Marlboro Man Essay

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Did Marlboro Man actually fall off his horse on ‘Marlboro Friday’? “Marlboro Friday” was widely considered as the day Philip Morris eroded its brand equity by reducing the prices of its premium brands by 20%. I think it was a masterstroke in face of radically changing market due to the regulatory environment and mounting health concerns criticism. Philip Morris was faced with two significant challenges, to stop the growth of non-profitable discount cigarette segment (Appendix A) and to manage the excess inventory that existed with its distributors. To further understand these challenges it is important to view the decision in light of economic value considerations (Appendix B) of the existing industry environment. Customers: Just looking at overall elasticity of the industry on the basis of Exhibit 3 given in the case. The price elasticity for inflation adjusted average cigarette price was 0.5 with an R squared value of 98% (Appendix C). But this data does not give us the complete picture in terms of customer segments. The overall industry decline was more due to increased awareness of health concerns related to smoking and increasingly difficult regulatory environment, which is reflected well in the Price Elasticity <1. But it is important to consider two additional factors here i.e. Segmentation and Psychology. In 1993, of the total cigarette smoking population 75.4% were earning below $ 50,000 per year. This can be associated with growing concerns in the more educated customer base from the aggressive marketing campaigns over health risks of smoking. By 1993 only 10% consumption was from light smokers whereas 61% from heavy smokers. From this data it can be concluded that customer perception of smoking as a cool image had changed and most of the consumption was from heavy smokers addicted to the Nicotine in the cigarettes. This is significant in terms of

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