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Example research essay topic: Complete Philip Morris Marketing Analysis - 5,212 words

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... or substitutes that would provide a healthier alternative. Philip Morris was the first company to take a step in the right direction by introducing Marlboro. The filtered cigarettes were believed to be healthier and reduce the chance of developing cancer.

Since then, more companies have introduced their own version of a healthier cigarette. Tobacco companies introduced such innovations as light and ultra light cigarettes. Light cigarettes are made with less tar; ultra lights have almost no tar in them. The concept of light cigarettes opens up the field of opportunity for smokers. They can now be more health conscious when choosing a cigarette, but light cigarettes can still cause cancer. Cost is another concern when it comes to smokers.

Research shows that most smokers are brand loyal and do not pay attention to price, but there is a possibility that some do buy the cheapest brand available. By offering a lower priced brand, tobacco companies can help to gain market share and broaden their variety and assortment of products. Not all current tobacco companies offer a low price cigarette; they tend to focus their strength on their top brand. Gender is segmented within the tobacco industry. Brands like Misty's, Virginia Slims, and Carlton are aimed at the female population.

Men have the Marlboro Man; women have slimmer and slender cigarettes. The tobacco industry has been trying to also segment ethnicity, but has failed in the past. One example is the brand Uptown, distributed by RJ Reynolds, which was aimed at African Americans. Many critics felt that the tobacco industry, as well as RJR, were exploiting and encouraging minorities to smoke. Virginia Slims is currently running ads that target many cultures by showing their brand as a cigarette to be smoked by all women worldwide. Flavored cigarettes are becoming an industry favorite.

Menthol cigarettes used to be the only choice available for a different taste. In todays market, there are many alternatives to menthol and regular cigarettes popping up around the industry. Camel is currently marketing new citrus and vanilla flavored cigarettes. These cigarettes come in regular, light, and ultra light varieties and offer a different perspective on smoking.

Camel also is offering different blends of cigarettes that are made with Turkish and domestic tobaccos, all giving off a different taste. Marlboro was the first brand to alter the appearance of the cigarette package by offering a flip-top box. The idea caught on quickly and now most cigarette packages do have the flip-top box. This little innovation made cigarettes less messy and easier to keep track of. Today, there are still soft and hard packages being offered to the smoking community. Each package comes wrapped in a cellophane seal to help protect the box, but can be removed for immediate use.

Cigarette box designs have not really changed much since the 1950 s, but there is room for improvement. 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. After a failed attempt to target women in the 1920 s and 30 s, 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 mens 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 articles 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 (web). 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. 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 p 3) 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. 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 Porters 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 Porters 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 companys 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. 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 litigation's 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 mega brand and Marlboro Lights/ Ultra Lights/ Menthol would be considered the sub brands. 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. Dont 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.

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 dont necessarily translate into equivalent reductions in consumption. (Kennedy, p 30, 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, p 31, June 1998) However, competitors have followed 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 dont have to make cars and trucks to make money. It has the second-highest profit margins among the top-ten U. S. manufacturers. (Hidden, p 26, 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 %. (p 2, 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 companys 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. 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 promotion and goodwill to keep its


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