Anne Landman's Collection
No Title -- Discusses Principal Risks to Marlboro
Abstract
This Philip Morris (PM) marketing strategy document carries some insights into how PM/Altria views its cigarette markets. For example, in discussing the Benson and Hedges (B&H) brand, it observes that "[relatively affluent, higher eduated smokers] have lower start rates and are quitting at faster rates than smokers with blue collar occupations," and, based on this information (which presaged the demise of the brand), PM planned to target future promotional efforts for Benson and Hedges cigarettes at younger adults, blacks and hispanics. PM/Altria also notes that a decline in the number of young smokers could affect future sales, saying
"The principal risk facing Marlboro during the plan period is the projected decline in the number of young smokers. From a total of 28 million now, the 18 to 24 age category is forecasted to decrease to approximately 125 million in 1991. Start rates for young adults are expected to remain relatively stable, but at a much lower level than ten years ago...These trends make it important that Marlboro continues building share among young smokers..."
PM/Altria also admits in this document that (rather than discouraging youth smoking) it actually depends on peer pressure to sell its brands:
"...Long test markets are especially necessary for image products targeted toward young smokers where word of mouth (peer exposure) remains an important method to generate brand recognition and unit volume growth."
Fields
- Quotes
The principal risk facing Marlboro during the plan period is the projected decline in the number of young smokers. From a total of 28 million now, the 18 to 24 age category is forecasted to decrease to approximately 125 million in 1991. Start rates for young adults are expected to remain relatively stable, but at a much lower level than ten years ago...These trends make it important that Marlboro continues building share among young smokers...
[From Page 6, Bates No. 204354041}
B&H currently has a relatively affluent, higher educated smoker profile. Survey data indicate that these groups have lower start rates and are quitting at faster rates than smokers with blue collar occupations. While we intend to maintain broad media support to B&H's core smokers, targeted efforts will be directed at younger adults, blacks and Hispanics...
...Inner city sampling programs and specialized POS will continue to be employed to increase menthol exposure among blacks...
[From Page 8, Bates No. 204354043}
Initial positioning [of Merit] as the industry's most technologically advanced cigarette gave Merit strong appeal among higher educated, higher income smokers. As previously mentioned, this group has relatively low and declining incidence which reduces the brand's potential smoker base...
[From Pages 18-19, Bates Nos. 2043543053/3054]:
...It appears that brand of choice phases last approximately ten years... With no comparable brand image available, yound smokers continued to view Marlboro as "their" brand. The success of Marlboro Lights among older Marlboro smokers may have increased Marlboro Red's acceptability among young people...
...Long test markets are especially necessary for image products targeted toward young smokers where word of mouth (peer exposure) remains an important method to generate brand recognition and unit volume growth.
- Company
- Philip Morris
- Author
- N/A, Presumed corporate author, Philip Morris
- Found in the area of
- Reuter, Barbara (PM marketing department)
Wrote interesting documents about inter-relationship of sales, addiction and demographics. PM Marketing Dept - Found in the area of
- Recipient
- N/A
- Region
- United States
- Named Organization
- Amer, American Tobacco
- Bw, Brown & Williamson
- Lig, Liggett
- Lor, Lorillard
- Msa
- Nielsen
- RJR, R.J.Reynolds
- PM, Philip Morris
- Bw, Brown & Williamson
- Litigation
- Stmn/Produced
- Named Person
- Adkins, C.
- Type
- MRRT, MARKET RESEARCH REPORT
- CHAR, CHART, GRAPH, TABLE, MAPS
- Subject
- marketing
- target market
- Target/ethnic (targeting ethnic markets)
- Target/Young Adults (Target Groups)
- target market
Document Images
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The principal risk facing,~Iarlboro during the plan period is the projected
decline in the number of young(snx~kers. From a total of 28 milli n now, the 18
lto 24 age category is forecasted to decrease to approximately 125 million in
1991. Start rates for young adults are expected to remain rela ively stable,
but at a much lower level than ten years ago. (See page 7.) Th~se trends ma-ke-
it important that Marlboro continues building share among young smokers. This
may prove difficult, however, because Marlboro already has an estimated 57
percent share among smokers aged 18 to 21 (up from 44 percent in 1984) and an
estimated 73 percent share among non-menthol smokers in this age category.
Consequently, Marlboro's performance is more dependent on retaining current
smokers, optimizing the brand's retail presence, developing relatively weak
geographic areas and introducing successful line extensions that attract older
and competitive (menthol) smokers. Two key goals during the plan period will be
to maintain stability of the parent business while maximizing Lights growth.
Advertising
Marlboro's unparalleled growth is partly attributable to its long-standing
advertising campaign which has created the industry's most recognizable brand
image. Marlboro has been the industry leader in claimed advertising awareness
for seven consecutive years. The brand's image continues to be relevant for
both young and old smokers as evidenced by recent share gains among all smokers,
especially those under 25 years of age. In addition, the successful
incorporation of Marlboro 100's and Lights into the brand's mainstream
advertising has proven instrumental in making Marlboro the leading brand among
females.
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Marlboro's advertising is designed to reinforce the brand's image using the
"Marlboro Country" theme, which will be supplemented with red roof branded and
sports oriented messages such as the sports calendar. These efforts should
continue to be effective in the future considering recent competitive movement
away from image advertising and toward couponing. We will continue to develop
interesting new graphics and ad design modifications to show consumers a
different look. However, these efforts will always support the brand's basic
image. Media spending is expected to increase with inflation with the Lights
packings receiving greater relative support. We will capitalize on Marlboro's
Hispanic strength by directing special media efforts toward this group.
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Promotions
~, During the plan period, additional emphasis will be placed on event
-ppromotions and incentives targeted across a wide demographic spectrum.
Promotions allow Marlboro to conanunicate with smokers outside traditional media,
increase the brand's presence, generate additional publicity and _provide
sampling opportunities. Incentives induce competitive trial, reward current
smokers and promote product usage. Promotional programs scheduled for 1987
include the Marlboro Country Music Tour, CART race car sponsorship including the
Marlboro 500 and Marlboro Race of Champions, the Marlboro Ski Challenge, the
Marlboro Cup and participation in both Hispanic festivals and seasonal resort
programs. On-product incentives will include the "Best of Marlboro" country
music cassette, jumbo lighters and tote bags. In addition, we will be testing
continuity programs using both sports gear and country store themes to reward
and retain current users in the face of price/value competition.
Retail
Since Marlboro is PM-USA's only major brand with a significant gap between
market share and retail inventory share, a concentrated effort will be made to
improve the brands' visibility and inventory depth. A parallel goal is to
establish Marlboro as the domi.nant brand at retail through extensive use of
special displays, temporary and permanent point-of-sale materials and programs
which encourage the trade to merchandise the brand effectively.
PM-USA 1986 MARKET SHARE vs. INVENTORY SHARE
MARKET INVENTORY
SHARE SHARE
®
U
MERIT VIRGINIA SLIMS
MARUBORO B&H
SOURCE: TRACKING STUDY
PM-USA is implementing an aggressive retail strategy to achieve these
objectives. During 1986, Marlboro's average out-of-stock level and share of
both total and visual inventory improved. Innovative POS such as Marlboro ash
trays and neon signs are increasing the brand's visibility in important trade
classes. Enlarged, better-positioned B-displays are succeeding in expanding
inventories in pack outlets and contributing to increased brand awareness.
Research indicates that Marlboro's seasonal popularity is skewed toward the
sumier months to a greater extent than previously believed. Future efforts will
seek to leverage this situation and establish a retail presence for Marlboro
more in line with its market share.
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Major elements in PM-USA's retail strategy for Marlboro include:
Marlboro is slated to receive a disproportionate share of future
shelf space gains.
Special sunaner programs will be utilized to increase Marlboro's
visual inventory, place additional POS and expand sampling. In
addition, two of the three Marlboro on-product incentives in 1987
are scheduled for summer mmnths.
The Marlboro Investment Support Test will target one region of the
country to receive increased media and sales support. Our
objective is to determine whether the brand's volume and share
growth can be accelerated through high, continuous levels of
support.
Geographic Development
While Marlboro was the leading brand in all regions of the U.S. in 1986 and
increased market share nationwide, opportunities exist to develop geographic
areas where the brand is less dominant. Marlboro's strongest markets are west
of the Mississippi River and in the Northeast. An opportunity may exist in the
Southeast, where Marlboro is weakest and RJR has the greatest retail presence.
We will intensify retail efforts in this region- to secure additional shelf
space, inventory and POS on behalf of Marlboro.
MARLBORO vs. RJR 1986 MARKET SHARES
MARLBORO TOTAL RJR
S
Line Extensions
The developnment of a successful Marlboro line extension o
opportunity to accelerate the brand's volume and share
Consequently, efforts will be made to expand the franchise into
menthol category. Marlboro Lights Menthol and a reformulat
scheduled for test in 1987. At the same time we will be prepar
Box versions of these packings, if appropriate. This strate
opportunity to broaden Marlboro's profile, but the inmpact on the
must be carefully evaluated before a national introduction.
menthol extensions will be targeted toward white smokers aged
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Advertising support will leverage Marlboro's strong brand image. We will
use distinct menthol cues and color within the "Marlboro Country" thene and
challenge smokers to taste the freshness of an "all natural" menthol. If test
market results are satisfactory, a full scale introduction is budgeted for 1987.
Future line extensions will be directed at developing products which can
improve- Marlboro's retention of smokers as they age or switch down the tar
spectrum. Current efforts are centered around an ultra low tar product and a
cork-tipped low tar concept.
BENSON & HEDGES
Benson & Hedges' volume totaled 25.0 billion units in 1986, down 8.3
percent from 1985. Market share was 4.3 percent, 0.3 share points below the
previous year. Both MSA and Nielsen data indicate some moderation in B&H's
share decline at the end of 1986. Like other full margin 100's, B&H is not
participating in the continued expansion of the 100 mm category, which increased
0.4 share points last year due to price/value growth. This is especially true
among the non-menthol packings which represented 53 percent of B&H's 1986 volume
but 59 percent of its decline. The brand's greatest weakness lies in the low
tar 100 mm category where B&H's category share has fallen from 12.5 percent in
1981 to 6.8 percent in 1986. PM-USA is forecasting that B&H's decline will
continue during the plan period with volume falling to 19.5 billion units and
3.7 share points by 1991.
BENSON & HEDGES CATEGORY POSITIONING
1981 1986
®
OT~HEDUCED 1 AR
1981 1985
RE6ULAR 7.6% 7.8%
WNTHOL 13.9s 13.7%
REGULAR MENTHOL REGULAR MENTHOL REGULAR MENJHUL
FULL FLAVOR LOW TAR ULTRA LOW TAR
PM-USA's objective is to stabilize B&H's market share trend in the early
years of the Plan. Once this is accomplished, it may be possible to generate
share and volume gains through line extensions and broad-based marketing
programs. A key strategy is to provide the brand's core 22 to 44 year old age
group with a meaningful, "value added" reason to purchase the brand. Packaging
modifications are planned for 1987 to update and unify all Benson & Hedges
packings and reinforce the brand's quality imagery without.sacrificing current
design integrity and consumer recognition.
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The historical performance of other cigarette brands highlights the
difficulty of stabilizing a declining brand franchise in the U.S. cigarette
industry. With the exception of Newport, no major brand since 1940 has
exhibited sustained volume growth following a period of stability or decline
without a significant shift in consLmter preferences or an "industry shock."
Improving B&H's; performance will be a challenge because of ccmpetitive
couponing, price/value growth and the brand's smoker demographics. However,
B&H's size, strong trademark, retail positioning and quality perception make it
worthwhile to explore all possible options before reducing investment.
A major growth problem for B&H is the low tar 100 mn category, where the
brand's share has fallen to 5.3 percent for B&H Lights and 10.1 percent for B&H
Lights menthol. Cannibalization by B&H Deluxe Ultra Lights is partly
responsible for this situation, as evidenced by the brand's relatively flat
share of the total reduced tar category. B&H Lights has not captured a
substantial number of smokers from full flavor B&H as they switched down the tar
spectrum. This is significant because B&H's parent non-menthol packings have
declined faster than the overall full flavor category.
B&H's declining appeal among young¢~nale smokers has given it the oldest
demographic profile of any major rand and inhibited B&H's growth in the
low tar category. An estimated 63 percent of B&H's smokers are over 35 years
old. Despite this trend, B&H's strong share among urban and ethnic smokers has
enabled the brand to capture a 16.8 percent share of the 100 mm menthol
category. In 1986, B&H was the fifth leading brand among black smokers. Since
1983, however, B&H's share of both blacks and Hispanics declined significantly.
BENSON & HEDGES DEMOGRAPHIC PROFILE
1983 1986
PERCENT
®
7.1
4.8
18-34 35-54 55+ MALE FEhALE WHITE BLACK HISPAN.
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Underlying B&H's underrepresentation in the low tar category is the brand's
failure to participate in the growth of the 100 mm segment in regions outside
the brand's traditionally strong markets. B&H's sales remain concentrated in
the southern rim of the U.S. from California to Florida, in the Northeastern
urban areas and in Chicago. The primary opportunity to expand B&H's geographic
boundaries is to use line extensions to penetrate markets where the brand is
underdeveloped, particularly in the northern half of the U.S.
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Advertising
A new advertising campaign for Benson & Hedges was introduced in January
1987. The campaign is designed to increase brand awareness by establishing a
positive image position for the brand based on quality. ("For people who like
to smoke ... BENSON & HEDGES because quality matters.") The appeal to quality
is also designed to create a visual identity which adds value and preempts
competitive inroads by providing a "reason why" to purchase the brand. The
campaign responds to increasing social pressures against smokers by focusing on
"smoker friendly" environments that conmtanicate feelings of relaxation, intimacy
and smoker acceptability.
A key objective of the campaign is to broaden B&H's demographic profile
(without alienating current smokers) by making the brand appear more mainstream.
B&H currently has a relatively affluent, higher educated smoker profile. Survey
data indicate that these groups have lower start rates and are quitting at
faster rates than smokers with blue collar occupations. While we intend to
maintain broad media support to B&H's core smokers, targeted efforts will be
directed at younger adults, blacks and Hispanics.
.
1980 SMOKING INCIDENCE BY OCCUPATION
MALES ONLY
60 PERCENT
V
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0
PAINTERS TRUCK CARPENTERS AUTO ASSEM6LERS ACCT.
DRIVERS /ECH.
SOURCE: 1995 SSURGEON GENERAL'S REPORT
Promotions
Increased emphasis will be placed on B&H promotions during the plan period.
These will be used to support the brand's new image utilizing "smker friendly"
events, purchase continuity programs and incentives which encourage product
usage. A key objective of these programs is to reduce attrition within the 22
to 44 age category. Consumer intercept couponing will be used in 1987 to target
competitive smokers. In the future, more intensive couponing may be necessary
if current strategies are unable to moderate B&H's decline. On-product
incentives scheduled for 1987 include a two-pack lighter promotion and selected
use of an on-carton FM radio. Inner city sampling programs and specialized POS
will continue to be employed to increase menthol exposure among blacks.
.
Line Extensions
Recent new product activity in the cigarette industry demonstrates that
line extensions have benefitted brands which are growing, but provided little,
if any, share growth to products which are stable or declining. This indicates
that a brand's parent packings must have vitality which can be leveraged through
line extensions or the extensions themselves must have meaningful "news" value-
(such as a new tar level or length) independent of the parent. This can be seen
in the successful launch of B&H Deluxe Ultra Lights while the more recent
Classic Lights and Deluxe Lights tests have not met expectations.
Consequently, while several B&H line extension options are available, it is
important to first establish the brand's new image in the consumers' mind. Once
this is accomplished, subsequent line extensions will have more relevant meaning
and have a greater chance of providing incremental volume. Future line
extension options include lights box, 120's and king size. Product concepts are
currently being prepared for each of these options.
.
MERIT
Merit's 1986 volume of 23.1 billion units was below 1985 by 4.3 percent.
Market share totaled 4.0 percent, down 0.1 share points for the year. Merit
Ultra Lights, however, continued to grow with unit volume up 10.0 percent over
1985. Merit Ultra Lights is now the second largest ultra low tar brand behind
Carlton and the fastest growing product in the category. Both MSA and Nielsen
data indicate a stabilization of Merit's share decline during the latter half of
1986. PM-USA forecasts Merit's market share to decline marginally during the
plan period, achieving a 3.9 percent share in 1991. Volume declines are also
expected to moderate, averaging 2.4 percent annually over the next five years.
Merit's parent packings have lost share in their respective segments since
1980, which has not been offset by growth in Merit Ultra Lights. Merit has not
fully participated in the continued growth of the 100 mm low tar category and
has declined among low tar 85 mm's. These trends reflect the recent weakness of
all low tar products except Marlboro Lights and discount cigarettes. Merit's
share among full margin reduced tars excluding Marlboro Lights has been
essentially flat over the last five years.
MERIT CATEGORY POSITIONING
(85 mm & 100 mm COMBINED)
1982 1984 19B6
10
®
~
REGULAR MENTHOL REGULAR
LOW TAR
MENTHOL
ULTRA LOW TAR
A challenge facing PM-USA during the plan peri is to revitalize Merit in
the current industry environment of stable tar ynamics and increased price
~ competition. Underlying Merit's weakness is an inability (in part due to
Ntarlboro) to attract an increasing number of young smokers. Tracking Study data
indicate that Merit's share of 18 to 24 year olds declined from 5.2 percent in
1983 to 3.7 percent in the most recent survey. Additional research indicates
that Merit is perceived as a low tar cigarette which compromises on taste.
Initial positioning as the industry's most technologically advanced cigarette
gave Merit strong appeal among higher educated, higher income smokers. As
previously mentioned, this group has relatively low and declining incidence
which reduces the brand's potential smoker base. Despite this situation, we
feel that Merit still possesses significant long-term potential, particularly if
the parent business can be stabilized.
Merit's geographic profile is virtually the opposite of Benson & Hedges',
with the exception of the Northeastern urban areas where both brands are
relatively strong. Important Merit markets in the Northwest and upper Midwest
are also areas of significant generic developxnent and the brand has been hurt by
price competition in these regions. Merit's best opportunity for regional
growth appears to be in the South where Vantage and Winston Lights are
disproportionately strong. Merit also underperforms in the West, a strong
Marlboro Lights region.
Advertising
A major objective during the plan period is to position Merit Ultra Lights
for long-term growth while stabilizing the parent business. An important
strategy is to address the perception among smokers that Merit represents a
taste compromise. These efforts are designed to broaden the brand's smoker base
and increase competitive trial. Packaging changes are also being considered for
1987 to unify Merit's product line and give the brand a more contemporary look.
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PM-USA's objective for Virginia Slims is to continue increasing volume and
share by stabilizing the parent business, returning the lights packings to their
previous growth rate and maximizing 120' pward ctnentum. Our strategy is to
increase the brand's appeal among oung6r =1 n, capitalize on growth
opportunities among older smokers and improv enetration of targeted geographic
areas and ethnic groups. To implement this strategy, PM-USA will continually
utilize innovative media and promotional programs to reinforce the brand's image
and launch line extensions that broaden Virginia Slims' demographic profile.
expenditures are expected to remain at current levels, increasing ZI
inflation. While maintaining support directed at all wcmen, yntmg-females will
be specifically targeted and the brand will continue to receive strong support
in ethnic markets.
Advertising
During the plan period, PM-USA will continue to employ image-based
advertising for Virginia Slims using the fun/fashion theme. The unique
combination of historical humor and modern style enables Virginia Slims to
congratulate and celebrate women and their accomplishments without appearing
overbearing, strident or self-conscious. The campaign continues to be easily
recognizable and provides an effective message as evidenced by the fact that
Virginia Slims has the highest claimed advertising awareness among wonen. Since
the brand has penetrated most media suited to its image, advertisin ~
Promotions
PM-USA will continue to utilize promotional programs and on-product
incentives to supplement Virginia Slims' broad media visibility. Major
promotional sponsorships such as Virginia Slims World Championship Tennis and -z=
Fashion Fun Fairs appeal to the brand's target audience and also provide avenues
for increased media exposure and sampling. During the plan period, these will
be supplemented with retail programs that increase visibility and induce trial.
The annual Book of Days promotion was successfully used as a three-pack
incentive for the first time in 1986 and will continue in this format for 1987.
Other planned pronotional activities include the Slimshop carton promotion and
special programs for ethnic groups and selected trade classes.
Line Extensions
Line extensions remain an integral part of our strategy to maintain
Virginia Slims' upward momentun. They offer an opportunity to broaden the
brand's geographic and demographic appeal while increasing PM-USA's share of
underrepresented segments. The recently introduced 120 irm extension and an
ultra lights version currently in test offer an opportunity to increase Virginia
Slims' appeal among older smokers and penetrate relatively weak geographic
areas.
VIRGINIA SLIMS vs. ULTRA LIGHTS 9 i20'S
1986 DEMOGRAPHIC PRQFILE
150 PERCENT
18-34
61
35-54 55+
®
~
VS tL 120'S
125+
25
28
~.... :re:._ .,...
VIRGINIA SLIMS ULTRA LIGHTS 120'S
SOURCE: TRACKING STUDY
Virginia Slims Lights 1201s, introduced in October 1985, attained a 0.5
percent market share in 1986 and a 18.7 percent category share. Virginia Slims
is already the second largest brand in the segment. While the 120's
introduction contributed to the recent Virginia Slims Lights decline, it has
succeeded in delivering incremental volume to the franchise. Virginia Slims
Lights 120's are expected to continue growing during the plan period, reaching a
0.8 percent share in 1991.
Virginia Slims Ultra Lights entered test market in February 1987. While
still too early to judge the test results, we teel that this line extension will
increase the brand's retention of maturing women smokers who may prefer an ultra
low tar alternative and capture competitors' older female smokers. In addition,
the ultra low tar category is strong in the Northwest and upper Midwest,
underdeveloped regions for the franchise.
Virginia Slims Ultra Lights will also position PM-USA to capitalize on any
renewed growth in the ultra low tar category. Future line extension options for
Virginia Slims include lights soft pack, full flavor box and a brown/beige
wrapped cigarette which would compete directly against More.
PARLIAMENT
Parliament is PM-USA's fifth largest brand with a 1986 market share of 0.9
percent, down fron 1.0 share points in 1985. Volume of 5.4 billion units was
off 6.5 percent from the previous year. While the brand has declined for
several years, it retains a loyal core of smokers and concentrated geographic
strength. PM-USA's objective for Parliament is to pursue a regional develognent
strategy and increase the brand's share in its strong markets. Longer term, a
revitalized Parliament could be expanded geographically, building on its core
regions. This is a similar strategy to the one successfully employed by Newport
during the 1970's.
MARCET Si1AAE 2.9% 10.12 2.5%
z FouLE swacFAS 962 s3s 81%
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