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PHILIP MORRIS Cigarette Marketing - A New Perspective November 1989 37 GOLDEN SQUARE LONDON W1R 4AH TELEPHONE 01-494 3525 FAX 01-734 5253 REGISTERED IN ENGLAND No 21?40312

- 2 - Who's directing the market? Key Issues Focus on the opportunities Consumer attitudes Product benefits Positioning Advertising Isolating the real potential Where next? N tJt 0 j O ~ 4 ~ ~ .!

3 Who's directing the market? Consumers in Europe (and probably throughout the World) are under increasing pressure to give up smoking. In behavioural terms this has translated into the growth of low tar sectors rather than a dramatic volume decline in the total market. On the surface this would seem to be an acceptable situation from the industry's point of view. However there are other implications that impact on the marketing of cigarettes - the market is now defined and structured by tar category low tar includes a large number of 'light' versions of parent brands brand images are more obscure - even in countries where advertising restrictions are less controlled than the UK, images are often not well defined. brand activity is becoming one dimensional - there are few revolutionary approaches!

4 The market structure is more a manufacturers response to the government/health lobbies rather than a reflection or development of consumer demand. If low tar brands are growing because of effective marketing, why are there no brands whose positioning reflects a positive consumer product benefit? Much of the advertising and promotional activity simply relies on pack colours and product descripters of 'mild' or 'light' to indicate the category. In many cases it is only the health warning that talks directly about the product to the consumer. We have to accept that social and health pressures will continue to direct smokers to low tar cigarettes, however there should be more confidence and re- assurance for the consumer than a health warning at the bottom of an advertisement. There are too many followers and not enough leaders in cigarettes. The approach in other markets is starting to change, there is an opportunity for a leader in cigarettes. ~_

- 5 - We believe that the industry has been channelled by outside pressures into one marketing approach for all brands. We equally believe that this provides an opportunity to stand back and review the market. An opportunity to take a new perspective .....

- 6 - Rey Issues The major issue for cigarette marketing is the often, one dimensional approach to advertising development. Research tends to focus on the consideration of advertising concept boards and to force reaction to the single image as presented. Advertising development is led by response to images that are largely directed by what other brands are doing rather than by addressing issues that are consumer orientated. There are a number of other key issues - they are neither definitive or mutually exclusive - however they all relate to the approach to the consumer. 1. If low tar is such a good idea and consumers respond to the message - why are we not focusing on the benefit? I 2. Should we be restricted by the artificial market structure? Is there a competitive opportunity? 3. Where are the lifestyle brands? 4. Where next after low tar?

7 5. In some areas the advertising 'rules are less restrictive (but likely to get tougher) - How do we give ourselves an edge for the future? 6. Advertising restrictions are increasingly more difficult - Does that mean that we really have to produce advertising that no one understands? 7. Can we exploit other consumer concerns in order to improve the image of cigarettes and smoking. 8. If we can't borrow positive images - can we create them? 9. Can we create a niche brand (that generates high volume)? 10. Consumer targeting - do we advertise at who we've got or who we want? 11. Can we learn from other markets? 12. Can we make the restrictions work in our favour? 13. Why do all cigarettes look the same? 14. Where do consumers get most of their positive images for cigarettes?

8 Focus on the opportunities Essentially, the key issues can be broken down into four discreet sectors, specific opportunities can however, appear in more than one category of influence/direction. Consumer Attitudes Product Benefits Issues 1, 3, 7, 10, 11 & 14 1, 4 & 13 Positioning Advertisina 2, 3, 5, 7, 9, 11 1, 2, 3, 6, 8, 9, 10, & 12 12 & 14 We have taken each sector and expanded the core thoughts and their implications for developing an alternative and more positive approach to cigarette marketing.

- 9 - Consumer Attitudes Lifestyle Although cigarettes are a'badge' product most of the brands, including the most successful ones, do not have strongly defined images. The probable exception is the masculine image of Marlboro. Where is the cigarette for the higher educated groups the affluent middle aged career women rising income groups the grey market. - In short, the articulate, aspirational and the adventurous within the broad cigarette market framework. Equally - where are the brands for the key groups within the mass market (C2D)? Advertising, particularly in the UK, has become irrelevant, abstract or stereotyped. It lacks total empathy with potential target groups. Consumer perceptions are based on pack designs, price points and usage patterns - not images created by the advertising. N ~ O ~ O ~ ~ 0

- 10 - Growing concerns Consumers are being increasingly aware and concerned on social and moral issues. In Germany and across Scandinavia the ecological movement is becoming a major force. Cigarette Companies continue to sponsor sporting events - why can't they get involved in 'green' issues - both promotionally and in a direct role. Will consumers feel less guilty about smoking cigarettes from a Green giant? Targeting Cigarette advertising is largely directed (both in research and executionally) at mass target groups - defined only by broad demographics and current brand behaviour. Why are we not being more selective in terms of who our message is directed at? We need to learn more about the attitudes and influences of - heavy users - vulnerable brands - new users - consumers who brand switch and ... when did we last target a campaign at recently lapsed users?