MARBOLORO’SPRICE DROP

BYAnas AhmadPGP01001

IIM Sirmaur

World’s largest cigarette selling brand

By Philip Morris

Women's Cigarette in 1924 Repositioned in 1950s

As a cigarette for men

Brand Equity of $21.9billionIn 2016(Forbes)

Positioning of the Brand

Market: USAProduct: Premium quality tobacco

Customers: Young and Middle aged smokers who want to live

life on the edge. People who want to experience quality smoking

WHAT HAPPENED in 1993?

MARLBORO FRIDAY

Or ‘THE BLACK

FRIDAY’

Management DecisionReduce the prices by 40-50 cents

Earnings decreased by 40%

Market Reaction

23% drop in share price !!!$13 billion LOSS in shareholder equity

WHY?

Sluggish Economy

Stiff Competition

Private Labels

Hefty Price Increase

80cents to 1$ Price Premiums

Strategy testing Conducted in

Portland40 % decrease in pack

priceIncrease in market share

by 4 points

RESULTS

Market Share Increase

Price Premium

35% premium

Discount Brands Marlboro

PRICE

QUA

LITY

Marlboro’s Price BandMarlboro’s Current Price Perception

Discount brand’s Price BandDiscount Brand’s Current Price Perception

Price Tiers in the year 1993

Can Strong Brands charge excessive Price Premiums?

Question?

Learning for BrandsStrong Brands can command Price Premiums but not Excessive Price Premiums

Summary

Disclaimer !Created by

Anas AhmadPGP01001IM Sirmaurduring the

Brand Managementcourse, under the guidance of

Prof, Sameer Mathur,IIM Lucknow