Targeting Strategy
Philip Morris has adopted the strategy that they are committed to marketing their tobacco products to adults who choose to smoke. So what is an adult? By company standards, an adult is a person who is at least 21 years old.
Philip Morris markets to adults by using a multiple-segment targeting strategy. Product specialization has worked well for the company over the last forty years. They have developed a series of brands that are very popular and well known among the smoking population. Philip Morris has also used market specialization to its advantage. The Marlboro Man is an example of how market specialization has been a success with the public.
Marketing Strategy
After a failed attempt to target women in the 1920s and 30s, Philip Morris pulled ?Mild As May? brand cigarettes off the market. At the time, the country was engulfed in WWII and people were rationing cigarettes. When the war was over, cigarette consumption skyrocketed, but new studies coupled cigarette smoking with lung cancer. Consumers were outraged and felt betrayed by their brands. There had never been much shift in brand preference before, even considering price and model differences. But consumers felt mislead and dropped their allegiances with old brands.
Philip Morris saw this as an opportunity to reintroduce their ?Mild As May? brand, but the product had undergone a drastic makeover. Trying to attract old smokers who feared lung cancer, Philip Morris introduced Marlboro brand to the public in 1955. Marlboro was a filtered cigarette that would be safer for all consumers. There was only one problem; filtered cigarettes were viewed as sissy and feminine. Philip Morris needed to assure male smokers that Marlboro was the right cigarette for them.
Marlboro launched a new advertising campaign entitled the ?Tattooed Man? campaign. The ?Tattooed Man? gave off the image of a new Marlboro smoker. Men were portrayed as lean, rugged, merited respect, relaxed, and outdoors oriented. Naval officers, ranchers, and airmen represented a ?Tattooed Man,? all showing that filter cigarettes were not at all sissy or feminine. The men?s hands were calloused and rough, depicting they were hardworking and demonstrating that filtered cigarettes were not sissy.
Marlboro developed full-page black and white advertisements that featured information on the filter and a new flip-top box. The campaign was a success and turned Marlboro into a top selling filtered cigarette overnight. As the campaign continued, researchers used different personalities to find the ideal Marlboro representative. The cowboy emerged as the most popular character and has gone on to represent what a Marlboro cigarette is today.
When the Marlboro Man was first introduced to the public, Philip Morris had to explain him. Life ran an article on who and what the Marlboro Man was in January 1957, where each frame pictured the cowboy talking about freedom, smoking, and ranching out West. The article?s purpose was to draw in men and make them jealous of a lifestyle that they did not possess. This introduction led to many more educational ads over the years, which in turn has led to silent, beautiful image-filled ads featured in present day magazines. Without words, the Marlboro Man takes you to a place that many consumers have come to know very well: Marlboro Country.
Consumers have also become very familiar with the Marlboro flip-top box. The design is very important to Marlboro smokers, as discovered by Forbes magazine in 1987. At that time, Forbes polled smokers by giving them two different packages of Marlboro cigarettes. One box was the standard red with black, bold lettering on it. The other box contained unaltered Marlboro cigarettes dressed in a generic brown wrapping and at half price. Only 21% were interested in the generic brown box, which proves that consumers prefer the bright red packaging (http://xroads.virginia.edu/~CLASS/marlboro/mman3.html). The box symbolizes membership into an elite club that recognizes the Marlboro Man as their spokes-person.
Currently, tobacco industry advertising standards are very harsh. Banned from television and any print media that is targeted at people under 21, Marlboro must make use of its minimal space. Marlboro Man ads can still be seen in magazines like Time and Life, and even on some billboards, but overall advertising has diminished. As stated earlier, Marlboro ads no longer explain anything because consumers are well educated and understand their meaning. Modern ads depict cattle running through a field, a mountain scene with wranglers herding cattle, or just the stereotypical Marlboro Man quietly holding his cigarette in his hand. Men understand the message and privately long to be a true Marlboro Man, which is what Philip Morris and Marlboro have been working on for over forty years.
Focus group
The focus group consisted of people with basically the same demographic information. Three males and three females participated in the focus group, each around the age of 21. Every person was from the Midwest, and many attended Truman State University. All the participants in the focus group now smoke Camel Lights or Marlboro Lights.
Almost all the participants smoke the brand they had started with. Friends in high school were a main factor in deciding which brand to smoke. One girl had even started smoking the brand her mother used. Many started to smoke a particular brand, became accustomed to the taste, and have never changed. Price is not even a consideration. Although Camel Lights and Marlboro Lights have the highest prices compared to most brands of cigarettes, the people in the group would not switch to another brand even if the price of the competitor’s brand was extremely low. Apparently, the switching costs are high in the tobacco industry. Each group member feels a high emotional connection with their particular brand, and would not consider switching brands.
The participants basically smoke because they believe they are addicted to the nicotine in the cigarettes. Many feel that smoking is a relaxing activity. Some agreed that social smoking was enjoyable. For example, Female 1 and Male 1 like to smoke while at the bar. (Interview, p 3) The gas station was a popular place to buy cigarettes, mainly for the convenience. Some group participants liked to stop at the gas station on their way to work or school. One participant, Female 3, buys her cigarettes at the bar where she works, which is convenient for her. Still others, like Female 1 and Male 1, buy their cigarettes at Walmart because the price is cheaper. (Interview, p 3) Male 1 sometimes has trouble getting his cigarettes from the gas station after the weekend because they are usually sold out. Also, the participants prefered hard packs, but most would but a soft pack if hard packs were sold out.
Overall, the participants were satisfied with the current product. Some participants were annoyed with the amount of wrapping on the boxes, but others thought that the wrapping protected the cigarettes better. (Interview p3) The price was considered to be high, but everyone would pay to get their favorite brand. The participants were dissatisfied with the soft packaging; the cigarettes were not well protected. Most group members did not like the smell that the cigarettes left on their clothing, but did not have a solution to the problem. Male 3 had a problem with the smell, because his girl friend did not like it, and a problem with the after taste. But these complaints would not stop anyone from smoking.
The severity of the problems is not great, but a few ideas have been raised. The tobacco companies need to look at the problems of aftertaste, smell of smoke, and packaging. Soft packs were not liked by any participants. More hard packs should be distributed. One point that surprised us was the excitement for prepacked cigarettes. Tobacco companies might have a marketing strategy with prepacked cigarettes. The high price of the cigarettes was noted within the group, but each was willing to pay for their particular brand. Tobacco companies do not need to lower price because the members of the group were still willing to pay. They all saw the brands of cigarettes as being very differentiated, and therefore the industry has very high switching costs. It was also noted that the participants still smoked the same brand of cigarettes that they started out with. Many have not even bothered to try different brands. This is a key point that the tobacco companies need to focus on. If they can get people to start smoking their brand first, then they have a good chance of having that person making a repeat purchase. The tobacco industry is seen by consumers to be very differentiated, allowing the companies to charge higher prices and creating high switching costs.
Current Marketing Mix
Philip Morris? Marlboro is currently in the mature life cycle. The cigarette industry as a whole is in this life cycle. The objectives for the mature stage are to extend the life cycle for Marlboro by maintaining the brand leader position, advertising image, and cannibalizing the product. Marlboro needs to watch competition (RJ Reynolds and Brown and Williamson), maintain high brand loyalty to keep brand leadership, and continue with creating a socially conscious company. The creating of this image as a socially conscious company is a company wide customer orientation. What has helped them remain on top is their size advantage, experience, and well-defined target. Some specific areas that Philip Morris needs to focus on are sales growth, profits, customers, and competition. These will be discussed briefly. We will elaborate on the factors product, pricing, promotion, and distribution in greater detail.
Marlboro is currently in a growth maturity stage for sales growth. Although the industry is in the mature life cycle, Marlboro still controls a majority of the share and sales are increasing (1999 Annual Report). With the 1998 Master Settlement Agreement, where Philip Morris had to pay a large settlement to past consumers for with holding information about the harmful effects of smoking, sales still increased from 1998 to 1999. This is mostly due to the high brand loyalty of consumers (focus group).
As mentioned above, due to the high and unusually strong brand loyalty of the market, profits have increased even with stricter laws and regulations. Pending litigation, smoking could become even more expensive than it already is. Taxes could be imposed to increase price per pack, which would hurt profits if consumers start buying cheaper brands. If government raises the price per pack as a standard and consumers remain brand loyal, profits could increase for the company.
Marlboro targets adults over twenty-one and will not use anybody in an advertisement who looks younger than twenty-five. They wish to retain current customers and try to discourage youth smoking. Many smokers start smoking in high school and remain loyal to the brand they start smoking (focus group). Though reality and their strategy are incongruent, they try to target current consumers.
The three big competitors in the tobacco industry are Philip Morris (market leader), RJ Reynolds, and Brown and Williamson. Philip Morris (Marlboro) and RJ Reynolds (Camels) own the two main brands. Due to the price increases delegated by the government, cheaper non-premium brands are catching price sensitive customers. If such price increases persist, competition could increase as well. That is only if the prices increase so much that brand loyalty sways.
We would like to discuss how these stated strategies of Marlboro effect Porter?s Five Forces. Buyers are an overall weak force in that they are so brand loyal, they will pay inflated prices for product. They do expect more from the parent company that helps explain the Philip Morris Foundation, a community service charity ran by the people of Philip Morris, and the new slogan for Philip Morris, ?Working to Make a Difference. The People of Philip Morris.? The main reason buyers are a weak force is because of their strong, unwavering brand loyalty.
Competitive rivalry is intense in the tobacco industry. With the changing view of smoking by society from one-time glamorous to now outcast and increasing government restrictions with price increases, the consumer pool is dwindling. Luckily, Philip Morris? Marlboro has an advantage as brand leader. The three main competitors are struggling to maintain market share, and Philip Morris is succeeding in remaining the market leader.
New entrants in the tobacco industry are rare. It is later in the life cycle, so many would-be new entrants are dissuaded by many factors. First is the sheer size of the established competition. They have the upper hand with economies of scale, experience curve, channels of distribution, and high brand loyalty. New entrants also are thwarted from entering the tobacco market by the uncertain future of the market. The pending legal dealings, increased restrictions, and mandated price increases makes the environment risky for new entrants. There are high barriers to entry.
Being that the cigarette industry is in the mature life cycle, the number and availability of substitutes should be numerous. There are a few substitutes to cigarettes like chew, snuff, and cigars, but none truly substitute the cigarette. Unlike perfume were the smell is similar enough or clothes that fit well and look nice, the taste and experience of smoking your brand of cigarettes can not be duplicated. This inability to reproduce the experience and taste makes the substitution uncommonly weak for the mature life cycle.
As mentioned in the new entrants, channels of distribution are established and the high demand from the brand loyal customers weakens the power of distributors. This is the environment for Marlboro in reference to Porter?s Five Forces. Although it does not follow the text book definition of the mature life cycle, it is due mainly to the unique industry of tobacco.
The competitive strategy of Marlboro is differentiation. Marlboro has a perceived uniqueness industry wide by consumers. The uniqueness of the brand name Marlboro and its image, quality, and taste, is highly valued by customers. The customers value it enough to pay higher prices for the Marlboro brand. Marlboro?s strategy of differentiation has remained stable and consistent.
There are three main strategies Philip Morris has chosen to help differentiate Marlboro. The company has increased the service quality of quick responsiveness to complaints and compliance to federal regulations, assurance of a quality product purchased, and empathy for consumers (smokers and non-) through the services of the Philip Morris Foundation. Philip Morris has differentiated by reputation and brand image as well. The company has remained consistent in their image as a high quality product and an American tradition. Their market expertise, as market leader, has also allowed them to differentiate their product. This strategy reinforces the image as a stable company and plays up the company?s longevity and dominance in the market.
The current position of Marlboro has been mentioned many times as the brand leader. As the brand/market leader, Marlboro has to defend their position and territory against competition (which as mentioned before is very intense). Luckily for Marlboro, the defensive position is the preferred position. It has becoming increasingly difficult to defend position pending legal results from numerous cases set against Philip Morris and other tobacco companies. If excise taxes ensue (which would increase price of cigarettes by federal government and state) they could lead to a decline in sales, a decline of volume for the entire industry, and a shift from the premium segment (Marlboro and Camels) to the discount segment (GPC) (1999 Annual Report).
Given Philip Morris? superior defensive position currently, it enables them to have defenses against environmental factors Porter identified as the Five Forces. Marlboro being a differentiated premium brand, this creates a buffer with high price and low cost. The consumers are brand loyal and less price sensitive. New entrants have barriers to entry due to Marlboro’s brand leader position. The barriers include the high emotional switching cost from Marlboro to a new brand due to high brand loyalty, the high product differentiation Marlboro has created and maintained, and the economies of scale and established distribution channels the com from Marlboro?s experience.
The buffer previously mentioned for the defense against the threat of new entrants, also is a defense against competitive rivalry. It is with this buffer that Philip Morris has the excess resources to fight, identified as the Principles of Force by Ries and Trout. The expertise of the company in the mature industry also is a powerful defense against competitors. As the market leader and the high brand loyalty, Marlboro is less susceptible to price wars.
For some of the same reasons mention above, Marlboro has similar defense against buyers. Being less susceptible to price wars because of the high brand loyalty helps the company have greater control over pricing. This could change, though, with price increases and pending excise taxes. For now it does not seem to be a problem, but the future of the industry is uncertain. But for now as market leader, Marlboro can create expectations of higher quality products and service. The buffer so prominent in many of the factors defends against suppliers.