Business Week is running a fascinating look at how resilient America’s leading tobacco marketer is in the face of 1998′s Master Settlement Agreement–a landmark piece of legislation designed to significantly curtail big tobacco’s reach.
There may be a cloud of condemnation hanging over cigarettes, but the companies nonetheless have plenty to celebrate. Long the U.S. market leader, Marlboro has been hitting all-time highs this year. Despite the sharp advertising restrictions agreed to by cigarette marketers in 1998 and a dramatic rise in state excise taxes since 2002, Marlboro is galloping ahead of the competition. The brand, which commands an average $3.28 per pack, now owns more than 40% of the market, up more than 21/2 percentage points in as many years. That surge has driven a broader gain for Philip Morris overall, which also makes Virginia Slims, Parliament, and other brands, and added significantly to the company’s profits, possibly more than $200 million a year.
Marlboro became one of the world’s most valuable brands the old-fashioned way — traditional mass marketing. For decades, Chicago ad shop Leo Burnett burned Marlboro into the consumer psyche with TV, magazine, and billboard images of freedom and cool personified by the rugged, horse-riding, Stetson-wearing cowboy.
But if Marlboro got to the top using an old tool kit that’s now restricted, it’s holding on to that spot with a blend of tactics for the new age: so-called “buzz” marketing at live events and bars that spur Internet chatter and sign-ups for promotional offers; a Web site where smokers sign up for a chance at discounts and bling; plus a healthy dollop of price promotions and direct mail.
Antismoking advocates may find it ironic that Philip Morris has become a more deft and efficient marketer as a result of the legal settlement that sought to hobble the cigarette makers. Back in 1998 the Master Settlement Agreement (MSA) with the state attorneys general ended tobacco advertising in most of its traditional forms. But by forcing Marlboro to go viral, be aggressive in retail stores, and be more creative in its media plan, it put the company on a successful path now being followed by every marketer from General Motors and Audi to AXE deodorant.
Contests and rewards may keep smokers loyal, but to add new acolytes, marketing experts say some low-tech means of persuasion are also important — most notably in-store promotions, price cuts, and other deals. “The ballgame’s in the store,” says Marvin E. Goldberg, a marketing professor at Penn State.