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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
manufactured other consumer products like cheese and coffee, investors felt that it may
announce price cuts in those categories as well.

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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.

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.

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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.

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.

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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.

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.

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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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SWOT Analysis
Strengths Weaknesses

1. Competition: Marlboro is the 1. Customer: The customer have


giant fermentable condition viz become savy and they are
v competitors. obsessed to seek out value in
2. Supplier: Companies enjoying their transaction come up
and maintaining good brand loyalty is not the
company relationship with consideration.
suppliers. 2. Competition: Competition is
3. Labor: Company is maintaining tough in the tobacco industry
good relationship with from both direction (i) direct (ii)
collective bargaining agent pvt brand/retail brand.
(CBR) 3. Organizational: The strategic
4. Financially: Philips and Morris direction of the company needs
is financially sound. improvement.
5. Production: systems 4. Market: Marketing
operational management management needs significant
including quality assurance improvement.
systems is in place. 5. HRM: Philips and Morris needs
improvement in HRM.

Opportunity Threats

1. Economic: the economic 1. Social: In USA the country is


condition of USA apparently experiencing social shift which
seems conducive. has negative implications on
2. Social: Philips and Morris is cigarette industry.
reasonably equip to internalize 2. Legal: Legalization has been
the social shift. passed frequently related to
3. Legal: the company is tobacco industry.
reasonably equip to meet the 3. Technology: technological
clauses of legislation. transformation is bone feature
4. Political: Political stability is at the tobacco industry.
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.

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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?