Discounting the Marlboro Man

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Discounting the Marlboro Man 1. Major Facts/ Major Problems: a. Phillip Morris is the largest tobacco company (1) Marlboro is the largest selling brand in the US (2) Started discounted or house brand later than competitors a. Has smaller market share (3) Conducted research in Oregon utilizing a price decrease b. Price cut increased market share (4) Spends significant amounts marketing the Marlboro Man b. Introduction of generics in 1981 by Liggett (1) Generics have increased in market share a. due to recession most significant increase was 1991-1992 c. RJR, Morris’s major competitor, began making house brand generics (1) Sold for up to a dollar cheaper than name brands a. Cheaper tobacco used b. Less advertising fees (2) RJR largest market share in generics (3) Cut prices due to competition from American Tobacco and Brown & Williamson 2. Possible Solutions: Solution A: Maintain the current pricing and utilize coupons to reduce the cost by forty (40) cents per pack. (1) Coupons could be placed inside of the cigarette package redeemable for the next pack purchased. (2) This maintains the current pricing and encourages individuals to make an initial purchase in order to obtain future discounts. (3) Coupons will entice new customers that have been shopping at your competitor. Consumers will break routine patterns to take advantage of a good offer. (4) Coupons will re-activate old customers. Those customers that have been lured away by your competitor will start buying from you again when you give them a good reason to do so. Solution B: Maintain current pricing incorporated with promotional program designed to create value and customer loyalty such as a scratch game. (1) Your customer list represents your most valuable asset. Your greatest potential for sales and profits lies in the customer database. To ignore this
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