salem brand rev i ew 20-year marketing history

,

a ,

I

SALEM BRAND REV I EW

20-YEAR MARKETING HISTORY

SgLEM B$AN ..D REVI EW *

20-YEAR MARKETING HISTORY

0 UCTION

A. PURPOSE

l. REVIEW THE HISTORY OF SALEM AND MENTHOL

CATEGORY COMPETITION TO PROVIDE AN

U1EDEnSTAND I NG OF CURRENT MARKET

PERFORMANCE .

2 . Focus ON PROBLEMS/OPPORTUNITIES IDENTIFIED

FOR SALEM IN MID-70'S TO ESTABLISH

FOUNDATION FOR BRAND'S CURRENT MARKETING

, STRATEGY .

0

-,

,

INTRODUCTION

B. FORMAT

I . SALEM 'S INTRODUCTION IN 1956II . THE EARLY YEARS : 1956 - 1963

III . KOOL'S GROWTH : 1964 - 1970IV. THE POST BROADCAST BAN YEARS : 1971 - 1974V . A NEW STRATEGY : 1975 - 1976

VI . 1977 AND THE FUTURE -

1 . SALEM 'S INTRODUCTION

A . STATE OF THE BUSINESS IN 1956B . SALEM 'S INTRODUCTION6 PRODUCT ~

0 POSITIONINGAREATIVE STRATEGY

6 ADVERTISING

SPENDING

!

~

STATE OF THE BUS I NESS

1956

STATE OF THE BUS I idESS I N 1956

0 INDUSTRY VOLUME HAD REACHED 382 BILLION UNITS IN 1955

® FILTERS HAD EMERGED AS THE NEW GROWTH CATEGORY BY 1956

o LENGTH PREFERENCES WERE CHANGING FRON 70MM TO 85MP1 .

0 MENTHOL CATEGORY (NON-FILTERS) SOM FLAT AT 3 .1%

CATEGORY TRENDS

CATEGORY

NON-FILTER.

-NFFMENTHOL (NON-FILTER)

LFFOTHER

TOTAL

STATE OF THE BIIS H-JESS i N 195 6

MENTHOL CATEGOR

Y 0 MENTHOL CATEGORY COMPOSED OF ONLY ONE BRAND (KOOL NON-

FILTER )

o KOOL REGULAR IN THE MARKET SINCE 1933 (70MM NON-FILTER) .

KOOL KING SIZE (85MM NON-FILTER) INTRODUCED IN 195 4

o KOOL ADVERTISED AS A "SPECIAL PURPOSE"/THERAPEUTIC/

MEDICINAL PRODUCT ("THROAT HOT? SMOKE KOOL!" )

0 MENTHOL ATTRIBUTE HAD NO BROAD, GENERAL APPEAL{

.

. O

•

SALEM'S INTRODUCTION

I

- . APRIL, 1956

St] LE!J ~_LiLL1OD Ststl_i__tZl1

THE SALEM PRODUCT

THE SALEM PRODUCT WAS UNIQUE ; A SIGNIFICANT DEPARTURE FROM

THE KOOL PRODUCT .C•

PHYSICAL CHARACTERISTICS.

. . . . . .~,HARACTER I STI C SALEM ` KQo-LLENGTH H5MM $5MM

FILTER YES NO •

MENTHOL LEVEL .Z9% (MILD) .37% ( STRONG)

TIPPING WHITE CORK .


IH.F SALEM PRODUCT_

0 .THE SALEM PRODUCT INCORPORATED AN EXPENSIVE, HIGH-QUALITY

TOBACCO BLEND AND WAS BETTER CONSTRUCTED THAN THE KOOL

PRODUCT .

TYPEToBACCo,BURLEY

FLUE-CURED

TURKI SH

RECONSTITUTED

STEMS

0 PERCEPTIONS

BLEND COMPARISON

SALEM

f

S~ wu~

27% 21%34 % 46'14% 5%25% 12%0% 16%

K94L0 SMOOTHi MI LD 0 HARSHj STROPJG ;

O SLOWER BURNING i FASTER BURNING ;

O-BALANCE OF MENTHOL 0 STRONG MENTHOL

AND TOBACCO TASTE TASTE

.

r

_ .,

. SALEM' S INTRODUCT i O;I

IHE SALEM PRODUCT

I

THE SQLE~'~ PRODUCT WAS DES I GPIED TO OFFER SMOKERS A NEW,

MORE REFRESHING, ENJOYABLE EXPERIENCE IN SMOKING

0"LI GHT AND MI LD't BLEND

0 MILD MENTHOL LEVEL

0 WHITE FILTER TIP

rx

.

S LA EM's INTRODUCTIONSALEM vs KooL1956 SPENDING

D NSPENDING

SHARE OF CATEGORY $

SHARE OF INDUSTRY $

SALEM K~.aL$4,4MM $4 .5MM49% 51%3.1% 3.2%

I

.

, ALEM's I.PJTRODUCT ION

COMPETITIVE ACTIVITY

~~

KOOL RESPONDED TO SALEM 'S INTRODUCTION BY LAUNCHING ANg5MM FILTER VERSION IN .JULY, 1956 .

i

.SUMMARY : 1956

M ENTHOL CATEGORY SOM ONLY -') . 1I IN 195 5

® KOOL ONLY MENTHOL BRAN D

o SALEM INTRODUCED IN APRI L

o SALEM PRODUCT DIFFERS FROM KOO L

e SALEM POSITIONING/CREATIVE STRATEGY IS UNIQUE

o SALEM INTRODUCTORY SPENDING LEVEL EQUALS KOOL ' S

0 K40L FILTER INTRODUCED IN JULY

,x,

0

THE EARLY YEARS : 1956 - 1963

STATE OF THE BUSINESS

MARKETING MIX

0 SPENDING

® CREATIVE STRATEGY

C . CONSUMER DYNAMICS

1/~~


1956 - 1963

4)


MAJOR EVENTS

1956 - 1963

1 . INTRODUCTION OF COMPETING MENTHOL BRANDS

2. MENTHOL CATEGORY UNDERGOES DRAMATIC GROWTH

3. SALEM LEADS GROWTH AND DOMINATES CATEGORY

LEVELING IN SALEM's GROWTH FIRST APPEARS LATE IN PERIOD

_,!

STATE OF THE R[1VJ l l"+ E J~,

NEW BRAND INTRODUCTIONS

1956 - 1963 .

EMERGENCE OF A NEW CATEGORY : FILTER-TIPPED MENTHOL

NEWPORT KING

OASIS

SPRING

ALPINE

BELAIR KING

PAXTON

MONTCLAIR

1957195719591959196019631963

. . . .'• , .

50310 6547

\T.. -7' ~ -7

.0~

-r T 7"7--T ..~.

- • -• ': - - - -....» .. ----.. . . .._ ....... ..L .. . . .,...~1..r-,,.. .~... . .~ rP.~.:.+r+•,, ~wrn...". ow^ t""'.*.'!...".. 84 - ~

. . • ~.

I

-.•..

. .•., .,r ...f

. . .. .. ~.*,S . .. ~

~'~,iJ~~.~~~~~"""'.,tt ~ . .Tvjoll'`- ,

T

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1

STATE OF THE BI!SINESSCATEGORY TRENDS

CATEGORY

1956som

1963__Sam

SHARE PT,

NON-FILTER 67 .8% 41,0% -26 .8

NFF 24 .2 . 30 .4 + 6 .2

MENTHOL FILTER 1 . 5 15 .6 +14 . 1MENTHOL NON-F I LTER _2A .6 - 2,2

TOTAL MENTHOL 4,3 16 .2 +11 .9

LFF 2 .8 12 .0 + 9 .2

OTHER ~~ .l{ - .5

TOTAL 100.0% 100,0%

s

V -6AS9 OLEOS~ . .

STATE OF THE BUSINESSSALEM i vs KoOL

BY BRAND STYLE

1956 1963 SHARE PT .BRAND STYLE --sm sm Af1'GECHANGE

TOTAL SALEM 1 .0% :

_

8 .7% +7 .7

,KOOL REGULAR 1 .7 .6 -1 .1

KOOL KING 1,1 : - -1 .1KOOL FILTER __,4 _ 2 .6 +2,2

TOTAL KooL 3 .2% 3 .2% NC

TOTAL MENTHOL 4 .37 16 .2% +11 .9

o SALEM SOC IN 1963 REACHES 54%

© SALEM & KOOL (COh1BINED) SOC is 73%

STATE OF THE BUS I PdESSSUMMARY

o SALEM STIMULATES GROWTH OF MENTHOL CATEGORY :

4 .3% SOM IN 1956 To 16 .2% SOM IN 1963 .

® SALEM CAPTURES 54% OF MENTHOL CATEGORY

(ALL-TIME HIGH) W ITH 8 .7% SOM,

KOOL SOM REMAINS FLAT,

® SALEM AND KOOL, COMBINED, ACCOUNT FOR 73%

OF CATEGORY .

s

MARKtT ING MI X

1956 - 1963

4)


POSITIONING/CREATIVE STRATEGY

ADVERTISING AGENCY

WILLIAM ESTY COMPANY

POSITIONING/STRATEGY

A NEW, UNIQUE .CIGARETTE THAT ALL SMOKERS CAN ENJOY . . A

CIGARETTE THAT MAKES SMOKING MORE REFRESHING AND MORE

PLEASURABLE . UNIQUENESS : MENTHOL BLEND AND FILTER TIP,

CBMPAiGN

© HEADLINES - "A NEW IDEA IN SMOKINGf"

"SALEM REFRESHES YOUR TASTE"

0 COPY POINTS

- MENTHOL FRESH

- RICH TOBACCO TASTE

- MODERN FILTER

s

.

N

a~. ~W

r

01

MARKETING MIXCREATIVE STRATEGY

® , TRATESY

0 SPECIAL, THERAPEUTIC APPEAL

0 APPEAL ONLY TO SMOKERS WITH A't PROBLEM"

0 ADVERTISING CAMPAIGN

0"THROAT HOT? SWITCH FROM 'HOTS' TO KOOLS "(1956 - 1963)

0 COPY POINTS; -

8"BREAK THE HOT C IGARETTE H/',BIT"

0 rOR A COLD

0"EXTRA COOLNESS IN YOUR 1'HROAT"

y

-ti

s

MARKET I NG M IXCREATIVE STRATEGIES

OTHER BRANDS

BRAND YEAR STRATEGY ADVERTISING CAMPAIGN

.NEWPORT 1957 DIFFERENT MENTHOL TASTE "HINT OF MINT"

1959 ADOPTS REFRESHMENT

POSITIONING

"REFRESHES WHILE YOU SMOKE

OASIS 1957 SMOOTH NEW TASTE "SOOTHING MENTHOL MIST,

FRESHEST NEW TASTE"

BELAIR 1959 A DIFFERENT CIGARETTE "BREATH EASY . . . SMOKE CLEAi :

1960 A DIFFERENT CIGARETTE "SMOKE TWICE AS REFRESHED"

ALPINE 1959 POSITIONED FOR MEN "WHO PUT THE i iEN I N MENTHO :

SMOKING"

SPR I NG 1959 Low TAR/H I GH MENTHOL "SPRING . .,THE AIR-CONDITIO :

CIGARETTE"

MONTCLA I R 1963 MENTHOL S'I I TH CHARCOAL

FILTER

"CHAR-COOL FILTER"

PAXTON 1963 DOUBLE FILTER (BACK-TO_

BACK) HUMIFLEX PACK

"PAXTON .,,FOR TODAY'S

SMOKING NEEDS"~0WJ

LAN

MARKETING f1IX

MEDIA SPE'JD I NG

1956 - 1963

o SALEM SPENDING INCREASES RAPIDLY, REACHES $20[1i1 LEVEL IN 1963 .

G KoOL SPENDING REMAINS FLAT, CONSISTENT WITH NO SOM GROWTH

o No MAJOR DIFFERENCES IN SALEM/K00L MEDIA MIX~t

SALEM KooL$ ~p $ % IND

1956 4 .4 3 .1 4 .5 3 .21957 6 .6 3 .9 5 .9 3 .51958 9 .3 4 .6 7 .3 3 .61959 17 .1 7 .9 . 5 .1 2 .31960 15 .2 6 .9 4 .9 2 .21961 18 .0 8 .3 7 .3 3 .31962 18 .3 8 .2 6 .5 2 .91963 20 .8 8 .4 6 .7 2 .7

• 50310 6557i~ .

..y f jA. +I:wa.'+41.'- f. ~ •

». ..,.. .. ...,. ..,;,yNt

\

MARKETING MIX

SUMMARY

1956 - 1963

SALEM ENTERS PERIOD OF HEAVY MEDIA SPENDING AS

BRAND GROWS . SALEM SPENDING DOMINATES KOOL SPENDIPJG .

~ CREATIVE STRATEGY EXTENDS BRAND'S MENTHOL REFRESHMENT

BENEFIT BEYOND KOOL'S LIMITED, THERAPEUTIC POSITIONING

TO APPEAL TO ALL SMOKERS .

o NEW BRANDS ADOPT SIMILAR "REFRESHING" COPY CLAIMS

II

C%lSUML° DYNAMI CS

.

.

1956 - 1963

CO'VSUMER DYNAM I CS

BRAND DEM G APHIC PROFILES

1956 - 1963

e SALEM, KOOL AND OTHER MENTHOL BRANDS DEVELOPFEMALE PROFILE .

COtJSUMER PROF I LE

DEMOGRAPHY SALEM KQOj„ TOTAL MENTHOL

ul

MALE

FEMALE

47% 44745%

[5iTl55

CONSUMER DYNAMI CSBRAND DEMOGRAPHIC PROFILES

1956 - 1963

.

o KOOL FRANCHISE SLIGHTLY OLDER (50+) THAN SALEPI FRANCHISE .

CONSUMER PROFILE

DEMOGRAPHY SALEM KooL

kE18 - 24 6%25 - 34 2835-49 41. 50+ 25

2638

I 31 I

10TAL MENTHOL

6%284026

0

~O~ .

• .r

CONSUMER DYNAM I CS

BRAND DEMOGRAPHIC PF,OFILES

1956 - 1963

o ALL MENTHOL BRAND SMOKERS TEND TOWARD LIGHTER CONSUMPTION .

CONSUMER PROFILE

DEMOGRAPHY

SMOKING EREQUENCY

HEAVY

AVERAGE

LIGHT

SALEM 00 TOTAL flENTHOL

18% 19% 18%28 36 3054 45 52

SUMMARY

1956 - 1963

~ IN EIGHT YEAR PERIOD, MENTHOL CATEGORY BECOMES MAJOR

MARKET SEGMENT WITH 16 .2% SOM .

© SALEM ATTAINS 8 . 7 % SOM WITH KOOL AS ONLY SIGNIFICANT

COMPETITIVE BRAND AT 3 .2% SOM .

o BY 1963, SALEM GROWTH LEVELING, KOOL SOM SHOWS NO GROWTH .

o SALEM's CREATIVE POSITIONING APPEALS TOALL SMOKERS .

o NEW BRAND ENTRIES ADOPT SALEM's REFRESHMENT STRATEGY .

© SALEM MEDIA SPENDING INCREASES, DOMINATING KOOL AND

CATEGORY .

0 MENTHO_ CATEGORY SKEWS TO OLDER FEMALES/LIGHT SMOKERS .

r

_ ~ .

0

III, KooL's GROVrTH : 1964 - 1970

A. STATE OF THE BUSINESS

MARKETING MIX

0 POSITIONINGAREATIVE STRATEGY

0 SPENDING/MEDIA MIX

C . CONSUMER DYNAMICS : REASONS FOR KOOL'S

GROWTH AND SALEM'S FLAT SOM

t

Lol. o

aN

v+r


1964 - 1970

STATE OF THE BUS I PIESS

MAJOR EVENTS

1964 - 1970

0 INDUSTRY GROWTH DROPS IN 1964 (SURGEON GENERAL'S REPORT)

AND REMAINS FLAT THROUGH LATE 60's

0 PERIOD CHARACTERIZED BY HEAVY SEGMENTATION OF MARKET

© IOOMM LINE EXTENSIONS LAUNCHED WITH INTRODUCTION OF SALEM

LONGS, KOOL LONGS, AND NEWPORT 100'S

0 . NEW 1OOMM BRANDS INTRODUCED

o NON-MENTHOL BRANDS INTRODUCE MENTHOL BRAND EXTENSIONS TO

ENTER .THE GROWING CATEGORY

© WOMEN'S CIGARETTES INTRODUCED

® Low TAR BRANDS EMERGE

0 GROWTH OF FILTERS, MENTHOL AND IOOMM CATEGORIES

0 KCOL BEGINS GROWING. GROWTH ACCELERATES DRAMATICALLY .

SALEM FLAT .

STATE OF THE BUS INESS -NEW BRAND INTRODUCTIONS

1964 - 1970 - .

MAJOR MENTHOL SPIN-OFFS

SALEM LON GSKooL LoNG SNEWPORT 1OO'S

SPRING 100'S

BELAIR 100'S

NEW BRANDS

TRUE

BENSON & HEDGES

VIRGINIA SLIMS

SILVA .THINS

DORAL. EVE

NFF MENTHOL SPIN-OFFS

MARLBORo

BENSON & HEDGES.

WINSTONNINE OTHERS

19671967196719671968

196619651968196819691971

19661966

1967 -

0o+~

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CY5

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7

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4 - 4

50310 6568

~

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~TATE OF THE BUS I NESS

CATEGORY TRENDS

1964 - 1970

NON-FILTER

NFFMENTHOL FILTER

LFFOTHER

TOTAL

95 - 101h1M

1963 1970 SHARE PO I rJT0 m 31m CHANGE

41,6% 20.5% -21 .1.30.4 41,6 +11 .215.6 23.3 +7,712,0 14.4 +2.4

.y .2 - ,2

100, 07 100, 07

18 .0% +18 .0

0

c

~r:r; c

, . :~.

r:~' ~.~.~ ~

.. ., . .K .~ . ._.~..~, . . . .. ..~.~~ .W .;., .. .:.. . :.~.. . . ., . . .~.: ....+ _~'' "'"

~-41z~----•-c~r.'r ---c( r,

'r -

:~ ~,: -- - -

OLS9 OL

SIATF OF THE RI1S I P1F~S-

SALEM vs KOOL/«EWPORT

By BRAND STYLE

BRAND STYL E,

1963__sz

1970SOM

SHARE POINTCHANGE

SALEM KINGSALEM LONGS

8 .7%•

6 .9%1 .8

-1 .8+1 .8

TOTAL SALEM 8 .7% ~ 8 .7% 0 .0

KoOL REGULAR .6% .4% - .2

KooL KING 2'.6 6,8 +4 .2KooL LONGS - 1, 0- +1, 0

TOTAL KooL 3,2% 8 .2% +5 .0

NEWPORT KING 1 .7% 6 -1 .1NEI`rPOR7 Box - .1 +0 .1NEWPORT 100 'S - +0,1

TOTAL NEwPORT . 1 .7% .8% -0 . 9 .

MARKETING MI X

1964 - 1970

CREATIVE STRATEGY

SALEM : 1956-1963

0 STRATEGY

c REFRESHING, GOOD TASTING CIGARETTE

0 APPEAL TO ALL SMOKERS


® "SALEM REFRESHES YOUR TASTE" (1956-1963)0 COPY POINTS :

0 THREE-POINT REASON-WHY : MENTHOL FRESH,

FILTER, RICH TOBACCO TASTE

MODERN

0 SPRINGTIME FRESH (VISUAL EMPHASIS)

0 "HIGH POROSITY PAPER AIR-SOFTENS EVERY PUFF "

(1958 - 1963) .

:

r


SALEM: 1964-1967I

•

0 POSITIONING : REFRESHING, GOOD TASTING CIGARETTE

0 APPEAL TO ALL SMOKERS

o ADVERTISING CAMPAIGNS

0"SALEM SOFTNESS FRESHENS YOUR TASTE" (1964)0 COPY POINTS :

0 MODERN FILTER

© RICH TOBACCO

0 SMOOTHEST MENTHOL

©"TURN TO SALEt°1, FOR A TASTE THAT'S SPRINGTIME FRESH"(1965)

0 COPY POINTS :

0 RICH TOBACCO

0 MENTHOL SOFT FLAVOR

(AOrO

O+~vr

'POSITIONING/CREATIVE STRATEGY

SALEM : 1968

8 STRATEGY

0 GREATER IMPACT/MEMORABILITY

® MORE SPIRITED/CONTEMPORARY ADVERTISING

® POSITIONING : SALEM's "COUNTRY-FRESH" TASTE


®'YOU CAN TAKE SALEM OUT OF THE COUNTRY . . .

BUT YOU CAN'T TAKE THE COUNTRY OUT OF SALEhI ."(1968)

0 COPY POINTS :

.© RICH TOBACCO

0 MENTHOL SOFT FLAVOR

MARKET ING MI X


KooL : 1964 - 1970 ~

8 STRATEGY

6 MORE/MOST MENTHOL TASTE

© MORE COMPETITIVE POSITIONING AGAINST SALEM, OTHER

MENTHOLS

® BROADER/LESS MEDICINAL BENEFIT

® ADVERTISING CAMPAIGNS

® "TASTE EXTRA COOLNESS AS YOU SMOKE"

O "COME ALL THE WAY UP TO K00L"

0 SLICE-OF-LIFE TECHNIQUE

0 MALE EMPHASIS

® COPY POINTS :

"MOST REFRESHING COOLNESS IN ANY

CIGARETTE"

MARKETING MIX

MEDIA SPENDING

1964-197J

o SALEM SPENDING REMAINS BASICALLY FLAT . KOOL'-S SPENDING

DOUBLES AND EQUALS SALEM BY END OF 1970,0 SPENDING LEVELS REFLECT SOM LEVELS .

SALEM KooL$ ~ I ND $ Z IND

1964 20 .6 7 .9 9,7 3 .7

1965 21 .3 8 .2 12,2 4 .71966 21 .8 7 .4 13 .7 4 .7

1967 22 .0 7,4 16 .5 5 .61968 26 .0 9 .1 15 .8 5 .51969* 22 .6 7 .8 16 .9 5 .81970 22,3 7 .3 20,5 6 .7

dARKETUNG MIXSALEM vs . Ko.ol .

MEIZIA~SPEtI 1DING MIX

1964 - 1970

a N0 SIGNIFICANT DIFFERENCES IN SALEM/KooL MEDIAMIX DURING THE PERIQD :

6 * SALEP'1 BEG I NS US I NG ETHN I C MED I A I N 1967 : KoOL FOLLOWS ,

MEDIUM SALEM Ko-aLNETWORK TV 61% 62%SPORT TV 15 19RADIO 6 1

MAGAZINES 13 12 -

NEWSPAPERS 1 1

SUPPLEMENTS I -

OOH 2 4ETHN I C -j` _~

100~TOTAL 100 cior

0

MARKETING MIXSUMMAR Y

1964 - 1970

0 SALEM LONGS, KOOL LONGS INTRODUCED IN 1967 .

o KOOL CHANGES CREATIVE STRATEGY IN 1964 ( "EXTRACOOLNESS") . SALEM CAMPAIGN CHANGES TO "YOU CAN

TAKE SALEM OUT OF THE COUNTRY" IN 1968 AND TO

"SPRINGTIME . . .IT HAPPENS EVERY,SALEM" IN 1970 .~

o SALEM SPENDING REMAINS FLAT . KOOL'S SPENDING

DOUBLES . By 1971 KOOL SPENDING EQUALS SALEt9 SPENDING .

SPENDING LEVELS REFLECT S0 MI LEVELS .

o BOTH BRANDS PLACE HEAVY EMPHASIS ON TV.(75-80% ) . NO MAJOR DIFFERENCES IN MEDIA MIX .

r

COSVSUMER DYNAM I CS

y

1964 - 1970

CONSUMER DYNAMICSREASONS FOR KOOL'S GROWTH AND SALEM'S FLAT SOM

CHANGING CONSUMER PREFERENCES

0 GROWING DEMAND FOR MENTHOL BENEFIT

0 ADVERTISING CO"1MUNICATES BROADER

. BENEFITS THAN RESPIRATORY PROBLEM-SOLUTION .

® ACCEPTANCE/PENETRATION BROADENS INTO NEW

DEMOGRAPHIC GROUPS,

® SURGEON GENERAL'S REPORT PRECIPITATES

TREND TOWARD "SAFER" CIGARETTES . C00LING/

SOOTHING PROPERTIES OF MENTHOL CARRY

"HEALTHFUL" PERCEPTIONS .

o GROWING DEMAND FOR KOOL'S UNIQUE PRODUCT :

STRONG FLAVOR/EXTRA COOL/HIGH LEVEL MENTHOL .

CONSUMER DYNAMICS

REASONS FOR KOOL'S GROWTH

2 . K00L BENEFITS FROM COMPOUNDING EFFECTS OF FOUR

IMPORTANT TRENDS :

8 TREND #1 : GROWING DEMAND/ACCEPTANCEISOM

FOR KOOL AMONG POPULATION SEGMENTS :

BLAC K MAR KET

TOTAL SALEMTOTAL KOOL

1 . BLAC KS:

SOM'1966 19709.1% ; 9, 3%8.7 17 .9

% INCREASE

2 .3%105,7

2 . YOUNG ADULTS

AGE IEN- , CAT.

18-24 6% 51 6%25-34 28 26 2835-49 41 38 4050 & OVER 25 31 26

SALEM Vs . K00L SMOKER DISTRIBUTION

1967

Z?

.

SA OOL MEN. CAT .

8% 8X 10%28 31 2736 35 3628 26 27

CONSUMER DYNAMICSASONS FOR KooL's GROWTH

C TREND #2 : GROWTH IN SIZE OF THESE SEGMENTS

(YOUNG ADULTS, BLACK AND WHITE) RESULTING FROM

POST I*1 I I BABY BOOM :

U .S . POPULATION

GM NT

TOTAL 18-24

BLAC K 18-2425-3435-4950+

% CHG, : 1965-1970+ 22%+ 30%

18-24 AGE GROUP GROWING SIGNIFICANTLY AND

DRAMATICALLY FASTER THAN ANY OTHER AGE SEGMENT .

CONS UMER DYNAMI CSREASONS FOR KOOL'S GROWTH

TREND #3 : GROWING INCIDENCE OF SMOKING AMONG

YOUNGER SMOKERS (14-17 YEARS), BLACK AND WHITE .

E

CONSUMER DYNAMICS

REASONS FOR KOOL' S GRO vFT H

o TREND #4 : GROWING ACCEPTANCE/SOM FOR' KOOL

AMONG MALES (WHO TEND TO BE HEAVIER SMOKERS) :

SALEM Vs . KooL

SMOKER DISTRIBUTION By SEX

SEX

MALE

FEMALE

197SALEM 1967 OOL SALEM ~

47 1 53 48 1 57

53 . 47 52 43

CONSUMER DYNAMI CS

KOOL ' S GROVJTH : ftoMETR I C EFFECT

GROWING SOP'I AMONG BLACKS/YOUNG ADULTS

xGROWTH IN SIZE OF THESE SEGMENTS

x ;r

GROWTH IN SMOKING INCIDENC I E AMONG THESE,;

SEGMENTS !

x !GROWTH AMONG HEAVIER-SMOKING MALES

e

SIGNIFICANT VOLUME INCREASES FOR KOOL

r

r

,

I

A

f

CONSUf'IER DYNAt'I I CS

REASONS FOR KOOL'S GROWTH

3 . NEW SOCIOLOGICAL PHENOMENA :

0 KOOL BECOMES ADOPTED BY BLACKS AS

THE "BLACK MARKET BRAND"

O BLACK TREND-SETTING INFLUENCE

MOTIVATES ACCEPTANCE AMONG YOUNG

WHITE MALES

0 P'OLARIZATION OF SOCIETY AND VALUES/

LIFESTYLES CAUSED BY

VI ETNAM WARBLACK MOVEMENTCHANGING VALUESMUSIC, CLOTHINGDRUGS, MARIJUANA

6 SALEM'S ADVERTISING AND SMOKER PRO-

FILE PERCEIVED AS FEMALE, MIDDLE CLASS

AND "ESTABLISHMENT" ; KOOL'S SMOKER

PROFILE/BRAND IMAGE BECOMES MALE/MACHOI

"COUNTER CULTURE . "

STRONG C IGARETTES (KOOL, MARLBORO) WITH

INDEPENDENT/MACHO/CONTEMPORARY USER IMAGERY

BECOME ADMISSION CARD TO PEER GROUP ACCEPTANCE

AMONG YOUNG AMERICANS .

4

SU.MMARY : 1964 - 1970

Q INDUSTRY VOLUME IS LEVEL

6 MENTHOL CATEGORY SOM GROWS DRAMATICALLY

o SALEM SOM IS FLAT . „

o KOOL'S SOM NEARLY TRIPLES

o SALEM KING DECLINES, KOOL KING GROWTH ACCELERATES

Ot. 100MM LENGTH APPEARS, KOOL LONGSISALFJ'l LONGS

INTRODUCED

0 CAMPAIGN CHANGES OCCUR

0 NON-MENTHOL BRANDS INTRODUCE MENTHOL LINE EXTENSIONS

O NEW BRANDS INTRODUCED (DORAUWOP'fEN'S CIGARETTES)

® K00L'S SPENDING INCREASES TO SALEM 's LEVEL

(REFLECTING SOM)

® NO REAL DIFFERENCES IN SPENDING MIX

0 FACTORS PRECIPITATING K00L'S GROWTH ARE IDENTIFIED :

ti CHANGING CONSUMER PREFERENCES

O COMPOUNDING EFFECT OF FOUR TRENDS

0 NEW SOCIOLOGICAL PHENOPIENA

IV, POST-BROADCAST-BAN YEARS : 1971 - 1974

A . STATE OF THE BUSINESS

B. CONSUMER DYNAMICS

C. MARKETING MIX

PRODUCT TESTING

© CREATIVE : STRATEGIES & PERFORMANCE

6 SPENDING

6 MEDIA MIX

0 RETAIL DISTRIBUTION/AVAILABILITY

0 MERCHANDISING/PROMOTION

0 SPIN-OFFS : SALEM BOX AND SALEM EXTRA

STATE OF THE BUS I N~SS

1971 - 1974


MAJOR EVENT S

1971 - 1974

-•0 BROADCAST BAN BEGINS (1971) . CIGARETTE

ADVERTISING MEDIA SHIFT TO PRINTIOOH .

INDUSTRY GROWTH RESUMES (BROADCAST BAN

ENDS ANTI-CIGARETTE TV ADVERTISING) . •

e FTC TO NUMBERS APPEAR IN ADVERTISING (1971) .

0 SURGEON GENERAL ' S WARNING APPEARS IN

ADVERTISING (1972) .

0 NEW HI-FI BRANDS INTRODUCED (VANTAGE , CARLTON) .

0 HI-Fl SPIN-OFFS LAUNCHED (MARLBORO LIGHTS ,

KOOL MILDS, WINSTON LIGHTS) .

STATE OF THE BUSINESS;

NEW BRAND INTRODUCTIONS

1971 - 1974 .

MENTHO(_ SP I N-OFFS

KOOL MILDS (1972)SALEM BOX (1974KooL Box (1974)ALPINE 100'S

NEW BRANDS

VANTAGECARLTON

ICEBERG 10'S

LEMON TWIST

MORE

NFF M ENTHOL SP I N-OFFS

PALL MALL 100 's Boxf'QARLB0R0 BoxTRUE IOO'S

BENSON & 'HEDGES Box


CATEGORY TRENDS

5r1i.LEGOF3Y 1970 JVI-1 12 / `t ,'& S,HARF . P()1 NT rHAN_CiE_

NON-FILTERS 20, 5% 14,1' -6 .4NFF 41,6 43,5 +1,9MENTHOL FILTER 23 .3 27 .0 +3,9

LFF 14,4 15 .2 + ,8OTHE R .2 1 ? --

TOTAL_

100,0%_i

100 .0% --

95-101 MM 18 .0 23 .2 +5 .2Hi-FI 5 .7 9 .4 +3,7

. d. 50310 6596

STATE OF T_RE BUS I_NESS

SALEM ys . KooL/IdcwPORT

BY BRAtI~ STYLE

BRAND STYLE

SALEM KINGLONGS

Box

TOTAL SALEM

KoOL REGULAR

KING

BoxLONGS

MILDS

TOTAL KooL

NEWPORT KI NG

Box100's

TOTAL «EWPORT

SHARE1970, SQM 1q.74 SOM eo1NL CHti~IGE

6 .9% 5 .9%'1 .8 2 .6--- __a8 .7 8 .8

.4% .2%6 .8 8 .3--- .11 .0 1 .7--- .58 .2 10 .8

.6%", .6'

.1 .2

.8 .9

'-1 .0%+ .8± -3+ .1

+ .1

r

STATE OF THE BUSI['ESS : 1971 - 1974

SUMMARY

® BROADCAST BAN BEGINS JANUARY 1971

0 INDUSTRY GROWTH RESUMES '

0 MENTHOL CATEGORY CONTINUES GROWTH

o Box STYLES INTRODUCED

o HI-FI BRANDS INTRODUCED

0 SALEM FLAT, KOOL GROWTH CONTINUES

® SALEM LONGS OUTPERFORMS KOOL LONGS

0 NEWPORT REVERSES DECLINE, BEGINS TO GROW

?it

7

9

50310 6599

r

,,

CONSUMER DYNAMICS

c

0 KOOL'S VOLUMEISOM CONTINUE TO ADVANCE SHARPLY .

SALEM SOM REMAINS FLAT .

o BRANDS CONTINUE ON DIVERGENT PATHS :

0 DEMOGRAPHIC PROFILE

® SEX

0 AGE

8 C I TY S-I ZE

o BLACK VS . WHITE

0 GEOGRAPHIC REGION

A PSYCHOGRAPHIC PROFILE

.8 PERCEPTIONS OF PRODUCT/TASTE

© PERCEPTIONS OF BRAND USER.

CONSUMER UYNAMI CS

MOGRAPHIC P^nQFI1-ES :

KOOL ' S STRONG PERFORMANCE AMONG MALE SMOKERS GROWS EVEN

STRONGER (1967 - 1973) . KooL INCREASINGLY BECOMES THE

MENTHOL BRAND ACCEPTED AMONG MEN :

SALEM vs KooL

DISTRIBUTION OF SMOKERS BY SEX

SALEM KQ& TML. MENTHOL

sEX 1 961 . 1 -04 73 MZ IQZ3 1967 IM_MALE 47% 4c° % 53% 60% 44% 45%

FEMALE 53% 52% 47% 40% 56% . 55%

CONSUMER DYNAMI CS -

DENOGRAPHIC PROFILES : AGE

KOOL'S PERFORMANCE AMONG YOUNG SMOKERS (18-24) ADVANCES

SHARPLY . VOLUME CONTRIBUTION BY THIS AGE GROUP DOUBLES

(1967-1973) :

SALEM vs KooL

D)ISTRIBUTION OF SMOKERS BY AGEI

SALEM ~QQl, IOTAj~MENTHOLi~

kG E 1q 2 m lNZ m m 1m.18-24 8% 7% 8% 15% 10% 9%25-34 28% 30% 31% 33% 27% 32%35-49 36% 35% 35% 29% 36% 32%50+ 28% 28% 26% 23% 27% 27%

CONSUMER DYPJAMI CS

DEMOGRAPHIC PROFILE : CITY SI7-E

KOOL'S STRONG URBAN PERFORMANCE (CITIES 2 MM+)

CONTINUES TO INCREASE (1967-1973)l ADVANTAGE OVER

SALEM AMONG URBAN SMOKERS CONT I NUES :

SALEM vs KooL

DISTRIBUTIONSF SMOKERS BY CITY SIZE

SALEh1 KQQL IQ]'A(,~ MENTHOL

CITY S lqEZ lm 195Z ~-~ Iuiz m.

2 MM+ 22% 29% 3[p% 367. 27% 31%500M -2hiP'1 25% 25% 25% 25% 27% 27%50h1=500M 19% 16% 15% 15% 17% 17%25M-50M 14% 13% 13% 12% 13% 12%RURAL 20% 17% .17% 12% 16% 13%

CONSUMER DYNAM I CSDEMOGRAPHIC PROFILE

BLACK MARKET : ITS S I Gi1 I F I CANCE

o BLACK MOVEMENT IN MID-60'S DEVELOPS

0 BLACK "UNITY" REFLECTED IN LIFESTYLES,

PURCHASE PATTERNS, BRAND SELECTION

0 YOUNG BLACK POPULATION GROWS FASTER THAN

YOUNG WHITE POPULAT,ION

BLACKS REPRESENT 11% OF U .S . IN 1970 AND

GROWING

B MENTHOL CATEGORY SHARE AMONG BLACKS REACHES

45% IN 1973 VERSUS 23% IN NON-BLACK MARKET

i

CONSUMER MIAMI CS

QEN1Q RAPHIC PRO H ACK

KoOL ' S DRAMATIC SOM GROWTH IN BLACK MARKET (B EGINNING IN

1966) CONTINUES UNTIL 1973 . SALEM REMAINS ESSENTIALLY

FLAT :

SALEM vs, KooL;BLACK MARKET . SHARE

I

Z9A0

OP

. .

SALENI

8 . 7$

1965 1970

Tc%~:.~.~-9 .9% 10 .3%

1975

C .

CONSUMER nYNAMI CS

L}E''OGRAPHIC PROFILE

BLACK MARKFT : IIS S I GP! I F I CANCE

kACK MARKET

% OF U .S . POPULATION

X OF 1973 VOLUMESHARE OF MENTHOLCATEGORY

~OTAL U .S . VOLUMERCWTH : 66-7s

BLACK VOLUME GROWTH

BLACK MARKETCONTRIBUTION TO GROWTH

SAl'E.MK4s~~11% 11%13% 31%

25% - 55%

+3 .$ BIL . UNITS +23 .3 BIL, UNITS

+1 .2-BIL . UNITS 111 .0 BIL . UNITS

32% -477

r

,

CONSUMER DYPJAf 1 I CS

GEOGRAPHIC PERFORMANCE

o SALEM's STRENGTH SKEWS TO SOUTHEAST/SOUTH

CENTRAL MARKETS .

.

I

,

' O KOOL'S STRENGTH SKEWS TO UPPER MIDDLE VlEST

(DETROIT, CHICAGO, ETC .) AND SOUTH CENTRAL

MARKETS . STRENGTH GENERALLY FOLLOWS LARGE

URBAN MARKETS WITH LARGE BLAC K POPULATIONS1

SALEM vs . KooLSOM INDEX BY GEOGRAPHIC REGION '

_SgLEM_ KooLSALES AREA 1972 1974 1972 1974

NORTHEAST

EAST Cci:TRAL

NORTH CENTRAL

SOUTHEAST

SOUTH CENTRAL

WE3T COAST

811 0392

8310692

124 128116 113

86

85 82125114

124114 ~

102 106

0~. ~,0a

CONSUMER DYNAMICS .

PSYCHOGRAPHIC TRENDS/PROFILE S

x

~ YANKELOVICH MONITOR REVEf LS THAT NEW SOCIAL

VALUES REPLACING OLD SOCIAL VALUES $

o NEW VALUE SEGMENTS GROWING ;

DECLINING .

SEGMENT

OLD VALUES

NEW VALUES

OLD VALUE SEGMENT S

1970 1975

54ro 35%

46% 65%

SALEM`S DISTRIBUTION OF SMOKERS WEAK AMONG

GROWING It NEW VALUESI' GROUPS . KOOL STRONG AMON G

it NEW VALUESIt SEGMENTS :

SEGMEH'T

CONSERVATIVES

LIBERALS

OTHER

TOTAL

SALEN KooL

1 417 28%

42 1 58

17 14

100% 100%


SALEM: 1970

0 STRATEGY

4 BEGIN TRANSITION FROM BROADCAST TO PRINT/OOH

o DISTILL SALEM's HERITAGE, ESSENTIAL BENEFITS INTO

WORD/PHRASE NOT DEPENDENT ON AUDIO/MOTION

® POSITIONING : SPRINGTIME-FRESH TASTE .

~ ADVERTISING CAMPAIGN

0 "SPR I NGT IME ! IT HAPPEN3 EVERY SALEM" (1970)0 COPY POINTS

0 RICH TOBACCO

0 MENTHOL SO:=T FLAVOR .

0 NATURAL MENTHOL

r

:

1

50310 6610

5r

P-"

- " ..-~.r,..,~ .~,, .,.~. . ..

ir

MARKETING MIX

MAJOR MARKETING ACTIVITY : 1971 - 1974 : -

PRODUCT TESTING

0 CREATIVE CHANGES -

0 EVALUATION OF ADVERTISING (SALEM vs . KOOL)

0 SPENDINGAEDIA MIX

0 PROMOTIONAL ACTIVITY AND EVALUATION

0 EVALUATION OF RETAIL DISTRIBUTION

0 SPIN-OFF INTRODUCTIONS : SALEM Box, SALEM EXTRA

\

MARKETING MIXPRODUCT TESTING

o EXTENSIVE PRODUCT TESTING CONDUCTED IN

1972-1973 TO DETERM I N E I F SALEM' S

PRODUCT/BLEND WAS A PROBLEM

0JEST RESULTS INDICATED THAT SALEM KING

PRODUCT WAS PREFERRED OVER KoOL KING

AMONG ALL SMOKERS EXCEPT KOOL KING SMOKERS

TYPE SMOKERS

PREFER SALEM KING K00L KING OTHER 85Mm MENTHOL

SALEM KING 77% 35% 71%KooL KI NG 23% 65ro 29%

_

ON I

~ MARKETING MIXPRODUCT TESTING

. SAL.ECIKING VS, KOOL JS1NG

o REASONS FOR PREFERENCES WERE :

TYPE SMOKER PREFERENCE REASON

SALEM KING SALEM KING MILDNESS~KOOL KING KOOL+KING STRENGTH

OTHER 85MM MENTHOL SALEM KING MILDNESS

o DESCRIPTIVE COMMENTS TENDED TO CONFIRM SALEM'sSUPERIOR BLEND AND CONSTRUCTION

1 . KOOL BURNED MUCH TOO FAST

2 . KOOL PACKED MUCH TOO LOOSELY

3. KOOL SMOKED TOO ROUGH/HARSH

MARKETING MIX

PRODUCT JE ST I NG

, ALEM QuGS vs . K0o1. LoNGS .

0 SALEM LONGS PERFORMED EVEN BETTER RELATIVE TO

KOOL LONGS : SALEM LONGS PREFERRED BY ALL SMOKER

GROUPS INCLUDING KOOL LONGS SMOKERS$

MARKETING MIX

QROR,UCT TEST I NG

CONCJ ..US I OT!S

1. SALEM AND KOOL ARE DIFFERENT CIGARETTES

® SALEM HAS A MORE EXPENSIVE BLEND

© SALEM I S BETTER CONSTRUCTED

o KOOL HAS MORE MENTHOL

e SALEM IS RELATIVELY MILD/SMOOTH ; KOOL

IS RELATIVELY STRONG/HARSH

KOOL TENDS TO BE PREFERRED OVER SALEM ONLY

AMONG KOOL SMOKERS ; AMONG ALL OTHER GROUPS

SALEM IS PREFERRED,

3. NET : DO NOT CHANGE THE SALEM PRODUCT

CREATIVE STRATEGY

SALEM : 1971

0 STRATEGY

0 POSITIONING : THE MOST REFRESHING CIGARETTE

AVAILABLE

0 SUPPORT CLAIM BY ESTABLISHING UNIQUE PRODUCT

INGREDIENT VS . OTHER MENT HOLS ("NATURAL MENTHOL")

0 RETAIN REFRESHMENT IMAGERY OF OUTDOOR GREENERY

IN CHANGEOVER TO PRINT

A ADVERTISING CAMPAIGN

0 "IT 'S ONLY NATURAL" (1971)0 COPY POINTS :

0 NATURAL MENTHOL, NOT ARTIFICIAL,

GIVES SALEM A TASTE THAT IS NOT

HARSH, HOT .

0 TASTES SPRINGTIME FRESH,

0 VISUALS : PORTRAYAL OF MORE CONTEMPORARY

'MODELS/LIFESTYLES, SUPERSEDING SOFT/

SPRINGTIME/PASSIVE IMAGERY .

CREATIVE STRATEGY

SALEM : 1972-1974

0 STRATEGY

0 MOVE AWAY FROM PRODUCT INGREDIENT HEADLINE

IN FAVOR OF CONSUMER END-BENEFIT PROMISE$

0 POSITIONING : THE MOST REFRESHING CIGARETTE

AVAILABLE@


0 ".SALEM REFRESHES NATURALLY" (1972-1974)

® COPY POINTS :

0 NATURAL MENTHOL BLEND MEANS

NATURAL MENTHOL TASTE .

0 NO HARSH, HOT TASTE .

.0 VISUALS : ACTIVE, MASCULINE, YOUNG ADULT

MODELS/SITUATIONS$

0 0011 ADVERT I S I NG CARR I ES R EF R ESKMENT

THEME/MASCULINE USER IMAGERY$

V,!;

MARKETING MIXCREATIVE STRATEGY

KooL : 1971-1974

STRATEGY

0 HIGHEST MENTHOL LEVEL

0 BETTER, FR ESH TASTE

0 INTRODUCE WATERFALL AS SYMBOL OF COOLNESS (1971)

ADVERTISING CAMPAIGNS

0 PROBLEM SOLUTION APPROACH : "LOOKING FOR A TASTE

THAT'S NEVER HOT?"

0 COPY CLAIMS :

0"COME ALL THE WAY UP"

0"THE TASTE OF EXTRA COOLNESS"

MARKFT I PdG M I X

CREATIVE STRATEGY

QTtiER MENTHOLS : 1571-197y

BRAND STRATUy. ADVERTISING

CAMPAIGN

NEWPORT 1971 INCREASED MENTHOL "MENTHOL CHILLED,

1972

TASTE REMARKABLYI ' REFRESHING TASTE .''

YOUTH! APPEAL, pIF SMOKING ISN'TSMOKING PLEASURE A PLEA~UR~, WHY~ BOTHER. LIV~

WITH PLEASURE

BELAIR FRESH TASTE, LIGHT "JUST THE RIGHTMENTHOL TOUCH OF MENTHOL"

MARKEtj NG M I X

AnVERTISINr, COPY

CAMPAIGN PERFORtQANCE

e SALEM'S AD AWARENESS, BRAND AWARENESS, BRAND TRIAL,

AND BRAND ATTITUDES PERFORMED WELL RELATIVE TO KOOL

(LATE 1974) :

PERFOMEASU

RMANCER E SALEM

BRAND AWARENESS

KING 99% 98%LONGS 50% 46%Box 34% 20%

BRAND TRIAL

KING 25% 24%LONGS 10% 8%Box 3% 1%

ADVERTISING AWARENESS 82% 76%

COPY POINT PLAYBACK

SALESPOINT COOL/NOT HOT COOL/NOT HOTFRESH/REFRESHING

VISUAL COUPLE/PEOPLE . PENGUIN/WATER- . SCENES

DAR IMPACT (BURKE) 6% 6%BRAND ATTITUDES(% RATING 7+)

27% 26%

0

H

0

MARKETING MIX

MEDIA SPENDING : 1971-1974

0 SALEM SPENDING DECLINES IN 1971, THEN RETURNS TOPRE BROADCAST BAN LEVEL .

0 SALEM SPENDING COMPETITIVE WITH KOOL

~

YEAR_~ SALE1~~-

$ ND .i

1971 13 .3 5 .3 21,2 8,41972 19 .1 7 .4 19 .4 7 .51973 20 .3 8 .5 16 .6 6 .91974 21 .4 7 .7 20,5 7 .4

0 t,/

MARKETING MI X

MEDIA SPENDING : 1971-1974

MEDIA SALECI ' K401

MAGAZINE 29% 33%

NEWSPAPERS 15 7

SUPPLEMENT 13 16

00N 36 40

ETHN I C _.._Z 4

TOTAL 100% 100%

0 NATIONAL VS . LOCAL SPENDING FOR SALEM AND KOO L

EXHIBIT NO DIFFERENCE #

0 MEDIA MIX FOR SALEMIK00L NOT SIGNIFICANTLY DIFFERENT $

o SALEM USES NEWSPAPER I N 1971I1ST HALF 1973, THEN

DISCONTINUES ROP .

o SALEM CONCENTRATES MORE SPENDING IN MAJOR URBAN

MARKETS (TOP 5O) ; DISCONTINUES LOCAL ADVERTISING

IN SMALLER MARKETS-

MARKETING MIXMAJOR MENTHOL BRANDS

M;:D I,A EXPE"PID I TURES

1971 - 1974e

0~ SALENi AND KOOL CONTINUE TO DOMINATE CATEGORY SPENDING .

SgLEI~ KOOL NEWPORT BELAIR A CATEGORYINDUSTRYSPENDIba

4 r` 1,~ l• r s!.lm

1971 13 .3 5 .3 21 .2 8 .1l 1 .2 .5 4 .5 1 .8 4 .0 1 .6- 74 .8 29 .7 251 .7

1972 19 .1 7 .4 19,4 7 .5 3 .8 1 .5 3 .9 1 .5 5 .2 2 .0 79 .3 30 .8 257 .1

1973 20 .3 8 .5 16 .6 6 .9 4 .0 1 .7 4 .1 1 .7 6 .5 2 .7 81 .3 33 .9 240 .0

1974 21 .4 7 .7 .20 .5 7 .4 E .2 2 .2 4 .4 1 .6 6 .9 2 .5 90 .6 32 .6 277 .9

V-

UZ99 OLEOS

MARKETING MIX

PROMOTION/MERCHANDISING

SALEM SALES PROMOTION STRATEGY : (LATE 60's, EARLY 70's)

0 USE "THEME" PROMOTIONS CONSISTENT WITH INTERESTS

AND LIFE STYLES OF TARGET SMOKERS TO :

t@ SUPPORT CREATIVE CAMPAIGNS .

® INCREASE READER INTEREST, INVOLVEMENT~ .

IN ADVERTISING .1

® INCREASE TRIAL, VOLUME THROUGH PURCHASE

REQUIREMENTS .

© USE ADVERTISED SWEEPSTA}:ES AND "SELF-LIQUIDATOR"

PROMOTIONS TO ACHIEVE BROAD CONSUMER AWARENESS, APPEAL .

OFFER HIGH VALUE PRIZES TO ACHIEVE CONSUMER PARTICIPATION .

o k00L STRATEGY SIMILAR .-

PR0M0TION STRATEGY LATER ABANDONED DUE TO :

o ABSENCE OF PROVEN INCREASE IN AD READERSHIP,

INVOLVEMENT

0 LOW LEVELS OF VOLUME, TRIAL INCREASES

© AVAILABILITY OF PROMOTION VEHICLES WITH ; ~'

GREATER, MORE IMMEDIATE PURCHASE I"IDUCEMENT

CAPABILITIESI

MARKETING MIX

TAI D,I TRI$uTION/AVAILABILITY

® NEITHER SALEM NOR KOOL EXPERIENCED PROBLEMS WITH RETAIL

DISTRIBUTION/PRODUCT AVAILABILITY .

o RJR's STRONG SALES FORCE ASSURED ADEQUATE PRODUCT VISIBILITY/

AVAILABILITY THROUGH THE U .S. •

® DISTRIBUTION/AVAILABILITY NOT A FACTOR .IN SALEM's POOR

PERFORMANCE RELATIVE TO KOOL .

SALEM vs . KOOLX RETAIL OUT-OF-STOCK

TOTAL U . S .

BRAND STYLE 11/72 11/73 &LZ4

SALEM KI NG 2 .1%KooL KING 1.1 %SALEM LONGS 5 .8%KooL LONGS 5, 0%

1 .3%1,0%4 .4%5 .0%

2 .6%)1 .5%5 .7%6.1%

RKET I NC M I X

6 BOY. CATEGORY GROWING SHARPLY IN EARLY 1970's .

0 CATEGORY PROFILE (YOUNG ADULT/URBAN/MALE)

; REFLECTIVE OF SALEM WEAKNESS RELATIVE TO

KooL,

e SALEM BOX INTRODUCED NATIONALLY IN 1ST HALF

1974,

0 YOUNG, MALE IMAGERY USED IN ADVERTISING ("IJENIM"),

o KOOL FOLLOWS WITH BOX INTRODUCTION IN 2ND HALF

1974,

A CATI:GORY MISJUDGED : A MARLBORO PHENOMENON :

LmTED VOLUME/GROWTH POTENTIAL FOR MENTHOL

BRAP:DS $

o SALEM BOX SOM PEAKS AT .3- .4%; KOOL BOX LEVELSAT .4% S0M .

MARKET ING M I X

SALEM EXTRA

o SALEM "EXTRA COOL" SPIN-OFF DEVELOPED AS DIRECT,

COMPETITIVE WEAPON AGAINST KOOL

0 PRODUCT DEVELOPED AT SAME MENTHOL LEVEL AS KOOL

WITH CORK TIP AND BETTER BLEND . BLIND PRODUCT TESTS

AMONG KOOL SMOKERS REVEAL SALEM EXTRA PREFERRED OVER

KOOL KING,

• SALEM EXTRA TEST MARKETED I N LATE 1Q/y/EARLY 1975r

® SALEM EXTRA FAILS TO ATTAIN ~. 4% SOM . REASONS :

~ KOOL SMOKERS REJECT SALEM IMAGE

~ SALEM SMOKERS REJECT KOOL-LI KE PRODUCT

(T00 STRONG/HIGH MENTHOL)

l f'

MARKETING MIX

FINDINGS/CONCLUSIONS

* SALEM CANNOT AND SHOULD NOT ATTEMPT TO COMPETE DIRECTLY

WITH KOOL FOR THE FOLLOWING REASONS :

1 . PRODUCT IS DIFFERENT (SALEM PROD UCT IS NOT

ACCEPTABLE TO KOOL .SMOKERS AND KOOL PRODUCT

IS UNACCEPTABLE TO SALEM SMOKERS)

2 . PERCEPTIONS OF BRAND TASTE ARE DIFFERENT '

3. IMAGE OF BRAND USER IS MARKEDLY DIFFERENT

4 . CONSUMER PROFILE/ATTITUDE WANTS AND NEEDS

ARE VERY DIFFER ENT

SALEM EXTRA EXPERIENCE CONFIRMS THE ABOVE

© SALEM'S MARKETING STRATEGY SHOULD CONCENTRATE ON

PROMOTING THE BRAND'S OWN UNIQUE BENEFITS AND RETAINING

ITS OWN NICHE IN THE CATEGORY, WHILE BUILDING BUSINESS

AMONG LIKELY NEW USERS OF THE BRAND$

SUMMARY : 1971-1974

O BROADCAST BAN BEGINS (JANUARY 1971)

6 INDUSTRY VOLUME GROWTH RESUMES

© MENTHOL CATEGORY GROWTH CONTINUES

6 •BOX SPIN-OFFS INTRODUCED

KOOL MI LDS I NTRODUCED

0 SALEM KI NG DECL I NES, KOOL I:I (dG GROWTH CONT I NUES

o SALEM LONGS, KOOL LONGS BOTH GROW

® NEWPORT REVERSES DECLI PIE

o HI-FI BRANDS IPJTRODUCED

o K00L"c: CONSUMER PROFILE BECOMES MORE MALE/YOUNG ADULT/

URBAN/'BLACK

LAOw

.o,1,/ Av W

O

S~ MMARY; 1971 -1974 ( CavT , )

KOOL STRONGER AMONG GROWING "NElh' VALUES" SEGMENTS

C BRAND USERS PERCEIVED AS DIFFERENT

o SALEM'S GOOD PRODUCT CONFIRMED IN TESTING

o ADVERTISING CAMPAIGN CHANGES OCCUR TO ADAPT TO PRINTI

o 1974 : "FASHION" CAMPAIGN (LONGS) AND BLACK CAMPAIGN,("SMOKE EASY") INTRODUCED

,o ADVERTISING AWARENESS/BRAND AWARENESS/BRAND ATTITUDES

NOT A PROBLEM

® SPENDING DECLINES BRIEFLY (1971) . RETURNS TO PRE-

BROADCAST BAN LEVELS, SPENDI NG COMPET I TI VE WI Tli KOOL .

o SALEti/KOOL SALES PROMOTION STRATEGIES SIMILAR

0 RETAIL DISTRIBUTION/AVAILABILITY NOT A PROBLEM

o SALEM EXTRA ATTEMPTED WITHOUT SUCCESS

50310 6632

0

V . A NEW STRATEGY : 1975 - 1976

a . PROBLEM IDENTIFICATION (1974 & 1ST HALF 1975)• 1. SYMPTOMS OF THE PROBLEM

2 . PROBLEM DEFINITION

3. PROBLEM ANALYSIS

B. INTRODUCTION OF NEW 3-PART MARKETING STRATEGY

(MID-1975)1 . NEW ADVERTISING CAMPAIGN

NEW "LIGHTS" STYLES

3 . NEW SPENDING STRATEGY

PROBLEM 1 I DENT I F I CATI 0N

SYMPTOMS OF THE PROBLEM

1SALES PERFORMANCE

I2, SMOKER ATTITUDES/PERCEPTIONS

13 , SWITCHING LOSSES

PR,OBEM .I]).FNT I F I CAT I OPr' : 19_75-1_a_7FSYMPTOMS OF THE PROBLEM

SALES PERFORMANCE

AND/C FGORY PERFORMANCE ,

1972 - 1074

Al

z VoL .BRAND7 TFGORY ~ CHANGE

SALEM 8.8% + 3 .3%KooL 9.3% +10 .2%NEWPORT .8% - 4 .8%TOTAL MENTHOL 24 .8% + 6 .4%

SUMMARY :

1973

0 SALEM' S VOLUME GROWTH ONLY 1/3 OF KOOL' S

o SALEM's VOLUME GROWTH ONLY 1/2 OF INDUSTRY'S

0 NEWPORT REVERSES DECLINE; BEGINS DRAMATIC GROWTH

o SALEM SOM FLAT; KoOL, NEWPORT, CATEGORY SHOW SQM

GROWTH

PROBLEM I DENT I F I CAT I ON : 1975 - 1976

SYMPZOMS OF THE PROBLE M

SALES PERFORMANC E

ID - 1975 FORECAST

JUNE QUARTER (1975) MRD FORECAST°INDICATED

CONTINUING PROBLEMS FOR BRAND WITH PRO-

JECTED DROP I N SO M :

1974 SOM 1975 SOM (FQRECAST)

8.a% 8.5%

PROBLEM I DENT I F I CA,T I011 : 1975 - 1976SYMPLQ['UE_IIE.EBQB1.Et1

SMOKER ATTITUDES/PERCPTION

MARKETING RESEARCH ALSO REVEALED FOUR MAJOR DANGER SIGNALS

RELATED TO CHANGING ATTITUDES OF THE SALEM FRANCHISE :

SALEM's OLDER, HEAVIER SMOKERS LEAVING. ~THE FRANCHISE : ~

SALEM

SOM TREND BY AGE GROUP

AGE SEGMErJl IM 9~18-24 7.4% 9 .2%25-34 9.0 10 .035-49 9.4 9.550 + I.Z _$.4

TOTAL

®

91' 01, 9,37o + 3

(ATTITUDES, TRIAL, AND PURCHASE RATES AMONG OLDER

SMOl:EttS WERE ALL DOI-11N .) ~--

SMOKER ATTITUDES/PERCEPTIM

2 . SALEM SMOKERS/LIGHTER SMOKERS/LESS COMMITTED/

. SMOKE FOR SOCIAL REASONS/ENJOY SMOKING LESS :

CONSUMPTION

COPISUMPT I ON ~SA~;~LIGHT (1-15) 36% .y7%MEDIUM (16-15) 30% 27%HEAVY (+25) 34% 26%

FNJ~OYMENZ~~ XRA INOE~JJOM~~ r~I

~ ~~SALEM yg%KooL 60%TOTAL SMOKERS 55%

SMOKER ATTITUDES/PERCEPTInNY

3 . SALEM SMOKERS' CONSUMPTION RATE DECLINING :

7SALEM NO. OF CIGARETTES_ PER nAY

AGE V I"C VUP 10/73 10[1~ D.1.LL.i

18-20 15 .9 13 .7 -2,221-24 16 .1 15 .6 .525-34 19 .4 18 .7 .735-49 19 .8 19 .450 +

TOTAL 18 .5 17 .4 -1 .1

MVrjE V,_ll.!_L_1D U L JIPE115t1..i _LJ 5111a

4 . SALEM SMOKERS I3ECOMI NG MORE CONCERNED ABOUT

THE ALLE(:ED HEALTH HAZARDS OF SMOKING :

X CONCERN7+ ON 10 PT SCALE 1973

. .

1M F F .DI,, __

SALEM SMOKERS 57% 61% +4TOTAL SMOKERS 59% 62% +3

f

SYMPTOMS OF THE PROBLEM

SWITCHING LOSSES

SALEM EXPERIENCING INCREASING SWITCHING LOSSES TO

HI-FI BRANDS :

NET LOSSES To Hi-Fi CATEGORY

PERI OD ENDING CHANGE

OCTOBER 1972

OCTOBER 1973 .

OCTOBER 1974

OCTOBER 1975

S.YMPTO' OF THE. PROBLEM

SUMMARY

1, COMPETITORS' VOLUME GROWTH 2-3 TIMES GREATER

THAN SALEM's

CHANGING ATTITUDES OF SALEM SMOKERS PRESENT

GROWING PROBLEM

© OLDER SMOKERS LEAVING THE FRANCHISE

• LIGHTER SMOKERS

0 CONSUMPTION DECLINES

0 "CONCERN" GROWS

3 . SWITCHING LOSSES

p.~QBLE~M IDENTIFICATI9N : 1975 - 1976

PRORLEP'~.UE:F1 N I II~

MARKETING RELATED CAUSES OF THE PROBLEM

E~~Et~t 8C'AS*PRICE ~ No

PRODUCT QUALITY ~ NoSPENDING LEVEL ' No~SPENDING/ffEDIA MIX ~ NoDISTRIBUTION/RETAIL AVAILABILITY NoMERCHANDISING/PROMOTION NoPACKAGING NoADVERTISING COPY YES

PRODUCT ATTRIBUTES/FORMS/STYLES YES

,

P_ ROB LEM I DE! JT I F I CAT I ON : 1975-1976

PROBLEM A'rlALYYS I S

PROBLEM #1 : ADVERTISING COPY

EVIDENCE "A "0 FAILURE TO MOTIVATE/ATTRACT ADEQUATE SHARE

OF YOUNG, URBAN, MALE SMOKERS (MEDIUM FLAVOR,

LIBERALS AND NEW SMOKERS)

CAUSE :

0 BRAND USER IMAGE (PSYCHOLOGICAL BENEFIT)

o FEMALE/PASSIVE/OLD-FASHIONED/NOT EMULATABLE

SOxCiUSIM :1 . USER I MAGE A KNOWN MOT I VAT I NG I NFLUENCE I N

REASONS FOR SMOKING AND BRAND SELECTION

ZSALEM SMOKER PERCEIVED QUITE DIFFERENTLY THAN

KOOL SMOKER

3~ SALE!•i BRAND USER IMAGE NOT COMPATIBLE WITH

LIFESTYLE/ATTITUDINAL NEEDS OF YOUNG ADULT,

• MALE/MEDIUM FLAVOR LIBERAL SMOKERS

y . IMAGE IS A DETERRENT TO SALEWS OPTIMAL GROWTH .

PROBLEM IDENTIFICATION : 1975-1976

PROBLEM ANALYSIS

PROBLEM #1 : ADVERTISING COPY

EVIDENCE "B"

C . ® LACK OF COMMITMENT/ENJOYMENT AMONG SALEM

FRANCHISE/CONSUMPTION LOSSES/LOSS OF OLDER

SMOKERS

CAUSE :

0 BRAND TASTE/BENEFIT POSITIONING (PHYSIOLOGICAL

BENEFIT)

Loss OF IMPACT : REFRESHES/REFRESHMENT

BENEFIT NO LONGER UNIQUE . (GENERIC TO

MENTHOL CATEGORY)

2, LOSS OF MOTIVATION : COMMUNICATION RESEARCH

REVEALS "REFRESHMENT" BENEFIT CONSIDERED

IMPORTANT BY LESS THAN 20% OF SMOKERS

PRQ LEI1 IDEN.TI F I CATIQ'lPROBLEM Ai•JALYS I S

PROBLEM #2 : PRODUCT ATTRIBUTES/FORMS/STYLES

ELIDEN .CE :

0 BRAND PRODUCT STYLE MIX WAS NOT FULLY

MEETING EMERGING WANTS/NEEDS .

C,AIE.CxQ.B.Y Z VOLUME CHANGE (75 VS 74)

NFF ~ -2. s%MENTHOL ~ +y,yz

Hi-Fi ~NON-FILTER

100MM-7 .3%+3 .2%

o FRANCHISE ATTITUDES CONFIRM FAILURE TO MEET

CERTAIN WANTS/NEEDS .

LARGE "WORRIER" SEGMENT

LOSS OF OLDER, MORE "WORRIEDit SMOKERS

GROWING It CONCERN" OVER HEALTH

CAUSE :.

o ABSENCE OF SALEM ENTRY IN FASTEST GROWING

CATEGORY (HI-FI) 0

o FAILURE TO PROVIDE ADEQUATE MARKETING SUPPORT

FOR BRAND GROWTH STYLE (100MM)

e ~

INTRODUCTION OF NEW THREE-PART

MARKETING STRATEGY : MID-1975

• NEW ADVERTISING CAMPAIGN

® NEW "LIGHTS" LINE EXTENSIONS

0 NEW SPENDING STRATEGY

' 7

0 BACKGROUND

0 PRELIMINARY STRATEGIES AND RESEARCH RESULTS

o FINAL CREATIVE STRATEGY

0 pSMOKING ENJOYMENT" CAMPAIGN DEVELOPED : RATIONALE

0 PERFORMANCE TO DATE

0 DAY-AFTER-RECALL TESTING

0 CAMPAIGN COMMUNICATION STUDIES

0 CONSUMER RESEARCH

NEI~1 PDVERTISING C1IMPAIGN

BACKGROUhD

© WILLIAM ESTY (AGENCY OF RECORD) AND ROSENFELD,

SIROWITZ & LAWSON GIVEN CREATIVE ASSIGNMENTS

EARLY I N 1974

i FOUR STRATEGIES DEVELOPED-i

1 . NEW MENTHOL BENEFIT

2 . POSITIONING WITHIN CATEGORY

3 . USER IMAGE

4 . RETURN TO ORIGINAL STRATEGY : SALEM AS AGOOD, ENJOYABLE CIGARETTE

0 APPROXIMATELY 100 CAMPAIGN IDEAS DEVELOPED

AND SCREENED ; 40 CAMPAIGNS SUBMITTED TO EXTENSIVE

COPY RESEARCH

NEVI ADVERT I S I NG CATAI GPJ

PREL IMI PIARY STRATEG I ES so, RESE/IRCH RESULTS

STRATEGY #1 : MENTHOL POSITIONING

COPY POINTS

FRESHNESS, MOIST, SOFT, COOL, SPRINGTIME, COUNTRY TASTE .

2, RESULTS® RECALL IMPACT OF MENTHOL POSITIONING CAMPAIGNS AT

OR BELOW LEVEL FOR EXISTING CAMPAIGN ("REFRESHES

NATURALLY") .

A MENTHOL DESCRIPTIVES/BENEFITS NOT NEW, UNIQUE, OR

IMPORTANT .

0%

j4EV ADVERT I S I f JG CAMPA I GN

PfsEL] ~]L1L'JARY STUTEGIES 1 RESEARCH RESULTS

STRATEGY #2 : POSITIONING'WITHIN CATEGORY@

1 . COPY POINTS

SMOOTH, EASY, MILD, NOT HARSHI,HOT .

RESULTS

• GENERALLY LOWER RECALL/PERSUASIVENESS THAN CURRENT

CAMPAIGN,

0 SMOOTH/EASY/MILD CLAIMS NOT UNIQUE, NEW, MEANINGFU~_ .

NEW ADVERT I S I NG CAMPlI I GN

P.BF1. IMI NARY STRATEG I ES & P.ESE.'14RCH RESULTS

STRATEGY #3 : USER IMAGE

1, COPY POINTS

VISUAL/VERBAL DESCRIPTION OF SALEM SMOKERS (CONTEMPORARY,

ACTIVE, MASCULINE)

RESULTS

® IMAGE ALONE GENERATED LOW PERSUASION

0 HARD TO ACCEPT/BELiEVE ;' N'EGATIVE RESPONSE TO

TOO-OBVIOUS IMAGE RUB-OFF

® CONCLUSION : IMAGE BENEFIT SHOULD BE MARRIED WITH

PRODUCT BENEFIT

C

0

4ers

~N

NEW ADVERZI S I PaG CAMPA I GN~ R RA G 8 c MINI& 8

STRATEGY #4 : RETURN TO ORIGINAL STRATEGY

1 . Copy POINTS

ENJOYMENT/SATISFACTION/GOOD CIGARETTE ("WHY

SMOKE IF YOU DON'T ENJOY IT?") .

2 . RESULTS

o ENJOYMENT/SATISFACTION CONCEPT GENERATED

HIGHEST COPY TESTING SCORES AMONG ALL

CAMPAIGNS TESTED :

6 MAIN IDEA COMMUNICATED

0 MAIN IDEA GIVEN HIGHEST RATING OF

1MPORTANCE/DIFFERENCE/INTEREST

c

NEt-! ADVERT I S I NG CAt1PAI GPJ

SUMMARY OF FINDIf1GS/CQNCLUSLONS

0 IMAGE PROBLEM MUST BE ADDRESSED .

NOT EFFECTIVE STRATEGY .

IMAGE ALONE , HOWEVER,

0 MENTHOL BENEFITS/POSITIONING WITHIN CATEGORY NOT UNIQUE/

IMPACTFUL, MEANINGFUL, PERSUASIVE .

0 "ORIGINAL" POSITIONING (PLEASURE/ SAT I SFACT I ONI ENJOYMENT)

MOST MEANINGFUL/IMPORTANT/UNIQUE .

0 OPTIMUM STRATEGY : COMBINE ORIGINAL POSITIONING WITH

IMAGE BENEFIT,

~

NEW ADVERTISING CAMPAIGI4

", MOS KI NG f N OYMFN,T" CAMPA I GN

,,WPALGN DEVE1,QPED AND EXECUTED

0 WILLIAM ESTY CAMPAIGN

RA'[IONALE FOR DE,VELQPdFjNT OF "SMOKING ENJO1jjyFNT" CAMPAIGNI

0 ON-STRATEGY

0 ADDRESSED IMAGE PROBLEM DIRECTLY

0 ADDRESSED PROBLEM OF SMOKER ATTITUDES/PERCEPTIONS

(LOW ENJOYMENT/DECREASING CONSUMPTION)

® UNIQUE BENEFIT MOTIVATING TO ALL SMOKERS

0 COPY PRE-TESTING RESULTS ARE POSITIVE

NEti.I AUVERT I S ING CAMPA I G;d

F I NAL. CRFAT I VE STRATEGY

e OBJECTIVEDEVELOP AN ADVERTISING CAMPAIGN FOR SALEM

WHICH SIGNIFICANTLY OUTPERFORMS THE CURRENT

1974-1975 CAMPAIGN IN TERMS OF ITS ABILITY

TO GENERATE AN INCREASED SHARE OF INDUSTRY

SALES .

. o CREATIVE STRATEGY

1 .

SMOKERS .

USER POSITIONING

CREATE A POSITIVE/CLEARLY DEFINED BRAND

USER IMAGE : MASCULINE, ACTIVE, CONTEM-

PORARY, EMULATABLE, THE IMAGE MUST HAVE

SPECIAL APPEAL TO MEDIUM FLAVOR LIBERAL

. o~ o+

, o+v+. ~

o CREATIVE STRATEGY (CONT,) :2, PRODUCT BENEFIT POSITIOWING

COMMUNICATE THAT SALEM ALWAYS DELIVERS

REAL SMOK I P!G ENJOYMEPJT/SAT I S FACT I ON/

PLEASURE . THE "REASON WHY" I S SALEM'S

GOOD CIGARETTE TASTE AND ITS REFRESHING/

COOLING MENTHOL .

0

@ CREATIVE STRATEGY

3 . EXECUTI OEJALGL1 i DEL I f•!E S

• PROVOCATIVE/IMPACTFU L

® HONESTY, CANDOR, BELIEVABILIT Y

® CAPABILITY TO INTEGRATE ALL BRAND

STYLES WNIDER CAMPAIG N

• ADAPTABLE TO ALL SPECIAL MARKET

SEGMENTS

• SIMPLE, CLEAR LANGUAGE

C/`~PAB I L I TY OF LONG TERM DURAT I OiJ

0NEW ADy R~ T I S ING CAMPA I GN

" I 'N6 ENJOYMENT" CAMPA I G[~!

CQ,['Y Pf;E-TE STING S~ ULTS ARE POSITIVE

A. EXPLORATORY RESEARCH (FOCUSED-GROUP SESSIONS)

® HIGH COMPREHENSION OF MAIN IDEA.

0 UNIQUE/UNLIKE OTHER CIGARETTE ADS

A YOUNG SMOKERS STRONGLY ATTRACTED TO MODELS

6 BELIEVABLE/HONEST

B. RECALL IMPACT (DAR TESTING)

o DAR TEST SCORES OF ADS AVERAGE 35% VERSUS

CIGARETTE NORM OF 19%

C . PERSUASION/MOTIVATION (PORTFOLIO ATTITUDE SHIFT)

® PORTFOLIO ATTITUDE SHIFT SCORE (101)

HIGHEST OF ALL 40 ALTERNATE CAMPAIGNS

TESTED

NEW ADVERTISING CAMPAIGN

"SMOKI NG ENJOYP9EPlT" CAMPAI GN

CAMPAIGN INTRODUCED NATIONALLY IN ALL MAJOR

MEDIA VEHICLES IN AUGUST 1975

__'SMOK I NG ENJOYMENT" CAtqPA I C NPERFORMANCE To DATE

DAR TESTING

® RECALL IMPACT

o 36% DAR AVERAGE (7 ADS)

o 60-65% ABOVE ALL-CIGARETTE NORM

® COMMUNICATION

o 57% OF RECALLERS PLAY BACK "ENJOYMENT"

(WINSTON TASTE : 56%)

0 100% OF RECALLERS PLAY BACK MODEL

o 40% OF*RECALLERS PLAY BACK STRONG ATTI-

TUDINAL COMMENTS RELATING TO MODEL/IMAGE

0 VOLUNTEERED BRAND STYLE PLAYBACK 20-30%

N" ~MOICI NG E!`1JOYMENT" CIIN' PA I G N

Pf RFORMA CE TO DATE

CAMPA I Gjy_C 9t'1(y1N I CAT I ON STUD I E S

0 ADVERTISING AWARENESS HOLDING AT HIGH LEVELS (74%)

0 BRAND AWARENESS UP :

BRAND STYLE

KI NG

BoxLONGS

LIGHTS

417. 4. V75 kdL99% 100% 100/wo

44% 49%54% 59% 60%

A"ENJOYMENT" SALESPOINT COMMENTS BEGIN TO APPEAR

0 COMMENTS ON MODELS/IMAGERY BEGIN TO APPEAR

® BRAND ATTITUDES UP

A'[? I TUDES R/75 Ylfi

% RATING

SALEM 7+22% 25%

"sMC!KINr, OYMENE CAMPAIGN

PE RFORMANCE TO DAT E

[ON$11M R _SEARC H

e MRD MONITOR INDICATES THAT PROBLEMS IDENTIFIED I N

74/75 ARE BEING CORRECTE D

0 BRAND SOM AMONG YOUNGER SMOKERS SHOWING

INCREASING STRENGT H

® BRAND CONSUMPTION RATES HAVE INCREASEDi

0 FRANCHISE NOW SKEWING MORE TO HEAVIE R

SMOKER S

0 SALEM SMOKERS ENJOY SMOKING MORE THAN

. IN 74/75

NEW THREE-PART MARKETING STRATEGY

1 . NEW ADVERTISING CAMPAIGN

2. NEW "LIGHTS" LINE EXTENSIONS

o SALEM LIGHTS IN NOVEMBER 1975e SALEM LONG LIGHTS IN OCTOBER ' 1976

SALFM LIGHTS_

BACKGROUND

1 . DEFENSIVE OPPORTUNITY

o SALEM ' S LARGE "WORRIER" SEGMENT

• GROWING LEVEL OF "CONCERN"

o SALEM KING TAR LEVEL HIGH AT 19 MGI

0 SWITCHING LOSSES TO Hi FI BRANDS

• Loss OF OLDER SMOKERS

OFFENSIVE OPPORTUNITY

0 ATTRACT COMPETITIVE MENTHOL SMOKERS

SALEM LIGHTS .

, . .OBJECTIVES

somYEAR

YEAR IYEAR IIYEAR I II

2 . PROFIT

GROSS ;OM NET SOM,y%,y%,4% ,2%

• DISCOUNTED R0I OF 27%~~

MARGINAL CONTRIBUTION EQUAL TO SALEM KING

m

4% SAI .FrI LIGHTS

STRATEGY

1 . POSITIONING

o LOWERED TAR CIGARETTE OFFERING SALEM'S

GOOD CIGARETTE/MENTHOL TASTE

2 . PRODUCT

9 REPLICATE SALEM KING TASTE WITH A TAR

LEVEL OF IZ-l4 MG .

o 85 MM SOFT PACK

3 . TARGET MARKET

® FEMALES

e OVER 350 UPSCALE

DISTRIBUTION

0 NATIONAL INTRODUCTION

5 . COPY9'ANNOUNCEMENT" COPY/FOCUS ON NEW PACKAGE

® f'NEON" DEV I CE

6. SPENDINC

0 $20 rTi ANNUAL RATE (IST 4 MONTHS)

SALEM LIGHTSFOR~~IANCE TO DATE

0 GROSS SOM OF 1 .1% IN 1976 vs . .47 OBJECTIVE

A NET $OM OF .3 -,4/ vs . .1% OBJECTIVE

• TOTAL BRAND SOM/VOLUME LOSSES REVERSED ; NEW

GROWTH BEGINS

AWARENESS UP TO 60%

9% SALEM LONG LIGHTS

BACKGROUND

1DEFENSIVE OPPORTUNITY

0 NEW BRAND INTRODUCTIONS (MERIT, KENT GOLDEN

LIGHTS, FACT) THREATEN SALEM BUSINESS

! ANTICIPATION OF MERIT MENTHOL 10015

0 100MM LENGTH CONSTITUTES 30% OF BRAND BUSINESS

0 SALEM LONGS TAR LEVEL HIGH AT 19 MG .

® SALEM LONGS SMOKERS' GROWING If CONCERN"

o LONGS EXPERIENCING ,1 -2% SOM LOSSES TO

HI-FI CATEGORY

2 . OFFENSIVE OPPORTUNITY

NI••FI CATEGORY CONTINUES DRAMATIC GROWTH

(+.15, 4' I N 1976)o EXISTING VOID IN 100MM/NI-FI CATEGORY

1. SOM

SALEM LONG LIGHTSOBJECTIVES ,

YEAR GROSS SOM NET SOM

YEAR I 5% 2%'

YEAR II 6% .2%

YEAR III .7 % .2%

2. PROFIT

c DISCOUNTED ROI OF 16%

0 MARGINAL CONTRIBUTION EQUAL TO LONGS

MUM LONG LIGHTS, TRS ATEGY

1. POSITIONING

® LOW TAR, LONGER.LENGTH, SALEM's MENTHOL

. TASTE

~ 0 SALEM LI GHTS NOW COME I N A KFa LQLLG,EB .

LENGTH

0 SELL LIGHTS/LONG LIGHTS AS LOW TAR FAMILY

FROM SALEM (LENGTH ALTERNATIVES)

2 . PRODUCT

0 IoOMM

8

o

REPLICATE SALEM LIGHTS TASTE

12 MG . TAR

3 . PACKAGING

0 SOFT PACK

0 WHITE PACK CLOSE REPLICATION OF SALEM

LIGHTS GRAPHICS

y . SPENDING '

0 $ZSMM ANNUAL RATE (IST 6 MONTHS)

NEW THREE-PART MARKETING STRATEGY

1 . NEW ADVERTISING CAMPAIGN

2. NEW "LIGHTS" LINE EXTENSION

3. NEW SPENDING STRATEGYf

0 NEW BRAND STYLE MARKETING MIX

9 SEGMENTATION STRATEGY

0 NEW SALES PROMOTION STRATEGY

0 SPENDING TESTS

NEW SPENn I "IG STRATEOY

NEW BRAND STYLE P1ARKETING PJIX~~~111

B HISTORICALLY. LOW LEVEL OF COPY EMPHASIS

ON INDIVIDUAL BRAND STYLES,

• SPENDING ALLOCATION BY BRAND STYLE FAILED

TO REFLECT GROWTH/GROWTH OPPORTUNITIES,

SALEMBRAND STYLE ALLOr.AT i ON

SHARE OF VOL UME VS . SHARE . F TIVE T I S.IM

BRAND STYLE

KING

LONGS

BoxBRAND FAMILY

TOTAL

--1.410 - --197-1-- __1SZ2__ 1973 1974_SQY M4 M SDA M SPA M MA m SQA1~ 43 77 36 - 7<< 29 ' 72 35 67 12

-45

26 17

3A

F28 7

3a

29 134 24

100 100 100 100 100 100 100 . 100 100 1o0

NEW SPEND I NG STRATEGYNEW BRAND STY E MAR KET ING M I X

A! 19CAT I ON PLAN

NEW BRAND STYLE SPENDING MIX IMPLEMENTED CONCURRENTLY

WITH NEW CAMPAIGN INTRODUCTIONS

BRAND STYLE SPENDING

SECOND H ALF 1975/IST HALF 1976

BRAND STYLE Z YQLUME Z SPEND I NG

SALEM KING 63% 33%SALEM LONGS 31% 447SALEM Box 4% 10%SALEM LIGHTS ( INTRO) 2% 13%

NFW SPEND I ~I_ G STR~TEGYNEW BRAND STYLE MARKETINQ MIX

CRE.A? IVE PLAN

0 INDIVIDUAL BRAND STYLE MESSAGES/BENEFITS INCORPORATED

INTO NEW CAMPAIGN .

0 COMMON BENEFITS (IMAGE/ENJOYMENT) DELIVERED IN ALL

ADVERTISING IMPRESSIONS; BRAND STYLE MESSAGES;

SEGMENTED BY AUDIENCE POTENTIAL :

IENJOYMENT

(PHYSIOLOGICAL). BENEFIT

IMAGE(PSYCHOLOGICAL)

BENEFIT

LONGSKI NG Box .

a+a~o,

NEW SP~dDING STRATEGYNEW SEGMENTATION STRATEGY

PREVIOUS STRATEGY0 ALLOCATE MARKETING DOLLARS TO MARKETS ON BASIS OF

POPULATION/CURRENT, ACTUAL VOLUME FOR TOTAL BRAND,

NEW STRAT GY0 GEOGRAPHIC SEGMENTATION AND SPENDING

0 MODEL DEVELOPED TO ALLOCATE DOLLARS ON BASIS

OF TRENDS/FUTURE VOLUME POTENTIAL FOR EACH

BRAND STYLE$

0 DEMOGRAPHIC SEGMENTATION AND STRATEGY

o MODEL DEVELOPED TO ALLOCATE DOLLARS ON BASIS

OF TRENDS/VOLUME POTENTIAL FOR MAJOR DEMO-

GRAPHIC GROUPS FOR EACH BRAND STYLE@

ON NEW SPENDING STRATEGY

NEW SALES PROMOTION STRATEGY

0 BACKGROUND

0 HISTORICALLY, BRAND USED SELF-LIQUIDATING

PREMIUM OFFERS AND SWEEPSTAKES PRIZES TO

GENERATE PACK SALES (VIA PROOF OF PURCHASE)

AND TO EXTEND ADVERTISING MESSAGE/READERSHIP

0 N0 EVIDENCE OF VOLUME INCREASES

0 NEW STRATEGY IMPLEMENTED : 1976® TRIAL/CONVERSION/VOLUME-BUILDING PROMOTIONS

• COUPONING IN 1976/1977

0 SAMPLING IN 1977

NEW SPENDING STRATEGY

SPENDING TESTS

0 PURPOSE : REFINE KNOWLEDGE OF BRAND'S RESPONSIVENESS

TO

B VARIATIONS IN ToTAL SPENDING LEVELS

0 VARIATIONS IN $TYLE SPENDING LEVELS

. ~0 SPENDING TESTS BEGUN IN RAY 1976

~

® +100% OF NATIONAL, LEVEL

,

o +50% ~0 -50%0 BRAND STYLE MIX (CONVERT ALL LOCAL

ADVERTISING TO BRAND STYLE WITH IDENTIFIED

GROWTH POTENTIAL)

@ RESULTS DUE LATE 1977

,

50310 6680

m

0

0 NEW CAMPAIGN AND LIGHTS STYLES HAVE INJECTED

NEW LIFE INTO SALEIVS BUSINESS .

1976 SOM OF $ .9i~ HIGHEST IN BRAND'S HISTORY .

0 8 .9% SOM NEARLY HALF-A-SHARE-POINT HIGHER

THAN 1975 FORECAST .

0 SHARE GROWTH ATTAINED IN SPITE OF NEW BRAND

PROLIFERATION

TOTAL N0 . OF BRANDS/STIFS

27 1040 GHANGING CONSUMER PREFERENCES ( I .E . LONGER

LENGTH, LOWER TAR, ETC .)

0 STRONG COMPETITION FROM K00,.,

MENTHOL SPIN-OFFS

NEW BRANDS,

d EVIDENCE SUGGESTS BRAND CAN AVOID NORMAL PRODUCT

LIFE,CYCLE PATTERN EVEN AFTER 20 YEARS .

50310 6682

i. ;. - . . . . . . . . . . . . ~.~

/ ~... r . .. ' .._T^~F ∎.-_ ,

~. ' ..L

..•

~ rAw*!,~.'f„~ww~l+ ~". ~+.. J . •

VI 1977 AND THE FUTURE

A. BUSINESS PROJECTIONS

B. 1977 MARKETING STRATEGY

BUDGETS/FINANCIAL

BUS I P:ESS PROJECT I0NS

0

r

US I PIESS PROJ EC'f I ONSQYERICIFJW

SALEM IS IN A STRONG POSITION AS BRAND ENTERS 1977 AND

FUTURE .

o BRAND VOLUME/SOM GROWTH RESTORED IN 1976 . WILLCONTINUE IN 1977 .

0 PRODUCT/BRAND STYLE MIX WELL-POSITIONED TO MEET

GROWING CONSUMER WANTS/NEEDS .

0 QUALITY PRODUCTS

o MILD TASTE PERCEPTIONS

0 TWO "LOW TAR" STYLES

o BRAND COMPETING IN GROWIFIG MENTHOL CATEGORY AND

GROWING SUB-CATEGORIES .

0 * HI-FIa IooMM

o RESEARCH SHOWS ADVERTISING CAMPAIGN

EFFECTIVELY CORRECTING PREVIOUS PROBLEMS :

4 BRAND IMAGE MORE CONTEMPORARY

© MORE MOTIVATING PROMISE

~ IMPROVED SMOICER ATTITUDES (ENJOYMENT

OF SMOKING~ CONSUMPTION)

US INLESS PROJECTIONS

DVEBICIEW

0 POPULATION/DEMOGRAPHIC SHIFTS AND TRENDS PRESENT

FAVORABLE ENVIRONMENT FOR SALEM .

o POPULATION GROWTH SHIFTING TO SALEM's STRONG

AREAS (SOUTHEAST/SOUTH CENTRAL) $

® MOVEMENT OF POPULATION BUBBLE INTO MIDDLE-I

AGE SEGMENTS CONSISTENT WITH SALEM's STRENGTH :

18-24

25-34

35-49

50+

65-7 0

+227

70-75

+12%

+p2

-2+8

75-80

+11 %

+22 1

o SALEM EXPERIENCING SOM GROWTH AMONG YOUNGER SMOKERS :

SALEM SHARE OF SMIOKERS.

~'iEQg4u.p APR . '74* AP3 .VS APR . '76

18-20 1111% 10,49: 11 .3%

21-24 9.5 9.6 919

' ;

BUSINESS PROJECTIONSOVERVIEW

• KOOL EXPECTED TO SHOW SOM/VOLUME DECLINES .

• LEVELING/DECLINING BLACK MARKET SOM

• LEVELING/DECLINING INCIDENCE OF

SMOKING AMONG YOUNG SMOKERS

6 SLOWDOWN I IV GROWTH RATES OF YOUNG .

ADULT POPULATION SEGMENTS

o KOOL INCONSISTENT (STRONG/HARSH)

WITH CHANGING CONSUMER PREFERENCES

(HI-FI/MILD TASTE)

a

BU I 'dPROT I MS

Q1(EffiCIEW

0 NEWPORT GROWTH LIKELY TO LEVELI

0 STRENGTH/GROWTH HAS BEEN CONTRIBUTED BY

YOUNGER WOMEN

0 SLOWDOWN IN GROWTH RATES OF YOUNG ADULT POPU-

LATION SEGMENTS

0 LEVELING/DECLINING INCIDENCE OF SMOKING AMONG

YOUNG SMOKERS (PARTICULARLY FEMALES)

® ABSENCE OF HI-FI ENTRY AS YOUNG SMOKERS

BEGIN TO ADOPT LOW TAR PREFERENCES

BUSlNESS PROJECTIONS~ QV.EPiYIE11

O BRAND MUST, HOWEVER, MEET CHALLENGES FRONI EXISTING

AND ANTICIPATED COMPETITORS

o MERIT MENTHOL : g5'S, NEW 100'5

8 NEWPORT LIGHTS '

'N

0 `KENT GOLDEN LIGHTS/CARLTON MENTHOL/VANTAGE MENTHOL

6 BENSON & HEDGES MENTHOL LIGHTS

• NEW PM MENTHOL BRAND

0

N

~~

BUSINESS PROJECTIONS

CATEGORY SOM PROJECTIONS

CATEGORY - l9Z6 1~IZ 1978. 1m 1980

MENTHOL 28.6% 29.2% 29 .7% 30.2% 30.6%NFF 41.3 41.0 41.0 40,8 40.595-101MM 24.2 24,8 25,4 26.2 26.8Hi-Fi 15,4 18,8 21.6 24,2 26 .5

O MENTHOL (4 .7) (6.0) (6.9) (8.0) (8.6)® NON-MENTHOL (10 .7) (12 .8) (14 .7) (16.2) (17 .9)

SUMMARY© MENTHOL CATEGORY SOM WILL GROW AT EXPENSE OF NON-MENTHOL

BRANDS .

e SALEM WI LL PARTICIPATE IN OTHER GROWINr- CATEGORIES/SUB-

CATEGORIES :

Q 100Mao HI-'FIo HI-FI MENTHOL

50310 6691

BUS1 NESS PR JECTIONSCATEGORY SPEND?NG

1975 1976 1977 CHG . '77 vs . '75,yCAIEGQBY $ .~ $ .. -L $ ~ $.

Hi-Fi $ 56 .9 20% $169 .3 45% $182 .0 45% +$125 .1 +220%

BALANCE INDUSTRY 232 .5 ..$( J 206 .1 M 2,2$aQ --

TOTAL $289 .4

.

100% $375 .4

-

100%

,.. .

$410 .0 100: '+w120 .6 + 42%

SUMMARY,• Hi-Fi CATEGORY ' S IMPACT ON INDUSTRY EVIDENCED IN CURRENT /PROJECTED SPENDING (45% oF

TOTAL IN 1976/1977) .

B1lSlNESS P.R . .JEO CT I 0"1S

SALEM SOM FROJ ECT I ONS

Q 1977 SOM GOAL : ACHIEVE ALL TIME HIGH SOP1 OF 9 .0%

BRAND STYLE

KING

Box

LONGS

LIGHTS

LONG LIGHTS

TOTAL 8. 9M 9 . - 0%

VOLUME(BILLIONS)

52 .6 53.5

VOLUME %CHANGE

+3.3% +1 .7%

1977 MARKETING STRATEGY

1977 MARKFTI ^!GST.BA.L GY

a PosITION SALEM :o As CIGARETTE THAT REPRESENTS SMOKING ENJOYMENT (I .E .

A GOOD, ENJOYABLE CIGARETTE WITH MENTHOL TASTE) .

© As CIGARETTE FOR COiJTEMPORARY, INDEPENDENT, SELF-

ASSURED ASSURED SMOKERS, WITH YOUNGER MALE EMPHASIS (CON-

~TINUE TO UPDATE BRAND IMAGE)

1977 MA_T I NG~ TRAT rY

• SUPPORT THE BRAND WITH HIGH COMPETITIVE

LEVEL OF SPENDING RESOURCES (31 .6MM),

.TERMINATING SALEM'S ERODING SHARE OF

INDUSTRY SPENDING (6%) .

. -1977 MARKE,T I rJG STRATEGY

CONTINUE INTRODUCTORY ADVERTISING SUPPORT

JCREATIVE AND SPENDING SUPPORT) FOR LIGHTS/

LONG LIGHTS THROUGH 1ST HALF OF 1977 .

r

' ~ . . . .

1977 MAR ETIPJG STRATEGY

0 IMPLEMENT SEGMENTED BRAND STYLE MARKETING

PLAN. DELIVERING ADVERTISING AND PROMOTION

TO DEMOGRAPHIC AND GEOGRAPHIC SEGMENTS

REPRESENTING HIGH GROWTH POTENTIAL FOR

EACH STYLE8

,3.977 MARKE]' IN5 STRATEGY

OON

e ALLOCATE BUDGET TO BRAND STYLES CONSISTENT WITH PROJECTED

GROWTH POTENTIAL :

BRAND STYLE Z SPE[dD I NG ~ VOLUME VQLUME TREND

KING 2LBox -- ~LONGS 25-LIGHTS/LONG _51'. ,;

483

28Zl

DOWN

DOWNFLATup -

LIGHTS

TOTAL 100% 100 % UP

1„477 MARKETING STRATEGY

DVERTISINr CAMPAIGN

® OBJECTIVES :

0 CONTINUE TO UPDATE/CONTEMPORIZE BRAND USER

IMAGE

® CONTINUE TO COMMUNICATE THAT SALEM ALWAYS

DELIVERS REAL SMOKING ENJOYMENT

• NEW EXECUTIONS TO BE ADDED TO POOL (PRE-

SCREENED BY COPY TESTING)

b CONTINUE MALE EMPHASIS (80%)

• EXPLORATION OF LIGHTS/LONG LIGHTS INTEGRATION

INTO CAMPAIGN UNDERWAY

o EXPLORATION OF THE USE CF MULTIPLE BRAND

STYLE S IN CURRENT CAMIPA :.GPl,

6 EXPLORATION OF NEW LIGHTS CAMPAIGN OR

LIGHTS/LONG LIGHTS INTEGRATION INTO

CAMPAIGN UNDERWAY,

1_97Z MARKET I NG STRATEGY

_NSUER RESEARCH

i CONDUCT MAJOR RESEARCH ANALYSIS OF MARKET AND

BRAND I N 1.977 . -

0. OBJECTIVES ;

0 IDENTIFY EMERGING CONSUMER TRENDS AND

PROBLEMS/OPPORTUNITIES FOR SALEM AS

BRAND CHARTS FUTURE DIRECTIONS

0 DEVELOP OPTIMAL LONG TERM STRATEGY FOR

BRAND (I .E . LIGHTS/LONG LIGHTS)

0 STAY AHEAD OF COMPETITION

1277 P"AgKET I NG STRATEG Y

PROj~w-CT , TE ST IIG L,DEVEJ,.,OPMENT

B DEVELOP CAPABILITY TO REDUCE TAR LEVELS

FOR KING AND LONGS TO 17 MG . BY END OF

YEAR

0 DEVELOP CAPABILITY TO- LOIVER KING TAR LEVEL

TO 15 MG . IN 1977

6 DEVELOP CAPABILITY TO LOWER TAR LEVEL ON

LIGHTS STYLE S

o DEVELOP C.4PAB I LI TY TO IMPROVE BLENDS OF

ALL BRAND STYLES

BUDGETS/FINAICIAL

MAgKEllu p yT

1976 vs 1977

($m"I)

BUDGET 1n 1277 - I CHANGE

ADVERTISING $27 , 4 $27 ,6 + 1%

PROMOTION 2 , 9 M. +30

OTHER A .2 -50

TOTAL GROSS $30.7 $31.6 + 2%

TOTAL NET $28.4 $29,6 + 3%

a2A l.ldl

1977 FINAPICIAL SUMMARY

® MARGINS WILL CONTINUE TO BE HIGH . .

0 RETURN ON SALES WI.LL REMAIN HIGH/INCREASE SLIGHTLY

® CHANGING BUSINESS MIX (I .E . TO LIGHTS STYLES) WILL

NOT DIMINISH MARGINS/RETURN

0 OPERATING PROFIT (BEFORE TAXES) WILL CONTINUE TO

INCREASE (+9 .0% VERSUS 1976)

0 SHARE OF CORPORATE PROFIT ( 31 % BEFORE TAX PROFIT)

WILL EXCEED SHARE OF CORPORATE VOLUME ( 26 %)

SALEMEINANCI SUMMARY

($000M NET)

J ~ ~ ~. / (DEC. ) ~

NET SALES $658.4 $697.0 $38.5 ~MARGINAL CONTRIBUTION 223.2 239.8 16.6" ~7.4OPER . PROFIT BEFORE TAXES & 184 .5 199 .0 14 .5 7 .9MKT . CONT . EXPENSE

SALES t"~ERCHAND I S I NG EXPENSE ~_ 1],j5 _ . 3 3.0

OPER. PROFIT BEFORE TAXES AND $173 .3 $187 .5 $14.2 8.2%ADV . EXPENSE

I ADVERTISING & PROMOTION $ 28.4 $ 29.6 $ 1.2 . 4.0%

OPER . PROFIT BEFORE TAXES $144 .9 $157.9 $13.0 9.0~

OPER. PROFIT AS % NET SALES

BEFORE MKT. EXPENSE 28.0% 28 .6%

AFTER PZKT . EXPENSE 22.0/00' 22 .7%

SOL9 0 lEOS - 1.~

salem brand rev i ew 20-year marketing history

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