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PHILIP MORRIS U.S.A. INTER-OFFICE CORRESPONDENCE 120 PARK AVENUE, NEW YORK, N.Y. 10017 TO: Distribution DATE: August 13, 1990 FROM: Doron Stern ~ ~ SUBJECT: PM Corporate Imagery OVERVIEW This discusses the findings of a Roper Study that evaluated consumers' overall opinion of Philip Morris Incorporated and R.J. Reynolds. The study indicates that the overall impression of Philip Morris Incorporated has declined compared to 1980. In addition, the R.J. Reynolds corporate name conveyed a more positive feeling than our own. Suspecting that an inherent ambiguity in the Reynolds name might have produced this result, Consumer Research conducted a second survey using the names R.J. Reynolds, RJR Nabisco, and R.J. Reynolds Tobacco Company. RJR Nabisco elicited the most positive response. While smokers still rated Philip Morris lower than R.J. Reynolds Tobacco Company, our rating substantially improved among non-smokers when compared explicitly to another cigarette company. BACKGROUND In January 1990, Roper conducted a study among 2,000 respondents to assess consumer behavior and attitudes on a wide range of topics. One of the questions in the study referred to the overall opinion of big businesses. Philip Morris Incorporated and R.J. Reynolds were among the companies included in this exercise. The results of the Roper Study suggested R.J. Reynolds has a more positive image than Philip Morris Incorporated. Consumer Research, however, was suspicious of the advantage enjoyed by R.J. Reynolds given the confusion the title "R.J. Reynolds" was likely to impart. To support our hypothesis, we included a similar overall opinion question in our March 1990 National Tracking Study. The question assessed the image of the Reynolds company using three titles -- R.J. Reynolds, RJR Nabisco, R.J. Reynolds Tobacco Company. The purpose of this modification was to prove that the perception of Reynolds is linked directly to the titles used to describe the company.

CONCLUSIONS According to our National Tracking Study, Reynolds achieves a range of different results depending on the titles used to describe the company. Both smokers and non-smokers rate RJR Nabisco the strongest and R.J. Reynolds Tobacco Company, the weakest. Philip Morris evokes a more favorable image compared to R.J. Reynolds Tobacco Company (a title that clearly portrays its core business) than it did relative to R.J. Reynolds in the Roper Study. Philip Morris still receives lower ratings among smokers, but roughly equal ratings among non-smokers. ROPER FINDINGS o The overall impression of Philip Morris Incorporated has declined compared to 1980. PM Inc. PM Inc. 1980 1990 Highly Favorable 5%\31 6%\26 Moderately Favorable 26 / 20 / Not Too Favorable 20 14 Unfavorable 17 22 Don't Know 32 39 o Both smokers and non-smokers convey a more positive feeling toward R.J. Reynolds than Philip Morris Incorporated. Smokers Non-Smokers R.J. R.J. PM Inc. Reynolds PM Inc. Reynolds Highly Favorable 140\ 45 140\ 51 20\ 17 50\ 30 Moderately Favorable 31/ 37/ 15/ 25/ Not Too Favorable 10 11 15 14 Unfavorable 8 8 27 24 Don't Know 36 30 41 32

NATIONAL TRACKING FINDINGS o To be sure, Reynolds elicits various opinions depending on the titles used to describe the company. Smokers and non-smokers agree RJR Nabisco generates the strongest image while R.J. Reynolds Tobacco Co. receives the most negative one. Smokers RJR Nabisco R.J. R.J. Reynolds Reynolds Tobacco Co. Very Favorable Mostly Favorable Neither Favorable/ 0 28 7 460/4 22 0 200 40~~62 34 ~54 Unfavorable Mostly Unfavorable Very Unfavorable Have No Opinion/D.K. 12 4 - 10 13 18 3 5 3 2 20 20 Non-Smokers RJR Nabisco R.J. R.J. Reynolds Reynolds Tobacco Co. Very Favorable 230\ 72 70\ 60\ 20 29 Mostly Favorable 49/ 14/ 22/ Neither Favorable/ Unfavorable 10 13 21 Mostly Unfavorable 6 15 14 Very Unfavorable 2 16 22 Have No Opinion/D.K. 9 27 23 o Smokers have a higher opinion of R.J. Reynolds Tobacco Co. than Philip Morris. Among non smokers, the two companies are virtually at parity. Smokers Non-Smokers R.J. Reynolds R.J. Reynolds PM Tobacco Co PM Tobacco Co Very Favorable Mostly Favorable Neither Favorable/ 140 330/47 200 340~54 40 15 ~19 60 14 ~20 Unfavorable 15 18 15 21 Mostly Unfavorable 4 5 16 14 Very Unfavorable 4 2 19 22 Have No Opinion/D.K. 30 20 32 23

o Both smokers and non-smokers indicate that they are more familiar with R.J. Reynolds Tobacco Co. than Philip Morris. Smokers Non-Smokers R.J. Reynolds R.J. Reynolds PM Tobacco Co PM Tobacco Co Have an Opinion 70% 79% 69% 77% Have no Opinion/D.K. 30 20 32 23 o Generally, respondents who give Philip Morris and R.J. Reynolds Tobacco Co. favorable ratings talk about the nature of their businesses, their strong reputations, and the fact that they did not hear anything negative about them. Specifically, smokers key in on the quality of their cigarettes while non-smokers mention product diversification. Smokers Non-Smokers R.J. Reynolds R.J. Reynolds % Rating Favorable PM Tobacco Co PM Tobacco Co Tobacco Company 13% 12% 12% 6% Never heard anything Bad about them 12 12 14 10 Well Established/ Good Company 11 8 10 10 My Brand/Good Cigarettes 16 19 2 6 Diversified Company 4 4 11 8 Provide Many Jobs 2 1 10 4 o Negative mentions relate to the fact that they are tobacco companies and the perceived health problem cigarettes pose. Smokers Non-Smokers % Rating Unfavorable PM R.J. Reynolds Tobacco Co* PM R.J. Reynolds Tobacco Co Tobacco Company Cigarettes Are Unhealthy *Very Low Base 32% 16 33% 6 55% 47 32% 36 cc: D. Beran A. Lopez E. Butson E. Merlo D. Dangoor M. Moore J. Isaacs J. Nelson C. Levy M. Winokur