Smoking Out The Elusive SmokerWalecia Konrad
When Philip Morris Inc. rolled out its Marlboro Medium cigarettes last spring, the new product got the usual barrage of support from print advertising and billboards. But the mighty marketer also used a more direct way of selling its latest smoke. The company sent buyers of competing Winston and Camel cigarettes a fancy package containing a fold-out colored ad and $3-off coupons good for a carton of Marlboro Mediums. That wasn't all: The piece de resistance was an outsize box with the Marlboro Medium logo outside and five packs of the new cigarette inside. Today, Marlboro Mediums have a 1.5% share of the U.S. cigarette market.
How does the country's largest cigarette maker know who smokes what? Along with R.J. Reynolds, Brown & Williamson, and other tobacco companies, Philip Morris has spent hundreds of millions of dollars to collect the names, addresses, and brand preferences of close to 70% of the nation's 40 million smokers, says Stan Rapp, who is anindependent consultant on data-base marketing. As tobacco marketers have trimmed their mass-media advertising (chart), they have been making more of those vast data bases. "Tobacco companies are learning they don't need traditional media as much anymore," says Michael J. Wolf, a consultant with Booz Allen & Hamilton Inc. who specializes in data-base marketing. "Instead, they're creating their own channels that talk directly to smokers."
You won't hear the tobacco companies boasting about their newfound expertise, though. Citing intense competition, the industry leaders are mostly mum about their data bases. Most information on these efforts comes from outside marketers and consultants. Nor will Philip Morris and R. J. Reynolds Co. discuss their targeted marketing strategies for Merit Ultimas and Camel Wides, two new brand extensions. But judging from earlier campaigns, the two companies will probably take advantage of their data bases to lure confirmed smokers of rival brands to try their new products. Since the margins on cigarettes run up to 35%, and since an average smoker spends about $750 a year on cigarettes, it's worth a lot of effort to get a smoker to switch.
Data-base marketing is increasingly a necessity for the tobacco companies. Using mass media to reach tobacco users is growing inefficient as the number of smokers slowly drops: In 1991, sales of cigarettes declined for the 10th year in a row, slipping 2.4% from 1990 levels, according to John C. Maxwell, an analyst at Wheat First Securities Inc. Today, less than a third of the adult population smokes. True, that's still a sizable number, but it's much smaller than, say, all the users of toothpaste or aspirin, products that can get a bigger bang from mass media.
But tobacco companies have come under heavy fire when they've attempted conventional forms of niche marketing--for example, targeting minorities or women. And they are eager to avoid any accusation that they're trying to attract youngsters to smoking. In this increasingly hostile environment, some lawmakers are pressing to restrict print and billboard cigarette advertising--adding to the ban on televised cigarette ads, which dates back to 1971. While marketers prepare for that possibility, data bases are a way for tobacco companies to lie low and still get their message out to users of competing brands. Luring away a competitor's customer is one of the few acceptable ways to grow in the U.S. tobacco market.
CHAIN MAIL. Reynolds is so convinced of the power of nontraditional tactics such as data-base marketing that it recently refused to sign its usual 12-month contracts with major magazine publishers and billboard companies for 1992. It will still use print and billboard advertising, of course, but less of it. A company spokeswoman confirms that spending on such traditional media will decline so that Reynolds can concentrate on promotions, which include data-base marketing as well as in-store deals.
Reynolds was the first tobacco manufacturer to use data bases, harvesting smokers' names about 10 years ago. It's a laborious process. In most cases, a magazine ad or a Sunday newspaper insert asks smokers to answer questions about their brand preferences. They must also sign a statement affirming they are at least 21. In return, they typically receive coupons or free samples, while their names and addresses are entered into computerized lists.
To ferret out even the smokers who don't grab cents-off coupons, tobacco companies try offers for T-shirts and other merchandise. Reynolds' Camel Cash program inserts proof-of-purchase coupons in every pack. Smokers send them in to get items sporting the Old Joe cartoon logo. For the Dakota brand, sold only in parts of Arizona, Reynolds has had retailers display catalogs offering items such as a double-length motorcycle chain belt with Dakota buckle. Sometimes the incentives are more elaborate: Last summer, Philip Morris ran a sweepstakes ad in Sports Illustrated offering a Corvette as first prize. To enter, consumers sent back a coupon revealing the brand they smoked.
One of the most successful data-base campaigns was the "blind taste test" Philip Morris staged in 1987. The company ran two-page advertisements in major magazines offering smokers two free packs of an unnamed brand. The 2 million smokers who answered the attached questionnaire were sent packs of Merit. Philip Morris then followed up with extensive mailings. The $30 million campaign converted half a million smokers to the brand, at least temporarily, according to marketing consultants familiar with the mailings. Merit's share has slid in the past two years, however, prompting Philip Morris to introduce its new Merit Ultimas brand in an attempt to lure smokers back.
`PAVED THE WAY.' The efforts of the tobacco companies have caught the attention of other marketers. Says Rapp: "They have really paved the way for other consumer goods companies. It's the next wave in marketing strategies." Many companies have to sell in markets where low growth or no growth is the rule these days. So they, too, are exploring high-tech marketing methods to strengthen ties to existing customers and forge new bonds with their rivals' patrons.
Kimberly-Clark Corp. and Procter & Gamble Co., for example, have been collecting names of new mothers from hospitals, doctors, and other sources. Both companies send moms coupons for disposable diapers and other baby products almost as soon as they arrive home from the hospital. As the child grows older, the manufacturers send coupons for larger diapers, which can go for a hefty $10 a pack or more. Data bases have also infiltrated the beer and soda industries: Pepsi-Cola Co. plans to send a million free cases of Diet Pepsi to die-hard Diet Coke drinkers, plucking them from a data base it has collected.
These programs can backfire, though. Randall's Food Markets in Houston tried out a data-base program that offered rebates to frequent shoppers. But it shut the program down because it was too cumbersome and costly. And when a minor was mailed a Camel T-shirt four years ago, the ensuing outcry prompted a congressional hearing. But the promise of winning a new customer is a strong one. It seems the cigarette makers have helped introduce a marketing habit few companies will want to break.
— With assistance by Christopher Power
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