By John Hennessy
When the government restricted Marlboro from using mass media, ad spending went down and profits went up. Marlboro now owns more than 40 percent of the market.
Marlboro replaced its spending on mass media with marketing to a database of 26 million smokers. Those on the list receive birthday coupons, the chance to attend events and special trips to a ranch it owns in Montana where vacationers are showered with gifts, meals and services - all on the company tab. Not only does this cost Marlboro a heck of a lot less than mass media advertising, it also builds a kind of loyalty that television, radio and print just can't buy.
By forcing Marlboro to go viral, be aggressive in retail stores and be more creative in its media plan, anti-smoking advocates put the company on a successful path now being followed by every marketer from General Motors and Audi to AXE Deodorant. Except, Marlboro does it better.
According to Merrill Lynch analyst Christine Farkas, Marlboro's operating profits will reach 28 percent next year from 26 percent in 2004. Net income will grow to an estimated $11.4 billion on $66.3 billion in sales.
Moderator's Comment: Is the success Marlboro is having with personal versus mass marketing unique to cigarettes or can it work for other products and services?
Setting aside the tobacco issue, there's a lot of talk about personalized marketing but few companies are pushing the envelope as far as Marlboro. It's probably safe to say that, without its hand being forced, Marlboro too would neither have embraced personalized marketing as completely nor seen its business improve as much.
It's just plain safer to keep spending on the mass marketing programs you have always executed.
Marlboro's personalized marketing driven business success indicates that continuing to execute mass marketing at your current level is fine, until your competitors start to execute loyalty building, personalized marketing programs. Then you have a really big problem. - John Hennessy - Moderator