Marlboro is a tobacco product that was started by Philip Morris in the early 1920s. Philip Morris the multimillion group of companies had a very good history of success and was proud of its good birthright. It initially designed the cigarette for women since it was filtered and had a red stripe around the filter to hide the lipstick blemishes from the women’s lips calling it “a cherry tip for your red lips” for it considered Marlboro a ladies choice. It decided to commence the project taking advantage of the slogan “Mild as May” in the year 1920. Marketing the product was very easy since it was all about “how a lady like a cigarette was”. In 1954 it decided to make the brand unisex after realizing that women kept away from the product and they were struggling to quit smoking, when scientists announced that it was a major cause of lung cancer. It argued out that men knew about the consequences of lung cancer but could not mind smoking especially because it was filtered. Back in the years, filtered cigarettes were considered safer to smoke than unfiltered ones. Following this, Philip Morris made Marlboro cigarette a men’s brand. In most parts of the world it had the greatest sales and made big profits.
On 2nd of April 1993, Philip decided to cut the prices of the product to get more customers and marked the day as “Marlboro Friday”. That was where the name came from. This allowed the company to compete with other major cigarette makers like embassy and the rest, although the company made enormous losses as a result of the price cut, the other competitors had no better prices to offer to buyers and it managed to recover the money lost in less than three years due to the large number of customers going for the brand. No wonder William Campbell had this to say”we think the pain was worth the effort. We are not in this for the short term. We are in this for the long term. Great brands are still great brands, but you have to keep the price value in line with today’s discerning consumers”.
Philip Morris discloses more than one hundred ways of finding marketing strategies. The firm adds these strategies are found in places you could ignore and term them as “funny places”. It started with a price promotion by announcing a reduction in price both in wholesale and in retail shops. Reducing the prices by almost 20% meant four times increase in brand shares. The calculation therefore showed that there was a price cut of 40 cents in every packet of cigarettes containing 20 sticks. This was done in a very professional way since the list price was not affected. Instead it played with the customer’s wits and introduced things like coupons and product promotion which went through the customers, for example if a customer purchased three packets of Marlboro he or she was given an extra packet free of charge. The retailers were greatly involved in the promotion and showed immense support by allowing their sales monitored weekly by sales representatives from Philip Morris, placing signs outside their shops displayed the reduction in prices and distribution of promotion catalogs to those who visited the outlets.
The second strategy by “Marlboro Friday” was expanding the continuity programs that existed. A lot of money was spent on a team that was involved in adventures and expeditions established in the early 90s. Not forgetting that Marlboro also involves itself in motorsports, those willing to participate in the adventure were supposed to purchase Marlboro products through which they earned redeemable points on items to be used in the adventure. Catalogs that included these items were also acquired by redeeming the points. Such items included clothing from western companies, branded cigarette lighters, and backpacks for carrying goods, radios, heavy jackets and cooking equipments were also redeemable. Credits were given according to items bought, for example a buyer was given a charcoal grill in every 130 packs of Marlboro purchased which was fair because the grill at a general retail outlet would go for 50$.
Discount change is the last strategy in which Philip Morris increased the prices (list) of the cheaper products or brands. These prices were made permanent through conversion of price promotion into an equivalent reduction in list price. This was applied in all other cigarette brands belonging to Philip Morris. It announced an increase in profound discount level and a decrease in middle price discount level. Changes were made in the cigarettes market price that implicated fall from three levels to two levels. Large scale mail campaign was used to make announcements to the buyers about the price changes made. The main objective of the new strategies on pricing was to reduce the gap between concession competitors and premium manufactured goods to a point where the decisions made by the buyers were based on quality and what they preferred to buy but not on price alone like they previously did.
The firm evaluated and enumerated the product demand in several ways. According to the media mark survey team the large numbers of people who smoked were light smokers who either were introducing themselves to smoking or smoked for leisure and were not addicts, followed by the medium smokers who were unpredictable and the least consumers were the heavy smokers who consumed up to five packs of cigarettes in a day. Compared to the United States many smokers were young, jobless, less likely to be college graduates and less likely to be newspaper readers and also low-income earners. Many smokers were also found to be loyal to the brands they smoked. A survey conducted by the “united states department of health and human services “ showed that out of all smokers above the age of 18 years, only less than 10% of them had smoked a different brand of cigarette within the year before the survey was conducted. Many were female smokers and those who were struggling with decision to quit smoking completely. Low-income earners were also not loyal to what they smoked.
Nicotine is a content in cigarettes is highly addictive and once somebody started smoking, leaving the habit was hard. Less than 3% managed to quit completely every year. In response to risks associated with smoking, a fall in consumption led to rising in disbursement of the dollar.
In 1993 cigarettes were widely available in retail shops like supermarkets, gas stations, clubs, and eating places. Size of the package and quantity to purchase depending on the outlet. Cigarettes continued giving retailers big profit margins despite the fact that the manufacturer’s price had increased more than retailer’s price in the year 1983. A decade later the industry started facing challenges that influenced the output and pricing of cigarette products. One of them was the proposal to increase taxes. A slight increment in cigarette price meant a decrease in demand and for this reason drop in profits. Increment of restrictions on smoking made many cities prohibit public smoking hence a decrease in demand. Deadset against smoke Campaigns were launched to discourage the smokers from furthering the inclination. This brought down the demand and profit levels.
Another major threat on demand was restrictions of marketing activities like commercials on radio and television forcing the firm to spend more on other media similar to printing and database marketing. It was even criticized that the whole advertisement thing should be banned as it was targeting children following a cartoon used in the advertisement and children are easily attracted to cartoons. Liability proceedings of the product were also a threat in the cigarette industry. The company never paid any amount to settle a case in any court concerning cigarettes.
“Marlboro Friday” had many implications in the market after being announced, one of them being cost. Prices cut down affected the market capital by causing a decline of almost 30%. The stock dropping from 64.12$ to 49.37$ was marked as the biggest decline in one day and on a single item in the stock market. This decline would continue in months ahead before starting to rise again. The overall stock average fell since investors feared losses and started selling their shares. Many bystanders made bad comments about the reaction saying it was overdone; others even had this to say “they used an ax where a scalpel would have been preferable, it destroyed the industries profitability.” but little did they know that it would one day be the greatest of all and most profitable. Philip Morris imagined things and made decisions that thought would take back the company to where it was in terms of profitability. This also affected the entire dwindle of other tobacco stock prices.
Philip preserved the actions taken on “Marlboro Friday” and continued defending them by saying the mentioned actions would maintain the company’s position in the entire cigarette market. Alex Wexler, a senior person and the vice president of Philip Morris had this to say, “We know there will be some short-term pain in our profitability. But this is an investment in the future. We have seen a lot of other companies, like IBM and GM, constantly try to fight very short term battles instead of addressing long term problems.” Since then many have continued to ask two major questions regarding what Philip decided about its company, one of the tantalizing questions is “did the actions taken by Philip Morris represent a necessary and effective strategy for preserving Marlboro’s brand equity”. The second question is “what were the implications of Marlboro Friday for brands and brand management”. This confirms the big question that fortune asked, “did big brands die the day the Marlboro man fell off his horse”. Though this is a critical question, it could mean a lot for the company. Philip Morris made a rebound and it is making good progress.