Marlboro

Marlboro
From Mass Marketing to New Age
Promotions
Case study
Reference no 506-018-1

This case was written by Bharathi S Gopal, under the direction of TR Venkatesh,
ICFAI Business School, Bangalore. It is intended to be used as the basis for class
discussion rather than to illustrate either effective or ineffective handling of a
management situation. The case was compiled from published sources.

© 2006, ICFAI Business School, Bangalore.
No part of this publication may be copied, stored, transmitted, reproduced
or distributed in any form or medium whatsoever without the permission
of the copyright owner.

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Marlboro: From Mass Marketing to New Age Promotions
On November 5th 2005, a select crowd of a few hundred people gathered in 49 cities in the U.S.
for the 50th birthday bash of Marlboro, the cigarette market leader in the U.S. with more than
40%1 market share. Despite advertising restrictions, agreed to by the cigarette marketers in 1998,
Marlboro was ahead of its competitors with a market share of 40%. The brand had reached the
top with traditional mass marketing techniques, and continued to hold on to its position by
adopting a mix of new age tactics like marketing at live events and bars, promoting Internet chat,
sign-ups for promotional offers from customers, price promotions, and direct mail.

On the contrary, supporters of the anti-smoking campaigns raised concerns that cigarette
advertising was done in a camouflaged manner and required more vigilance and stringent
restrictions. Industry analysts were not sure whether Marlboro, with its new age advertising
methods, would continue to dominate the market in the U.S. in the event of tougher restrictions in
the future.

Tobacco Industry
The tobacco industry comprised of companies that manufactured and marketed cigarettes, cigars,
snuff, and chewing and pipe tobacco. The industry was dominated by large companies such as
Philip Morris USA and R.J. Reynolds Tobacco Company. In the mid 1990s, the tobacco industry
in the U.S. was in a crisis after being sued by several States for understating the cancer-causing
effects of their products. This was followed by cash settlements, high tax on the profits of the
industry, smoking bans and advertising restrictions. Over the years, cigarette consumption had
decreased and it was even debated whether the industry would survive in the future (Annexure I).

During the late 1990s, the demand for premium cigars fell drastically as the market was saturated
with cheap cigars. Cigar manufacturers started to find new customers by adding exotic flavors.
This was a threat to the cigarette manufacturers. Further, the competition was intensified by the
entry of cigarillos2, which was perceived as better than the cigarettes, as it provided a longer
smoke. Though the market was competitive, there was not much scope for product innovation. In
order to differentiate their brands, manufacturers used flavors and unique packaging to add value
to their brands and developed premium brand extensions. These brand extensions helped to
capture the urban market. But at the same time, concerns were raised that the cigarettes with
flavors attracted teenagers to smoking.

In November 1998, the Master Settlement Agreement (MSA) between the Attorneys General
from 46 States of the U.S. and the tobacco companies, aimed at reimbursing States for medical
expenses related to the treatment of smoking-related illnesses. The reimbursement amounted to
$206 billion over a period of 25 years. As a result of this, cigarette companies hiked the prices
which, in turn, curtailed consumption (Annexure II). The downward sales-trend of cigarettes
continued in 2003. Consumers started to quit smoking because of health concerns, negative
public attitude towards smoking besides high prices caused by the MSA. Further, marketers were
unable to attract new smokers because of advertising restrictions imposed by the MSA.

The industry was invaded by a new breed of cigarette sellers who gave deep discounts by
supplying low-priced cigarettes. In a declining market where price was a major factor, these new
sellers grabbed the market share. The increasing prices of cigarettes encouraged smokers to
purchase low-priced cigarettes over the Internet. Online retailers gained a cost advantage by

1
‘Leader of the Packs’: http://www.businessweek.com/@@WZSkKWYQZ8JkMQ8A/premium/content/05_44/b3957107.htm,
November 23, 2005.
2
A cigarillo was a short, narrow cigar that resembled a cigarette. It was wrapped in whole leaf tobacco and contained less additives.
Cigarillos were like cigars, where the smoke was not inhaled and hence safer than cigarettes

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operating in tobacco-producing States with very low cigarette taxes or in areas with low/no
excise taxes. Some Internet retailers also sold counterfeit or smuggled cigarettes at low prices. In
2003, the top players launched a counterattack by offering price cuts and increasing advertising
budgets on their premium brands. This helped to regain the market for the premium and mid-
priced brands. But the discounted brands of the online retailers still remained a threat for the low
priced brands of these players.

In 2004, Marlboro marketed by Philip Morris USA (PM) held a market share of about 40%,
which was larger than the combined share of the next ten leading brands in the U.S.

Philip Morris USA
Philip Morris, a London-based tobacconist was a pioneer in hand-rolled cigarettes in the 1860s.
He sold them under the brand names, Oxford and Cambridge Blues. The company opened its
New York office in 1902 and sold tobacco brands, Marlboro3, Ambridge and Derby. In 1924,
Philip Morris introduced Marlboro as a woman’s cigarette and promoted the brand with the
slogan, “Mild as May”. The brand started to lose its appeal in the market during World War II.
After the war, three new competing brands, Camel4, Lucky Strike5 and Chesterfields6 emerged in
the market. This further weakened the market for Marlboro.

In 1942, the July issue of Reader’s Digest7 published an article titled, “Cigarette Advertising:
Fact and Fiction”. It was mentioned in the article that all cigarettes were the same and harmful.
Further in 1957, Reader’s Digest published another article that linked smoking to lung cancer.
Philip Morris identified the opportunity and repositioned Marlboro as a safer cigarette by adding
a filter tip. Consumers, unable to quit smoking, moved from established brands to try out new
brands. But Marlboro was initially targeted at a female audience and the new filtered cigarette
was perceived as another product extension. So Philip Morris repositioned Marlboro by
associating the brand with the image of a cowboy, which later on became accepted as the symbol
of American culture.

In 1967, PM introduced Marlboro 100s, which was relatively a longer cigarette. In 1968, the
company introduced Virginia Slims for women smokers. The brand image was created keeping
the modern woman in mind. In 1972, Marlboro Lights which contained low tar and nicotine was
launched. This was followed by further extensions, Marlboro 25s in 1985, Marlboro Ultra Lights
in 1989 and a milder version of Marlboro, Marlboro Mediums. The company responded to the
threat of moderately priced cigarettes by introducing Bristol and Alpine in 1989 and Buck, the
following year.

After the ban on cigarette advertising on television in 1971, the Marlboro campaign was featured
in magazines, billboards and point of purchase displays. The company responded to the changing
customer preferences and introduced various line extensions. In the 1980s, the industry was
facing a decline in the total consumption of cigarettes, but the market share for Marlboro steadily
increased to about 11% by 1971, to over 20% by 19838.

In 1985, the corporate framework of the group was restructured and Philip Morris Companies
Inc. became the parent company of Philip Morris Inc. The group acquired General Foods Corp.

3
Marlboro was named after Marlborough, a street in London where the company’s factory was situated.
4
Camel was launched in 1913 by R. J. Reynolds Tobacco Company. It was the first nationally marketed cigarette in the U.S.
5
Lucky Strike was a non-support brand of R.J. Reynolds Tobacco Company. It was provided the distribution support only.
6
Chesterfields was one of the top three brands in the U.S. and was marketed by Liggett & Myers.
7
Reader’s Digest was first published in 1922. It was a monthly general interest family magazine. By 2004, the U.S. edition of the
magazine reached 12.5 million prints.
8
Andrew Hyland, Ray Goldstein, Anthony Brown, Richard O’Connor, K. Michael Cummings; “Happy Birthday Marlboro – the
cigarette whose taste outlasts its customers”;
http://roswell.tobaccodocuments.org/downloads/50%20years%20of%20marlboro%20compiled%2020051121.pdf

3

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for $5.6 billion and its revenues increased by 50% to $25.4 billion in 1986. In 1988, the company
acquired Kraft for $13.6 billion. In 1990, Kraft Inc. and General Foods were combined to form
Kraft General Foods, which was the largest food company in the U.S. This was followed by
further acquisitions of Jack’s Frozen Pizza in 1992, RJR Nabisco in 1993 and many others in
Eastern Europe, former Soviet Union, U.K. and Scandinavia.

In 1998, the restrictions laid down by the MSA also affected PM. The company requested that a
substantial amount that each State received as a part of the $206 billion settlement amount, be
dedicated to Youth Smoking Prevention programs. In addition to this, PM spent $100 million on
the Youth Smoking Prevention program.

During January 2003, Philip Morris Companies Inc. changed its name to Altria9 Group Inc. as the
company wanted to shed its image as a tobacco company and reflect its wide portfolio. In 2004,
PM’s total retail share was 49.8% out of which Marlboro had the largest share of 39.5%. The
company, headquartered at Richmond, Virginia, was the manufacturer of Marlboro, Virginia
Slims, Benson & Hedges, Parliament, Basic and other brands. Apart from manufacturing, PM
also marketed and sold cigarettes in the U.S. and exported tobacco products. PM was the largest
cigarette company in the U.S. in 2005. It led the market10 with a retail share of 50.1% for the
third quarter in 2005 with Marlboro as the leading brand (Exhibit I).

Exhibit I
Retail Share of PM USA’s brands in second quarter of 2005

Source: Based on data from the IRI/Capstone Total Retail Panel; http://www.philipmorrisusa.com

Promoting Marlboro

From 1950s to 1980s

During the early 1950s, there were six filter11 cigarettes in the American market. These brands
together amounted to 10% of the total cigarette sales. The American men perceived that the filter
tip cigarettes were feminine. Marlboro, the non-filter tipped cigarette was positioned as ‘Mild as
May’ for women since 1924. In 1936, the company extended the line by adding a red beauty tip
to the cigarette and advertised with the slogan, ‘to match your lips and fingertips’. The brand
failed to attract the market and in 1954 sales were about 1%. Analysts felt that the brand’s future
was dim.

9
The New York based Altria Group, Inc. was one of the world's largest food, beverage, and tobacco corporations and was a
component of the Dow Jones Industrial Average.
10
IRI/Capstone Total Retail Panel was developed to measure market share in retail stores selling cigarettes. It did not include
sales from the Internet or direct mail.
11
Six filter cigarettes: Winston, Kent, L&M, Viceroy, Tareyton and Parliament.

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During May 1954, the company test marketed filter tipped Marlboro cigarettes in the State of
Texas. The cigarettes were in a new package of crush proof flip-top box. The company hired
Chicago-based advertising agency, Leo Burnett (Burnett), which changed the red and white
stripes of the package to a solid red chevron12 (Annexure III). The agency was asked to identify a
masculine image. In the brainstorming session that followed, the cowboy was chosen to represent
the brand. The brand was advertised with the line, ‘Delivers the goods on flavor’. The first
advertisement of the Marlboro Man was used in Dallas, Fort Worth in early January 1955. Within
a span of eight months of Marlboro’s launch, the sales increased by 5000%13 and Marlboro
became the top selling filtered cigarette.

Burnett further added more men, who looked tough but polished, in the Marlboro ad. A simple
military tattoo on the back of the Marlboro Man’s hand became a part of the campaign till it was
replaced by the cowboy in ‘Marlboro Country’ in 1962. A Western landscape, a rugged cowboy
and the color red became the essential elements of the Marlboro ad and with these elements in the
ad the brand was recognized even without the brand name, sales pitch or slogan (Annexure IV).

In 1963, Philip Morris purchased the rights of the Academy Award nominated soundtrack of the
movie, ‘The Magnificent Seven’. This was used as the background music for the Marlboro TV
commercials. This musical score became an integral part of the Marlboro campaign. In 1971,
cigarette advertising was banned from television and radio. This led to tobacco companies
advertising through the outdoor media. Over a period of time, the geometrical red and white
design of the packaging was used as point of purchase display on retail counters across the U.S.
and other countries. The Marlboro ads also adorned the billboards on the highways in the U.S. By
December 1975, Marlboro was named14 as the ‘top selling brand in the United States and the all-
time best-seller in the world’. By the late 1980s, the industry was shifting its resources away from
billboards. The colorful and panoramic Marlboro ads made inroads into magazines from Life to
Playboy. In 1989, Marlboro emerged as the best-seller15 with one fourth of the total cigarette
sales in the U.S.

From 1990s to 2005

With advertising on radio and television being banned, the tobacco companies spent $300 million
on billboard advertising alone in 1996. Later on, in 1998, the MSA limited advertising and sports
event sponsorships by the tobacco industry. The major players in the tobacco industry agreed to
remove the billboard ads in stadiums, shopping places and arenas. The MSA also banned the
distribution and sale of merchandise (such as caps, T-shirts and backpacks) with brand names and
logos of the tobacco companies. The ban also extended to the use of cartoons in advertising and
packaging of tobacco products. With restrictions on tobacco advertising, the industry focused on
magazines and other media. In 1998, the advertising expenditure of the industry increased by
25% to $375 million. The industry was experimenting with innovative methods such as retail
store displays, direct mail and hosting events to promote its brands. As an industry insider
mentioned, ‘All that former advertising money has to go somewhere. The tobacco firms are
looking to create extensive “design languages” in bars and clubs and other venues through the
use of particular types of furniture or material which will make people think of their brands’16
(Annexure V).

12
An inverted V- shaped design.
13
Katherine M.West: “The Marlboro Man: The Making of an American Image”;
http://xroads.virginia.edu/~CLASS/AM483_95/projects/marlboro/mman.html
14
ibid
15
http://www.jmdl.com/glossary/entry.cfm?id=69
16
Jamie Doward & Lea Teuscher; ‘Tobacco firms’ subtle tactics lure smokers to their brand’, The Observer, September 25, 2005;
http://observer.guardian.co.uk/uk_news/story/0,6903,1577892,00.html

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PM was one of the companies to initiate and adopt new methods to promote Marlboro (Annexure
VI). The company used live events and bars as a platform to host evenings and promotions, and
encouraged sign-ups from customers for promotional offers. The company also launched a
website, where smokers signed up to win discount offers, price promotions, customized mail and
engaged in online chat. Marlboro built a database (by the company field sales representatives,
through Internet sign-ups and calls to an 800 number17) of 26 million smokers who were sent
birthday coupons and invitations to attend special events like the November’s (2005) birthday
concerts. The smokers in the Marlboro database also participated in a game, ‘Outwit The West’
contest where the winning team (comprising of four members) won a prize money of $1 million.
The only mass-market promotion was a cigarette packaging, featuring the special anniversary
cover for a short period of two weeks and similar signs in stores.

For the loyal customers of Marlboro, a special booklet was mailed. This booklet contained prizes
from a Zippo18 lighter to a Quarter Horse19. Some of these prizes were redeemed with the
Marlboro Miles earned on each cigarette pack purchased, while others were given away in
sweepstakes20. Marlboro arranged special trips to its ranch in Montana, where its customers were
pampered with gifts, meals, drinks, and massages, and were involved in outdoor activities like
snowmobiling and horseback riding. The company believed that treating customers with such
extravagance built loyalty. As one customer mentioned, ‘I’d never smoke another brand of
cigarette.’21

To add new customers, Marlboro enticed retailers with price cuts, in-store promotions and other
deals. According to the Federal Trade Commission22, out of the $15 billion spent in 2003 on
tobacco marketing, nearly 80% was spent on discounts and incentives to retailers. A retailer who
owned 22 Kent Kwik Convenience Stores in Midland, Texas, paid $5.50 less for a carton of
Marlboros as compared to a carton of Camels. In turn, the retailer gave 66% of his cigarette shelf
space to Marlboro. He mentioned that PM offered him a better deal than the other cigarette
companies and went on to say that Marlboro was the dominant brand in his market.

It was believed that the company was on a successful path with its marketing campaign which
was not only followed by other marketers23 but also its competitors. Competitors of PM were
unhappy about the advertising restrictions and felt that they had no choice but to follow the
leader, Marlboro. Tommy J. Payne, Executive Vice President of External Relations, R.J.
Reynolds Tobacco Co. mentioned that his company used the same direct marketing tactics as PM
and added,

‘If you have 50% of the domestic market and the ability of your competition to react to that (is
limited), you don’t have to have a Harvard MBA school degree to know who benefits. It’s the
bigger brand.’24

17
The 800 number was a toll free number in the U.S.
18
Zippo Manufacturing Company, established in 1932, was the maker of the world-famous windproof lighter with the lifetime
guarantee. The company’s diverse line included pocket knives, key holders, money clips, writing instruments and measuring tapes.
19
The Quarter Horse, named for its extraordinary speed over a quarter of a mile, was America's most popular and successful breed. In
the fifty-seven years from the beginning of registration in 1940 nearly 3 million horses were registered and the breed was
represented in over sixty countries around the world. Traditionally, the horse of the Western ranches and the short distance
racetrack, the Quarter Horse competed for huge prizes on the racetrack and in many other events.
20
A sweepstakes was a lottery in which the prize was financed through the tickets sold. In the U.S., it was associated with promotions
where prizes were given away for free. They were called prize draws in the United Kingdom. The term ‘sweepstakes’ was derived
from the Irish Sweepstakes which became popular from the 1930s to the 1980s.
21
Michael Thomsen, a pack-a-day smoker from Wake Forest, N.C., was gifted a ranch trip on his birthday in 2004.
22
The Federal Trade Commission was founded in 1914 to prevent unfair methods of competition in business in the U.S. The
Congress, over the years, passed additional laws and gave more authority to police anticompetitive practices.
23
Other companies to benefit from viral advertising were General Motors, Audi and Axe deodorant.
24
‘Leader of the Packs’: http://www.businessweek.com/@@WZSkKWYQZ8JkMQ8A/premium/content/05_44/b3957107.htm,
November 23, 2005.

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What Next?
The MSA ended tobacco advertising in its traditional form. But it gave Marlboro an opportunity
to understate its promotional campaign, be more aggressive in retail stores, and creative in its
media plan. Experts said such marketing was becoming popular. Gerard Hastings, Director,
Institute for Social Marketing and Centre for Tobacco Control, Stirling University25 added, ‘The
more subtle the message, the more likely it is to be accepted. If you see something blatant, it
forewarns you. But if it’s something subliminal it will go under the radar.’26

At the same time, health experts were satisfied at the decreasing smoking levels in the U.S. But
there was still criticism about Marlboro’s tactics. Apart from the legislation, PM had self-
imposed tougher restrictions on ads and kept its ads out of magazines. But concerns were raised
about Marlboro’s marketing plans. As Amanda Sandford, Research Director of the anti-smoking
group ASH27, pointed out, ‘Cigarette advertising is going underground, it’s becoming more
covert. This just shows the need for greater vigilance’.28

With stringent laws, the landscape of tobacco advertising in the U.S. had certainly changed and it
was felt that the legislations would continue to be tougher in the future. In an environment with
increasing restrictions on advertising would Marlboro continue to be the market leader?

25
Stirling University was located at Scotland, U.K.
26
Jamie Doward & Lea Teuscher; “Tobacco firms’ subtle tactics lure smokers to their brand”, The Observer, September 25, 2005;
27
Action on Smoking and Health (ASH) was a non-profit, tax-exempt, legal action and antismoking organization based in the United
States. It was solely devoted to the problems of smoking. Its principal activity was to serve as the legal action arm of the
nonsmoking community, bringing or joining in legal actions related to smoking, and insuring that the voice of the nonsmoker was
heard. It also served as an advocate of the nonsmokers' rights movement.
28
Op cit Footnote 26: “Tobacco firms’ subtle tactics lure smokers to their brand”;

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Annexure I
Cigarette Consumption in the U.S. from 1991 to 2005

Source: Thomas C. Capehart, Jr.‘Trends in the Cigarette Industry After the Master Settlement Agreement’;
www.ers.usda.gov/publications/tbs/oct01/tbs250-01

Annexure II
Trends in Cigarette Prices from 1990 to 2001

Source: Thomas C. Capehart, Jr.‘Trends in the Cigarette Industry After the Master Settlement Agreement’;
www.ers.usda.gov/publications/tbs/oct01/tbs250-01

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Annexure III
Marlboro Pack Design

Source:http://www.wclynx.com/burntofferings/packsmarlboro_filter.html

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Annexure IV
Advertising History of Marlboro

Source:roswell.tobaccodocuments.org/downloads/50%20years%20of%20marlboro%20compiled%2020051121.pdf

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Annexure V
Trends in Cigarette Marketing & Promotion

Source: http://www.who.int/tobacco/en/atlas22.pdf

Annexure VI
Marlboro’s Subliminal Messages

In Britain’s up market bars and music events, Philip Morris attempted ‘experiential marketing’. The
furniture and design were used to subtly convey the brand’s strengths. The company offered financial
incentives to managers to fill their bars with furniture bearing the Marlboro logo and place branded
ashtrays and vending machine in areas where smoking was allowed.

PM also communicated through themed bar areas or installations which were put up at major social
events without the brand name or the logo being featured. These installations were known as
Marlboro Motels. They contained lounge areas with comfortable red sofas placed in front of video
screens showing scenes from the Wild West. This reminded the message of the Marlboro country.

PM also created ‘chill out’ smoking areas, which featured a sofa shaped like a bath tub. This gave an
impression to the smokers that it was area where they could relax and subtly suggested that Marlboro
could help them deal with stress.

PM also trained its marketing teams with scripts to use while interacting with bar managers and event
promoters. The script had statements like, ‘Our customers are your customers’, ‘Nearly 80 per cent of
Marlboro smokers are ABC1, aged 18 to 35’ and ‘Marlboro is arguably the world’s best known brand
after Coco-Cola’. This was a part of a comprehensive plan to target affluent smokers aged between 18
and 35. PM also wanted to make its presence in high-profile music events where attractive female
‘Marlboro models’ sold cigarettes.

Source: Jamie Doward & Lea Teuscher; ‘Tobacco firms’ subtle tactics lure smokers to their brand’, The
Observer, September 25, 2005; http://observer.guardian.co.uk/uk_news/story/0,6903,1577892,00.html

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References

1. ‘Leader of the Packs’; November 23, 2005;
http://www.businessweek.com/@@WZSkKWYQZ8JkMQ8A/premium/content
/05_44/b3957107 .htm; accessed on November 23, 2005.
2. Andrew Hyland, Ray Goldstein, Anthony Brown, Richard O’Connor, K. Michael Cummings;
Happy Birthday Marlboro – the cigarette whose taste outlasts its customers;
http://roswell.tobaccodocuments.org/downloads/
50%20years%20of%20marlboro%20compiled%2020051121.pdf
3. ‘The Marlboro Man Meets the Surgeon General’;
http://xroads.virginia.edu/~CLASS/AM483_95/projects/marlboro/mman1.html
4. Thomas C. Capehart, Jr.‘Trends in the Cigarette Industry After the Master Settlement
Agreement’; www.ers.usda.gov/publications/tbs/oct01/tbs250-01
5. Jamie Doward & Lea Teuscher; ‘Tobacco firms’ subtle tactics lure smokers to their brand’,
The Observer, September 25, 2005;
6. ‘Marlboro Man Hangs up Billboard Hat’; April 23, 1999;
http://www.cnn.com/US/9904/23/tobacco.billboards/
7. Usha Ramachandran, ICFAI Knowledge Centre; Case study on www.ecch.com: ‘From “Philip
Morris” to “Altria”’
8. Bruce Isaacson and Prof. Alvin Silk, Harvard Business School; Case study on www.ecch.com:
‘Philip Morris: Marlboro Friday (A)’
9. ‘The Marlboro Man’; http://www.adage.com/century/icon01.html; accessed on
December 6, 2005.
10. Stacy Flaherty & Mimi Minnick, November 2000; ‘Marlboro Advertising Oral History And
Documentation Project, ca. 1926-1986’;
http://americanhistory.si.edu/archives/d7198.htm#top; accessed on December 6, 2005.
11. ‘The Marlboro Man: 1954-1962’; http://users.wclynx.com/theshaws/adsmarlboro.html,
accessed on December 6, 2005.
12. ‘History of Cigarette Advertising’; accessed on December 20, 2005,
http://www.clinimmune.com/immunotoxicologylab/smokinghistory.htm;
13. ‘Industry Brief: Cigarettes’, August 28, 2003;
http://www.oligopolywatch.com/2003/08/28.html
14. ‘Tobacco Industry Marketing’, September 2005; accessed on November 24, 2005;
http://www.cdc.gov/tobacco/factsheets/Tobacco_Industry_Marketing_Factsheet.htm
15. http://www.philipmorrisusa.com
16. www.altria.com
17. www.tobacco.org
18. http://www.jmdl.com/glossary/entry.cfm?id=69
19. www.who.int
20. www.ftc.gov
21. http://xroads.virginia.edu/~CLASS/AM483_95/projects/marlboro/mman1.html
22. http://www.courses.rochester.edu
23. www.npr.org
24. www.wikipedia.com
25. www.life.com
26. www.answers.com
27. www.dictionary.com

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