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Marlboro Cigarettes

A funny thing happened to Marlboro cigarettes when the government said it could no longer use mass media to market its products - its ad spending went down and its profits went up, as reported by Nanette Byrnes in Business Week (10/31/05). "Philip Morris does not disclose how much it spends promoting the brand, but the company says it has been spending less on marketing in general each year." And yet Marlboro, "now owns more than 40 percent of the market, up more than 2.5 percentage points in as many years," and its profits are "possibly more than $200 million a year."
The heart and lungs of Marlboro's success appears to be its "growing database of 26 million smokers to whom it sends everything from birthday coupons to the chance to attend events," such as rock concerts starring the likes of Lenny Kravitz and John Mellencamp. What Marlboro has built is not so much a brand as it is "an exclusive club for its devotees, who wouldn't miss an opportunity for a discount and often feel victimized by social pressure and no-smoking laws." Marlboro is able to lavish attention on its fan base - up to and including "special trips to a ranch it owns in Montana, where vacationers are showered with gifts, eat five-course meals, drink for free and enjoy massages, snowmobiling, horseback riding and the like, all on the company tab." Not only does this cost Marlboro a heck of a lot less than mass media advertising, it also builds a kind of loyalty that television, radio and print just can't buy.
"I'd never smoke another brand of cigarette," says Michael Thompson, 30, who smokes a pack a day. Oh, the irony: " By forcing Marlboro to go viral, be aggressive in retail stores, and be more creative in its media plan," anti-smoking advocates "put the company on a successful path now being followed by every marketer from General Motors and Audi to AXE deodorant." Except that Marlboro is better at it than they are. According to Merrill Lynch analyst Christine Farkas, Marlboro's operating profits will "reach 28 percent next year, from 26 percent in 2004, as net income grows to an estimated $11.4 billion on $66.3 billion in sales in the U.S. and abroad. That's twice the current operating margin of well-run companies like General Electric and Exxon-Mobil and also well beyond Procter & Gamble's 19 percent margin this year " (*cough, cough*).
from: Marlboro Miles

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