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Marlboro's Price Drop

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Brand Management

Marketing
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Marlboro’s Price Drop
Marlboro Made by Philip Morris USA within the United States  And by Philip Morris International outside the United States.    Best selling brand of cigarettes in the world !   
Strong BRANDS command an excessive price Premium !!! DO THEY ???
SCENARIO Retail price Increased more than 3 times Between 1980-1992 & A Sluggish economy…
ISSUE ! Losing market share to discount brands
Marlboro Positioning Market: USA Product: Premium quality tobacco Customers: Young and Middle aged smokers who want to live life on the edge. People who want to experience quality smoking
Marlboro as a BRAND
Marlboro Value Curve
$0.80 - $1.00 price premium per pack TOO HIGH !!! VALUE PRICING
Strategy testing ! Conducted in Portland 40 % decrease in pack price Increase in market share by 4 points
Management Decision Drop prices by 40-50 cents !!! Decreased earnings by 40%
Market Reaction 23% drop in share price !!! $5 billion LOSS in shareholder equity
Significant stock price decrease in other consumer goods company $5 billion loss Faced by Coca – Cola alone !!!
The Long Term Results
Take out the Competition !!!
COMMIT!!! Charge PREMIUM over the average
Marlboro Share Price Growth 42 % Market Share
Conclusion Strong Brands can command price premiums NOT excessive price premiums
References: 1.http://articles.latimes.com/1993-04-03/business/fi-18634_1_philip-morris 2.http://www.slideshare.net/ponch67/philip-morris-presentation 3.http://www.slideshare.net/vsosto/marlboro-brand-analysis 4.https://ideasinspiringinnovation.wordpress.com/2010/04/30/marlboro-friday-a-crucial-lesson-on-the-value-of-branding-as / 5.http:// articles.chicagotribune.com/1993-04-03/news/9304030209_1_discount-cigarettes-philip-morris-cos-tobacco-industry 6.http://www.nytimes.com/1993/04/03/business/philip-morris-cuts-cigarette-prices-stunning-market.html 7.http://www.businessinsider.in/The-epic-rise-of-Marlboro-cigarettes/articleshow/46292102.cms 8.https://annetonia.wordpress.com/2012/10/14/dut-2-2/ YouTube videos: 1.https://www.youtube.com/watch?v=8ob3PH-HB6A 2.https://www.youtube.com/watch?v=kBOYCYUK2e0
DISCLAIMER ! Created by Aniket Sinha (PGP31013) IIM Lucknow during the Brand Management course, under the guidance of Prof, Sameer Mathur, IIM Lucknow

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Marlboro's Price Drop