nhaley ~ CX-77 PLAIIV'I'IFF'$ E}CHIBIT RJM04B50B 84M01932 ~
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JD IS AN EXAMPLE OF A VIABLE POSITIONING, EXECUTED IN A `NON'STANDARD` BUT AUTHENTIC AND UNPRETENTIOUS WAY, WHICH REACHES YA CONSUMERS NOT ONLY THROUGH THEIR BOOKS, BUT BY CONVERTING YA'S INTO WALKING BILLBOARDS. THEY STARTED WITH A GOOD IDEA AND STUCK ~ ~ TO IT. ~ ~ BUDWEISER, IN CONTRAST, IS A STORY OF HAVING TO RE-THINK THE YA a MARKET WHEN THE GOING GOT ROUGH. RM0003776
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2. IFVERAGE IN DEMOGRAPHIC SHIFTS A. YA o N SMOKERS SLOWLY GAINED IMPORTANCE OVER THE LAST DECADE, BUT HAVE HELD E4UAL WITH YAS MEN FOR NEARLY THREE YEARS. I IMPORTANCE M(,THIN )R'74 ~(1 TRACKFR 19j~ 1gjrQ 19$Q LQ$1 1= Im 19.$4:1 MALE 54 52 52 51 50 50 50 FEMALE 46 48 48 49 50 50 50 IT IS NOT CLEAR WHETHER TA FEMALE SMOKERS WILL CONTINUE W•TO BE A GROWTH SECTOR, BUT 17 IS UNLIKELY THAT THEY WILL ~AECOME LESS IMPORTANT THAN MALES• ~ 05r-`IHIS DOES NOT, HOWEVER, NECESSARILY IMPLY A DEMAND FOR ` iJFEMALE' BRANDS. F-r~:~~IISTORICAL ANALYSIS SHOWS THE MOST SUCCESSFUL FIRST USUAL 1~- YANKELOVICN DATA FROM 1915'80. COVERING 18 TYPES OF PRODUCTS SHOWED TNAT THERE WAS LESS INTEREST IN MALE/ FEMALE SRANDS OF BEER, CARS, AND CIGARETTES ('THE CONSTANTS IN LIFE') THAN IN ANY OTHER OF THE PRODUCT TYPES• 'BELIEVE THERE SHOULD BE DIFFERENT PRODUCTS FOR MEN AND WOMEN' ~ BEER 9 CIGARETTES 10 CARS 11 18 PRoDuct AVG. 38 • BRANDS HAVE SEEN DUAL'SEX• IT DOES IMPLY THAT FEMALES AND THEIR KEY GIVEN FOUAL ATTENTION IN YA MARKETING• MANTS MUST 9 r BE ...~. Go V7
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3• THEY DIDN'T REPOSITION THE BRAND, THEY RE'EXECUTED IT FOR THE YOUNGER ADULT MARKET. THEY LEFT THE COPY AND CHANGED THE MESSAGE, • BUD PRODUCED SPECIAL TV SPOTS FOR YA'TARGETED SHOWSo STARTING ON SATURDAY NIGHT LIVE WITH "TASTE BUD' -- AN IMPROMPTU'LOOKING AD WITH PEOPLE DRESSED AS TASTE BUDS IN A GIANT MOUTH, TOSSING BACK PIZZA INGREDIENTS WHICH WERE WASHED DOWN BY THROWING THE PRODUCT IN THEIR FACES• IT LOOKED LIKE PART OF THE PROGRAM• TODAY "FOR ALL YOU DO" IN THE GENERAL MARKET IS TREATED AS I A STRAIGHT, EVEN INSPIRATION LINE- BUT FOR YA "ALL YOU I Do' CAN MEAN ANYTHING• 0 ~ 4 0 0 ON RADIO, THE BUD COMMERCIAL IS NOT A JINGLE BUT A ROCK ~ SONG '" NOT A YEAR OLD, POPULAR ROCK SONG, BUT ONE FROM 0. ~ THE LATEST HEAVY METAL ALBUM -- ON THE RIGHT STATIONS. .~ RM0003782
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, DL MEDIp s JD IS A TOP SPENDER AMONG BOURBONS, BUT IS ABOUT MATCHED BY 2`3 OTHER BRANDS• ITS "SHARE OF VOICE" ROUGHLY EQUALS ITS SHARE OF SALES• AD EXPENDITURES (MAGAZINE/NEWSIOOH) DOLLARS (MM) ~1 9 S• 4• S•1 i5 0 SHARE OF BOURBON SPENDING 10% 11% 14% 16% 17% SALES 11 13 16 16 16 ~ ~ JD EMPHASIZES MAGAZINES, BUT SPENDS MORE ODH DOLLARS THAN OTHER BRAND• UNLIKE ITS COMPETITORS, IT HAS NEWSPAPERS UNTIL VERY RECENTLY• NOT TOUCHED ANY ~ ~~~ $eFhDlU PROFILE ~ 1 1 y »' ." T J• DANIEL'S MAG• 1~ 74X 79 !yk 81z ~ L S 1 2 ~ OOH 28 26 21 21 19 ? ' ALL BOURBON MAG• NEwS• 61 13 61 13 59 14 60 11 65 F va 11 OOH 24 z L F 's JD DOES CUSTOM SELECT ITS IMAGE• ITS BOOKS TO REFLECT BOTH ITS TARGET AND= 9 V e 4 L " YOUNGER ADULT ' JD PUTS MORE "PAGESa IN ROLLING STONE THAN ANY OTHER BOOK (1982). - THE LIKES OF GAMES, DISCOVER, AND MOTHER EARTH NEWS, WHICH OTHER BOURBONS RARELY TOUCH• -- 'PREMIUM' - DOUBLE OTHER BOURBONS' EXPOSURE IN BIG BUSINESS (E•G- FORTUNE) AND EDUCATED UPSCALE (E•G•, HARPERS, AN )• - OW EMPHASIS ON "TRADITIONAL" BOURBON VEHICLES LIKE SPORTS ILLUSTRATED OR SOUTHERN LIVING• ' No BLACK BOOKS• RM0003774
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BY 1983, BUD HAD ACCOMPLISHED 3 KEY CHANGES: 1~ DIFFERENTIAIION OF BUD'S SUPERIORITY AS A BEER WITH FULL- BODIED TASTE (NOTE THIS IS NOT OPPOSITE TO 'LIGHT")- 2• PRODUCT QUALITY PERCEPTIONS WHICH MEAN 'GOOD VALUE` t REGARDLESS OF PRICE- • THE SIDE BENEFIT OF PEER PRESSURE- YA PERCEPTIONS $.Ojl MA MASCULINE REGULAR PERSON SELF CONFIDENT PRESTIGE MODERN/YOUTHFUL . 1..GLiL_LLLSSURE POPULAR PRODUCT SUPERIOR TASTE SMOOTH TASTE FULL-BODIED TASTE LIGHT TASTE HIGH QUALITY 62 66 58 NA 54 44 43 48 50 33 56 VALUE GooD VALUE 37 FREQUENTLY ON SALE 36 YA REG. BRAND SHARE 15 1g$0 1983 , HIGH I IF Bll11 HIGH 1 IFF <- - 57 71 <-- 52 63 65 60 55 54 49 NA 61 55 -> 63 61 58 -> 66 63 <--52 ---> 65 58 <- - 50 -> 69 50 -> 65 ---> 65 64 <- 49 -> 59 33 -> 57 -> 67 60<--52 43 39 <- - 30 31 35 30 -> 22 126 <- 9 ~ ~ c + 9 - 5= ~ _1 _3a - 4 - 6 - NA NA ~ +7 -5:'. ~ v E_ c,. +19 +15 + 2 t14 N +4 +11 =16 RM0003784
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WHAT DID BUD DO? 1• THEY APPEAR TO HAVE UPPED THEIR OVERALL ADVERTISING- BUD ALMOST DOUBLED ITS PSHARE OF VO1CE' IN THE INDUSTRY (ESSENTIALLY MATCHING MILLER FOR THE FIRST TIME 1N 1982)f BUDWEISER - AD SPENDING (MAG/NEws/OOH/TV/RADIO) SMM i BF.E~1lSI~ & BRAND FAMILY IM IM IM -M .L.M z BUDWEISER 36.5 49.0 67.7 104.7 9.9 ->11.7 ->14.6 - MILLER 59.0 76.0 84.4 109.0 16.0 18-1 18.2 SOURCE: IMPACT DATABOOK BUT YOUNGER ADULT AD wA ARENESS PER SE WAS N0T THEIR PROBLEM Vl• MILLER AND NOT THE SOLUTION TO AD AWARENESS 18-24 THEIR PROBLEM- ~ w 0 REG. BRAND USAGE 18-24 ~ o ~ _ m RM0003780
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JACK DANIEL'S Iftw dA" 1""N SAUS ;, Source: Maxvell Data (1983 Estimated) ! AD AGE SAYS JACK DANIEL'S IS 'UNDOUBTEDLY ONE OF THE CLEAREST EXAMPLES OF SUCCESSFUL MARKETING IN A DECLINING CATEGORY•" JV5 SALES GAINS THROUGHOUT THE 1970'5 AVERAGED 15% GROWTH YEAR, MORE THAN TRIPLING ITS VOLUME OVER THE DECADE• JD ROSE FROM 09 AMONG BOURBONS IN 1974 TO #2 BY 1979 AND HAS SINCE RUN NECK AND NECK FOR #1 WITH JIM BEAM, THE LONG TIME MARKET LEADER• !,1D MANAGEMENT SAYS THE BRAND WAS AFFECTED IN 1983 BY PRICE SENSITIVITY "WITHIN CERTAIN SEGMENTS WHICH HAD BEEN AN EXPANDING PART OF THE BRAND'S FRANCHISE-" ftICUOR INDUSTRY MARKETING, 1984, P• 46) WE SUSPECT THAT THOSE "EXPANDING SEGMENTS" WERE YOUNGER ADULTS• RM0003767
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•"!N 1976, A-B REALIZED THAT TO GET THE 18-24 MARKET, THEY WOULD HAVE TO DEVELOP PLANS SPECIFICALLY FOR THIS SEGMENT•" IN 1977: ' A NATIONAL "TEST` COORDINATOR FOR COLLEWYOUNG ADULT FIELD-MARKETING WAS HIRED WITH A BUDGET OF S1MM- ' THE DECISION WAS MADE TO CREATE SEPARATE YA VERSIONS OF BUD'S TV, RADIO, AND PRINT CAMPAIGN• EVERY YEAR SINCE 1977, A-B HAS INCREASED ITS YA COMMITMENT, WHICH REACHED 18 STAFF AND f10MM BY 1984. RMooo3>>8
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ON THE BOTTOH LINE, YA PERCEPTIONS OF BUD f21.B LYi9HGE• IN 1980, MILLER HAD THE KEY PERCEPTIONS ON ITS SIDE• • AU PRODUCT PERCEPTIONS • "YOUTHFUL" IMAGE • PEER PRESSURE 4P~nNe ~g80 --~ u1H1L1J1L MA MASCULINE 62 <- - 57 e REGULAR PERSON 66 63 I SELF CONFIDENT 58 55 PRESTIGE NA NA 2 O M /Y 54 > 3 C L ODERN OUTHFUL 6 9 R RESSURE F 9 e POPULAR 44 > 66 9L PRODUCT L O J ~ SUPERIOR TASTE _ 43 > 65 4 ~ SMOOTH TASTE 48 > 69 - BODIED TASTE FULL 50 > 65 LIGHT TASTE 33 > _ 59 U HIGH QUALITY 56 > 67 N N ALUE co D ~ ~ 01 GOOD VALUE 37 43 FREQUENTLY ON SALE 36 31 AR YA REG. BRAND SH E 15 > 22 RM0003783
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2. IFVFRAGE 1N DEMOGRAPHIC SHIFTS (CONT'D) SMOKERS 1980 19-24 - (79-91) HS OR LESS 701 PAST HS 30 IN COLLEGE 14 1981 1982 1983 (90-92) (91-93) ~ 72% 731 73% 28 27 27 13 13 12 WHICH IMPLIES THAT INCIDENCE It NEARLY TWICE AS NIiN AMONG THE NON-COLLEGE AND ALSO A GROWING tAP• SMOKING DEVELOPMENT (YANKELOVtCH) 11 ON NFO, IT APPEARS 18-20 AND HAS SEEN DECADE- Im 18-20 TouL HS COLLECE B. HS Vi. COLLEGE (CONT'D) • SEVERAL SOURCES SUGGEST THAT THIS CAP HAS lEEN WIDENING iTEADiLY• • YANKELOVICN SHOWS THAT NON-COLLEGE YA LMOKER IMPORTANCE HAS IEEN GROWING lY A30UT A POINT A YEAR•••. 18-24 ioTAl HS OR LESS PAST HS IN COLLEGE THAT THE GAP It SIMILAR AT AGES HOLDING OR SLONLY EVOLVING FOR A 1Q7~ 1~,g~ 100 100 131 145 63 57 I
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.)D*5 CAMPAIGN'%£NERATE'~0 SO4kMf°OF THE HIGHEST AWARENESS NUMBERS IN THE LIQUOR INDUSTRY (AA 7/26/84)• FOR EXAMPLE, IN A FIRST-HALF 1984 STUDY, JD RECEIVED MORE MENTIONS THAN ANY OTHER HRAND MHEN CONSUMERS WERE ASKED TO NAME THE FIRST LIQUOR ADVERTISING THAT CAME TO MIND -- NOT JUST BOURBON (IMPACT 9/1/84, P• 9)- /1 LOAD Ot: t IlUtD MAPLE is a welcunx stKht to our rickyard manager hecause it takes a lot to proFxr{y smooth out Jack Daniel's. NciRhbors with a use for extn money can count on our buying their hard maple. You see, it rakcs a bunch of wtnxl to make enough charcoal to 611 )ust one of the charcoal mellowing vats we seep our whiskey through. But the sippin' smooth• ne%s it gives Jack l7aniel'. 'c wrl) worth all we t1o tttr rceepa goud supply. Y..rt.vr ~.M • 10 L.r • O.NW ." M.A* ti bA 0109 Pf/47 1~ r.i.. r~ ..wr l. t,.~t vw Xo r..n.n unr fyr.A,n~n.n.1....rN"•.rrpM.b/rM1/n•rwrlSMr..I'.n..wn~ Wt THIS DOES NOT SEEM TO TOTALLY RESULT FROM SPENDING- ral Trade Comm'ssiun pursuant to subpwna daltd ./une 6, 1997. tSno ZaEos 985V 68iZ5
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JD HAS A 'HYSTIQUE`-• • THOUGH NEVER A FORMAL PART OF JD'S MARKETiNG EFFORT, THE BRAND HAS BENEFITTED FROM ITS ASSOCIATION WITH CELEBRITIES SUCH AS HUMPHREY BOGART, SAM RAYBURN, AND EVERETTE DIRKSEN, WHO WERE SUPPOSED TO HAV: BEEN DEVOTEES OF THE BRAND- (AA 8/4/80) MORE RECENTLY: 'MY TWO FAVORITE TENNESSEANS -- JACK AND CHARLEY DANIELS-' OF TI 1L Z,531 CAVES in Tennessee, this one in Moore County is particularly prizcd. It's fcd, you see, by an underground, iron- free spring flowing at 56° year round. Mr. Jack Daniel, a native of these patts, laid claim to the cave in 1866. And from that year forward, its water has been used to make Jack Daniel's Whiskey. Of course, there Jj CHARCOAL ~r'y>L MELLOW/FD h d d f are un re caves just as s o lovely. But after a sip of I Jack Daniel's, you'll know why this one is valued ~ sto highly. a DROP 0 BY DROP • BECAUSE OF PRODUCTION CAPACITY. JD HAS BEE PUT ON ALLOCATION AT TIMES, LENDING IT A a HARD TO GET0 IMAGE- (AA H/II/HO) • BUT JD HELPS THE MYSTiQUE- ITS DISTILLERY IS ADVERTISED TO BE: - NESTLED IN THE FOOTHILLS OF THE CUMBERLAND MOUNTAINS AT LYNCHBURG, TN (PoP- 361)- - IN A DRY COUNTY (THEREFORE 'ILLICIT')- ON THE U•S- NATIONAL REGISTER I'nduccd tu Federul 1'rade Cumrni~~iun pursuaut tu,tJbiP8 I C ta„rrisre ooun.n - 70 nwt - Pnw„y uu lanrt er act, tr"a O~ttttr.t datCd .luex 6, 1997. trwrol4.hw-tka.t.trwM.qtrq ]6tt4.w~r.e71757 A.r.e n rnw N,rro...r Ae(. f n. o/ /~n,w.~ I'r.r.f ftr/.n [/...reJ Sl,rwf Ca.wnr-w,r 0 S Tf 0 ZQ e 0 S 5855 681es PLACES- OF
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IT PAID OFF WITH YOUNGER ADULTS AND IT PAID OFF IN THE TOTAL MARKET• 1'T CAN BE DONE- BuDwEISER - MILLER MaML V nRT KrOUD{ SKi.l Jt1 DID IT• BUD DID IT " LEARNED TO DO IT• WE CAN DO IT, T00• HOM CAN WE DO IT? RM0003785 s 0 w 0 N C L C
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= '4 rn.s Craige .:~R. •A.,-DaSisfl y R. Ed~ins~' 3: kY~ t4S `li p ;f~.reexan f'~ r 1 .. ~ .~r . :, t?. B: c Iu1k5-'.;-1 +li K 1y...r. ^:• :.Il.. . n r.o-. ., } . N1rP.~~.tan J. R. Nribar .t,~1S 'rpk"E~` GalYa4n4 z' `'.'.. .. . •. . . . .,.~. : .. }~4•~' .... . PLAINTIFFS EXHIBIT jo ' W;TId'.rpoten ~ D. H. Lavreace , <V.. :i .. ..Lr, J. M. Levis ...^~HY/M....< . . ., . ., . . . .. . ., ~..yl.,<, .. . .. .. . . ... . .. ~ ..r..qr;~! .• ••11•HiPe`~r•A'.•I~w4r;•NrrnYf^.µS~t++VlllqTi~h r . ..0.,...... ..y..v... .• .Yr aw.411i t!t N r ~ ~
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1• 1N TUNE - DIFFEREI{,T1g110N • To BE IDENTIFIABLE AS YA TO YA'S, A BRAND MUST EMBODY ELEMENTS ("WANTSN) WHICH CLEARLY DIFFERENTIATE THE TARGET GROUP FROM ALL OTHER GROUPS- THUS, TO TARGET YA SMOKERS 18-20 (FIRST USUAL BRAND SMOKERS), THE BRAND MUST TARGET WANTS WHICH ENDURINGLY DIFFERENTIATE YA SMOKERS 18'Z0 FROM ALL OTHER GROUPS: SMOKERS 21+ NONSMOKERS 2)+ ' ~ SMOKERS 21'24 ~ ~ NONSMOKERS 21-2q ` NONSMOKERS 18-20 ; L 0 • DIFFERENTIATION DOES NOT MEAN: G ~ f - - WANTS OF SMOKERS 18-20 WHICH ARE DETESTED BY OTHER GROUPS• THEY DON'T REALLY EXIST AND WOULD NOT ENGENDE%- -E LOYALTY ANYWAY. 2 a - TRANSIENT, FRIVOLOUS WANTS- ~ L ' NECESSARILY "EXTREME" PROPOSITIONS• ~ THAT UNDIFFERENTIATING ELEMENTS -- UNIVERSAL WANTS -- ~ J CAN'T BE INCORPORATED T00• ~ ~ • DIFFERENTIATION DOES MEAN: SOMETHING MORE SPECIFIC THAN JUST "APPEAL AMONG YOUNGER ADULT SMOKERS"- BETTER DISCRIMINATION IN SELECTING KEY WANTS AMONG MANY WANTS, ON A MEASURABLE BASIS- RM0003787
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2. USING GROWTH SECTORS v 'OPTIMUM lFVFRAGEABILITY' OBVIOUSLY, WE CAN LEVERAGE (OR TRY TO LEVERAGE) ALMOST ANYTHING• THE KEY POINT, HOWEVER, IS HOW MUCH EFFORT IS REQUIRED FOR HOW MUCH PAYOFF• S ~. ~ ~ n n 0 L 0 a INPUT > OUTPUT 1 ~ G L 0 O E_ L d THE IDEA OF OPTIMUM LEVERAGEABILITY IS TO MAXIMIZE THE CHANCE ~ i OF A PAYOFF AND THE SIZE OF THE PAYOFF• ~ ~ : 0 ~ ~ a RM0003788
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2• THEY HEAVIED UP FIELD MARKETING AND PROMOTIONS• • THEIR LABEL (A YA STRENGTH) WENT ON PILLOWS, T SHIRTS, EVEN JEANS• ATTRACTIVE PKG. PERCEPTIONS 18- 4 l11.LLFL1. L• I7I LLER L I TE <.- • CAMPUS EVENTS, BAR NIGHTS, SO FTBALL TEAMS AND STREET ~ SCENES -- GIVING THEIR COORDI NATOR AUTHORITY TO IMPLEMENT ~ AS HE SAW FIT (WITHIN GUIDELI NES) TO CAPITALIZE ON A FIELD E OPPORTUNITY ALMOST OVERNIGHT• ~ THEY WENT WHERE THE YA WERE, N SMALL AS WELL AS BIG WAYS• C e a ~~ RM000378'I
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Z . .M.~fAmA '• JT IS NOT DESIRABLE TO TARGET WANTS WHICH HAVE ALREADY GROWN TOO R THE BRAND TO `CATCH' THE TREND RATHER THAN F "~ O FAR OR T00 FAST FOLLOW !T• RM0003791
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HOW WE CAN DO IT BASIC PRINCIPLES FROM HISTORY IN THE YA OPPORTUNITY ANALYSIS, WE IDENTIFIED KEY THEMES IN THE ~SUCCESSION OF MAJOR FIRST USUAL BRANDS OF THE PAST- IN ESSENCE, THESE THEMES WERE: 1. OR - INDIRECTLY CHANGE SMOKER WANTS BY CHANGING THE DEMOGRAPHIC MIX AMONG YA SMOKERS. EXAMPLE: As MORE WOMEN SMOKED IN THE 1940'5, "FEMALE" WANTS ;ECAME MORE IMPORTANT AND PALL MALL ROSE ON STYLISH LENGTH , ALTHOUGH IT NEVER CALLED ITSELF A "FEMALE" BRAND• THE SUCCESSFUL BRANDS WERE THOSE THAT "CAUGHT THE RISING TREND" BEING "IN TUNE" OR "OUT OF TUNE" _ A SUCCESSFUL FIRST USUAL BRAND BEGINS TO DECLINE WHEN ANOTHER BRAND BECOMES BETTER "IN TUNE" THAN ITS PREDECES'SOR WITH THE : YAS WANTS OF THE TIMES, IN TERMS OF PRODUCT, POSITIONING, OR ~, EXECUTION• ' c XAMP MARLBORO'S UNSMILING COWBOY WAS BETTER ATTUNED TO T6E REBELLIOUS, FLOWER-CHILD 1960'5 THAN LIGHTHEARTED "ALL ~ AMERICAN" WINSTON. ; ~ e 'e yROWTH SECTORg ~ ~ 2 9 BECOMING MORE (OR LESS) "IN TUNE" HAS BEEN MORE A FUNCTION OFE . CHANGES IN YA WANTS THAN CHANGES IN BRANDS. THESE CHANGES INp WANTS HAVE OFTEN BEEN TRIGGERED OR PROPELLED BY CHANGES IN ~ ~ EXTERNAL FACTORS, WHICH: ~ a ' DIRECTLY AFFECTED SMOKER WANTS (E•G•, THE RUSH TO FILTERS AFTER THE EARLY 1950'5 AND WINSTON) AT THE RIGHT TIME -- EARLY• TO FOLLOW UP ON THIS LEARNING, WE CAN CLARIFY THESE TWO IDEAS AND MAKE THEM MORE CONCRETE AS FOLLOWS: RM0003786
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MAXIMUM RESULTS WILL BE OBTAINED FROM A PROPOSITION (LEVER) WHICH CAP T I ALIIES ON TNE EXJSTING BEGINNINGS OF MOMENTUM/ GROMING ~,. ~Y4 MANTS... ••• UR AT LEAST POTENTIAL MOMENTUM (WANTS WHICH ARE LIKELY TO GROw IN THE FUTURE) RM0003790
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RPRUMOTIONS PROMOTIONAL MERCHANDISE, ESPECIALLY IN JD's MARKETING PROGRAM• CLOTHING, IS A MAJOR ELEMENT PROMO 1TEMS ARE MARKETED THROUGH THE "LYNCH URG MARDWA 8 ~ RE AND GENERAL STORE~, WHICH I$ HEADED BY A CORPORATE VP• 0 Na. m EXEC• VP BRAND MARKETING THE 'LYNCHBURG STORE' RUNS ITS FOR WEARABLE$. / Ar /1 Main St , lenehburR IN 37JS2 RM0003775 JACK UANiEI.'S FIELD Tt:STEIt SHIRTS tNt,t aR lusl lilr mr shills 010 M/llIact Beny Wt0 to wNt 01 fOu/St rrt shirls he.r the aaoen iratuwt ol a Jl[9 Uanrclt lhp Nu ) IKid Ir,lrl on the thril MIOt ul 511 , . IOllun 501pulyt51r/ thty uSh rASI ,nC 4rp IA,"n Sn,pr COIorS NdWal Jn Wuwn klltiMp tt0 UW blatl .An.ftdt Ntlriiny. Slrts XS S M, l XL $15100 dei,.eft0 . 101 flat .HII N/lr 1, /1/1./0tR IqM1 aa.n tr1 Uu v 11n441A Lqrlbt M u+ Mn Mt uplnn iA00 6\\ YW ta b lh en.rt., f/ o.ber uln'o0 •~e iol 9or S..qn IK \\ ~r ~r/l /nroKar 6U 159 /IN , .1 N VP - BRAND ADVERTISING ` ~. VP - 'LYNCHBURG HARDWARE & GENERAL STORE` OWN SEPARATE, NATIONAL CAMPAIGN 'AW ~VGtIr.11I1Y Jm CJ• 23 Maln St., Lrnchburg. TM 37352 JACK DANIEL'S FIELD TESTER CAP This is a comlortable sporlsman's billed cap Black mesh (au cooled) and ad usb able to any size head, with in ot~KUl "Jack Daniel's Field Testet" patch on the liont Guwoetesd lo shade your eyes and stall a lot ol conversalloNs My 5650 prlce Includes posla¢e and handling pa rl/tl DNn /Alf t/ MI /eW<M IYnu 141ne41 eluolIn1RM YIW4a11u~lln W I~rtlr.r/ I W06~\ yVt W b TM otrFl l fy 1 1m,lia,or, tnnt w tmt S.rp 11 n. tooa Wanl 1640" Na e19 tIM \ ~.-J . 9 '_'-- ~ 4 r ~r, Ln 0 C ~. C C ~r
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THESE 3 "PRINCIPLES" DIFFERENTIATION OF THE TARGET OPTIMUM LEVERAGEABILITY MEANINGFUL BRAND DtFFERENCE ~~s~ ~• ARE TOOLS TO GUIDE, NOT MAGIC FORMULAS- 2 k b a .: 9 7 ~ a f .- 'C '~ ~ .d ~ 40 0 PUT THEM TO USE. ~~ ~.. C i L ~ WHAT IS LEVERAGEABLE ~ ~ ~ AMONG YA SMOKERS TODAY? ~ RM0003794
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LEVERAGING WANTS WHICH ARE STABLE (DIFFERENTIATING BUT FLAT) REQUIRES EXTRA ENERGY (RESOURCES) BUT SEEMS POSSIBLE ••• f. . ~ ~:~~.~~.• r wa._, NO OTHER BRAND HAS PREEMPTED THE POSITION• li.-A`1INGFUL DIFFERENCE ` NO MOTION• RM0003793
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OPTIMUM LEVERAGEABILITY CAN BE ACHIEVED ONLY ON AN ELEMENT WHICH DIFFERENTIATES THE TARGET• ~ I~E MUST FIND THE TARGET PRECISELY TO KNOW WHERE TO PLACE THE r L, E V E R. ~,. P, THI S su3 NOT THIS NONSMOKERS 18-20 RM0003789
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PRESENTATION „ ` ~`t 1 Adult Smokers (FUBYAS) presentation The First L'sual Brand Younger has!been`tscheduled:for~?tarketing Sciences on Novetcber',14,`1984, ~' froa 8:30 to•a10:30 a.n:' T}iis ceeting has been c:ovedito• the large ..'~:uiJ ~: confe~enFe~rooullo~thg~lOth'Flo_o, . .~- .r.. . . . . The objective of this presentation is to provide the needed u:der- standing of-younSer ad,ilt s:~o'~_ers in ord_~r to dcveldp''action plu^a which vi!l help ~.1R fcpr,:., its~c.rr~r--~tecc '.r this key age gr::up. See you t``cre! {L'. „ i ~:j{~ ~i~. . 1w~~4Y~.~t:',t`pIR~.l~r~• M/a• ...1. A, M~ Diane S. Burrows NarketingDevelopnent De.partcent DSB:df '• cc: R. C. `:ordice J. wi•.afev ! 1{r . ~ . U1 N . v 01 b,y,..w*..;,e. . . ., , . .. .. ,. . .. , _ , u,.~..,.: RM0004467 SCXibuCdo[L ~sr•. t ~ : ~'41niT a2; 1t S ?: 3u r rovs'a:a-% WOM
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IT IS ALSO UNDF.SIREABLE TO LEVERAGE WANTS WHICH ARE DECLINING- THIS CAN BE NONPRODUCTIVE• a ••• OR EVEN COUNTERPRODUCTIVE, FOR EXAMPLE, A BRAND COULD EARN FUBYAS RESENTMENT BY LEVERAGING AN `IN` TREND WHICH IS ALREADY N OUT` - PRESUMPTUOUS! RM0003792 -
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2. IFVERAGE IN DEMOGRAPHIC SHIFTS (CONT`D) B. HS VS. COLLEGE • THE GREATEST DIFFERENTIATION OF SMOKING AMONG YOUNGER ADULTS APPEARS TO BE THE COLLEGE/NON-COLLEGE SPLIT• RJR DATA IS NOT AVAILABLE, BUT TWO OUTSIDE SOURCES AGREE THAT IN 1983 THRFF-FOURTHS OF SMOKERS 1.H-2U WERE e FDUCATED THROUGH HIGH SCHOOL_OR SS• ~ L ~ r. 1983 19.82-84 ~ E SMOKERS 18'24 MM YANKELOVICH a HS OR LESS PAST HS 78% 73% 22 27 RM0003801
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2- LEVERAGE IN nEMOGRAPHIC SHIFTS (CoNT'D) THESE QUANTIFIABLE RESULTS SUGGEST THAT CURRENTLY, THERE ARE ~° THREE KEY SECTORS WHICH MAY BE LEVERAGEABLE AMONG YOUNGER ADULT SMOKERS OF THE MID'1980'S: 1• YA FEMALES, WHO ARE LIKELY TO EQUAL OR EXCEED MALES IN IMPORTANCE.•• a c S 'WANTS' WHICH ARE KEY TO FEMALES, BUT MAY ALSO BE HELD2 I BY MALES, SHOULD BE MORE LEVERAGEABLE THAN LARGELY MALE MANTS• NOT NECESSARILY 'FEMALE B°ANDS' ? ~ 0 ~ ~ a .E ~ c - L 2. YA BLACK SMOKERS AFFORD POSSIBLE LEVERAGEABILITY OF =~ PRODUCT BASED C00LNESS/MENTHOL/FF BENEFITS AS WELL AS 9 2 IMAGERY ELEMENTS• ~ L ~ 3. THE NON-COLLEGE SMOKER IS THREE-FOURTHS OF THE TOTAL YA i. ~ TARGET, A TREND WHICH APPEARS TO STILL BE EVOLVING• THIS7c SUGGESTS THAT WANTS, EXECUTIONS, CUES AND SYMBOLS WHICH ~ SUIT THE NON-COLLEGE IDENTITY MAY BE MORE LEVERAGEABLE AMONG YAS THAN THE COLLEGE-ORIENTED DPTIONS• N r m ~ LESS QUANTIFIABLE BUT PERHAPS MORE MEANINGFUL IS THE CONTENT ~ OF YOUNGER ADULT SMOKER LIFESTYLES. ATTITUDES, AND VALUES THEIR MINDSET TODAY• co RM0003805
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I• 8 2. BELONGING AND BEING flIFFERENT • THE NATURE OF THESE NEEDS FOR FUBYAS '- BELONGING TO THE EAMIJ„Y (SECURE) REPLACED BY BELONGING TO SELECTED PEER GROUP (NOT AS SECURE) z ~ ~ ~ n BELONGING TO SELECTED PEER GROUP REQUIRES BEING ~ 0 DFFI ERENT FROM: a .¢ a 0 - FAMILY ~ = . i 9 ' OTHER PEER GROUPS ~ ln • FOR FUBYAS, THE 2 ARE INSEPARABLE - OD ID ~ m N U RM0003812
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1. LEVERAGE IN MARKETPLACE TRENDS (CONT'D) • AMONG BLACK YAS, COOLNESS 1S HOLDING 1TS ONN, SINCE KOOL'S MASSIVE LOSSES ARE BEiNG OFFSET BY NEWPORT ••• TRACKER SHARE AGES~]8-24 im 1.JU 198.1 14$2 19U 1984 s 1 SKg2 KooL 34.6 30.8 27.9 21.8 17.2 -17.4 NEWPORT 18.6 22.4 27•7 36.4 38.6 +20.0 SALEM 17.2 19.2 17.3 13.6 15.9 - 1.33 ~ t COOLNESS 71.3 72.2 73.0 72.1 72.4 + 1.f ~ AND MENTHOLS CAPTURE 90% OF THE MARKET, BLACK YAS FROM ALL OTHER SMOKERS• G ~ I.E., DIFFERENTIATE a r~ ~- ~ a C V ~ TRACKER SHARE AuS tg-2a 9 F r 9 ~LAG K 1.46.Q 9..$1 1 19$2 1M 19 $y a . _ COOLNESS 71.3 72.8 73.0 72.1 72.4 +1.1.~ MENTHOL 88.6 89.7 91.5 88.9 93.8 +5.2~ Ln N N ~[1 ~ N RM0003798
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1. 8 2. ELLQNGING AND BEING D1FFERENT (CONT.) • MARKETING REL_EybNCE -- FUBYAS' PEER GROUP IDENTITY WITH IDENTIFIABLE SOCIAL GROUPS PROVIDES • SPECTRUM -- MINDSETS • SPECTRUM -- CUES & SYMBOLS • WILL DISCUSS LATER IN DETAIL RM0003815
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4. EXCITEMENT • `TyF D. ' ,; • 'THE EDGEO flIFFEg_FNTIATES THIS GROUP•.. -- THEY LIKE TO RE SEEN AS RISK TAKERS••• LIKES TO TAKE RISY,S RM000382q
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1. LEVERAGE IN MARKETPLACE TR NDS (CONT'D) B• Ell AMONG WHITE YAS, FFLT HAS BEEN GROWING, BUT MORE SLOWLY IN RECENT YEARS• TRACKER SHARE 18-24 19L4 1~$4 14$1 14.$2 1M 14$1i1 2L. FFLT 37.1 39.3 39.8 41.3 40.6 42.4 +5.3 s ~ THIS FFLT TREND DOES NOT APPEAR TO DERIVE FROM CONSUMER ~ r INTEREST IN 'LOW TAR" PER SE• DESPITE CONTINUING IMPLIEI£ EMPHASIS BY THE FTC, 1/4 OF BOTH TOTAL AND YA SMOKERS ~ HAVE MOVED FROM "AGREE" TO "DISAGREE" ON THIS POINT SINC 4 1980. ; ~ .~ "LOW TAR AND NICOTINE CIGARETTES REPRESENT A MAJOR STEP ~= IN THE DIRECTION OF MAKING SMOKING LESS HARMFUL TO THE ?~ C " ~ 9 HEALTH (YANKELOVICH) D pL L SMOKERS AGREEING Au JH.~ C_jFG- 18-24 66 < 41 -25 4 18+ 77 < 43 -34 ~ AMONG YA SMOKERS, Tr1IS IS CLEARLY CONFIRMED BY PERFORMANCE OF THE MODERATION AND CONCERNED SEGMENTS• TRACKER SHARE 18-24 1414 1M 1M 1M 1M 1984:1 CHG. MODERATION 9.6 9.7 9.4 9.2 8.2 7.4 -2.2 CONCERNED 5.4 4.5 4.0 3.0 2.4 2.2 -3.2 s FFLT IS BECOMING MAINSTREAM, BUT PROBABLY FOR THE POSITIVE ATTRIBUTE OF SMOOTHNESS• RM0003796
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1. BELONGING , )• BELONGING IS ENORMOUSLY IMPORTANT TO FUBYAS :_:• AND THIS NEED DIFFERENTIATES THEM FROM SMOKERS IN OLDER AGE GROUPS BELONG/F1T IN •J.CI •r.01 RM0003810
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1. LEV RAGE IN MARKETPLACE TRENQS A. yjRiLE/FF • IN TERMS OF CIGARETTE CHOICE, VAS ARE BEST DIFFERENTIATED FROM OTHER SMOKERS BY THEIR AFFINITY FOR FULL FLAVOR AND VIRILE SMOKES• F1RST HALF 1984 18_a 18* VIRILE 50.4 37.5 FULL FLAVOR 50•4 43.0 SOURCE: TRACKER • FULL FLAVOR OR `TASTE`, AS A CENTRAL FEATURE FOR A BRaD DOES NOT APPEAR LEVERAGEABLE AMONG WHITE YOUNGER ADUL f SINCE IT IS DECLINING• IT MAY, HOMEVER, STILL HAVE S(94f MOMENTUM AMONG YA BLACK SMOKERS• 9 ~ L 4 18-24 TRACKER SHARE ; 9 ~~~~p~ ~~Q~ ~~p~~ ,~ 1~ v• 19 11- 1~12SL 12 i1 L 1?L • 1..~.4i1 i.JVl y TOTAL 53.9 52.8 50 .9 52.3 50.4 ~ BLACK 68.2 67.5 71 .5 76.9 76.3 +~,1 THIS FITS WITH THE GENERAL PERFORMANCE OF NEWPORT VS• NEMPORT LIGHTS AND MARLBORO VS• MARLBORQ LIGHTS• • THE VIRILE CONCEPT STILL APPEARS LEVERAGEABLE, EXCEPT THAT ALL OF THE SEGMENTI S GROWTH COMES FROM MARLBORO• RM0003795
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1• LfURAGE IN MARKETPLACE TRENDS (CoNT'D) IN SUMMARY, 0 THERE DOES NOT APPEAR TO BE POSITIVE LEVERAGE AMONG WHITE YA SMOKERS ON EITHER FF ("TASTE") OR FFLT ("LOW TAR")• z Y ~ < • COOLNESS/MENTHOL/FF PROPOSITIONS STILL MAY RETAIN SOME"c POSITIVE LEVERAGEABILITY AMONG BJ.AS<!i YA SMOKERS! ~ e_ t c 0 . 7 p t J r S L RM0003799
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:• B 2. AFLONGING AND BEING DIFFERENT (CONT•) FUBYAS VS. BELONGING: PEER GROUP IDENTITY SWIT .H RC BELONGING: A FEW CLOSE FRIENDS '- A FEW CLOSE FRIE~DS ~ " OPPOSITE SEX ~ c " THE BROADER SOC4T,-y a ~ L C 9ElNG DIFFERENT; "" BEING DIFFERENT VIA THE GROUP WHO ARE WE RM0003814 BEING DIFFERENT~ BEING DIFFERENT AS AN INDIVIDUAL DEVELOPING SELF' IDENTITY (TRANSITION) WHO AM I
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B. KEY NEps 3. UPWARD STRlY1NG DIFFERENTIATES FUBYAS BE SEEN AS SUCCESSFUL ~ RM0003816
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Ru a1 n fu THROUGHOUT THIS NEXT SECTION, WE WILL BE TALKING ABOUT: 18-20 YEAR OLD SMOKERS - FUBYAS 21-24 YEAR OLD SMOKERS a SWITCHERS A NOT ONLY HAVE 21 YEAR OLDS ALREADY CHOSEN THEIR FUB, BUT THEI~ SWITCHING BEHAVIOR IS MARKEDLY DIFFERENT• e ' e m NFO NET SWITCHING; 1976-83 t ~ G ~p ~~ 1S2 L SL ~~ `1 2 y ~ . TOTAL RJR -5•98 +1•39 ~ ~ ~ . 7 TOTAL P• NiORRIS +7•g2 6 1• y p ~ - F 'o t L GAP -13•80 +3•06 ~ ~ ~ ~ r RM0003808
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BE1NG DIFFERENT • BUT THEY ALSO • • R l • BELONG/FlT IN AtiIl ENJOY BEING DIFFERENT BE DIFFERENT A SOURCE OF NON-FUB MINDS -- UNTIL WE LOOK CONFUSION TO THROUGH THEIR EYES RATHER THAN RM0003811 OURS •
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1. t V RAGE IN MARK TPLA. T FNOS (CONT'D) C• COOLNESS/MENTHOL IN TOTAL, COOLNESS/MENTHOL HAS DECLINED SEVERELY AS A FIRST'USUAL BRAND CHOICE SINCE 1977• COOLNESS _ NFO SHARE AGES 18-20 mmmmmm12.$1 mnu S;~ 32.9 33.5 33.1 30.9 29.7 26.0 24.1 20.7 18.7 • THIS DECLINE, HOWEVER, HAS OCCURRED ONLY AMONG WHITE YAS. ~ TRACKER SHARE AGES 18-24~ COOLNESS 14~4 14$1 14$2 1~$~ 19~4:1 WHITE 23.1 21.4 20.1 18.1 18.2 BLACK 71.3 72.8 73.0 72.1 72.4 C O AMONG WHITE YAS, THE MOVEMENT HAS NOT ONLY BEEN AWAY FROM == J = COOLNESS, BUT MENTHOLS IN GENERAL• 9 p_ L 9 TRACKER SHARE AGES 18-24 y XKIF 19$Q 1U1 1 982 1M 19$ 9;1 . . COOLNESS 23.1 21.4 20.1 18.1 18.2 -4.97Z~ 4 MENTHOL 31.5 31.5 30.6 27.7 27.7 -3.8E AMONG WHITE YAS, THE COOLNESS/MENTHOL LOSSES ARE GOING TO MARLBORO• IN THE 1983 SDS, 94% OF ALL 18-20 NON-MENTHOL SMOKERS ARE NOW SMOKING MARLBORO, USED TO SMOKE MARLBORO, OR LIST MARLBORO AMONG THEIR 3 FAVORITE BRANDS• THE LONG-TERM R N ON NFO ARE MIRROR IMAGES (DISREGARD LEVEL)• NFO SHARE AGES 18-20 1la 19a m 191_$ m m 19$1 19$2 19$1 S~1.fi_ COOLNESS 32.9 33.5 33.1 30.9 29.7 26.0 24.1 20.7 18.7 -14-2 ~ MARLBORO 34.3 33.6 32.6 34.8 36.4 38.4 43.2 46.7 w 50.9 +16-6 ° C c fiM0003797
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DIFFERENCES WITHIN YAS ON KEY NEEDS • ITS MEANING AND NATURE TO FUBYAS • THE DIFFERENCE FUBYAS vs. SWITCHERS • RELEVANCE TO MARKETING • FIVE KEY NEEDS -- BELONGING BEING DIFFERENT UPWARD STRIVING EXCITEMENT SEX 1 ALL HIGHLY INTERRELATEO Rit10003809
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2. LEVERAGE IN DEMOGRAPHIC SHIFTS (CONT'D) B• HS yS• COLLEGE (CONT'D) • IN TERMS OF IMAGERY, YANKELOVICH DATA INDICATE THAT COLLEGE IS NOT A KEY ASPIRATION OF THE HS'EDUCATED SMOKER ANY MORE THAN THEL K NON-COLLEGE ROUTE APPEALS TO SMOKERS WHO GO TO J. CDLLEGE- 0 ~ s ~ t F c 22'16A. "THE WAY FOR YOUNG PEOPLE TO GET AHEAD IN L a LIFE IS T0.•••" L SMOKERS @ 9Y L GD To COLLEGE LEARN A SKILL - 18-20 TOTAL 44% 55% 18-24 TOTAL 42 57 HS OR LESSO 31 69 PAST HS 68 31 IN COLLEGE 65 31 *MAY INCLUDE HS STUDENTS WHO PLAN TO ATTEND COLLEGE- SOURCE: YANKELOVICH MONITOR, 1980-83 COMBINED- o ~ 0 rr 0 0 ~ RM0003803
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DIFFERENTIATING YAS TODAY FROM YESTERDAY •T...... [-.. .....- .-.,N - T... Yf1. --- P-..--.- ._..M • WE ARE MUCH MORE OPEN ABOUT EVERYTHING • WE HAVE SO MUCH FREEDOM WE DON'T NEED TO REBEL GROW UP FASTER -- MORE OPTIONS (`PRIVILEGES") ~ 'm LIBERAL ATTITUDES ABOU" SEX r DON'T GET MARRIED, HAVE BABIES AS YOUNG ~ 0 " " ( RESPONSIBILITIES ) 0 INTO DRUGS AND DRINK TOO MUCH a • BUT WITH FREEDOM, COMES STRESS '- RESPONSIBLE FOR CHOICES '- MAKE MISTAKES EARLIER L 9 t L ~ i p_ • OUR GENERATION IS GOING TO HUSTLE FOR THE MATERIAL THINGS= ; -- EXPENSIVE TOYS -- NOT SAVE THE WORLD 0 C • BYWORD OF THE GENERATION 6 GOALS• WE DON'T RESPECT PEERS W/0 GOALS -- BUT ALMOST ANY GOALS WILL DO ` ' Ln N w • THE OLDER GENERATION IS IN A RUT- 00 Io ~ m w W RM0003806
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2. LEVERAGE IN DEMOGRAPHIC SHfFTS (CONT'D) THESE QUANTIFIABLE RESULTS SUGGEST THAT CURRENTLY, THERE ARE THREE KEY SECTORS WHICH MAY BE LEVERAGEABLE AMONG YOUNGER ADULT SMOKERS OF THE M1D'I9H0'S1 1• YA FEMALE SMOKERS, WHO ARE LIKELY TO EQUAL OR EXCEED MALES IN IMPORTANCE••• a B"YIANTS" WHICH ARE KEY TO FEMALE SMOKERS, BUT MAY ALSO ~ 0 BE HELD BY MALES, SHOULD BE MORE LEVERAGEABLE THAN _~ LARGELY MALE WANTS• _; 0 z ~ c B NOT NECESSARILY "FEMALE BRANDS" : ~ i - ~ e a W '- ~ ,. - 2. YA BLACK SMOKERS AFFORD POSSIBLE LEVERAGEABILITY OF 9'E PRODUCT BASED COOLNESS/MENTHOL/FF BENEFITS AS WELL AS =~ z IMAGERY ELEMENTS• i 4 i ~ ~ 3. THE NON-COLLEGE SMOKER IS THREE-FOURTHS OF THE TOTAL YA 4 C SMOKER TARGET, A TREND WHICH APPEARS TO STILL BE - EVOLVING. THIS SUGGESTS THAT WANTS, EXECUTIONS, CUES AND SYMBOLS WHICH SUIT THE NON-COLLEGE IDENTITY. MAY BE MORE LEVERAGEABLE AMONG YAS THAN THE COLLEGE-ORIENTED OPTIONS• LESS QUANTIFIABLE BUT PERHAPS MORE MEANINGFUL IS THE CONTENT OF YOUNGER ADULT SMOKER LIFESTYLES, ATTITUDES, AND VALUES "" THEIR MINDSET TODAY. RM0003804
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I• a 2. BELONGING AND BEING DIFFERENT • SOURCES FOR SATISFYING THESE NEEDS: A FEW CLOSE FRIENDS > BELONGING I INTIMATE RELATIONSHIP, CHERISHED PEER GROUP IDENTITY > BELONGING • DIFFERENT VIA THE GROUP, NOT INDIVIDUALLY ;THfY ENJOY BEIFIr DIFFEPEPI h RM0003813 + g ~ b a ~ n a a L ~ BEING a DIFFER(V o~E BUT VAIT TO SEE WHAT OTHERS THINK ~ i.
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2. LEVERAGE IN DEMOGRAPHIC SHIFTS A• YA WDM N SMOKERS SLOWLY GAINED IMPORTANCE OVER THE LAST DECADE, BUT HAVE HELD EQUAL WITH YA$ MEN FOR NEARLY THREE YEARS- S IMPORTANCE WITHIN ig-24 ~y TRACKER 19Z~ 1~14 14~5! 11$.1 = M 19$4o1 MALE 54 52 52 51 50 50 50 FEMALE 46 48 48 49 50 50 50 IT IS NOT CLEAR WHETHER YA FEMALE SMOKERS WILL CONTINUE 2 TO BE A GROWTH SECTOR, BUT IT IS UNLIKELY THAT THEY WILLI .0 BECOME LESS IMPORTANT THAN MALES- l. e m THIS DOES NOT, HOWEVER, NECESSARILY IMPLY A DEMAND FOR C 0 `FEMALE" BRANDS- ~ ~ E a HISTORICAL ANALYSIS SHOWS THE MOST SUCCESSFUL FIRST USUAI; ~ BRANDS HAVE BEEN DUAL-SEX• " -' v ~ i'• YANKELOVICH DATA FROM 1975-80, COVERING 18 TYPES OF L PRODUCTS SHOWED THAT THERE WAS LESS INTEREST IN MALE/i FEMALE BRANDS OF BEER, CARS, AND CIGARETTES ('THE p CONSTANTS IN LIFE') THAN IN ANY OTHER OF THE PRODUCT 4 TYPES- ~ `BELIEVE THERE SHOULD BE DIFFERENT PRODUCTS FOR MEN AND WOMEN' ~ BEER 9 CIGARETTES 10 CARS 11 18 PRODUCT AVG. 38 IT DOES IMPLY THAT FEMALES AND THEIR KEY WANTS MUST BE GIVEN EOUAL ATTENTION IN YAS MARKETING- RM0003800
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2. LEYERAGE 1N DEMOGRAPHIC SHIFTS (CoNT'D) B. HS VS. COLLEGE (CONT'D) • SEVERAL SOURCES SUGGEST THAT THIS GAP HAS BEEN WIDENING STEADILY• • YANKELOVICH SHOWS THAT NON-COLLEGE YA SMOKER IMPORTANCE HAS BEEN GROWING BY ABOUT A POINT A YEAR.... SMOKERS 1980 1981 1982 1983 _1$_29_ (79-81) (80-82) (.B 1-83) . (HZ84) ~ ~ HS OR LESS 702 721 73% 73% .3 PAST HS 30 28 27 27 ~ -3 ~ L IN COLLEGE 14 13 13 12 -2 ~ WHICH IMPLIES THAT INCIDENCE IS NEARLY TWICE AS HIGH ~ AMONG THE NON'COLLEGE AND ALSO A GROWING GAP• ~ - O ~ ~ SMOKING UEYELOPMEHT (YANKELOVICH) L L ~ 1983 i S 82_$~) ~ ~ 18-24 TOTAL. 100 ~ ~ HS OR LESS 1257771.9;1 PAST HS 67 IN COLLEGE 58 - ON NFO, IT APPEARS THAT THE GAP IS SIMILAR AT AGES 18-20 AND HAS BEEN HOLDING OR SLOWLY E4OLVING FOR A DECADE• INCIDENCE 1NpEX 1v_~ 1.m 18-20 TOTAL 100 100 HS 131 145 COLLEGE 63 57 RM0003802
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4. Lyu7Lff KI i THE GRAPH SAYS YOUNGER ADULT SMOKERS ARE RIGHT WHEN THEY DESCRIRE THE REST OF US AS BEING IN A RUT. EXCITING THINGS RM0003821
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3. UPWARD STRIVING (CONT-) a THE GOOD OLD DAYS (NEw RoMANTtcISM) THE DEGREE TO WHICH FUBYAS FIND ROMANCE IN THE fANTASY OF `THE GOOD OLD DAYSr HIGHLY DIFFERENTIATES THEM FROM OLDER SMOKERS• * 18-2f1 SMOKER NET AGREE V$• 18 x "GOOD OLD DAYS' SOURCE: YANKEL0VICH RM0003820
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4. EXCITEMENT  'TH EDG' " AGGRESSIVE... RM0003826
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3. 1lPWARD STRIVING • WHAT DO FUBYAS MEAN WHEN THEY TALK ABOUT THIS NEED FUBYAS VS. t . SUCCESS RELATES TO TODAY B REAuiY-BASED AND FANTASY'BASED SUCSESS SWITCHERS SUCCESS RELATES TO TOMORROW 6 eSPIRATIONAL SUCCESS "MAKING 1T" ' JOB, CAREER SUCCt-SS ACHIEVEABLE GOOD, GREAT INCOFEE DEVELOPING POTENIIAL - A DATE MEETING GOALS : ~ - A GOOD PARTY - A "COUP" IN FRONT THE GANG OF NICE HOME MANY "THINGS" ~i - e o C. - FAyJA jY-BASED"T0D A Y/ UNACHIEVABLE : - THE MOST POPULAR ~ - THE MOST ADMIRED ~ ~ - c 'RIDING THE BIG WAVE" RM0003817
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4• EXLITEMENT • `TH DGF" < " As RUGGED•.. RUGGED RM0003828
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3. UPWARD STRIVING • bARKETING RELVAN " UPWARD STRIVING MOTIVES AND THEREFORE CUES AND SYMBOLS RELATED TO TOMORROW ARE NOT RELEVANT To FUBYAS " YANKELOVICH DATA SUGGESTS TWO FORMS OF FANTASY MAY BE BOTH DIFFERENTIATING AND LEVERAGABLE: r5Z • ESCAPE INTO IMAGINATION ~ , • THE GOOD OLD DAYS i c RM0003818
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'FUBYAS GENERATION' vs. 'OLDER GENERATION' r L.. wa MARKETING RELEVANCE s No REBELLION'-SO MUCH FREEDOM -- SMOKING NOT REBELLION II I•l I41 r^,••IK .~IL:!I ,o „ 11 1' % PARENTAL PERI"ISSION TO SMOKE HEN 18 I/iD I[.• :M!% .1 c..r! i.l: t:s 11'0 0 NO REBELLION--NO GENERATION GAP -- PARENTS' BRANDS OK RM0003807 tr N I11f 1/1: F, W t0 i+ m N m
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3. )lPWARD SJRIViNG (,CONT•) • ESCAPE INTO IMAGINATION (RESPONSIVENESS TO FANTASY) `• THE INCLINATION TO DEAL WITH LIFE BY ESCAPING INTO IMAGINATION DIFFERENTIATES FUBYAS BOTH FROM OLDER SMOKERS AND FROM NON-SMOKING PEERS• 18-20 SMOKERS NET AGREEMENT: S G VERSUS VERSUS 1 Igt SMOKERS 18-20 NON-SMOZERS x ESCAPE INTO IMAGINATION AND, IT APPEARS TO BE IS GROWING• +40 +18 9 L 9 PARTICULARLY LEVERAGEABLE BECAUb~E10-RIT ~ 9L Y 18-20 SMOKERS ~ r4 a 19-1981 1981-83 ~. ~ ESCAPE INTO IMAGINATION SOURCE: YANKELOvICH RM00038 T 9
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4. fXCITEMENT -- "THE EDGE' • THE DESIRE 70 LIVE ON 'THE EDGE' NOT ONLY DIFFERENTIATES FUBYAS FROM OLDER SMOKERS, IT ALSO APPEARS TO BE A PARTICULARLY LEVERAGABLE IDEA, 1•E•, IT IS GROWING• FUB VS. SWITCHER FUBYAS GROWTH 'THE E_,DGE" DIFFERENCE 19483 PTS. _ BAN~ 3~. ~ B9NK LIKES TO TAKE RISKS + .61 1 + .61 ~ 1 ACHIEVEMENT ORIENTED + .36 3 + .47 a 3 ADVENTUROUS + .29 8 + •42 .;, a 4 STAND OUT IN A CROWD +•31 4 + .3 8' ~ a 5 = GENUINE + .35 6 +•35~=6 RUGGED + .27 12 + .34 ° ~ 7 DYNAMIC + .27 11 +•32 8 AGGRESSIVE + .30 5 +.26p 9 y ~ J • 'THE EDGE" IS NOT LIMITED TO MACHO/PHYSICAL DANGER CONTEi " L 'THE EDGE' IS AN IMAGE, AN IDEA, AND CAN APPLY TO CLOTHES, SEX, DRUGS, LANGUAGE, CARS, ANY WAY YOU CAN 0 TAKE IT TO THE L1MIT•' SOURCE: SDS RM0003830
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4. FXCITEMENT (CONT;) FUBYAS VS. HAVE FUN IN EVERY WAY POSSIBLE AT EVERY TIME POSSIBLE • NO FUN ' PARENTS • Av01D BOREDOM, RUT, ROUTINE • BE SPONTANEOUS • FUBYAS FUN IS FUBYAS SUCCESS -- ENJOY TODAY/THE MOMENT To THE LIMIT SNITCHERS - HAVE FUN SELECTIVELY I SELECT ACTIVITIES OF INTEREST ~ ~ ~ • DEVELOP EXPERI'3SE 5 • PURSUE IN ALL&ATED G • LEISURE TIME :r SWiTCHERS LU.il A SIGN OF SW1TC 9 p,~ SUCCESS = ti C ~ '" SHOWS YOU` 'ItpE MAKING ITIM J ~ RM0003822
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4, f.XLITEMENT • 'THE E[1Gf' -- AS ACHIEVEMENT ORIENTED (IN THEIR OWN WAY) ... G RM0003827
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y• Exc1IEtiEti1 (CONT.) I MARKETING QELEVAN[E " FOR TODAY'S FUBYAS, EXCITEMENT IS NOT SIMPLY "A GOOD TIME." -' IT is LIVING ON THE EDGE/THE LIMIT...oR, AT LEAST, IMAGINING so. RM0003823
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" As ONE WHO STANDS OUT IN A CROMD•.• STANDS OUT iN CROND RM0003825
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4. FXCITEMENT - `TNE ED6E' -- AND, ADVENTUROUS• ADVENTUROUS RM0003829
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• FUBYAS ARE M ONE HOMOGENEOUS GROUP THIS IS GOOD NEWS, BECAUSE THEREIN LIES DIFFERENTIATION AND OPPORTUNITY 11 e C .~i • THE SEGMENTS THAT FUBYAS KNOW ARE THEIR SOCIAL GROUPS. THES~ ARE LARGE, LOOSELY KNIT BUT HIGHLY LABELED SUB'SOCI.ETIES FROrg L WHICH FUBYAS DRAW THEIR IDENTITY, I•E•, BY BELONGING TO THE ~~ a GROUP AND USING THE GROUP TO BE DIFFERENT FROM OTHER YOUNGER.9 ADULTS• ; = 0 RM0003838
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LAST -- BUT SURELY NOT LEAST• ~ ~~ EUBY9S . L: 0 LOTS OF DATES " LINKS TO SUCCESS NEED • ANYTHING GOES V S $ W LT C H R S • CLOSER RELATIONSHIPS $ a ? 4 O ~ I WE'RE PARTNERS ~~ .~_ " LINKS TO EXCITEMENT NEED '- 50/50 i-° o ~L L 4 ~ L L ~ a. RM0003831 0 lz
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5SEX ~CONT) ~ USE THE LEARNING DEFENSIVELY -- KEEP IN MIND THAT SQUEAKY CLEAN LOOKS GOOD TO US " BUT IS OUT-OF-SYNC WITH THE FUBYAS VIEWPOINT- IT IS LIKELY TO BE SEEN BY THEM AS NOT SPEAKING TO THEM~ ~ NOT UNDERSTANDINGi NOT RELEVANT TO THEIR LIFESTYLE• ^ ; ~ c ~ a RM0003836 ~ c
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Fl1AYAS SOCIAL GROUP SP TRUM 0 WITH REGARD TO "SOCIAL GROUP" PARTICIPATION, FUBYAS TEND TO LIVE IN A MOVIE -- THEY KNOW THE ROLES b ~ ~. r " THEY KNOW THE SCRIPT ? c a 0 " THEY KNOW THE COSTUMES 6 c ~ i - " THEY KNOW THE PROPS ~ ~ ~ u ~ i WE WANT TO SUPPLY ONE OF THE PROPS -- THEIR BRAND OF ' ~ CIGARETTES ~ RM0003844
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5. ~U ( CONT•) 1 USE SELECTED ELEMENTS TARGETED TO FUBYAS ONLY FOR EXAMPLE: " T'SHIRTS ARE SO POPULAR BECAUSE THEY ARE FUN, SELF' EXPRESSIVE/BADGES• " MUCH OF THE CLASSIFIED AD SECTION OF ROLLING STONE is DEVOTED TO T-SHIRTS WITH "SAYINGS•" A FEW TAME ONESg k 1 THIS TIME IT'S LOVE. NEXT TIME IT'S $20. ~ ; 1 HOW CAN I LOVE YOU WHEN YOU WON'T LIE DOWN. ~ ~ c • I THINK I COULD FALL MADLY IN BED WITH YOU• - e TO TIE A LINE TO A BRAND WOULD, OF COURSE, TAKE A RELEVAkT"' LINK• t' p RM0003835
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THE OBJECTIVE IS 10: s Y ~ • IDENTIFY THE ENDURING H1IiL5_ELS BEHIND THE SOCIAL GROUPS• r ~ L ~ c • USE THE GROUP LABELS NOT AS TARGETS, BUT AS GUIDELINES TO HELP~ E L EXECUTE RIGHT FOR TODAY• .`_ ; @ ~ • RM0003842
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5- ,S.U (CONT• ) s MARKET1Nr;RELEyANCE " LIBERAL ATTITUDES TOWARD SEX CLEARLY DIFFERENTIATE FUBYAS FROM THEIR NON'SMOKING PEERS•••THEY ARE TWICE AS IN TUNE WITH THIS VIEWPOINT. NET AGREEMENT/UISAGREEM NT s ~ S ~ ~ e ~ 0 ~ S2195E3S. HON- MOKERS a p h LIBERAL SEX ATTITUDES 18-20 18+ SOURCE: 1981-1983 YANKELOVICH 29 17 15 -2 RM0003832
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~ROAD GUIDELINES FOR UNDERSTg~K(~/gRD3:$S1LlSt FMUAEEp~ I ALL OF THESE KEY NEEDS ARE ENORMOUSLY 1NTERTWINED• -- You HAVE SEEN THE INSEPARABLE RELATIONSHIP BETWEEN THE NEED TO BELONG AND TO BE DIFFERENT " AND HOW THE NEEDS FOR SUCCESS, EXCITEMENT AND SEX RELATE TO EACH OTHER• q ~ 3 5. -' IN THE NEXT SECTION, YOU WILL SEE HOW THESE LAST THREE ; ARE TIED TO BELONGING AND BEING DIFFERENT- G ~ ~ .G -e o 7 v -f A FEW CONCISE IDEAS CAN BE CAPTURED FROM THESE NEEDS AND THEPt~ INTERRELATIONSHIPS TO SERVE AS READY-REFERENCE GUIDELINES: Eu FOR THE FUBYAS WHAT ts CRITICAL ls; 1- TODAY, NOT TOMORROW 2. STAYING YOUNG/NOT IN THE RUT 3. ON THE EDGE, NOT THE MIDDLE GROUND SEE THINGS THROUGH THEIR EYES, NOT OURS. RM0003837
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LIFFERENTIATING WITHIN THE FUBYAS GROUP •YHY AND HqM ARE THESE $Q~IAL GROUPS POTENTIALLY USEFUL TO MA3KE IlHS~'.) -- THESE GROUPS FORM A SPECTRUM • SPECTRUM REFLECTS ATTITUDINAL STANCES OR MINDSETS s TOWARD DEALING WITH LIFE/WITH NEEDS ~ • FROM VERY CONSERVATIVE To OUTRAGEOUSLY EXTREME •]N ADDiTION TO PROVIDING A SPECTRUM OF MINDSETS TO NEEDS, WE FIND THAT THE RESULTANT LIFESTYLE s r e n z ~ ~ ~ a ~ RELATE~ = E a CUES ANt ~ SYMBOLS ARE ALSO DISTRIBUTED ACROSS THE SOCIAL GROUPS -9 p ~.. ~ SPECTRUM i L 4 ACTIVITIES MUSIC DRESS PRODUCT/BRAND SELECTION • IN NET, THE SOCIAL GROUPS SEEM TO DIFFERENTIATE BETTER THAN DO DEMOGRAPHICS: -- FUBYAS MINDSETS TOWARD DEALING WITH LIFE/WITH NEEDS " THE NATURE OF THEIR NEEDS " THE RESULTANT LIFESTYLE CUES AND SYMBOLS RM0003839
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FUBYAs~Q~~L~eQUe _~eEUteu~ A FEW T-SHIRT LINES WHICH SEEM TO CAPTURE THE FEELING OF THE SOCIAL GROUPS• SDL1A1 siMP I_SHLRI_IIKE I a e n GOODY GOODIES - NONE ; (GOODY GOODIES ARE BORING• r ~~ T-SHIRTS AREN'T-) ~ E t PREPS D 15COS ROCKERS PUNKERS BURNOUTS RM0003846 ~ v ~p 9 L L y7 l'^ - IT'S NOT WHETHER YOU WIN OR LOSEi ~ IT'S HOW YOU LOOK PLAYING THE y ~ GAME- ; ~ C - )T`S IMPORTANT TO HAVE BELIEFS• I BELIEVE I'LL HAVE ANOTHER BEER- IF YOU LOVE SOMETHING, SET IT FREE• IF IT DOESN'T COME BACK TO YOU, HUNT IT DOWN AND KILL IT• - TIME FLIES WHEN YOU DON'T KNOW WHAT YOU'RE DOING-
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5. ~jj (CONT•) • A MARKETER CAN SELECT AMONG 3 ALTERNATIVES TO APPLY THIS LEARNING: " AS THE TOTAL MARKETING EFFORT• ` USE SELECTED ELEMENTS OF THE MARKETING MIX TO TARGET ~ THE SEX THEME TO FUBYAS ONLY• ~ ~ r USE THE LEARNING DEFENSIVELY, I•E•, EXECUTE RELEVANT ~ „ ~ MARKETING EFFORTS THAT DON'T APPEAR OUT-OF-SYNC WITH = FUBYAS VIEWPOINT• ,; ~~- -„ L z y 4 ~ ~ ~ ~ C RM0003833
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• CAUTION THE INDIVIDUAL FUBYAS IS NOT A PERFECT STEREOTYPE• NE/SHE DOES NOT EXIST PURELY AS A MEMBER OF ONE, AND ONLY ONE, SOCIAL GROUP -- ANY MORE THAN A WINSTON SMOKER FITS THE VIRILE LABEL PERFECTLY ON ALL DIMENSIONS• a ~ NONETHELESS, THE FUBYAS: r n • READILY CLASSIFIES OTHERS INTO THE GROUPS • KNOWS WHAT HIS "MEMBERSHiP` IS ~ ~ • PROVIDES ATTITUDINAL AND BEHAVIORAL SELF- a DESCRIPTION% a ~ - WHICH SUPPORT SOCIAL GROUP CLASSIFICATION• =° 'e y RM0003840
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5. ~ • ENTIRE MARKETING EFFORT FOR EXAMPLE: JOVAN hUSK OIL MA ~HARE 18-24 25-34 35+ 18+ 4.6 149 2.4 3•0 QUOTING FROM BUSINESS WEEK 10/22/79: 78 100 JOVAN•••IS THE FIRST COMPANY TO BREAK INTO THE U•S• FRAGRANCE MARKET SUCCESSFULLY IN 15 YEARS• INDEED, JOVAN'S NOVEL MERCHANDISING TECHNIQUES HAVE TURNED THE INDUSTRY ON ITS EAR• WHILE OTHER COMPANIES MAY ONLY ALLUDE TO A USER'S SEX APPEAL, JOVAN SPELLS IT OUT WITH COPY ON BOTTLES, PACKAGES, AND ADVERTISING DESCRIBING MUSK OIL AS: • "PASSION-AROUSING" ~, • "EROGENOUS" - N • "ANIMAL-L1KE" o~o • "APHRODISIAC" iO a AND JUST A PLAIN "TURN-ON•" ~ J "THIS MESSAGE APPEALS TO THE UNDER 25 CROWD," SAYS AN INDUSTRY ANALYST. SOURCE: 1983 SMRB RM0003834
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fADS/TRENDS (coNT.) ' 2 • SPREAD • TO GROW/GAIN MOMENTUM--MUST BE PICKED UP BY LEADING EDGE IN OTHER GROUPS ~ • CALLED CROSSING OVER x a • ERHAP - ~ ~ S S SOFTENED, MODIFIED TO APPEAL 0 , ~ a • VARIATIONS OF THE MOHAWK, UPTOWN :. - (? 9 . ~ L ~ • CELEBRITY ADOPTS ONE/MAGAZINES SHOW THEM ~ 4 • THE FAD BECOMES THE FASHION ~ • FINAL STEP = ADOPTION BY THE MASSES "" MAKES IT IN KANSAS CITY " THE 'BUZZN HAS MOVED ON. RM000385T
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EXTREME ~ CONFORMITY A ~ ~ 0 0 0 (4 co A t PiBXA~ SOL 1Al GRfJUPS`' ATkM TODAY'S SOCIAL GROUPS ~BELQNSIN G e_BE1flG DIFFERENT) • GOODY GOODIES • PREPS • GQs • DISCOS THE LENGTH OF THE SPECTRUM IS XQ1 CONSTANT OVER TIME--EXPANDS AND CONTRACTS - IN 1940s, LESS RANGE - IN I950s. MORE RANGE • WHATEVER THE LABEL--THERE IS ALWAYS A GROUP VIEWED AS VERY NONCONFORMING FOR ITS GENERATION• 0 THE LARELS CHANGE OVER TIME " BUT SLOWLY • ROCKERS • PARTY PARTIES AND THERE ARE MORE LABELS TODAY THAN SHOWN--BUT THEY REFLECT SUBTLE DIFFERENCES THE LIFESTYLE CUES AND SYMBOLS (WHICH YOU WILL SEE SOON) CHANGE OVER TIME W EXTREME pNCONFQR~ILT1 I • PUNKERSuard tn Tadrral Tradc ('unmiivsi m pursoaul~M~b~Rna CHANGE RAP I DLY datrd.lunr 6, I • BURNOUTS I+S9v 68TZ5
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TODAY'S SOCIAL GROUPS Music CLOTHES • GOODY GOODIES • PREPS . Ga's • DISCO's Mustc AS THE FASHION LOOK • ROCKERS • PARTY PARTIES • PUNKERS BACKGROUND (ToP 40) - IZOD - 'NICE' Muslc AS A LIFE STATEMENT IMMERSION CONCERTS PERFORMERS SELECTED FOR THEIR IMAGE CARS Dqlntis. 9~B 1 H MIXED E MERCEDES DRINKS VOLVO I LIGHT BEER l CAMARO HEINEKEN ~ k U THI ANTI-FASHiON USED CAR TO - FIXED UP OUTRAGEOUS - SOUPED UP - OLD BLACK VAN T-SHIRT PICK UP Produird to Federal Tradr C'~~nunia~tiiun punuant fn suRgKna dated Junc 6, 1997. CLOTHES 8 • BURNOUTS £zSO ZOCOS HAIR JUST WHEELS JAcK DANIELS BUDMEISER b THI 8599 68TZS
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FADS/TRENDS (CONT.) THUS, THOUGH YOU WOULD NOT TARGET A BRAND TO PUNKERS, ONE MIGHT CONSIDER A NEW BRAND IDEA IN LIGHT OF WHETHER OR NOT THERE IS AT LEAST ONE GROUP WHERE THE BRAND COULD FIRST "SEED•" FOR AN ESTABLISHED BRAND, ITS ABILITY TO START A NEW "BUZZ" MAY DEPEND ON THE BAGGAGE IT BRINGS BACK FROM KANSAS CITY• a Y ~ ~ ~ G 0 c •f a t. ^ o 2 . - a T U O W O RM0003852 - Q „ ul
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-- GROUPS ON CONFORMING END OF SCALE VIEW NONCOMFORMING GROUPS WITH DISTASTE -- NONCONFORMING GROUPS TEND TO RESENT CONFORMING GROUPS 5 . ~ ~ • PHONY ` ' o ' a ': - • THE HAVE S -- DON T HAVE TO STRUGGLE FOR THINGS G =_ O L 9 7 L 7 -- ALL GROUPS TEND TO ADMIRE THE MOST NON-CONFORMING GROUPS i u T. ~ ~ 0 N • OT WHAT GROUP DOES 4 ` • BUT WHAT BEHAVIOR REPRESENTS: "- THE 'GUTS' TO NOT CONFORM -' NOT BE1NG SADDLED WITH ANY SENSE OF RESPONSIBILITY RM0003847 ° N
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EXTREME NON CONFORMITY _ 0 _ EXTREME NON CONFORMITY INCREASING ORDER TODAY'S SOCIAL GROUPS SMOKING INCIDENCE THEY TOLD US••- • GOODY GOODIES • PREPS v GO'S • DISCOS • ROCKER • PARTY PARTIES • PUNKERS datrd June 6, 'PREPS DON'T SNOKE • mCIGARETTE TRENDS WOULD START WITH ROCKERS OR PUNKERSm • BU RNOUT S Produccd to 1''edcral 'Cnide <'unu4l011 PurlulOlt to lOIIpUCIIa L:0 ZOEOti T995 68ZZ5
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~ ~ d .. . . .. ....,Y 0 0 F j~B~YA$ SpS QUP~ S~E~~RUM 0 _ w 00 ~ w EXTREME TODAY'S SOCIAL GROUPS UPWARD CONFORMITY ~BFtONGiNG R BEIMG DIFFERENT) STRIVING • GOODY GOODIES "SUCCESS" IS ESTAB- LISHMENT APPROVAL • PREPS • G8's • DISCO'S _ Q _ • ROCKERS • PARTY PARTIES ~ ' • PUNKERS "SUCCESS~ IS ESTAB- EXTREME LISHMENT OUTRAGE F . BURNOUTS EXCITEMENT DON'T GO NEAR "THE EDGE" AvoiD SEX APPRECIATE EDGE, LIBERAL BUT RARELY PART- ICIPATE LIVE AT EDGE MORE NOX AND THEN LIBERAL THE VERY MOST EDGE LIBERAL - 1'mduced to Feder.d Tradc l'onindatiinn pursuant to subpoena 9S9b 68IZS dated.luncn,19v7.
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FUBYA~ SOCIAL GROUP SPECTRUM • WHY ARE FUBYAS SO WRAPPED UP IN FADS/TRENDS? • FADS & TRENDS ARE VERY IMPORTANT TO THEM IN SEVERAL WAYS " THEY ARE CRITICAL TO EACH GROUP'S IDENTITY I SERVE AS CUES/SYMBOLS • DIFFERENT GROUPS HAVE CREDIBILITY TO tTART CERTAIN. TYPES OF TRENDS - NICE CLOTHES -- PREPS - REAL BOOZE -- ROCKERS -- FADS & TRENDS HELP SATISFY FUBYAS NEEDS: • TO BELONG JQ THE GROUP • To BE DIFFERENT Y1P, THE GROUP • FOR EXCITEMENT IN BEING 111 ON A TREND • FOR SUCCESS IN H W N YOU'RE IN ON A TREND RM0003849
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FADS/TRENDS -- HOW DO THEY START/GROW? 1HE DIFFUSION MECHANISM -- SEED AND SPREAD " ECONOMIC FACTORS " SOCIAL CHANGE " DEMOGRAPHIC MIX CHANGES " INADEOUACY OF PRODUCT CATEGORY ALTERNATIVES " DESIRE FOR THE NEW, THE DIFFERENT • AT THIS STAGE--CALLED A BUZZ • EXAMPLE: MOHAWK HAIRCUTS IN THE VILLAGE RM0003850 ~ m m w w C c n
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MRKfTING/MDD IMPI ICATIONS II• ST&AIf.GY ANDEXECUTION (CONT'D) CREATIVE AND IMAGINATIVE EXECUTIONS WILL BE THE KEY TO IMPROVING PERFORMANCE• RJR'S CHALLENGE IN ADDRESSING THIS ISSUE PROBABLY LIES IN ESTABLISHING THE RIGHT PROCESS RATHER THAN SIMPLY CREATING SPECIFIC POSITIONINGS AND EXECUTIONS• A POSSIBLE PROCESS: • TALK TO ENOUGH SMOKERS TO ENSURE THAT WE FIND A EEAL • TARGET GROUP WITH A'COMMON MIND'SET" WORTH PURSUING• IDENTIFY SPECIFIC 18-20 SMOKERS WHO ARE PART OF THAT a o MIND'SET Bj(p HAVE INSIGHTS AND JUDGEMENTS ABOUT PEOPLE e= WHO ARE LIKE THEM- USE AS A PANEL TO HELP PROVIDE CONTINUOUS FEEDBACK AND DEVELOPMENT EFFORTS ADVERTISING, PRODUCT PROMOTION, ETC• "- . ~ 9Y L a. • CHOOSE CREATIVE PROFESSIONALS (AGENCY OR OTHERWISE) WHt~ RELATE TO THE TARGET MIND'SET AND CAPITALIZE ON GROUP ~ DYNAMICS BETWEEN THE EXPERTS AND THE PANEL• ~ F • USE THE RESULTING SYNERGY TO BE CREATIVE AND IMAGINATIVE WITHIN RJR MANAGEMENT GUIDELINES• rNv H ~ t0 RM0003g56
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• JUNIOR LEVEL •COMMITMENT 'ONCE AUGUST BUSCH REALLY SHOWED HE WAS COMMITTED T0 YOUNGER ADULT MARKETING, DOORS OPENED UP AND N0 ONE WAS AFRAID TO COME UP WITH IDEAS• BEFORE THEN, THE IDEAS WERE THERE BUT PEOPLE WERE AFRAID TO TALK ABOUT THEM. THE iDEAS FOR THIS MARKET OFTEN COME FROM JUNIOR PEOPLE- THEY'RE THE ONES WITH THE ENERGY TO PUT INTO FIELD MARKETING• BUT THEY DON'T HAVE THE CREDIBILITY SO SOMEONE AT A HIGHER LEVEL MUST BELIEVE IN THEM AND GET THE IDEAS TO THE TOP PEOPLE•" ~ ~ 0* WE NEED TO REMEMBER THAT BIG PAY-OFFS MAY TAKE 3 OR 4 YEARS TO ~ ACHIEVE BOTTOM-LINE RESULTS. A SOLID STRATEGY IS NEEDED AS WELi ~ l AS THE RESOURCES TO IMPLEMENT IT AND MONITOR ITS PROGRESS. FORc EXAMPLE, THE BUDWEISER PROGRAM HAS GROWN FROM I MAN/SIMM TO 18 1 ~ e '6 PEOPLE/SIOMM• ` ~ ~ - RM000385g
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THE ABILITY TO IMPROVE PERFORMANCE DEPENDS ON THE ATTITUDES AND BELIEFS THAT SMOKERS 18-20 HAVE ABOUT CIGARETTE BRANDS: • DOES MARLBORO'S STRENGTH IN THIS SEGMENT MEAN THAT THEY LOVE IT"~ THINK THAT IT IS THE "BEST BRAND"~ OR DO THEY m SIMPLY CHOOSE IT "BECAUSE EVERYONE ELSE DOES" (WHY NOT?)' k R • DO THEY HATE WINSTON OR IS IT SIMPLY IRRELEVANT? ~ C 0 a • NHY DO THEY LOVE OR HATE CERTAIN BRANDS? r~ v p • WHAT TYPES OF THINGS TURN THEM ON OR OFF? z ~ RM0003853
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MlAfiKETING/MDD IMPLICATIONS II• STRAIEGY AND E%E~ CUTION_ (CONT'D) THERE ARE SEVERAL GENERAL GUIDELINES THAT SHOULD BE CONSIDERED IN ANY EFFORTS TO ADDRESS SMOKERS 18-20. 0 USE PULL STRATEGIES -- DRAW CONSUMERS TO THE BRAND. AVOID THE HARD SELL• FEEL FREE TO BE A LITTLE IRREVERENT ABOUT THE BRAND• § B PAT, INSTITUTIONAL ADS LACK APPEAL• BE CLOSER TO THE ~ EDGE. DON'T CHASE A TREND THAT HAS ALREADY HAPPENED- 212. ~ s A GOOD PRODUCT IS CRITICAL BUT PRODUCT SELLS DON'T WORK2 0 AVO1D PROBLEM-SOLUTION POSITIONINGS• ~ ~ t - e o f DON'T BE PHONY. FOR EXAMPLE, ENSURE EXECUTIONS HAVE - INTERNAL INTEGRITY IN TERMS OF PREPPY VS• ROCKER LOOKS ~- 9 4 AND ACTIVITIES• C z L L B AVO1D PRICE DISCOUNTING TACTICS• r I MAKE THE MARKETING FIT •• 1. TODAY, NOT TOMORRnW 2. STAYING YOUNG/NOT IN THE RUT 3. ON THE EDGE, NOT THE MIDDLE GROUND SEE THINGS THROUGH THEIR EYES, NOT OURS. RM0003855
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MARKETING/MDD 1MPLICATIONS 1l• STRATEGY AND EXECUTION THERE ARE MAJOR ISSUES/TRENDS THAT MUST BE CONSIDERED IN DETERMINING THE BEST DIRECTIONS• IN SOME CASES, FURTHER RESEARCH IS NEEDED• I• THE COOLNESS SEGMENT (AND MENTHOLS) SEEM HEADED FOR • INEVITABLE DECLINES IN SHARE. THE BUSINESS THAT IS LEFj WILL GROW INCREASINGLY BLACK• ~ a 0 J PREPS DON'T SMOKE -- THE MARKET IS LIKELY TO BECOME INCREASINGLY ORIENTED TO THE VALUES OF HON-COLLEGE ~ SMOKERS, ROCKERS• THE SQUEAKY CLEAN LOOKS WILL BE OUT•a 3. MARLBORO IS THE KEY COMPETITION, WITH NEWPORT BEING '` e IMPORTANT FOR MENTHOL PRODUCTS IN THE BLACK SUBGROUP• L s 9 L 7 4• IN MARKETING TO YOUNGER ADULT SMOKERS, THE CRITICAL i REACTION IS "HEY, THEYI RE TALKING TO ME•` THIS SUGGESTT THAT VIABLE POSITIONINGS AND EXECUTIONAL THEMES MUST 9 MORE THAN JUST "APPEAL" TO YAS, THEY MUST APPEAL TO YAS; IN A WAY THAT "DIFFERENTIATES" THEM FROM ALL OTHER = GROUPS AND DIFFERENTIATES OUR BRAND FROM ALL OTHERS IN A MEANINGFUL WAY• RM0003858 C C v
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~ FURTHER RESEARCH IS NEEDED TO QUANTIFY THIS LEARNING• SPECIFIC ISSUES CAN BE IDENTIFIED BY END USERS. GENERAL ISSUES ARE: I• IMPORTANCE OF VALUES/WANTS (RELATIVE AND ABSOLUTE) 2. HOW ARE jH YEXPRESSED IN SMOKERS' LJVE 3• PERCEPTIONS OF S0C1AL SEGMENTS 4• ASSOCIATIONS OF SYMBOLS/CUES 5. LEvEL/NATuRE OF BRAND ATTITUDES C O ! 6 B A T ~ L c . RAp 1NK5 TO LS OF HESE ~ ~ ; - SINCE NEW TRENDS OFTEN ARISE QUICKLY AND SYMBOLS CHANGE, A FIB~ MONITOR IS NEEDED• IT WILL ALSO BE NECESARY TO MONITOR - ~ 9 p PROGRESS AGAINST STRATEGIES ADOPTED• ~ 9 E L ENSURE THAT pETA1LED STRATEGIC RESEARCH LEARNING IS INTEGRATED INTO ACTION PLANS AS THEY ARE DEVELOPED• ~ ~ 0 4 a I RM0003854
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BRAND ATiITUDE f is VERY FEW SMOKERS 18-20 ARE AWARE OF CIGARETTE ADVERTISING--HOW THEY ARE "POSITIONED". BRAND PERCEPTIONS ARE MORE LIKELY 70 COME FROM USERS THEY SEE• EVEN FOR MARLBORO• ATTITUDES ABOUT CIGARETTE BRANDS ARE NOT EXTREME IN MOST CASIS V --USUALLY THEY ARE NEITHER LCVED NOR HATED. THIS SEEMED TRUt THF. ONLY ATTITUDES THAT WERE STRONG ENOUGH TO BLOCK ~ c ~ 0 C ° a A BRAND .iP~E 1 .. USUALLY PRODUCT DRIVEN'-"THEY ARE REALLY ROUGH BECAUSE THEY'K, NOT FILTERED", OR THEY TASTE LIKE STALE MARLBOROS", OR "THE4 p E ~ TASTE LIKE COTTON"• THIS MAY MEAN OUR PRODUCT PERCEPTIONS !(~EOD TO BE TURNED AROUND "' AS BUDWEISER'S WERE• p x 9 v THE MOST SENSITIVITY WHEN IT COMES TO IMAGERY IS LOOKING PHO!Y "-OF TRYING TO BE MORE THAN YOU ARE, SOMEWHAT LIKE THE ROCKER'S ATTITUDE TOWARD PREPS• RESPONDENTS TENDED TO ASSOCIATE BRANDS WITH THEIR GROUP STEREOTYPES AS FOLLOWS: •"PREP" BRANDS: PLAYERS, V• SLIMS, BBH, VANTAGE, NEWPORT• •"R-ICKER" BRANDS: CAMEL, WINSTON, MARLBORO, AND KOOL• OBVIOUSLY, MARLBORO WAS "ACCEPTFD" IN ALL GROUPS- RM0003862
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MARKETINC/MDD IMPLICATIONS II• STRATEGY AND EXECUTION (CONT'D) 5. A PROCESS FOR DETERMINING EFFECTIVE STRATEGIES NEEDS TO BE IDENTIFED• KEY PROBLEMS MUST BE OVERCOME: • A SEGMENTATION BY DEMOGRAPHICS, SEGMENT, OR CATEGORY IS NOT ADEQUATE BECAUSE SMOKER MINDSETS D BE YON GO THESE BOUNDARIES. = i • r e POSITIONING AGAINST "DRIVING MOTIVES' -- BELONGING6 DIFFERENCE, UPWARD STRIVING, EXCITEMENT AND SEX CAN POSE PROBLEMS, SINCE THESE WANTS FORM A TIGHTLI; KNIT BUNDLE TO 18-20 SMOKERS• 17 IS SOMEWHAT ARTIFICIAL TO SEPARATE THEM -- TO PICK ONE AND POSSIBLY VIOLATE THE OTHERS. G a ! a ~ d E `- ' • THE HEART OF AN EFFECTIVE STRATEGY MAY BE AS MUCH L ? MEDIUM AS THE MESSAGE -` FIELD MARKETING, SPECIAL EVENTS, ETC•, AS OPPOSED TO MAGAZINES• ~ • p WE MUST CIRCUMVENT THE PROBLEMS THAT MAKE BOTH RJR 4 C AND OUR ADVERTISING AGENCIES INCREASINGLY OUT OF ^ TOUCH. As YOUNGER ADULT SMOKERS BECOME INCREASINGLY NON-COLLEGE AND NON-PREPPY, THE ATTITUDINAL GAP BETWEEN MANAGEMENT (EVEN AT LOWER LEVELS) AND 18-20 SMOKERS IS LIKELY TO WIDEN. THIS MAKES IT HARD TO BE CREATIVE AND IMAGINATIVE IN A RELEVANT WAY• RM0003857
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bARKETING/MDD IMPlICA1I0NS THE ABSOLUTE BdTTOM LINE IS THE NEED FOR I• COMMITMENT II• IMAGINATIVE STRATEGIES AND EXECUTION• f&M-H1 LENI a ~ 3 ~ ~ . A THE FOLLOWING QUOTES WERE TAKEN FROM THE "EXPERT WORK$HOP` ~31 a NEW YORK -- AND EVERYONE IN THE ROOM SMILED AND NODDED• _~ • TOP MANAGEMENT COMMITMENT 'WITHOUT HAVING SOLD AUGUST c 0 :. - BUSCH ON THE NATURE AND THE ` 9 RISKS OF YOUNGER ADULT MARKETING, WE COULD NEVER HAVE @ TURNED AROUND BUDWEISER• YOU JUST CANtT DO IT WITHOUT TFZE SUPPORT OF TOP MANAGEMENT•" ~ . ~ 4 • MIDDLE MANAGEMENT COMMITMENT ~ `THE PROBLEM WHEN YOU HAVE A GOOD IDEA FOR THE YOUNGER ADULT MARKET AND YOU HAVE TO GO UP THE CHANNEL FOR APPROVAL IT GETS WATERED DOWN VERY OUICKLY• EVERYBODY WANTS TO TAKE RiSKS AND BE THE ENTREPRENEUR• BUT WHEN THE BRAND MANAGER'S JOB IS ON THE LINE BECAUSE HE'S GOT TO SELL A CAMPAIGN TO AUGUST WHERE YOU'RE GOING TO THROW BEER AT PEOPLE -- HIS PRODUCT, YOU'VE GOT TO KNOW AUGUST BUSCH -- YOU START TO LOSE THAT RISKING ABILITY INSIDE. THE IDEAS GET WATERED DOWN AND THE COMPANY FAILS AT YOUNGER ADULT MARKETING- " RM0003860
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BRAND ATTITUDE CONCLUSIONS 1~ RJR CAN IMPROVE PERFORMANCE VERSUS MARLBORO. THEY DO NOT HAVE INSURMOUNTABLE STRENGTHS IN IMAGERY -- FUBYAS SMOKE IT BECAUSE EVERYONE ELSE DOES AND THEY DON'T SEE VIABLE, ATTRACTIVE ALTERNATIVES- 2• THERE ARE MAJOR OPPORTUNITIES TO USE NONTRADITIONAL CHANNELS T0 EFFECTIVELY REACH THE IS-20 SMOKER MARKET -' TO- REACH THEM, ~PEAK IN THEIR OWN LANGUAGE INCLUDING THE RIGHT SYMBOLS AND CUES, ND BE RELEVANT• THIS IS THE HEART OF THE JACK DANIELS AND BUD'~ISER SUCCESS STORIES AND NO CIGARETTE COMPANY IS DOING IT -- AT L~ AST NOT RIGHTI ? , . ~ a IT IS POSSIBLE TO IMPROVE PERFORMANCE WITH CAMEL, WINSTON, 49 SALEM, BUT EACH HAS DIFFERENT STRENGTHS AND WEAKNESSES• B'e a ~ vA • CAMEL -- TENDS TO RECEIVE MORE POSITIVE COMMENTS THAN OUi~, 9 OTHER BRANDS ALTHOUGH ITS NON-FILTER HERITAGE IS STILL ; L PROMINENT- IT'S STRONG VISUAL IDENTITY MAKES THE BRAND ~ INTERESTING AND LENDS ITSELF TO SPECIAL PROMOTIQN. PEOP NOTICE CAMEL. WHILE ITS NON-FILTER SUGGESTS PRODUCT T; ~ NEGATIVES, IT DOES FORM A SOLID LINK TO AUTHENTICITY AND~ PRODUCT QUALITY -- ITS ORIGINS IN THE "GOOD OLD DAYS" IS NOT A NEGATIVE- Ln N . r B WINSTON/SALEM -- IGNORED MORE THAN HATED. THESE BRANDS CARRY ~ THE BAGGAGE OF BEING IN KANSAS CITY FOR SO LONG ... AND THE ~ ~ USER IMAGE ASSOCIATED WITH THIS. THE BRANDS ARE SIMPLY NOT VERY INTERESTING -- PACK, NAME, ETC• THESE ARE SEEN AS CLEAR #2 BRANDS WITH PRODUCT NEGATIVES- c L G K RM0003861
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..... w ._ ....,.., .~.. H::7 ~. . l { . . a • AS A RESULT OF BRAND LOYALTY AND THE AGING PROCESS, STRENGTH AMONG YOUNGER ADULT SMOKERS ULTIMATELY YIELDS GROWTH IN OLDER AGE BRACKETS- -- AMONG SMOKERS 25+, ALL MARLBORO'S GAINS ARE ATTRiBUTABLE TO THE BRAND LOYALTY/AGING PROCESS--SWITCHING APPEARS TO HAVE HAD NO NET LONG-TERM EFFECT- I '- MARLBORO'S TOTAL SHARE IS A RESULT OF INITIAL YOUNGER ADULT SMOKER STRENGTH. `r -- IF MARLBORO JUST HOLDS SHARE OF YOUNGER ADULT SMOKERS, THEN ITS TOTAL SHARE WILL GROW TO 24•O DIlE TO AGING- 1ST HALF 19$Q 1981 19$2 1983 1988 18-24 SMOKER SHARE 32.4 34-3 36-3 41•2 41.2 TOTAL 18+ SMOKER SHARE 15.6 16-6 17-0 18•9 Z4.0 • ADDITIONALLY, AS SMOKERS AGE, THEIR RATE-PER-DAY INCREASES CONFIUENTIAI: - b"1'C DOCKt°P No. 92lLS ~-- SMOKERS 25+ CONSUME 2~` d?~QRt~ @~I 1~1(~i~is~srr~u,vnt to subpurw. ----- - . datrd.iune6,1997. - 9Tb9 68TZ5 R3016314
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