Marketing Plan Final (1)

7/30/2019 Marketing Plan Final (1)

http://slidepdf.com/reader/full/marketing-plan-final-1 1/18

Marketing Plan – ‘Marlboro Switch’ 1

Introduction

Marlboro cigarette is a brand owned by the Altria Group in USA and by Philip Morris

International outside USA. The brand emerged at England in 1847 and targeted women. Later in

1920, it emerged in US markets targeting predominantly female smokers. During 1950‟s it

targeted the health conscious people by introducing filtered cigarette and also started targeting

men. The brand is famous for its advertisements like „Marlboro man‟, slogans like „Mild as May‟

and for sponsoring various motor-sports events. During 1972 it became one of the most popular

brands in the world (Marlboro Cigarettes). In 2012, Marlboro brand was ranked 53 amongst the

top 500 global firms of the world with a brand value of $15,171 million and an enterprise value

of $180,739 million (Marlboro, 2011).

Executive Summary

The company plans to launch a new reformed cigarette in the markets of Singapore where

they already enjoy a market share of 50%. The product will be called „Marlboro Switch‟. This

cigarette will contain less harmful ingredients which will reduce odor and smoke. It will give a

distinct experience to smokers by providing them three distinct flavors. Along with this it will

give the smokers leisure of enjoying two flavors in one cigarette by pressing a switch and

changing the flavor. The product will be sold in an attractive and convenient packaging which

will have a slot for keeping the lighter. It will give the consumers luxury of carrying the lighter

along with the packaging thereby making the product unique, stylish and have less harmful

effects.

The company wants to release this product by the year end and gain a competitive edge

over their competitors. The product will not be overpriced but will be competitive with other

brands. By providing less harmful cigarette it will target the health conscious people and thereby

tend to increase its market share by 10% by 2015.




Industry Analysis

This analysis was done to understand the company‟s position in the industry with respect

to other existing industries in its sector. The analysis was conducted by using the Porter‟s five

forces framework.

Threat of Substitute Products:

In Singapore market our closest competitors like Dunhill and Winston have „Switch‟

available with only one flavor Ice-blast and Menthol respectively. Our company has decided to

come up with three distinct flavors which are not available in any other brand. Du nhill‟s Switch

cigarette has a higher cost than our product and is limited to one flavor. Winston brand provides

„Switch‟ with also one flavor at slightly lesser cost . However, both these brands are more

harmful than our cigarettes. So in our product consumers get more variety of flavors at

reasonable cost along with a lighter slot in the packaging. It also has less harmful contents, thus,

making it is superior to other products in the market. All these factors will make the consumers

to stick with our product and not switch to other brands. Therefore the threat of substitutes for

our product is low and so market will be more attractive and profit oriented.

Threat of New Entrants:

Singapore markets have strong brands available in the markets like Dunhill (BAT) which

has 30% market share and Japan Tobacco international (Winston) which has 20% market share.In spite of the strong brands certain smaller brands have gained entry like 235 by Natuzzi

Trading Pte Ltd, which can pose a threat to us (Euromonitor, 2011). The presence of strong

brands will make it not easy for any new company to enter the market but will definitely hamper

their growth because it will not be easy for smaller companies to gain brand awareness due to

existing loyalty for major brands. Government regulations of Singapore are another significant

factor because it has banned advertisements, promotion and sponsorship. By implementation of

Tobacco (Control of Advertisements and Sale) Act new entrants will find it very difficult to

compete with the strong brands (tobaccocontrollaws, 2011). Hence, the threat of new entrants

posing problems is low. Therefore our new product will not face any obstacles from new entry as

Marlboro is well established and has loyalty from Singaporeans.




Bargaining Power of Suppliers:

Cigarette is composed of many

small elements and so requires

different suppliers. Products

required to produce cigarettes

can easily be substituted like

cigarette papers and adhesives.

As the products are not much highly distributed it‟s easy to switch suppliers based on cost.

“Land devoted to tobacco cultivation in Singapore dwindled over the years from 365

hectares in 1970 to nil today. Its leaf imports increased from 5688 metric tons in 1970 to 11 288

metric tons in 2000. Singapore‟s cigarette exports have increased from 1550 million sticks in

1970 to 27 562 million sticks in 2000, indicating Singapore‟s role as a cigarette processing,

production, and export center for the Asia Pacific region” (tobaccocontrol.bmj, 2004). So we can

conclude that bargaining power of Suppliers is less as there are plenty of suppliers worldwide

and can easily be switched.

Bargaining Power of Buyers:

Cigarette smoking causes addiction and this habit is not easy to give up. Although there

are substitutes available in the market like nicotine patches, they are expensive. Also buyers

don‟t find alternatives more attractive. Research suggests there is a link between cigarette

addictions and brands (Roshdi, 2003). Consumers do not change their brand easily and cannot

stay without it for long. Change in brands means change in taste. This often leads to irritation in

the throat. However, customers shall not face this problem as we, Marlboro, use the same

tobacco in all our cigarettes. Thus, they are addicted to our brand as they purchase regularly,

thereby, having less bargaining power.




Competitive Rivalry:

Singapore tobacco industry

comprises of three main competitors

like Dunhill (BAT) which has 30%

market share and Japan Tobacco

international (Winston) which has

20% market share.

Fig: Major competitors of tobacco industry in Singapore.

In this industry there is not much of product differentiation. Decision of competitors has a

direct impact on others. If a competitor decreases it price to gain more market share other players

in the industry need to decrease their price too. Industry growth is on the slower side too due to

regulations and consumer switching costs are low. These factors make this industry highly

competitive.

Market Characteristics

PEST: Political, Economic, Social and Technological.

Political/Legal:

Singapore is very stable nation in terms of political activities. It enjoys a remarkably

open, corruption free environment and stable prices. Government created Tobacco Regulation

Unit to curb smoking among Singaporeans (www.hsa.gov.sg, 2012). Singapore has come up

with a notion of „Tobacco free Singapore” (tobaccofreesingapore, 2012).

Economy:

Singapore is ranked 1st in ease of doing business.

http://www.economywatch.com/world_economy/singapore/?page=full

Per-capita income is also growing fast which shows that people are becoming richer. And they

have more money to spend on other things like smoking. “Tobacco taxes were raised in 2005

from $293 to $352 for every 1,000 cigarettes imported. This raised the price of a pack of smokes

50%

30%

20%

Market Share

Marlboro

BAT

Japan Tobacco

International







to the current average of $12, making Singapore one of the world‟s most expensive places to

light up” (Hui, 2011).

Social:

Singapore is an eastern country who still follows the traditional family values but the

younger generation has started to adopt western cultures and values. Nowadays many youngsters

get addicted to smoking which is not fit for them and society. Passive smokers also get affected.

Smoking leads to dangerous diseases and causes environmental pollution. Steps like banning

advertisements, fining retailers for selling to minors and scary pictures on packaging has come

up.

Technology:

In this industry manufacturing costs are high and depends on scheduling, planning

processes for maximum gain. Therefore automating these processes has helped the industry.

Quality of improved filters and printing technology on labeling has improved.

Customer Analysis:

The main reason for people taking up smoking is because of stress. They feel smoking is

a way to relieve their stress. The age group of 18 and above is more vulnerable to smoking

cigarettes.

According to survey conducted by National Center for Biotechnology Information, U.S.

National Library of Medicine (NCBI), 23% of the participants either quit, re-started, adopted or

experimented with smoking over 10 years. Living in a rural or remote area and lower educational

attainment were associated with continued smoking. (NCBI, 2009)




Competitor Analysis

Winston

It is Japan tobacco international company's key growth power and its sales in

growing worldwide with a growth rate of 13.8%. Currently Winston is at 3 rd

position in Singapore with a market share of 20%.

Winston‟s cigarettes are cheaper in comparison to Marlboro. Price strategy is

the main strategy of the company to fetch more customers and market share.

Dunhill

Although Dunhill is world‟s 9th biggest cigarette brand but it has strong

presence in Singapore market with 30% market share and grabbing 2 nd

position.

Dunhill for the customer launched new and innovative products for the

customers. That is the reason its sales is growing in Singapore and young

consumers like this brand.

Product/Service Offering

Our new "Marlboro Switch" contains less tar and nicotine, than other competitors. This

will greatly reduce the odor and smoke emission. It has three different flavors. Through the

"switch", switch cigarette taste into clove, cinnamon or ice blast. These flavors from natural

extract composition. Available in Full flavor (Black) and Lights (Silver)(7 mg Tar, 0.6 mgNicotine). All those above reasons make us have the leading position in Singapore market, and

have more opportunity to expand the market share. Singapore consumers have a high level

education, like new things and new products. Our new concept Marlboro switch will be widely

accepted by Singapore market.




SWOT Analysis

Strengths:

The main strength of Marlboro is that it has strong roots in Singapore and enjoys the

status of market leader. Singaporeans show a brand loyalty towards Marlboro and making it a

leader in cigarette industry with 50% of the market share. Marlboro‟s main aim is to give unique

products to the customers. That‟s why innovations are the main focus area for the company since

its inception in Singapore.

Weaknesses:

Singaporeans haven‟t tried or tested such types of cigarettes so company doesn‟t have the

real idea how successful its products will be. Company wants to sell its new „Marlboro Switch‟

at the almost same price as of the existing price of its cigarettes. So it‟ll have to spend moremoney on these innovations and can‟t make huge profits in the initial launch of these cigarettes.

Opportunities:

Smoking industry has a continuous growth in Singapore. As surveys show, young

Singaporeans are getting more addicted to cigarettes. So company has lots of opportunities to

increase its sales and get growth in its market share. Our new product is different from existing

products and less harmful. So it will have great demand among people of all age groups.

Threats:

Government is making rules stricter against smokers. Not showing any cigarette ads on

TV, radio, newspaper make people unaware of new products. Singapore government is

promoting “Tobacco free Singapore” and raising high taxes on cigarettes in order to discourage

smoking. Packaging must have scary and horrible picture to make people aware of harmful

effects of smoking and encouraging them to quit it.




Marketing Research and Information

Exploring Opportunity:

A research was conducted to know if the product suits the market. Other competitor

brands had similar product which were doing well. Our targeted markets were using these

products and so we had to offer a better product to them.

Identifying needs and wants:

The stressful population of Singapore often adopts smoking. Singaporeans are health

conscious so launching cigarettes which were less harmful, provided flavors and convenience.

Methods Used:

Various websites, newspapers and journals were explored to understand the market. Also

qualitative research was done by interviewing potential customers.

Marketing Strategy:

Vision

To become the best-selling innovative brand in Singapore‟s tobacco industry by

providing cigarettes which are less harmful and dangerous to the consumers and the

environment.

Mission

Our mission is to launch „Marlboro Switch‟ in Singapore market with less harmful effects

combined with convenient packaging and innovative flavors thereby bringing a smile on

consumers face. With this launch we will increase our brand awareness amongst our target

groups and hence increase our market share by 10% in 2015.

Marketing Objectives:

The main objective will be to increase market share by 4% in the first year of launch.

Another important factor was to make younger generation aware of product benefits and

convenience.




To implement the objective of 4% and 10% market share in first year and 2015 respectively

we need to achieve

Targeting our product to younger generation by promotional strategies and retain 90% of

our existing customers and attract 15% new customers by October 2013.

Collaborating with our existing and finding new retailers for selling our product before

launching our product on 1st

November 2012.

To make our product visible at maximum places by 28 th February 2013 and attract

people due to its stylish packaging and the option of cigarette slot. By this strategy we

target to reach breakeven point in just three months of launch.

Financial Objectives:

Revenues:

The company intends to sell 12,000 packets of cigarette by October 2013 and gain revenues of

SGD 138,000.

Costs:

The selling cost of one packet of cigarette will be SGD 11.50. This price will be inclusive

of manufacturing costs and taxes imposed by government.

Advertising:

As cigarette advertising is banned there won‟t be much funds allocated for it. However

funds of SGD 50,000 will be needed to collaborate with new retail outlets to make product

visible. Also we will target the Malaysian channels for advertising which will be around SGD

10000.

Profit:

The company in order to achieve more market share will try to reduce the price to SGD11.20 after five months of launch. Government taxes imposed on industry during the coming

times will also impact the cost of cigarette packs. Depending on the success of product in first

five months company will increase the cost to SGD 11.80 to gain more profit.




Target Market

Our target market will be young Singaporeans

aged 18 to 29, both, men and women. The results

show that the number of youngsters taking up

smoking has increased from 12.3% in 2004 to

16.3% in 2010 – this represents a 33% increase in

just six years. (Tobacco Free Singapore, 2011)

We need to target this particular group as this

shall make them loyal to our brand at a very

young age. This shall make most of them

loyal to our cigarettes throughout

their lifetime. As we are launching a

superior cigarette with less harmful

ingredients we will be targeting the health

conscious people of Singapore. Company will also target young professionals who lead a

stressful life and as a result, are adopting smoking.

Segmentation:

We segment our cigarette market into three segments: Demographic, Psychographic and

Behavioral Segments.

Demographic:

The variables used are age, gender, income, social class and lifestyle.

Age:

Younger generation between ages of 18 and 29 go for style, luxury, health and

convenience.

Older age group will like it more because of health concerns.

Gender: Both Male and Female.




Income:

Between 1000-3000 SGD

Above 3000 SGD

Psychographic:

The variables used are social class, personality and loyalty.

Social Class:

Middle Class

Upper Class

Personality:

People living a hectic lifestyle, health conscious people and people willing to try new

things.

Loyalty: Retaining our old customers and spending less time on potential customers.

Behavioral:

Occasions – Regular habits of smokers.




Positioning:

By launching „Marlboro switch‟ we make sure that the consumers think about our brand

as the best brand in Singapore. To achieve this we have come out with our innovations which is

going to be our „blue ocean‟ strategy. Here in the graph we see the comparison between our

product and an average of other competitor‟s products.

Red Ocean Blue Ocean

Availability Price Size Flavor variety Packaging

Fig: Positioning of our Product against our competitors.

Marlboro

Other Competitors




Broad Overall Strategy:

The overall strategy will be to have our product available at plenty of retail

stores so that it‟s visible to public. Other strategy will be to retain the Marlboro

loyal customers and increase customer base by 15%. In the long term we tend to

minimize competition by launching innovative products.

Marketing Mix:

Product:

Marlboro comes up with a new type of cigarette „Marlboro Switch‟ which contains less

Tar and Nicotine, compared to other competitors. This will drastically reduce the odor and

smoke emitted.

It will be available in three distinct flavors. So these cigarettes will be very different from

others and will be of best qualities. The reason for it being called „switch‟ is that the flavor of the

cigarette switches to Clove, Cinnamon or Ice Blast when the capsule in filter is pressed by the

smoker. These flavors shall be made from natural extracts.

The cigarette packet shall have a slot to accommodate a lighter, thus, making it more

convenient to carry.

Place (distribution) Strategy & Customer Convenience:

Marlboro's strategy is to grow the new product out of Singapore. The recommended

distributors are very capable of facilitating sales. An exclusive distribution arrangement should

be negotiated on performance and sales.

Hotels/restaurants/bars were the leading distribution channel for cigarettes given the

contribution of sales by food courts. In addition, convenience stores were the second leading

distribution channel for cigarettes, as outlets such as 7-Eleven and Cheers can be found easily in

every neighborhood.

As our consumption group is 18 to 29 years, so our sales should be where youth frequent,

such as bar, night club, KTV, etc., retail shops, convenience stores, etc. Secondly, according to

the reality of Singapore, Singapore food courts will be targeted.




We should give full attention to the customer purchasing process of convenience so our

retailers are close to region choice, location choice and other factors, especially should consider

"consumer accessible". These factors, make easy access for customer to stores

Price:

„Marlboro Switch‟ will be priced between our two main competitors. When Dunhill and

Winston customers purchase our brand, they will pay less and more than their respective brands

and enjoy better flavors sold by us. The pricing has been shown below:

Brand Price (in SGD)

Dunhill 12.30

Marlboro Switch 11.00

Winston 10.50

When we maintain the same price for all our products, the customers can try our product

without thinking twice. Moreover, Dunhill customers will not look at „Marlboro Switch‟ as a

cheap brand, due our high brand equity.

Promotion:

Promotional strategy will be to advertise our new product in Malaysian television and

radio channels which are viewed in Singapore. By this way we can spread awareness of the

product. Other strategy is to advertise our product in Singaporean Grand Prix. This can be done

in Singapore as Marlboro has always been associated with racing. We will make our product

more visible to the potential customers by selling our product across multiple retail outlets like

Cheers etc. at the selling counters.

Financial:

There will be many marketing activities to launch the new product. So Budget financialoverview consists of sales forecast, expanse budget, break even analysis and the overall analysis

of the marketing plan. Marlboro‟s business activities are categorized on the basis of two years

data - current year and next year (the year after launching new product).

Table 1: Total sales of the Marlboro Cigarettes:




Year Annual Sales

(in units)

Price Total Sales

Current 91,250,000 $11.50 $1049,375,000

Next 109,500,000 $11.50 $1259,250,000

(After launching New Product)

Table 2: Total Expenses:

Expense budget In Current Year In Nest Year

Production $300,000,000 $360,000,000

Distribution $200,000,000 $240,000,000

Marketing $100,000,000 $150,000,000

Total Expenses $600,000,000 $750,000,000

Here production cost includes the cost of all types of material like raw material (paper, adhesive,

filter, natural extracts for flavors etc.), work in progress and other types of expenses incurred by

the company for production.

Table 3: Break even analysis:




Break Even Analysis Current Year Next Year

Unit Break Even 60,000,000 70,000,000

Sales Break Even $600,000,000 $750,000,000

Table 4: Final Analysis:

Final Analysis In Current Year In Next Year

Total Sales and Marketing Expenses $60,000,000 $75,000,000

Percent of Sales 57.17 59.55

Gross Profit $449,375,000 $509,250,000

Thus, Increase in Profit: 13.32%

0

100000000

200000000

300000000

400000000

500000000

600000000

700000000

800000000

current year next year

unit break

even

Sales Break

Even




Control Plan:

The purpose of „Marlboros Switch‟ marketing plan is to serve as a guide for the organization.

Specific measures will be taken throughout the initial years to ensure sustainability of „Marlboro

Switch‟. These are mentioned below:

1) Advertising:

i) Moreover, advertising/promotion of any cigarettes is banned in Singapore. Therefore,

our major advertising shall be in Malaysia, where most Singaporeans travel to. We

shall target major retail chains and display our products in most visible areas like

airports, because a lot of Singaporeans travel to Malaysia.

ii) We shall advertise our brand in Malaysian media like radio and TV channels, which

are broadcasted in Singapore.

iii) We shall launch the product in outlets like Cheers, Seven-Eleven, Fair Price, whereour other Marlboro products are already available.

2) ‘Pull’ Strategy:

i) Our endeavor shall be to make all three flavors a success. However, our approach

shall be different. We introduce one flavor only, but simultaneously advertise the

other two products as „Coming Soon‟.

3) Monitor Repeat Business and Customer Satisfaction:

i) We shall monitor the number of customers purchasing our product by giving a

„Privilege Card‟ when they purchase for the first time. Each time a customer buys any

of our flavors, he gets points on this card and he can later redeem these points to

receive benefits like discounts, free branded lighters, etc. This shall also help us to get

feedback from customers.




Contingency Plan

Contingency plan is designed to protect the critical strategies of our plan from the associated

risks that we have identified in the "Threats" section. Contingency plan minimizes risk by

addressing the following issues:

1) Setup Monitoring Operations:

By monitoring operations the risks, difficulties and problems like unexpected costs in the

warehousing and distribution of goods and an entry into the closeout market by an already

existing wholesaler will be revealed more quickly.

Firstly, if our advertising plan cannot implement and obstacles appear, at this time we will

consider Personal selling, Promotional offers (for example: buy 1 get 1 free), Sales offers.

Secondly, if our new product cannot be accepted by customer and thus, cannot gain market

share more than competitors, then we need to get feedbacks from clients on the product toimprove it and do some surveys through online polls or even face to face interaction.

2) Define Alternative Plans of Action in advance:

The purpose of this plan is to solve the problems faster and better so that minimal time and

energy is spent on deciding what to do after the problem is recognized.

Firstly, Singapore government very strict with regards to control of cigarettes, which is the

greatest disruption of current activities and plans in all aspects of the marketing in cigarettes.

We have heavy restrictions on taxes, promotion and even packing. In this case, only through

the positive development of innovative products, strengthening consumer relationship and

pricing, we can achieve greater profit.

Secondly, if our costs of the plan are excessive, we will try to readjust and re-plan

production, marketing and other financial aspects.

Third, if any delay occurs and we have to postpone the launch of the product, we have to

maintain active vigilance on our competitors‟ move.

Documents

Marketing Plan Final (1)