BRAND MANAGEMENT

CASE STUDY

ON

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S No. Contents Pg No.

1 Introduction to the Case 3

2 Case Study 4

2 History 6

3 Conclusion 7

5 SWOT Analysis 8

6 Branding Strategy 9

7 Recommendation to the Management 10

8 Annexure

9 Attachments

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Overview

The tobacco industry in the 90's was seeing the private label brands of cigarettes grabbing

market share from premium labels due to its lower price for similar quality. The market

leading brand was Philip Morris' Marlboro brand, which suffered the most. Michael

Miles, the then CEO of Philip Morris was forced to take action as Marlboro was Philip

Morris' "cash cow", and he was also facing drop in market share across the board in other

premium brands like Kraft and Maxwell House coffee. On Friday April 2 1993, Miles

announced a 20% price cut for Marlboro. In addition it also announced various cost

cutting measures and increased expenditure on advertising. This was to cost Philip Morris

40% of their pre-tax profits. The price cut launched a price war with other competitors

also dropping prices. On the following Monday, which later came to be known as

Marlboro Monday, investors triggered a selloff of tobacco manufacturers' shares across

the board. Investors extrapolated that there could be similar price cutting for premium

brands in other consumer product categories, resulting in a sell off of stock of most

consumer product manufacturers. One explanation could be that since Philip Morris also

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manufactured other consumer products like cheese and coffee, investors felt that it may

announce price cuts in those categories as well.

Case Study

Marlboro Friday refers to April 2, 1993, when Philip Morris announced a price cut to

their Marlboro cigarettes to fight back against generic competitors, which were

increasingly eating into their market share. Philips Morris USA announced a strategy to

increase market share and grow long term profitability in a sensitive market share

environment. He quoted to tobacco unit president and CEO William I. Campbell that in

the current economic condition where consumer confidence is very low and they are very

depress. We should take some steps to capture the market share rather then to run behind

earning income growth rates that can lead us to shift our leading market position down.

He announced four major steps, in which one became the news for the marketers. He cut

down the major portion of Marlboro price, which was expected to lead to a decrease in

the earnings of the most profitable unit by 40%. But the action he took was justified

because he first launched his strategy in Portland, Oregon in December that showed the

positive increase in market share by 4 points.

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As a result of the actions, Philip Morris's stock fell 23% that represented a one day loss of

$13 billion in share holder equity, and the share value of other branded consumer product

companies, including Sara Lee, Kellogg’s, General Mills and Procter & Gamble. A

company that got major hit was Coca Cola whose share holder lost 5 billion. That day

was called Black Friday.

There were a number of factors that led Marlboro to take this step, the economy was slow

moving and they wanted to come out from the recession. One important factor was that

new private label and store brand cigarettes increased their quality and were receiving

more attention from customers and retailers.

A prime consideration was that Philip Morris‘s immense price increase strategy. The

retail price of a pack had tripled between 1980 & 1992 due to rapid increase (i.e 2 to 3

time) in a year. The difference between Premium brand and discount brand of 80 cents to

$1 at that time was thought to be the reason that their balanced sales increased at the cost

of Marlboros market share, which was dropped to 22% and was projected that it could

decline further to 18% if no action was taken.

Even though much of the press releases developed image that Marlboros action declared

that Brands had no value and the concept of brand equity was dead. But in fact the whole

scenario visibly explained that new brands were entering as a competitor of the premium

brand to create their own brand equity on the basis of consumer association.

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At the same time it also explained that if the brand is properly managed it can rule its

loyalty, enjoy price premium and still be extremely profitable. By discounting roughly

40cents between the price of Marlboro and discount cigarettes, Philip Morris was able to

get back his market share of loyal customers. In between 9 months after the price

discount its market share increased almost to 27%.

It has been prove a price correction with respect to brand value led Marlboro to regain its

market share increase it and cement the loyalty of the customers with the rest of the

decade's economy being dominated by brands and driven by high-budget marketing

campaigns.

History

The amazing Marlboro cigarette brand began in England 1847 and was initially targeted at female smokers. Aiming at this market segment was not successful, so in the 1920's Marlboro was re-targeted to female smokers in the United States. In this campaign it was stressed that Marlboro was a 'mild' cigarette. These efforts continued into World War II when the brand was eventually taken off the market.

In the 1950's Marlboro was again introduced to the market, this time on the heels of a stories about the negative health aspects of smoking. At the time, the vast majority of cigarettes being sold were non-filtered. Marlboro was a filtered cigarette, so this clearly was an attempt to win over the health conscience crowd.

Later, during the 50's, the company decided to dump the targeting of women and began promoting Marlboro as a man's cigarette. The first icon of this new change in marketing was the 'Tattooed Man' depicted on this page. Various images of healthy looking, outdoor type began showing up in ads.

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The images used in their ads evolved more and more into those depicting particularly macho types. In the beginning, images of naval officers and livestock ranchers made the advertising scene. In 1954, the now well known 'Marlboro Man' was introduced, and by 1963 was the sole representative of Marlboro ads.

Around 1972, Marlboro cigarettes became the most popular brand, and have remained so, for the most part since then.

While the Marlboro brand may not be ranked at the top any longer, it still retains a value in excess of $21 billion. That figure places it above such brands as American Express, Hewlett-Packard, and Gillette.

Conclusion

In today's globalized economy, the lessons learned from Marlboro Friday, and the

ensuing shift in advertising behavior, are as important as ever. Some of the world's most

prosperous companies have proved that what you sell is less important than how you sell

it. As geographic borders become increasingly irrelevant in defining markets, and

competition rises, there's little room for companies that fail to make a name for them.

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Strengths

1. Competition: Marlboro is the giant fermentable condition viz v competitors.

2. Supplier: Companies enjoying and maintaining good company relationship with suppliers.

3. Labor: Company is maintaining good relationship with collective bargaining agent (CBR)

4. Financially: Philips and Morris is financially sound.

5. Production: systems operational management including quality assurance systems is in place.

Weaknesses

1. Customer: The customer have become savy and they are obsessed to seek out value in their transaction come up brand loyalty is not the consideration.

2. Competition: Competition is tough in the tobacco industry from both direction (i) direct (ii) pvt brand/retail brand.

3. Organizational: The strategic direction of the company needs improvement.

4. Market: Marketing management needs significant improvement.

5. HRM: Philips and Morris needs improvement in HRM.

Opportunity

1. Economic: the economic condition of USA apparently seems conducive.

2. Social: Philips and Morris is reasonably equip to internalize the social shift.

3. Legal: the company is reasonably equip to meet the clauses of legislation.

4. Political: Political stability is evident in USA.

5. Technology: Philips and Morris is reasonably equip with contemporary technology.

6. International environments for Philips and Morris portrays a reasonably good position.

Threats

1. Social: In USA the country is experiencing social shift which has negative implications on cigarette industry.

2. Legal: Legalization has been passed frequently related to tobacco industry.

3. Technology: technological transformation is bone feature at the tobacco industry.

SWOT Analysis

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Branding Strategy

Marlboro launches new premium brand cigarette – is its strategy up in   smoke?

My colleague Mark Choueke posted an interesting blog all about the launch of a new “premium” cigarette brand next week. Marlboro is unveiling a new innovation for smokers which aims to give those who love the ciggies a more refined experience, it seems.

It’s been a long time since I heard about any new cigarette innovation in the tobacco market. And it’s especially interesting as I thought that most of the Big Tobacco brands were moving away from focusing on cigarettes towards products like “snus” that are seen as less damaging than cigarettes (I wrote a little piece about this back in 2006, which subscribers of Mad.co.uk can read here).

As smoker numbers have dropped off, snus has been seen as one part of the tobacco industry still growing. While it’s hardly akin to Big Tobacco firms buying up smoking cessation products, it seems to be a step towards these firms evolving their business models to areas that have future potential, rather than clinging onto a product of the past.

This launch seems to be back to more traditional territory. Or does it? From the consumer point of view, Mark also makes an interesting point in his piece – the point of many premium brands is to be seen with them. These days with the smoking ban, you often never see a cigarette brand as it’s stuffed in a pocket outside. So why would you pay premium for a brand that nobody will see you with?

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