The defense against substitutes is Marlboro?s decreased susceptibility to a price ceiling and the brand name loyalty advantage. Due to the position of market leader, Philip Morris and Marlboro have strong defenses against factors in the industrial environment. Their defensive position allows them these perks and if the market is not too effected by litigations pending, it looks to be a very sustainable advantage.
Growth strategies of Marlboro have been product development or line extensions. They have created new products like Marlboro Lights and Marlboro Menthol and introduced them in the same market. They have also employed a family of branding such as specific brands (Marlboro, Virginia Slims, and Newport) that target certain segments and offer different images.
Marlboro is well positioned and successfully maintaining the leadership position in the mature life cycle stage. They have retained this position through differentiation and product development. These have helped and will continue to help, if the market stays stable, Marlboro extend the mature life cycle and remain market leader. Now we are going to focus and emphasis some major factors in the current marketing mix not yet discussed. These factors are the product, pricing, promotion, and distribution.
The product strategy is differentiation and being widely available through distribution. As market leader, Marlboro has taken the Defensive Warfare. They have had the courage to attack themselves through line extensions, and have expanded the market with their family of brands.
Strengths of their product position is that the company has a strong position. They are not over, under, confused, or doubtful in their positioning of Marlboro. It makes sense, is not too narrow, is stable and consistent, and consumers believe in the higher quality of the brand. The high brand loyalty and perceived higher quality help the positioning of the product to be strong.
Some weaknesses of the product are mainly environmental. Society?s view of smoking has changed. Smoking used to be considered glamorous and beautiful, now most buildings are smoke free. Smokers have to huddle outside in rain, sleet, and shine and enjoy their cigarettes. Restrictions on advertising for tobacco products have increased. Outdoor advertising has recently been taken away. The only traditional medium appropriate to find tobacco product advertisements is print. There have also been legal backlashes due to health risks of nicotine use. A negative view of tobacco companies that is prominent in society is one of shiftiness and shadiness. Plus in medium unavailable to the tobacco companies, there has been an influx of anti-smoking campaigns. But even with all of the weaknesses of the market, Marlboro has remained brand leader.
The branding strategy of Philip Morris, as mentioned before, is family of branding. Marlboro follows a family branding strategy. Marlboro would be considered the megabrand and Marlboro Lights/ Ultra Lights/ Menthol would be considered the subbrands. This some what follows Ries and Ries? 22 Laws of Immutable Branding. Ries and Ries say that family of branding is good, while family branding takes away from the product. Marlboro follows many of the suggestions made by Ries and Ries.
Marlboro has a unique and one of a kind name that helps set it apart from other cigarettes. Marlboro also owns a word, that word is rugged. The cowboy, who embodies a sense of a great American tradition, represents this ruggedness. There are many characteristics highly valued in our society that are related directly to cowboy. Marlboro has also been continuously consistent in their brand imaging (with the cowboy) and packaging. Changes have been slight and industry wide, like the introduction to Lights, Ultra Lights, and hard packs. Some other ways in which Marlboro follows Ries and Ries? suggestions are their law of color, law of quality, and law of extensions. As mentioned above, Marlboro has followed Ries and Ries? law of consistency. They have done this not only in the handling of their brand image, but also in the look of their packaging.
Marlboro does not follow all of the suggestions from Ries and Ries. One is their law of publicity. With all of the trials impending and the changed view of society on smoking and tobacco companies, publicity has not helped the product or the market. Though the Philip Morris Foundation would be an excellent vehicle for publicity, they have decided to advertise. If they would let the newspapers and reporters take the drivers seat, consumers might believe it more.
Even with all of the problems the industry is seeing, Marlboro is still the brand leader. The high brand loyalty is the key factor to Marlboro?s dominance in the market. They achieved brand loyalty by being first movers, becoming established, quality of their product, and consistency. This has helped them endure through the turbulent times in the industry.
Brand equity is also very important to the product. Marlboro has a lot of brand equity. It has high brand loyalty that increases trade leverage, attracts new customers, and gives consumers a reassurance in you product. The high brand awareness is due in part of it being brand leader. Marlboro sticks out in the mind of consumers, including non-smokers because of familiarity, and is seen as a brand to consider. The perceived quality is very high for Marlboro. It is positioned as a premium brand and the price leader. Marlboro is also closely associated with its parent company, Philip Morris. Philip Morris is currently creating an image as a socially conscious company. This indirectly creates a positive image for Marlboro. And as the market leader, Marlboro has a competitive advantage. All of these factors increase Marlboro?s brand equity.
This brand equity helps the consumer by increasing satisfaction, confidence in purchase and helps them to process information by setting a reference point. Brand equity helps the firms by assisting in creating efficient and effective marketing programs, increasing brand loyalty, to independently set prices, aid in brand extensions, increase trade leverage, and competitive advantage. This is shown through the increase of shares from 1998 to 1999 (1999 Annual Report) even though there has been an increase in restrictions. The increases help demonstrate the power of brand equity.
The nineties ushered in a time of relationship marketing. Customer Services programs were the most popular way many companies played the new game. Marlboro and Philip Morris are no different. Marlboro offers Marlboro Miles to their customers. Collect a certain amount of ?miles? and order items out of a catalogue them have Marlboro written all over them. This gives current customers perk and draws in new customers. Philip Morris started the Philip Morris Foundation, a service charity and created a new slogan. Their community service relief is aiding in creating a new image for the Philip Morris company. Instead of a seedy, shady cigarette manufacture, Philip Morris is helping society and is socially conscious.
Some recommendations for Philip Morris and Marlboro are to let the news organizations cover your good work. Perhaps send out press releases of activities the Philip Morris Foundation are involved in. Don?t stop the advertisements, it creates awareness and since Marlboro and Philip Morris are so closely associated it helps separate them during the legal mess and hopefully will have a carry-over effect from Philip Morris to Marlboro. They need to continue the programs that are working for them. These things are the consistent image of the brand, being a first mover to comply with government regulations, and in creating the image of a socially conscious company. They also could introduce a new product, a line extension, of the brand leader Marlboro. They need to introduce a product that offers what no other cigarette offers, waterproof packaging.
Pricing Strategy
Marlboro is a very well known company with many subsidiaries. The pricing strategy followed by the tobacco portion of the company is one where the primary objective is to simply sell the most products possible through promotions and brand-loyalty.
For the first part, demand has been proven to be inelastic. Even if the United States Government enacts bills where cigarette taxes grow even further, customer brand-loyalty will still exist strongly. In fact, history has shown that demand ??is very, very inelastic, meaning higher prices don?t necessarily translate into equivalent reductions in consumption.? (Kennedy, p30, June 1998) Indeed, the one out of six tobacco smokers that use Marlboro products have proven their preference not to change.
Secondly, Marlboro uses a fair amount of discounting in order to retain its customer base. The company, two times a year, will run promotions where consumers can buy two packs and receive a third for free. This has been shown to not only keep customers who are loyal to Phillip Morris, but will also tend to take away from the competition. According to the article, ?Experts Pick: Marlboro,? by Nathaniel Kennedy, every time the campaign is launched, Marlboro gains a substantial portion of market share. (Kennedy, p31, June 1998) However, competitors have follwed the lead of Marlboro. They too run the same promotions that, in turn, balance out the market share that Marlboro had just recently taken.
Because competition is so fierce, the majority of Marlboro? pricing strategy is to promote lower prices. In fact, ?Marlboro?shows that you don?t have to make cars and trucks to make money. It has the second-highest profit margins among the top-ten U.S. manufacturers.?(Hedden, p26, October 1996) The reason being is simple. Marlboro does not sell low enough for it to be considered a generic, but it does keep its prices compatible with its closest competitors.
For example, in Mexico, Marlboro and its Mexican producer Cigarrera La Tabacelera Mexicana are ?temporarily reducing the price of Marlboro cigarettes in Mexico by 20%.? (p2, March 1997) The move is an attempt to beat the competition of cigarette smugglers, who are illegally importing the cheaper U.S.-manufactured cigarettes and selling them at steep discounts.
Furthermore, the company must fight in the face of many legal competitors as well. With three main competitors, RJ Reynolds, Brown & Williamson and Lorillard, Marlboro strives to keep its products at a quality level and it prices competitive with the other leaders in the industry. The aforementioned laws of the United States governments have also proved to be a stiff competitor to the company?s overall successes. Through maintaining low prices, an inelastic demand and well-placed discounts, Marlboro? share of the market is more than doubling its closest rival.
However, that demand could easily switch hands at any time. Marlboro relies too heavily upon brand-loyalty to assume that it would always be the leader. Newcomers are plentiful, and it will take a lot of work for the company to maintain its current market share. Indeed, with cigarette prices on the rise as much as they are, consumers are more likely to become, in the future, more price-sensitive than they currently are. If Marlboro falls into the age-old trap of incumbent inertia, there is a good possibility that the corporation will lose their number one spot in the industry. To prevent market loss, Marlboro needs to pay close attention to consumers? preferences and any new additions to the industry (such as a less harmful cigarette). Marlboro will be able to keep on top of the game. Technology is the key here, and the corporation must do everything possible to be ahead of it.
Promotion Strategy
The biggest problems that Marlboro faces today are health problems and advertising to children. To combat these issues, the company uses a substantial amount of