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(MBASkills.IN) Marlboro
Philip Morris repositioned Marlboro from a women's filter cigarette brand to a men's brand with the 'Marlboro Man' and became the world’s #1 selling cigarette. Following a dramatic price cut in 1993, they implemented value-based pricing to compete with low-priced brands, leading to a significant drop in share price initially. However, Marlboro later increased its market share to 42% by integrating its brand into consumers’ lifestyles and maintaining a price premium over competitors.
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(MBASkills.IN) Marlboro
- 2. Philip Morris &Marlboro Philip Morris launched Marlboro as a filter cigarette brand for women Publication of a study that linked smoking to lung cancer Philip Morris repositioned Marlboro as a men’s cigarette Launched ad campaigns with a lineup of manly figures. The Marlboro Man was born 1924 1950 1952
- 5. Philip Morris &Marlboro Philip Morris Overseas is established as an international division Marlboro becomes the world’s #1 selling cigarette Cigarette sales volume tops 400 billion units1991 1972 1955
- 7. Marlboro’s Price Dropin 1993 Philip Morris USA announced a dramatic shift in its corporate strategy Concerned about prolonged economic conditions and depressed consumer confidence Focused towards building long term profitability given the highly valuable and price sensitive market Resorted to “value based pricing” and announced a price cut of 40 cents a pack which was expected to decrease earnings by 40%
- 8. Rationale for Valuebased pricing • Value based pricing is a pricing strategy in which prices are set according to the perceived value of the product to customers • Marlboro realized that low priced discount brands and private labels were providing better value to consumers Customers Value Cost Price Product
- 9. 1) Short termbloodbath • Share price dropped 23% in 1 day • $13 billion loss in shareholder equity Share Price • Stock price declines for all major consumer goods companies • April 2 1993 was termed “Black Friday” Ripple Effect
- 10. Did Black Fridaysignal the death of premium pricing & brands?
- 11. No! It signaled thebeginning of a shift from advertising to branding
- 12. 2) Medium termturnaround Market Share increased to 27% within 9 months
- 13. Marlboro realized they couldno longer just emphasize the flavor of its cigarette
- 15. The Marlboro Manstood for a cowboy lifestyle that was not aspirational enough
- 17. Decided to integrate theirproduct into consumers’ lives
- 19. Promised an experience, anaspirational lifestyle rather than just the face of a product
- 21. Developed a long standingrelationship with motorsport
- 25. That went beyond the reachof the law!
- 30. 3) Long termbenefits • Currently owns 42% of the market, up from 22% in 1993 Market Share • Currently priced at $5.7 a pack • Cheapest competitor brands are priced at $4.21 (35% price premium) Price Premium
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- 32. Summary Existing brands, if managedproperly can command loyalty, enjoy price premiums & be extremely profitable
- 33. Disclaimer These slides havebeen created by Tanmay Sah, a final year PGP student at IIM Lucknow during the course Brand Management taught by Professor Sameer Mathur Thank You!