PHILIP MORRIS

Cigarette Marketing
- A New Perspective

November 1989

37 GOLDEN SQUARE LONDON W1R 4AH TELEPHONE 01-494 3525 FAX 01-734 5253
REGISTERED IN ENGLAND No 21?40312

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Who's directing the market?

Key Issues

Focus on the opportunities

Consumer attitudes

Product benefits

Positioning

Advertising

Isolating the real potential

Where next?

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Who's directing the market?

Consumers in Europe (and probably throughout the
World) are under increasing pressure to give up
smoking .

In behavioural terms this has translated into the
growth of low tar sectors rather than a dramatic
volume decline in the total market .

On the surface this would seem to be an acceptable
situation from the industry's point of view . However
there are other implications that impact on the
marketing of cigarettes -

the market is now defined and structured by
tar category

low tar includes a large number of 'light'
versions of parent brands

brand images are more obscure - even in
countries where advertising restrictions are
less controlled than the UK, images are
often not well defined .

brand activity is becoming one dimensional there are few revolutionary approaches!

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The market structure is more a manufacturers response
to the government/health lobbies rather than a
reflection or development of consumer demand .

If low tar brands are growing because of effective
marketing, why are there no brands whose positioning
reflects a positive consumer product benefit?

Much of the advertising and promotional activity
simply relies on pack colours and product descripters
of 'mild' or 'light' to indicate the category . In many

cases it is

only the health warning that talks

directly about the product to the consumer .

We have to accept that social and health pressures
will continue to direct smokers to low tar cigarettes,
however there should be more confidence and reassurance for the consumer than a health warning at
the bottom of an advertisement .

There are too many followers and not enough leaders in
cigarettes . The approach in other markets is starting
to change, there is an opportunity for a leader in
cigarettes .

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We believe that the industry has been channelled by
outside pressures into one marketing approach for all
brands .

We equally believe that this provides an opportunity
to stand back and review the market .

An opportunity to take a new perspective

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Rey Issues

The major issue for cigarette marketing is the often,
one dimensional approach to advertising development .
Research tends to focus on the consideration of
advertising concept boards and to force reaction to
the single image as presented . Advertising development
is led by response to images that are largely directed
by what other brands are doing rather than by
addressing issues that are consumer orientated .

There are a number of other key issues - they are
neither definitive or mutually exclusive - however
they all relate to the approach to the consumer .

1 . If low tar is such a good idea and consumers
respond to the message - why are we not focusing
on the benefit?
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2 . Should we be restricted by the artificial market
structure? Is there a competitive opportunity?

3 . Where are the lifestyle brands?
4 . Where next after low tar?

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5 . In some areas the advertising 'rules are less
restrictive (but likely to get tougher) - How do
we give ourselves an edge for the future?

6 . Advertising restrictions are increasingly more
difficult - Does that mean that we really have to
produce advertising that no one understands?

7 . Can we exploit other consumer concerns in order
to improve the image of cigarettes and smoking .
8 . If we can't borrow positive images - can we
create them?

9 . Can we create a niche brand (that generates high
volume)?

10 . Consumer targeting - do we advertise at who we've
got or who we want?

11 . Can we learn from other markets?

12 . Can we make the restrictions work in our favour?

13 . Why do all cigarettes look the same?

14 . Where do consumers get most of their positive
images for cigarettes?

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Focus on the opportunities

Essentially, the key issues can be broken down into
four discreet sectors, specific opportunities can
however, appear in more than one category of
influence/direction .

Consumer Attitudes

Product Benefits

Issues
1, 3, 7, 10, 11 & 14

1, 4 & 13

Positioning

Advertisina

2, 3, 5, 7, 9, 11

1, 2, 3, 6, 8, 9, 10,

& 12

12 & 14

We have taken each sector and expanded the core
thoughts and their implications for developing an
alternative and more positive approach to cigarette
marketing .

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Consumer Attitudes

Lifestyle

Although cigarettes are a'badge' product most of the
brands, including the most successful ones, do not
have strongly defined images . The probable exception
is the masculine image of Marlboro .

Where is the cigarette for

the higher educated groups
the affluent middle aged
career women
rising income groups
the grey market .

- In short, the articulate, aspirational and the
adventurous within the broad cigarette market
framework .

Equally - where are the brands for the key groups
within the mass market (C2D)?

Advertising, particularly in the UK, has become
irrelevant, abstract or stereotyped . It lacks total
empathy with potential target groups .

Consumer perceptions are based on pack designs, price
points and usage patterns - not images created by the
advertising .

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Growing concerns
Consumers are being increasingly aware and concerned
on social and moral issues .

In Germany and across Scandinavia the ecological
movement is becoming a major force . Cigarette
Companies continue to sponsor sporting events - why
can't they get involved in 'green' issues - both
promotionally and in a direct role .

Will consumers feel less guilty about smoking
cigarettes from a Green giant?

Targeting
Cigarette advertising is largely directed (both in
research and executionally) at mass target groups defined only by broad demographics and current brand
behaviour .

Why are we not being more selective in terms of who
our message is directed at? We need to learn more
about the attitudes and influences of

- heavy users
- vulnerable brands
- new users
- consumers who brand switch and . . .

when did we last target a campaign at recently lapsed
users?

Current Images

We believe that most of the strong, positive images
for cigarettes and smoking are created and perpetuated
by cinema and television .

We have seen the 'hero' smoking in Wall Street,
Crocodile Dundee and Roger Rabbit . Mickey Rourke, Mel
Gibson and Goldie Hawn are forever seen, both on and
off the screen, with a lighted cigarette .

it is reasonable to assume that films and
personalities have more influence on consumers than a
static poster of the letters from a B & H pack hung on
a washing line under a dark and stormy sky!

If branded cigarette advertising is to take full
advantage of these images then it has to do more than
simply achieve pack recognition - it has to feed off
and exploit the image source (without breaking the
restrictions) .

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Product Benefit s

Low Tar

In most markets where consumers are consciously
changing purchasing patterns, manufacturers underline,
re-inforce and exaggerate the specific benefit(s)
which sponsor that change - for example the
development of low fat dairy spreads and low alcohol
beers have been based on promoting their physical
points of difference .
The generic benefit of low tar has not been
appropriated for a particular cigarette brand - it
remains like the star rating for petrol . Consumers
drift or leap into the sector because of external
pressures - the brand which can interest the consumer
in the inherent low tar benefit will be the one
through which that consumer will enter the sector .
Advertising only the brand is missing the opportunity
to create and exploit the initial interest and
therefore has to work harder to gain trial - it speaks
only to a converted audience and with an equal voice
because it competes directly with all other low tars .

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What Next?

The market will eventually become low tar . The speed
with which this occurs will depend on several factors

the health lobby momentum

the speed of increase in advertising
restrictions

adverse publicity on smoking
an increase in promotional activity on low
tar (whether general or specific) .

The low tar market will itself begin to be segmented .
Indeed, in Europe there are already Ultra and
Superlight brand derivatives . It will be important to
be sure that it is right to fragment this sector by
narrow tar/nicotine levels .

What do smokers understand from fractional
pack indicators?

Where's the benefit in a numbers game?

What alternatives are there - in terms of
taste claims, filters, new smoking
materials, cosmetic product changes .

Segmenting a growth market is an important and
potentially valuable opportunity - we should find,
develop or create a credible (real, emotional or
perceived) benefit and project it .

In the short-term, the fact that the product may not
deliver a readily acceptable taste (compared with the
standard product) should not be an automatic deterrent
- look at what's happened with skimmed milk and the
Cambridge diet - both markets which have grown and
flourished (despite poor product performance) on the
strength of a well communicated product benefit .

In the near future the taste issue will not be
relevant . At some point the whole market will be low
tar and all cigarettes will be similar . This means -

there will be fewer brands

we will need to add value to those brands
which survive

we must differentiate on the basis of strong
and credible images

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Branding
Cigarette branding is on the pack - the 'badge' which
people display . Philip Morris successfully market
'designer' packs (Star) in Europe - why not brand the
cigarette? Outside the pack cigarettes are virtually
indistinguishable - the Marlboro image mixes with Silk
Cut and Virginia Slims .

Colours and designs could be carried through to the
cigarette itself - a visible extension of the
personality of the brand (and the user) .

Positioning

Being Competitive
We live in a competitive world - everyday we are
subjected to work, social and domestic pressures . We
are also bombarded with hundreds of messages - better,
stronger, faster, the only!

Why, then, is most cigarette advertising passive?

Brands compete in sectors defined only by price and/or
tar level - they are rarely competitive within these
strict groupings, much less across them .

We should consider the opportunity - not just for
direct aggressive positionings but for positionings
that challenge the rules of a market structure that
sees product differences only in terms of price and
non-involving product definition .

Pra-empting changes in the rules

The restrictions on cigarette advertising vary across
international borders .

If a universal agreement were made tomorrow to ban all
forms of advertising and promotion of cigarettes which brands would retain their image and personality?

There is a strong argument that only Marlboro would
have any residual consumer personality for any length
of time . The Marlboro cowboy and then Marlboro Country
has given the brand a single minded and firmly
masculine image . This results not just from the tight
positioning but also from the consistency of image .

It is hard to imagine another brand which would
achieve any clear or lasting imagery . Although B & H
and Silk Cut have been single-minded and consistent
for many years their creative direction has
concentrated only on achieving pack and name
awareness . There is no attempt to involve the consumer
in a dialogue about the product - they only seek (and
achieve) pack ubiquity .

There is an opportunity to repeat the Marlboro lesson
in countries where positive and overt images are still
allowed . Creating a powerful and direct advertising
execution to carve a strong and consistent image in
the mind of the consumer . This image will not only be
lasting but, like Marlboro, can be continued in some
reminder form as advertising restrictions toughen .

A new view of the restrictions

The rules on cigarette advertising are a real
marketing problem - they are designed to prevent the
development of any creative work that encourages
smoking .

For most advertisers the restrictions are an
increasing problem that strangle any chance of
positive advertising development .

We believe that there is always an alternative view and that there is an alternative approach .

If they work against everyone else How can we make the restrictions work for us?

The answer is to take a lesson from history - just
look what prohibition did for alcohol .

The idea is to buck the trend - create a brand
property that is all about rebellion - a brand that
highlights and focuses on the restrictions, ridicules
them and becomes known as being rebellious . As the
restrictions become more intense - the toughening of
the rules automatically promotes the image you've
created .

In theory, if the rules progressed until they didn't
aii.low any advertising - the brand could still be
communicated simply by printing huge health warnings .

Niche brands (that sell)

Niche brands don't always happen by accident, there
are ways of creating a cult brand that owes more to
marketing than supposed discovery by the style
leaders .

In grocery marketing the best way to increase volume
sales of a slow line is to indicate to the trade that
it is in limited supply and you will soon have to
restrict the stock they can purchase .

We can do the same to create a niche brand -

limit the distribution (by shop type maybe just sell it at railway
stations and airports) .

restrict regional availability - not a test
market, but a real limit - tell
the trade (and consumers) that its
blended especially for smokers in
a small area of Switzerland . Just
like Coors beer in the States it
will start to appear everywhere .

Nothing sells a brand faster than putting it on
allocation!

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Emotional benefit

There is a psychology of smoking - beyond the physical
pleasure and addiction of tobacco .

Consumers find the act of smoking a tactile and
emotional experience -

they provide confidence
something to do with your hands
and physical displacement (body language) .
There is an opportunity to market a brand (with no
nicotine and little flavour) to smokers who have given
up but who miss the emotional benefits .

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Advertising

Copy
We are losing the art of communicating with our
consumers . We no longer sell . We assume that our
audience can only take on single issue statements or
will be involved with intriguing, interesting or
surrealistic images .

As poster images they may be effective, however there
is considerable advertising support for cigarettes in
magazines and the press . Why is there little or no
copy - have we really nothing to say about our brands?

Involvement

Cigarette advertising is polarising - simple pack shot
with innocuous copy or obscure and intriguing visual
with nothing but a health warning . It is hard to
believe that the target audience similarly divide into
morons or mensa .

We have to accept that advertising must sell - we
should not be hesitant to produce creative work that
provokes positive images and attitudes towards our
brand .

If the advertising isn't selling then it isn't
working!

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Positive images
Creating a campaign that sells and also conforms to
the different levels of advertising restrictions is
not easy . This is evidenced by the use of abstract and
surreal images and the increasing basic concentration
on pack and name recognition and little else .

It might be possible, however, to create our own style
- a style that becomes in vogue - predicting fashion
changes in art and design and taking ownership or
creating a style that becomes fashionable in its own
right . Instead of borrowing positive images we create
our own .

It can be avant garde, it can be art, photography,
design, painting - essentially it has to be different
and new!

It if works - you have created it - so how can you be
stopped from using it?

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isolating the real potential

The key to how to proceed is in our investigation of
the consumer . This has to be on a much broader scale
than measuring the qualitative response of tight
demographic groups to advertising executions .

Current work on the advertising development in the
fashion market and for beverages and soft drinks
(across Europe) and for chilled produce (in the UK)
highlights the opportunity to go one step beyond
'Lifestyle' .

In order to explore the potential for a new approach
it is essential to understand fully the attitudes and
motives of the target groups . Qualitative research
groups for cigarettes tend to concentrate on single
issue directions and executions - they overtly
question attitudes of and to smoking . The risk is that
we miss some key issues which can be exploited for
cigarettes, but which are not directly related (either
in the consumer or researcher's mind) .

We have developed and proven a research technique that
is designed to provide an in-depth study into consumer
attitudes - not just on the market in question, but
the overall influences on their lifestyle .

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It enables us to develop advertising that takes
account of alll factors that affect behaviour .

The objective is to get behind the consumer's thinking
on a wide range of subjects

clothes worn for different occasions,
current trends

drinks - when and where

cigarettes - brands, attitudes and
influences

sources of information

hierarchy of key influences

'self-images'

'brand images'

image/awareness of brands (cigarettes,
jeans, clothing)

future trends on fashion, outlook, age
groups - and effects on cigarette brands and
smoking

attitudes to a battery of new concepts .

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The intention is to isolate the specific influences
and concerns of our key consumer groups identifying

their priorities (for example other studies
with young age groups have shown
clear indicators on areas such as
- education, goals, dependents,
independence, job, happiness,
material aspects)

needs

(e .g . - experiences, travel,
appearance, peer relationships,
independence, confidence,
security, guidance, authorities)

fears (e .g . failing to - succeed, be
appreciated, fulfilled, and ruined
plans, no esteem/recognition,
loyalty, getting older, fat)
desires/likes (e .g . fashion, going out,
street-wise, night clubs, music,
concerts, shopping, being first,
standing out, being liked, being
different)

action seeking (e .g . company, sharing,
needing people, showing off, being
seen, not missing out)

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fashion (e .g . individual, influences,
James Dean, old films, freedom, no
fashion < - > designer) .

other areas covered include - sport, the future, brand
names and finally attitudes to new concepts which are
presented after key motivations and influences have
been isolated .

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Where Next?

We firmly believe that there is an opportunity to
approach this market from a new direction .

The Research is not an end in itself, it is designed
to provide an in depth three dimensional view of the
market in order to develop effective and consumer
responsive advertising . We would like to present a
research and development proposal that allows Philip
Morris to give its brands a real edge in the various
markets in which they compete .