Marlboro, the world's largest cigarette brand, decreased prices significantly in 1993 which led to a major loss in revenue and shareholder equity. The price drop of 40-50 cents per pack resulted in a 23% drop in share price and $13 billion loss in shareholder equity. This major price reduction was in response to a sluggish economy, stiff competition from private labels, and hefty price increases in prior years that made Marlboro's premium prices untenable. While the short-term results showed an increase in market share, the episode highlighted that even strong brands cannot command excessive price premiums indefinitely.

1. MARBOLORO’S
PRICE DROP
BY
Anas Ahmad
PGP01001
IIM Sirmaur

2. World’s largest cigarette
selling brand
By Philip Morris
Women's Cigarette in 1924
Repositioned in 1950s
As a cigarette for me
Brand Equity of
$21.9billion
In 2016(Forbes)

3. Positioning of the
BrandMarket: USA
Product: Premium quality tobacco
Customers:Young and Middle aged
smokers who want to live life on the
edge. People who want to experience

5. WHAT HAPPENED in 1993?

6. Management Decision
Reduce the prices by 40-50 cents
Earnings decreased by 40%

7. Market
Reaction
23% drop in share price !!!
$13 billion LOSS in shareholder
equity

8. WHY?

9. Sluggish Economy

10. Stiff Competition
Private Labels

11. Hefty Price Increase
80cents to 1$
Price Premiums

12. Conducted in Portland
40 % decrease in pack price
Increase in market share by 4 points

13. RESULTS

14. Market Share Increase

15. Price Premium

16. Discount BrandsMarlboro

17. PRICE
QUALITY
Marlboro’s Price
Band
Marlboro’s
Current Price
Perception
Discount brand’s
Price Band
Discount Brand’s
Current Price
Perception
PriceTiers in the year 1993

18. Can
Strong Brands
charge excessive
Price Premiums?
Question?

19. Learning for Brands
Strong Brands
can command
Price Premiums
but not
Excessive Price Premiums

20. Summary

21. Disclaimer !
Created by
Anas Ahmad
PGP01001
IM Sirmaur
during the
Brand Management
course, under the guidance of
Prof, Sameer Mathur,
IIM Lucknow