Cigarette

Brand Loyalty of Cigarette Smokers: A study
Submitted by SUSIL KUMAR SAHU (77 !"""#
In $artial fulfillment for t%e re&uirement of t%e t'o year (ull )ime *ost +raduate *rogramme in Management, !"""- !""!
LAL BAHA.UR SHAS)RI I/S)I)U)0 1( MA/A+0M0/), SHAS)RI SA.A/ S0C)1R 2III, R3K3 *URAM , /04 .0LHI -!!
C0R)I(ICA)0
The Project Study entitled Brand Loyalty 1f Cigarette Smokers 2 A Study5 submitted by Susil Kumar Sahu in partial fulfilment for the requirement of the two year Full Time Post Graduate Programme in Management !"""# !""! is a piece of original wor$ carried out by him under my guidance and super%ision& The wor$ has not been submitted elsewhere for award of any 'egree (or) 'iploma&
Susil $umar Sahu -oll .o/001!"""
*Prof&+ P& K& ,ansal 2al ,ahadur Shastri 3nstitute 4f Management .ew 'elhi
2al ,hadur Shastri 3nstitute of Management .ew 'elhi
ACK/14L0.+0M0/)
The wor$ is not a solo endea%or but rather the amalgamati%e consequence of contributions from %arious people and sources& Therefore it would be discourteous to present it without ac$nowledging their %aluable guidance& 3t is indeed a great pri%ilege to e5press my deep regards profound gratitude and sincere than$s to my re%ered guides *rof3 *3 K3 Bansal for bestowing his noble guidance in%aluable ad%ice and continuous inspiration through out the course of wor$& 2ast but not the least 3 e5press my sincere than$s to all the respondents of .ew 'elhi who pro%ided me sincere support and feedbac$ to carry out the project with their cooperation
Susil Kumar Sahu
060CU)I70 SUMMAR8
3n ancient times tobacco was used as currency& Smo$ing sniffing etc& are some of the ways of using tobacco& 7igarette is the most sophisticated way of using tobacco& 8oint family system is no more in our society& .ow it)s time of nuclear family& Generation 9 belie%es in handsome earning and to spend it for him& :e li$es to be fashionable and stylish& Today the search for style has ta$en o%er from the desire to be fashionable& The ultimate effect of fashion is to ma$e e%eryone ali$e ha%ing style means accepting the broad flow of fashion but ma$ing it indi%idual to oneself& The man of !;st century earns huge amount< the basic necessities of life can be satisfied with a few thousands of rupees& So he is left with remaining huge amount& So now what to do with this amount= Therefore he indulges himself in drin$ing smo$ing gambling etc& some do smo$ing just for $illing the time while some do it to relie%e themsel%es from tension& Smo$ing has to do with showing off too and sometimes it gi%es boost to their self#esteem&
)o$i9 of resear9%: brand loyalty of cigarette smo$ers/ > study& Sam$le design: 'escripti%e design )y$e of sam$ling: -andom sampling .ata 9olle9tion met%od: ?uestionnaire method Sam$le si:e: ;;@ inter%iewed and ;"" accepted Analysis te9%ni&ues used: ;& !& 6& @& A& 7hi#square test Graphical method Mean Median 7ross#tabulation B#test
Result of analysis: ;&Taste is more important for the entire age group and income group& Coungsters and low#income group people are more price conscious than other age group and income group people& !& > cigarette smo$er will not sift from one brand to another on finding the ad%ertisement of the new brand attracti%e& 6& @& A& ,rand loyalty is affected by change in price& ,rand loyalty is affected by change in income& ,rand loyalty is not affected by scheme of free gift introduced by the other brand&
D& There is no significant difference in brand loyalty between regular and occasional smo$ers& 0& Coungsters are more influenced by the ad%ertisement than other age group smo$ers& Re9ommendations: ;& >%ailability of the fa%orite brand is most important for the brand loyal cigarette smo$ers& ,ecause of non#a%ailability they may try another brand& So physical distribution and deli%ery on time at %arious outlets are %ery important& !& 6& 7ompany should not increase the price of cigarette more than !"E because after that the brand loyalty decreases at faster rate& 7ompany should not introduce free gift scheme to attract the cigarette smo$ers&
)ABL0 1( C1/)0/)S
C%a$ter no3 Title 7ertificate >c$nowledgement F5ecuti%e summary Introdu9tion Ghy is the problem considered worth in%estigation= Loyalty # attitude beha%ior and good science/ My thoughts ,rand equity H brand loyalty measurement and management 2oyalty/ how secure is the brandIs customer base= Putting it all together/ the master brand equity inde5 Gho is loyal customer= Effect of brand-stretching 2oyalty in the mar$et place 4orlds to<a99o industry 3ndustry profile The tobacco industry and youth smo$ing 7hange is possible 7onclusion ,ig tobaccoIs global e5pansion Top mar$eters in selected countries ,ig tobaccoIs global reach International e>$erien9e Furopean union directi%e USA : freedom of choice 7hina/ the last frontier Malaysia/ brand stretched France/ the brand model /ational e>$erien9e Tobacco ads ha%e impact&&& on women Top 0 techniques to build brand loyalty Dark side of tobacco consumption 1<Ae9tiBes Main objecti%es Supplementary objecti%es 2al ,hadur Shastri 3nstitute of Management .ew 'elhi *age /o
C%a$ter ; ;&; ;3! ;&6 ;&@ ;&A ;&D ;&0 ;&J ;&K C%a$ter! !&; !&! !&6 !&@ !&A !&D !&0 C%a$ter= 6&; 3.2 6&6 6&@ 6&A C%a$ter? @&; @&! 4.3 C%a$ter@ A&; A&! D
C%a$terC C%a$ter7 0&; 0&! 0&6 7.4 7." C%a$terD #.$ J&! #.3 J&@ J&A J&D J&0 #.# #.* #.$, #.$$ #.$2 C%a$terE *.$ *.2 *. 3 K&@ *." *.1 C%a$ter;" C%a$ter;;
Hy$ot%esis Resear9% design Type of research Source of data 'ata collection method Samp e si!e Samp ing Resear9% analysis Sample design Formulation of hypothesis %ho is brand o&a ' 7alculation of correlation 7alculation of chi#square Gho is brand loyal with respect to change in price= 3ncome elasticity (ncome-)ise brand o&a +rand o&a t& among the regu ar and occasiona smokers -reference to)ards attributes Ad.ertisement Effect of reference group on brand se ection (indings A.erage e/penditure on cigarette b& the students 0arket share of .arious brands -rice of ne) brand and reaction of cigarette smokers ,uying and consumption pattern of regular smo$ers among %arious age groups Effect of non a.ai abi it& of fa.orite brand on brand o&a t& 2esu t of the h&pothesis Con9lusion Limitation Anne/ure ,ibliography H references
LIS) 1( )ABL0S
)a<le /o3
; ! 6 @ A D 0 J K ;" ;; ;! ;6 ;@ ;A ;D ;0 ;J ;K !" !; !! !6 !@ !A
)itle
>ge#wise and income wise sample design Table showing brand loyalty among %arious age groups .o& 4f respondents passing in three criteria 7alculation of correlation 3a cu ation of chi-s4uare Table showing no& 4f brand loyal at %arious price change %ho is brand o&a )ith respect to change in price' (ncome e asticit& >ge wise brand loyal (ncome-)ise brand o&a +rand o&a t& among the regu ar and occasiona smokers -reference to)ards attributes Table showing age wise preference towards attributes 3ncome#wise preference towards attributes -eason for starting smo$ing Effect of reference group on brand se ection >wareness of ad%ertisement of other brands 3nfluencing factor in ad%ertisement -eaction towards ad%ertisement A.erage e/penditure on cigarette b& the students 0arket share of .arious brands -rice of ne) brand and reaction of cigarette smokers 7onsumption pattern/ less than ;" cigarettes per day 7onsumption pattern/ ;" and more cigarettes per day Effect of non a.ai abi it& of fa.orite brand on brand o&a t&
*age /o
C%a$ter ;
I/)R1.UC)I1/
Mar$eting is %ery inno%ati%e field& :ere nothing can be assumed& Ghate%er inno%ati%e idea we generate we ha%e to test them and they must be supported by pro%ed results& For this mar$eting research is %ery important& 7onsumer beha%iour is one such aspect that is %ery difficult to measure by guesswor$& >nything you say about it it must be based on reliable research& Ge are going to analyLe the brand loyalty of cigarette smo$ers& Ge ha%e e5plained the rationale below&
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4H8 IS )H0 *R1BL0M C1/SI.0R0. 41R)H I/70S)I+A)I1/F
3t is said that though the cigarette smo$ers are not loyal to their health they are %ery loyal to the brand of cigarette which they smo$e& 4ne cannot ma$e such assumptions without any strong basis& To justify brand loyalty among cigarette smo$ers we ha%e underta$en a small sur%ey& The sur%ey also throws light on the reference groups which influence them in ma$ing decision regarding the purchase of cigarette and reasons for smo$ing& To facilitate our purpose we ha%e formed a questionnaire and got it filled by ;;@ respondents& HOW PEOPLE DEFINED CUSTOME LO!"LT!# M2oyalty is a dual edged sword an opportunity for those that consistently deli%er on their promises< high ris$ for those who donIt&M *Martin :offmitL F5ecuti%e Nice President+ M> customer can hardly be loyal to a particular company& > customer is loyal to people that represent this company& 2oyalty is aimed at people and not things&M *3%an 2efeb%re >ccount F5ecuti%e+ M> customer who continues to buy because he is loc$ed into a contract but is so unhappy that the probability of renewing the contract is Lero is not a loyal customer< he or she is a trapped customer&M *,rian S& 2unde Sr& 'irector+ M> loyal customer can be completed dissatisfied and a satisfied customer disloyal& 2oyalty on its own is not a great predictor of customer beha%iour # it only measures current beha%iour and cannot predict customer retention or attraction in the future&M *Shaun 'i5 Senior -esearch F5ecuti%e+ M2oyalty is de%eloped in the absence of something better&M *8ustin 2ees 7ommercial 7ontroller+
MFol$s in our business are always trying to measure things *loyalty+ ## to ma$e them more real& ,ut 3 also thin$ fol$s in our business are afraid to tell their client that the baby is ugly& Sometimes we need to loo$ at the negati%e side of emotions to get positi%e results&M *FliLabeth M& Tuc$er Ph&'& Senior 7onsultant+ MF%ery company has at least an implicit legal contract with e%ery customer& :owe%er the contract that matters most in nurturing customer loyalty is the psychological contract& 7ustomers are less forgi%ing when the psychological contract is bro$en than if you slip a bit on the legal contract&M *'a%id ,& Golfe 'e%elopmental -elationship Mar$eter+
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Loyalty - Attitude, Be%aBior, and +ood S9ien9e:
Gilliam .eal respected authority on mar$eting research says categorically MLoyalty is a beha%ior&M :e says M3f 3 purchase in a product category ;" times in one year and 3 purchase the same <rand all ;" times 3 am ;""E loyal& 3f 3 purchase the <rand only fi%e out of ;" times 3 am A"E loyal&M .eal also says it is MridiculousM to attempt to measure loyalty with three questions # o%erall satisfaction recommend intent and repurchase intent& These three questions says .eal will li$ely correlate at least &J"& Measuring intent to recommend and intent to continue in addition to measuring o%erall satisfaction is tantamount to Mmeasuring the same thing two more times M according to .eal& .aturally these statements cry for rebuttal by Burke 3nc& because Burke uses e5actly those three questions in their approach to loyalty research& '& -andall ,randt a respected authority himself states Mwe ta$e a position that is strongly opposed to the one offered by Mr& .eal&M Onli$e .ealIs beha%ior#only %iew ,randt states his firmIs position # loyalty is Mreflected by a combination of attitudes and beha%iors&M ,randt goes on to defend the three specific items by noting that while correlated the measures are not redundant& Scoring highly on one does not necessarily mean scoring highly on all& ,ut says ,randt scoring highly on all is an indication of being a Msecure customer&M ,randt says the three items can ser%e as leading indicators of a %ariety of actual beha%iors surrounding loyalty *e&g& repeat purchase customer retention+ once an association has been established empirically& So we ha%e competing opinions about the nature of loyalty& Ge also ha%e competing opinions about appropriateness *or lac$ thereof+ of measurement with the three items/ satisfaction recommend and continue& 3Im compelled to chime in with a third perspecti%e on some of the points raised by .eal and ,randt& 3 suggest that *a+ pre%ious literature in our field *b+ specification of causal relationships and *c+ scientific principles related to measurement and modeling can help to shed some light on the debate& Loyalty as Be%aBior 1nly, or Attitude and Be%aBiorF First letIs consider the nature of loyalty& 3s it attitudinal and beha%ioral as described by ,randt or is it beha%ioral only as argued by .eal= >s ,randt has pointed out the attitude and beha%ior perspecti%e seems to ha%e pre%ailed in the literature as early as the ;K0"s& 3ndeed in ;KDK George S& 'ay a pillar in our field argued that loyalty in%ol%ed both attitude and beha%ior& 4ther early theorists also promoted this %iew *e&g& -ichard 2utL and Paul Ginn+& The classic te5t is probably 8acoby H 7hestnut *;K0J+ ;" 2al ,hadur Shastri 3nstitute of Management .ew 'elhi
MBrand Loyalty/ Measurement and ManagementM published by Giley& 3n fact that was an e5hausti%e re%iew of e5isting literature on the topic of <rand loyalty including 8acobyIs own wor$ in the early se%enties& ,ased on that a well reasoned conceptual definition of loyalty was put forth that included both attitudinal and beha%ioral components& 3t is my opinion that we should not lea%e behind this rich research tradition and literature& >ll that wor$ has a natural carry o%er from the <rand conte5t to the customer conte5t& 3n fact recent publications ha%e drawn from this attitude#beha%ior heritage to continue present day theoretical discussions of loyalty *e&g& 'ic$ H ,asu ;KK@< 4li%er ;KKK+& So in light of past literature and along with ,randt 3 respectfully disagree with .ealIs position that loyalty is only about beha%ior& 3 add a problematic scenario to the ones pointed out by ,randt to re%eal another potential wea$ spot in the beha%ior only %iew& 3f a buyer has a cogniti%e rule Mbuy the lowest priced <rand M and <rand , is always lowest the person loo$s li$e a loyal customer o%er time beha%iorally& Ontil <rand > enters the mar$et at a lower price& Then the customer switches to show repeat purchase of > until mar$et prices change again& To which are they truly loyal # the brands or the decision rule= -epeat purchase beha%ior does not equal true loyalty& Satisfa9tion, Re9ommend, and Continue - Correlation and S$e9ifi9ation 3 agree with ,randt that multiple attitudinal and beha%ioral elements can be used to measure loyalty& :owe%er 3 respectfully disagree with him about the three particular items used in the Burke inde5 # o%erall satisfaction recommend intent and repurchase intent& 3 side with .eal who asserts MThose questions do not measure loyalty&M So what do they measure and why are they correlated= 4n those subjects 3 disagree with both .eal and ,randt& .eal suggests all three may measure satisfaction. Pointing to their intercorrelation he says they Musually are measuring the same thing # satisfaction with the product or ser%ice&M This implies a reflecti%e measurement model shown in Figure ; where all three items MreflectM *arrows pointing outward+ a single underlying latent construct/ customer satisfaction& Refle9tiBe Model Im$lied <y GAll Measure Same )%ingG ,randt while also ac$nowledging the correlation among the three items argues that all three wor$ together to capture l$yalty& Through application of an algorithm he says Burke uses the pattern on the three items to constitute a degree of loyalty # or in their terminology a le%el of customer Msecurity&M This %iew implies a formati%e measurement model as shown in Figure ! where all three items wor$ to MformM an inde5 *arrows point inward+ capturing an underlying latent construct/ customer security1 loyalty& (ormatiBe Model Im$lied <y G*attern of )%ree RatingsG So two specific %iews ha%e been proposed about what the three items measure and why they are intercorrelated& ,randt notes that just because the measures correlate does not mean they are redundant/ Mmeasures may be correlated for a %ariety of reasons&M >nd .eal says MFor most people if they are satisfied with a <rand&&&then they also are highly li$ely to say they would recommend that <rand to others and that they would li$ely repurchase&&&&M 3n fact .ealIs statement perfectly frames my opinion about the three items& Satisfa9tion, re9ommendation intent and re$ur9%ase intent do not measure any
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single conceptually clean unidimensional construct& They measure three different constructs and are correlated because of an underlying structure of causa re ationships. +ood S9ien9e Can Hel$ .e<ates A<out Measurement and Modeling :ow do we bring clarity to this debate= 3 belie%e we do so through standard established scientific procedures as continually applied& There needs to be a reasoned conceptual definition of each distinct construct under scrutiny %alid and reliable measures of those constructs appropriately specified structural1causal models showing theoretically how the constructs are related followed by empirical testing of those hypothesiLed model structures& 3n the case of loyalty drawing from the literature a reasoned conceptual definition of loyalty should include both attitudinal and beha%ioral components& 3n research using sur%ey methodologies intent to repurchase can tap the beha.iora component of loyalty& >s a beha%ioral intention this is distinct from pure attitude and has been argued in attitudinal theories to be a precursor of subsequent beha%ior& That is not to preclude use of truly beha%ioral measures howe%er& >ctual repeat purchase beha%ior certainly can be used to capture the beha%ioral component of loyalty& .e5t we need a clear conceptual definition for attitudina loyalty& >gain the literature offers a number of directions here& For e5ample one might use something li$e psychological attachment to the <rand1product1ser%ice& >fter using theory and past research to define attitudinal loyalty it must be operationaliLed with appropriate measures& Fmpirical data on these measures need to demonstrate certain characteristics *internal consistency reliability con%ergent and discriminant %alidity etc&+& 7an intent to recommend and satisfaction together somehow capture this attitudinal part of loyalty= My opinion is that they cannot& 3ntent to recommend is a beha%ioral intention not a measure of attitudinal loyalty& 2i$e repurchase intent it is a causa outcome of fa%orable attitudes not a direct measure of them *i&e& 3 am satisfied therefore 3 recommend+& Ghat about satisfaction # can it tap attitudinal loyalty= >gain 3 donIt thin$ so& -ather than being a measure of attitudinal loyalty it is a causa antecedent to attitudinal loyalty *i&e& 3 am satisfied therefore 3 am predisposed to be loyal+& 3n fact there needs to be e5plicit recognition that satisfaction is not a direct indicator of attitudinal loyalty& Ge $now some satisfied customers defect& >s .eal pointed out Mjust because 3 am highly satisfied with a brandIs performance doesnIt mean 3 will necessarily repurchase&M Satisfaction may contribute to loyalty but it is not equi%alent to loyalty& Then ha%ing considered %alid conceptual definitions and measures of the attitudinal and beha%ioral components of loyalty an appropriate method must be used to combine these into a single construct measurement& 'epending upon a chosen theoretical position on how the two components wor$ together a reflecti%e latent %ariable a formati%e latent %ariable or some other means or statistical combination can be used& ,ottom line/ we need conceptually and empirically %alid measurement and combination of the attitudinal and beha%ioral components of loyalty& >fter that we can use accepted scientific practices to specify and test things that result from loyalty *e&g& recommendation+ and things that contribute to it *e&g& satisfaction %alue+& This is a classic scientific sequence # attention to %alid and reliable construct measurement then specification and testing of causal antecedents and consequences of that construct&
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%&' M! THOU(HTS
.eal and ,randt ha%e raised important issues about the conceptualiLation and measurement of customer loyalty& Their opposing %iews about the nature of loyalty and the appropriateness of the three#item approach spar$ useful debate on a topic of considerable theoretical and applied interest in our time& 3 ha%e presented an alternati%e %iew that 3 belie%e a%oids some potential points of critique in their positions while le%eraging and unifying the strongest points of the two perspecti%es& 3n conclusion then letIs not miss the rich history from which general consensus emerged about conceptualiLing loyalty& 3t in%ol%es attitudinal and beha%ioral components& Then letIs apply the best scientific practices in our field to operationaliLe and test appropriate definitions with measures and models that withstand rigorous conceptual and empirical in%estigation& Maybe then we can land on something about which we all can agree&
%&) * "ND E+UIT! , * "ND LO!"LT! ME"SU EMENT "ND M"N"(EMENT

7ompanies wor$ hard building the strength of their brands # it is critical to the ongoing brand management process to ha%e meaningful and actionable data#dri%en measures of these efforts& ,uilding a brand culti%ating its strengths pruning its wea$nesses and ma$ing it more %aluable to its owners is the bottom line job of mar$eting& F%erything mar$eting does should ultimately wor$ in concert to ma$e a firmIs brands more %aluable& There are many different tactics and strategies that go into strengthening a brand name/ ad%ertising promotions public relations and research and de%elopment to name a few& Ghile companies use these and many other methods to strengthen their brandsI positions in increasingly competiti%e mar$ets how can they measure the return on this wor$= More precisely how can a company determine the worth of one or any its brands= Putting the brand to a true test the company can better judge how much that brand is worth and how much opportunity for impro%ement might e5ist&
4%y Measure Brand 0&uityF
Measuring brand equity allows a company to establish a baseline and trac$ changes in its brand equity o%er time& 3f a company consistently wor$s to impro%e the strength of its brands it must trace progress or ris$ Mflying blind&M 7hanges in a quantitati%e measurement of brand equity can show the company the effects of its wor$ and greatly aid in setting mar$eting and management priorities in the ne5t business planning cycle& 4nce a brand equity measurement system is established a company can better understand and therefore determine if equity in a gi%en brand can be le%eraged or transferred to an entirely new product or ser%ice category& Thus a firm can increase the return from the in%estment in building a particular brand o%er time by e5tending that brandIs equity into new categories& ;6 2al ,hadur Shastri 3nstitute of Management .ew 'elhi
> company may want to measure its brand equity to aid in assigning a monetary %alue to a brand& Gall Street measures the strength of a brand by loo$ing primarily at current and historical financial measures with minimal use of information directly from the M%oice of the mar$etplaceM *i&e& current and prospecti%e customers+& Ghile historical financial performance is important in understanding brand strength it does not tell the whole story especially in terms of what the future might hold for the brand& This potential deficiency deri%es from the choices made in defining brand equity& .efining Brand 0&uity ,rand equity can be defined in many different ways& ,ur$e has de%eloped a simple yet powerful definition of brand equity& For a brand to be strong it must accomplish two things o%er time/ retain current customers and attract new ones& To the e5tent a brand does these things well it grows stronger %ersus competition and deli%ers more profits to its owners& ,rea$ing down the definition of Mbrand equityM into its two components we can more easily determine a reliable way to measure brand equity and to trac$ changes in brand equity o%er time& The components of brand equity retention and attraction of customers stem from peopleIs e5periences with and perceptions of a brand& The ability to retain customers is largely e5periential& :igh equity brands e5hibit stronger le%els of customer satisfaction and loyalty& :istory has shown that consumers will continue to buy a brand that offers them Mtheir moneyIs worth&M The ability to attract new customers is largely perceptual& ,ecause customers do not ha%e actual brand e5perience they must go by what they hear see and belie%e about a brand& The two primary ways the mar$et recei%es this information is through messages controlled by mar$eting such as ad%ertising and P- efforts as well as uncontrolled messages such as press stories and Mword of mouth&M
)%e Burke A$$roa9% )o )ra9king Brand 0&uity
,ur$e has created a brand equity inde5 comprised of three components best described as a molecule& 3n the brand equity Mmolecule M three smaller components # li$e atoms # are so tightly interrelated that they form the larger substance& 3n this case the three MatomsM interacting with and affecting each other are customer loyalty image and %alue&
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The brand equity molecule is the o%erarching de%ice of retaining and attracting customers& 3mage and %alue perceptions pull in new customers while loyalty and %alue retain current customers& Fach component of brand equity represents an inde5 in its own right& 3n order to build the o%erall measure of brand equity we need specific measures in each of the three critical areas of loyalty image and %alue& 2etIs ta$e a loo$ at each of these&
%&- LO!"LT!. HOW SECU E IS THE * "ND/S CUSTOME *"SE0

>s an outgrowth of our wor$ in customer satisfaction and retention research and consulting ,ur$e has de%eloped a measure of customer loyalty called the Secure 7ustomer 3nde5P *S73P+& The S73 is composed of three measures/ 9ustomer satisfa9tion, 9ustomer 9ommitment and 9ustomer adBo9a9y and has been used in o%er K"" research studies dealing with customer satisfaction& To be declared Msecure M a customer must be %ery satisfied definitely would recommend the brand to others and definitely plan to repurchase& The 2oyalty 3nde5 within the greater brand equity framewor$ is the percentage of current customers who are MsecureM as defined by the S73& Image: 4%at .oes )%e Brand Mean )o *eo$leF ,ur$e typically conducts an in#depth analysis of a brand at the beginning of the measurement process to determine the perceptual MessenceM of the brand that is what the brand means to current and potential buyers& The measurements of image consist of both general McorporateM elements and specific MperformanceM elements& For instance in measuring the image of a gasoline brand we might as$ current and potential customers to answer such questions as/ 3s the company en%ironmentally conscious= 7an 3 trust the company= 3s the company dedicated to producing high quality products= Ge also as$ more specific product performance questions such as/ 'oes the brand pro%ide superior performance in your car= 'o they ha%e friendly ser%ice= 7an 3 easily pay at the pump= Oltimately we want to see which image items pro%ide the most le%erage %ersus a critical mar$et measure such as mar$et share& 4ften we can determine if an image item is a
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McoreM equity item # an item on which the brand cannot afford mar$etplace disappointment& 3n these cases the downside ris$ is greater than the upside opportunity of a gi%en image impro%ement strategy& 4n the other hand some attributes display a pattern in which the upside outweighs the downside ris$& These attributes feature a good in%estment opportunity for brand image impro%ement& The final part of the image analysis phase is to create an o%erall cumulati%e MimageM inde5 for the brand& 7alue: Are *eo$le 4illing )o *ay More (or )%e BrandF The final component of the brand equity inde5 is the creation of a %alue inde5& ?uantifying the %alue component can be approached in %arious ways depending on the nature of the data collection tas$ the project budget and what ma$es best sense for the product and category at hand& 4ften the best way to attac$ %alue perception is with a simple brand1price trade#off tas$& 4ther times %alue is best measured with direct questioning such as M%alue for the moneyM type rating questions& For e5ample one method of measuring %alue is the brand1price trade#off method in essence a simple conjoint tas$& This is accomplished by setting up choice situations for respondents where at the first le%el of choices all prices are equal across brand names& The only basis for choosing among brands is the psychological association one has with a gi%en brand name& Ge e5pect the customerIs first choice to be his1her fa%orite brand& ,ut as the price increases in relation to other brands we witness how much a customer is willing to pay& That is we can quantify how MimmuneM a brand might or might not be to increases in price& This allows us to scale their loyalty for the brand in the conte5t of a reasonable range of prices and create an o%erall %alue inde5&
%&1 PUTTIN( IT "LL TO(ETHE . THE M"STE * "ND E+UIT! INDE2

3n the end the o%erall ,rand Fquity 3nde5 is a combination of the indices on the core elements of 2oyalty 3mage and Nalue with a MperfectM score being 6""& 4f course no brand will e%er achie%e 6"" but this pro%ides us with a common yardstic$ to compare a clientIs brand to competition or to compare relati%e brand strength across product or ser%ice categories& Typical brand equity inde5 numbers obser%ed so far are in the J" # ;A" range& Gith the inde5 we can pinpoint more easily what needs to be done to impro%e brand equity and mo%e toward the elusi%e 6""& The three components of the brand equity inde5 allow us to decompose changes in the score to understand fluctuations in brand equity& Gor$ing bac$ward we can show that brand equity increased because of an impro%ement in one of the components& ,y loo$ing at the sub#indices we can trac$ which areas are increasing or decreasing o%er time and thus what strategies wor$ed and where opportunities lie for future impro%ements and greater paybac$&
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)%e Burke A$$roa9% )o 0>tending Brand 0&uity ,efore you can successfully e5tend current equity you must understand what images attitudes and associations are generated by the core brand to be e5tended& Ghen the elements that dri%e the core brandIs equity are understood then e%aluations can be made as to what degree potential brand e5tensions ha%e a perceptual fit with the core brand& Ge begin to understand how best to le%erage those elements into a new category& >nd we begin to understand the ris$s *if any+ to the core brand and how to minimiLe them& The ,ur$e approach to ,rand Fquity F5tension for any brand in%ol%es the following/

'efine and measure current Mbrand equityM for the core brand of GauchoIs Salsa& 'etermine what images attitudes and associations are most critical to dri%ing current brand equity& 'etermine the degree to which GauchoIs current equity is transferable to other potential categories& 3dentify and sort the strong from the wea$ e5tension possibilities in terms of o%erall business potential&
Oltimately an Mequity transference and business potentialM map would be created to show which concepts are most li$ely to carry the core brand name well and the o%erall sales potential for each/ >dditionally the ,ur$e analysis will show the path to ma5imiLing consumer acceptance of the GauchoIs brand in new product categories by showing which brand attributes must be impro%ed maintained or protected against competiti%e mo%es&
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,rands in todayIs intense global economy are strategic assets and a $ey source of competiti%e ad%antage& > brandIs equity that which adds or detracts from the power of the brand must be managed and le%eraged to produce strong long#term performance and lasting re%enue growth& Strong brand#building and measurement s$ills are crucial to achie%ing these critical objecti%es in todayIs fiercely competiti%e global economy& S-,3 is a leader in designing and conducting brand equity research& S-,3 has put its considerable brand equity research e5perience and capabilities to wor$ for many domestic and global brands in media financial ser%ices consumer goods telecommunications and transportation ser%ices& This includes research to support new branding initiati%es and the repositioning and re%italiLation of established brands& S-,3Is brand research e5perience and capabilities are presented within our +rand E4uit& E.a uation and 0easurement -rogram which addresses such critical brand research issues as/

>ttitudes toward and perceptions of the brand ,rand acceptance and affinity ,rand awareness attitude and usage trac$ing ,rand equity measurement and e%aluation 2ine e5tension e%aluation Mar$et feasibility Mar$et structure and segmentation Positioning .ame testing and selection
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OSP de%elopment and testing
S-,3 pro%ides brand research programs that incorporate all of these issues as well as programs that include only one or se%eral of the abo%e issues& S-,3Is brand research is customiLed to your specific needs and is designed to pro%ide meaningful solutions not just numbers& The S2+( +rand E4uit& E.a uation and 0easurement -rogram is a progressi%e A#step process which pro%ides mar$et and customer data and e%aluation on which to base brand strategies and tactics&
> $ey component of the ,rand Fquity Measurement and 'e%elopment Program is 5he +rand E4uit& -o)er (nde/ a single measure of brand power using sur%ey data and e5ternal mar$et data as %ariable inputs& 3nputs to this model can be adjusted modified and manipulated through gaming to determine the effects of the %ariable inputs on brand equity power&
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%&3
WHO IS LO!"L CUSTOME 0
3t is defined earlier that a loyal customer as one who purchased regularly showed interest in a cross#section of products and ser%ices and recommended the company to others& Today that definition must be e5panded to reflect the changes in both customer beha%ior and supporting technologies& -esearch suggests that customers who engage with a firm through multiple channels e5hibit deeper loyalty than single channel customers& This assumes the customer recei%es the same consistent ser%ice from the %endor whether he wal$s into the store logs onto the Geb site or calls the ser%ice center& TodayIs customers e5pect to hop from channel to channel and they e5pect good ser%ice to follow& Today call center representati%es are increasingly the new MfrontlineM for more and more companies& 7on%erged call centers *phone fa5 email Geb+ are on the rise& Gartner Group estimates that 0"E of .orth >mericaIs call centers will migrate to multi# channel contact centers by !""A& >nd customers are changing their Mflight patternsM to mo%e right with them& Forrester -esearch predicts that by ne5t year customer e#mail will grow from K&JE to ;0&6E while Geb contacts with customers will double from J&;E to ;0&;E& 7all center representati%es ha%e the potential to be the Mloyalty warriorsM of the future& To be effecti%e they need to be as equipped to write a well#written email reply and na%igate the company Geb site as they are in being helpful and friendly on a phone call& Two con%erging e%ents since the mid#;KK"s ha%e made for a buyer that is significantly more demanding than half a decade ago ## widespread use of the 3nternet coupled with $nowledge management brea$throughs ha%e created a new breed of MloyalM customer& Cet most companies ha%e not $ept pace with this new empowered customer and the customer e5perience has suffered& The result/ 7ustomers feel under#whelmed o%er#promised under#deli%ered and Munloyal#li$e&M Ghat will define a loyal customer fi%e years from now is still unfolding& :owe%er companies that recogniLe that the face of the customer is changing will be better positioned to respond well through %arious channels Q# today and tomorrow& HBrand-stret9%ingH ,rand#stretching that is the use of tobacco brand names on non#tobacco merchandise or ser%ices has been used by the tobacco industry for many years as a means of promoting cigarettes when faced with a ban on direct tobacco ad%ertising& The e5amples which follow show the e5tent to which the tobacco industry will go in order to circum%ent restrictions on tobacco promotion& This has serious implications for Furopean nations as go%ernments draft their domestic legislation to conform with the FO 'irecti%e on tobacco ad%ertising&
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Rationale
,rand#stretching has nothing to do with the di%ersification of the tobacco industry& Most of the multi#national tobacco companies already ha%e separate di%isions dealing with non#tobacco products& For e5ample Philip Morris owns General Foods which includes many well#$nown brands such as Ma5well :ouse Kraft etc& The objecti%e of tobacco brand#stretching was made quite clear in a ;K0K document from ,>T/ 4pportunities should be e5plored by all companies Rie in the ,>T groupS to find non# tobacco products and other ser%ices which can be used to communicate the brand or house name together with their essential %isual identifiers&&&& The principle is to ensure that tobacco lines can be effecti%ely publicised when all direct lines of communication are denied ;& > similar strategy was set out by -8 -eynolds manufacturers of 7amel cigarettes in a document which sought ways to circum%ent the French law which bans both direct and indirect ad%ertising& The document attributed to Gorldwide ,rands another -eynolds subsidiary recommended a Mcreati%e approach to legal mattersM to achie%e Ma balance between legal ris$s and desired benefitsM& The document recommended using cigarette brand names for MlifestyleM products such as clothing shoes and watches& Most re%ealingly the document stated that e5penditure for such promotions would increase through legal and financial channels that must be Mhermetically separated from the tobacco companyM !& )y$es of <rand-stret9%ing 4ne of the earliest e5amples of brand#stretching or indirect ad%ertising was in .orway where following a ban on tobacco ad%ertising in ;K0A ad%ertisements for 7amel boots started to appear in magaLines and newspapers& The ads were identical to those that had pre%iously ad%ertised 7amel cigarettes& The Go%ernment acted quic$ly and deemed the ads to be a breach of the law& They were subsequently only permitted once the characteristic lettering of the word M7amelM and the 7amel trademar$ were dropped& 3n 4ctober ;KK0 >S: complained to the >d%ertising Standards >uthority about a similar campaign in the ,ritish press& The ad for 7amel boots featured the distincti%e logo and lettering of 7amel cigarettes and portrayed the characteristic rugged outdoor imagery associated with the brand& >S: argued that the ad%ertisement was promoting cigarettes as well as boots but that it was essentially a promotion for the 7amel brand which is a cigarette brand& >S: belie%es that the ad%ertisement should therefore be subject to the same controls as tobacco ad%ertising& Onder the terms of the 7igarette 7ode which defines restrictions on style and content of cigarette ads the ad%ertisement for 7amel boots would be prohibited& :owe%er the >S> ruled that because the ad for 7amel boots contained no references to cigarettes in a way that promoted smo$ing it did not breach the ad%ertising codes&
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4ther early e5amples of brand#stretching occurred in ,elgium and France following tobacco ad%ertising restrictions& Ontil ;KJ! indirect ad%ertising did not e5ist in ,elgium but following the regulation of tobacco ad%ertising ad%ertisements for Marlboro lighters and matches started to appear& > judge ruled the campaign illegal and said that it was clear that the intention was to promote cigarettes& People are not stupid& They immediately identify the tobacco brand promoted through lighters or matches& > similar initiati%e can be seen with the recent promotion for -iLla cigarette papers& 3mperial Tobacco acquired the company in 8anuary ;KK0 and has spent considerable sums promoting the brand& >cti%ities include the -iLla -olling -oad#Show which tours OK music festi%als and the sponsorship of night clubs& For such a low %alue product the scale of promotion is immense& -iLla has e%en launched its own website on the 3nternet with the clear intention of targeting a youth audience& >nother well#$nown brand which has benefited from indirect ad%ertising is the worldIs leading cigarette brand Marl<oro& The Marlboro 7lassics range of clothing is designed to reflect the MGild GestM imagery associated with the Marlboro brand& 3t was initially a loss leader for Philip Morris the manufacturer of Marlboro but is now the second#largest mail order brand in the OS> and there are ; """T Marlboro 7lassics stores throughout Furope and >sia& 7igarette brand names ha%e also been associated with holidays shops cafes music and e%en public ser%ice messages in countries as di%erse as France 3ndia Malaysia Thailand O$raine and the OS>& 4%o 9ontrols <rand-stret9%ingF 3n order to side#step laws go%erning tobacco ad%ertising the tobacco industry has attempted to dissociate itself from indirect ad%ertising by the establishment of quasi# independent companies which ha%e sole responsibility for promoting non#tobacco products using cigarette brand names& >n e5ample is that of Gorldwide ,rands 3nc set up by -8- .abisco :oldings which owns the 7amel trademar$ outside the tobacco sector& The company claims to ha%e no direct legal or financial relationship with any -8 -eynolds tobacco operation& >ccording to G,3 the companyIs business is Mbrand di%ersificationM and has been mar$eting fashion accessories using the 7amel brand name for !" years&
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EFFECT OF * "ND4ST ETCHIN(
The tobacco companies argue that products and ser%ices bearing tobacco brand names should not be subject to any tobacco control legislation because they are not selling cigarettes but other ser%ices& :owe%er the e5amples from Malaysia and France show clearly that the prime moti%e behind the use of tobacco brand di%ersification is the continued promotion of the product for which the brand name became recognised ie cigarettes& Tobacco promotional merchandise has become widespread in the OS> and is %ery popular with children& Money spent by the tobacco industry on promotional merchandise increased from 0&0E of its ad%ertising budget in ;KK" to !A&JE in ;KK@& -ecent research has shown that schoolchildren who wear clothing emblaLoned with cigarette names are four times more li$ely to smo$e than other children& -esearchers found that 6! per cent of the children sur%eyed owned promotional merchandise such as T#shirts and baseball caps& The impact of Marlboro brand#stretching was demonstrated clearly in a sur%ey of cinema goers in .orway where limited indirect ad%ertising is permitted& The poll re%ealed that A" per cent of %isitors thought that they had seen an ad%ertisement for cigarettes after the screening of an ad for Marlboro clothing& (uture deBelo$ments > recent de%elopment from brand#stretching is Mimage#stretchingM& .ot content with using brand names and logos the tobacco companies are now acti%ely promoting the imagery associated with particular brands& Thus in Malaysia ,>T has been enticing people to participate in its ,enson H :edges MGolden 'reamsM programme a TN programme about the aspirations of selected indi%iduals& 3n Thailand a new canned coffee be%erage called M 7offee is adorned with the cowboy imagery associated with Marlboro& ;A 3n Furope cigarette companies ha%e been building brand recognition by the use of colour& Thus Sil$ 7ut has become synonymous with purple ,enson H :edges with gold and so on& The tobacco companies ha%e also begun to publish life#style magaLines to encourage brand loyalty& 4ne of the first to use this format was -othmans with its -ende%ous with -affles magaLine& 3ts circulation now stands at around ;"" """& To date tobacco ad%ertising on electronic media has been fairly limited& This reflects a %oluntary agreement by the tobacco companies in the OK not to ad%ertise until the law has been clarified& :owe%er websites promoting tobacco already e5ist& For e5ample the Gest brand in Germany has its own site and an indirect promotion for 2uc$y Stri$e has been created through a website called 7ircuit ,rea$er based in 7alifornia& 4ther forms of electronic media are also being e5ploited by the tobacco industry& ,enson H :edges which recently sponsored :ogLone a ,ritish night club tour used interacti%e $ios$s alongside lightshows and promotional gifts to attract young customers& > spo$eswoman for ,enson H :edgesI sales promotion agency 3gnis commented there/
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M3t was a new presentation of the ,enson H :edges brand&&& The electronic medium is %ery important in appealing to a youth audience& 3n the absence of a web site the $ios$s are a way tobacco companies can use new media and reach that youth audience& They can also do it in a fairly elliptical way rather than forcing it down peopleIs throats&M
Lig%ting u$ People who ha%e ne%er smo$ed ha%e no plans to start lighting up but those who ha%e pic$ed up the habit show no signs of quitting& Findings from a sur%ey show that regular smo$ers are highly loyal to their fa%orite brands with JD percent claiming they would ne%er consider buying another brand on a regular basis& The sur%ey of ; """ males and females aged ;A to D@ was conducted late last year by mar$et research firm >sia Mar$et 3ntelligence& -esults show that printed warnings on the dangers of smo$ing may be sin$ing in##only !K percent of the entire sample sur%eyed light up regularly& Forty#se%en percent of male respondents smo$e ma$ing them the best customers of the tobacco industry in contrast to the ;6 percent of women who puff away out of habit& 4ne out of e%ery four smo$ers is aged ;A to !@ ma$ing the Filipino youth another prime target as the worldwide tobacco industry see$s to refresh its dwindling customer base& :owe%er it)s the !A to 6K age brac$et that has the most number of smo$ers with the number tapering off as they mo%e into the @" to AK age range and health issues become a more prominent concern& Majority of the smo$ers sur%eyed claim they smo$e less than fi%e stic$s a day& Pac$#a# day die#hards are quite rare and more li$ely to be older D"# to D@#years#old and male& Thirty#four percent of smo$ers said they buy their cigarettes daily with K@ percent buying them on their own& Ghen as$ed to specify the brand they smo$ed most often both Philip Morris brands came out best& M7ompared to other >sian mar$ets the Philippines differs in that imported brand names dominate domestic ones M obser%es Kurt Thompson director of >sia Mar$et 3ntelligence in Manila& M,rand loyalty is also unusually strong unli$e other mar$ets where brand promiscuity is endemic&M >bout 6J percent the highest percentage amongst smo$ers sur%eyed claim they ha%e been smo$ing their regular brand ;" years or more& 3t also appears that once loyalty is instilled during the crucial !A# to 6K#year#old stage it)s difficult con%incing them to switch&
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Forty#one percent from this age brac$et which has the most number of smo$ers say they ha%e been smo$ing their regular brand for at least a decade& 4nly ;@ percent of all smo$ing respondents said they would consider changing to a different main regular brand in the future& 'espite their o%erwhelming loyalty on occasional @; percent still smo$e brands other than their regular brand##possibly when their regular cigarettes are una%ailable& Ginston King SiLe leads the list of alternati%es at ;D percent followed by Ginston again##no %ariety specified##at ;A percent& The ubiquitous Marlboro Filters King SiLe ran$ third at ;@ percent& > window of opportunity e5ists though for these alternati%e brands should they see$ to increase mar$et share& Forty#two percent of respondents say that roughly three quarters of all cigarettes they smo$e are their regular brand& 3n comparison only 60 percent claim that all the cigarettes they smo$e ne%er %ary from the regular brand to which they are accustomed& :eightening awareness of cigarette brands is a gargantuan challenge as restrictions on ad%ertising sponsorship and all $inds of abo%e# or below#the#line acti%ities for the tobacco industry continue to grow& Somehow cigarette manufacturers manage##when as$ed to mention cigarette brands roughly three out of ;" smo$ers said Marlboro while !; percent mentioned Philip Morris& :ope King SiLe and Ginston were ne5t at ;" percent and K percent respecti%ely& Marlboro also appears to be the most familiar MstarterM cigarette for the youth at @A percent& This figure falls to 66 percent amongst !A# to 6K#year#olds who apparently start e5perimenting with other brands and %arieties as smo$ing settles into a habit& 4f this age group !6 percent mentioned Philip Morris ;J percent specified Marlboro Filters King SiLe and ;; percent said Ginston as other brands they $now& Ghen as$ed to mention other brands they were familiar with @A percent of the smo$ing respondents came up with Philip Morris followed by Ginston King SiLe at 6J percent and Marlboro Filters King SiLe at 6D percent& Gith the recent political uphea%al people ha%e been much more cautious in e5penditure especially when major in%estments are concerned& 7onsidering the relati%e cost of cigarettes their ready a%ailability and the ingrained loyalty to specific brands Filipino smo$ers will continue their patronage of fa%orite cigarette brands##politics or no politics&
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%&5
LO!"LT! IN THE M" KET PL"CE
Ghether husbands are loyal to their wi%es or not whether employees remain loyal to their employers or not mar$eters are realising the need to ha%e a large number of loyal customers& The purpose of any organisation does not end with just getting the customers& -etaining them in their fold is an equally important tas$& .o successful company is satisfied if a customer buys the product of the 7ompany just once or twice&:e1She must be made to buy the same brand again and again& This is should be the core strategy for many of the fast mo%ing consumer goods& 4ften consumers may not be aware of e%en the total set of brands a%ailable in the mar$et of the product category under consideration& >gain they do not consider for choice all the brands they are aware of& They ha%e an e%o$ed set or a consideration set of brands within which they normally switch from one to another& 7onsider the case of toilet soaps& There are any number of toilet soaps a%ailable in the mar$et& ,ut consumers usually choose from their e%o$ed set only& Suppose the e%o$ed set of brands for toilet# soaps for a consumer consists of :amam -e5ona and 2u5 she will buy only from these three brands& >t the same time she may buy one particular brand more often than other brands in the e%o$ed set which is a different issue to be ta$en up later& The composition of the e%o$ed set might change from time to time depending on the ad%ertising pressure brought on the consumers by different companies& :ence it is important for the mar$eter to $now the composition of the e%o$ed set of consumers he is trying to satisfy and then try and get their brands into the e%o$ed set of customers&
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Ge shall de%elop the concept of brand loyalty using our understanding of e%o$ed sets& Suppose the brands in the e%o$ed set of a consumer are > , 7 ' and F& 4ut of the last ;" purchases made in that product category let us say brand 7 was bought 0 times brand > , and ' were bought once each& Then he is said to be 0" per cent loyal to brand 7& 4n the other hand if all the ten purchases were that of brand 7 then the customer is said to be totally loyal to brand 7& This $ind of data about customers has a lot of implications to the mar$eter& 7ustomers can be di%ided into four groups according to their loyalty status& HAR.-C1R0 L18ALS: 7onsumers who buy one brand all the time& Thus a buying pattern of 7 7 7 7 7 represents a consumer with undi%ided loyalty to brand 7& S1() -C1R0 L18ALS: 7onsumers who are loyal to two or three brands& The buying pattern 7 7 > > 7 > represents a consumer with a di%ided loyalty between 7 and >& SHI()I/+ L18ALS/ 7onsumers who shift from fa%ouring one brand to another& The buying pattern 7 7 7 , , , would suggest a consumer who is shifting brand loyalty from 7 to ,&
S4I)CH0RS: 7onsumers who show no loyalty to any brand& The buying pattern > 7 F , ' 7 would suggest a non#loyal consumer who is either deal prone *buys the brand which gi%es discount or gift+ or %ariety prone *wants something different+&
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C%a$ter!
41RL.S )1BACC1 I/.US)R8

INDUST ! P OFILE
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*HILI* M1RRIS, BA) I RJ R08/1L.S L11K 170RS0AS The ,ig 6 global tobacco players bear substantial responsibility for rising smo$ing rates and projected future increases& MGith growers and manufacturers being threatened by stiff O&S& regulations on tobacco it is logical to e5pect them to strengthen their o%erseas mar$ets& >nd they will M says 'iana Temple of Salomon ,rothers 3nc& ;& Former Nice#President 'an ?uayle summed up the industry %iew in ;KK" when he remar$ed to a group in .orth 7arolina MTobacco e5ports should be e5panded aggressi%ely because >mericans are smo$ing less&M ; For two decades the tobacco companies ha%e in%ested hea%ily in o%erseas ad%ertising& They ha%e acquired newly pri%atiLed cigarette companies set up joint %entures and built distribution and sales networ$s& >s a result Philip Morris -8 -eynolds and ,>T ha%e registered double#digit growth in international cigarette sales in recent years& Philip Morris and -8 -eynolds now sell more cigarettes abroad than they do in the Onited States& 3n ;KK0 Philip Morris made more profit selling cigarettes abroad than in the Onited States and analysts e5pect in the ne5t ;" years that -8 -eynolds and ,rown H Gilliamson *,>TIs O&S& subsidiary+ will do the same& ,etween ;KJD and ;KKD O&S& cigarette e5ports grew by !D" percent and now account for nearly 6" percent of all domestic cigarette production with @" percent of these e5ports now destined for >sia& MMost of their capital e5penditure and infrastructure is in place and the profit comes from growing RinternationalS %olumes M says Salomon Smith ,arney analyst Martin Feldman who e5pects the companiesI international tobacco profits to rise by around !" percent o%er the ne5t few years& >n increasing proportion of these companiesI o%erseas sales are being manufactured abroad rather than being e5ported from the Onited States& O&S& cigarette e5ports fell ;; percent in ;KK0 Mdue to greater offshore production by O&S& manufacturers M says the O&S& 'epartment of >griculture *OS'>+& 3n ;KKD the big three O&S& cigarette companies shipped !@@ billion O&S& made cigarettes to foreign countries& This amount was less than half of what Philip Morris alone sold abroad that year while in ;KK0 only ;J percent of the cigarettes -8 -eynolds sold o%erseas were made in the Onited States&
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MO&S& companies are li$ely to loo$ harder at their operations abroad and produce fewer cigarettes here M says Peter ,urr an agricultural economist at OS'> who specialiLes in tobacco& > number of factors ha%e dri%en this o%erseas e5pansion

including/
the opening up of formerly closed economies in Fastern Furope the former So%iet Onion and 7hina< pressure on go%ernments by the international financial institutions to pri%atiLe state#owned industries and rela5 laws restricting foreign in%estment< the attempt by de%eloping countries to attract foreign in%estment through the pro%ision of ta5 incenti%es and the lifting of import duties< U cheaper labor and transport costs< the threat of further regulation in the multinationalIs home countries and the attempt by these companies to shield an increasing proportion of their assets from lawsuits in de%eloped countries< and the desire to locate cigarette manufacturing plants closer to sources of tobacco leaf an increasing proportion of which is being purchased o%erseas *see MFncouraging Foreign Tobacco ProductionM+&
The ,ig 6Is increasing reliance on o%erseas production has transformed the tobacco industry around the globe& 3n country after country they ha%e purchased pre%iously state# owned factories set up joint %entures with e5isting state enterprises and built new factories& 7urrently Philip Morris -8 -eynolds and ,>T each own or lease plants in at least A" different countries spanning all corners of the globe&;; The following is a summary of their o%erseas operations/ *%ili$ Morris Philip Morris is the worldIs largest multinational cigarette company& 3t controls around ;D percent of the global cigarette mar$et and haw$s the worldIs most popular brand Marlboro which accounts for J&@ percent of global consumption&;! The company has subsidiaries affiliates and licensing agreements in A@ countries around the world ;6 and has at least a ;A percent mar$et share in o%er @" countries& Philip MorrisI international tobacco unit is the companyIs fastest growing in terms of profit and sales& Since ;KK" the companyIs cigarette sales ha%e risen by only @&0 percent in the Onited States but J" percent o%erseas ;@ while profits from international sales ha%e risen by 0; percent since ;KK6&;A 3n ;KK0 the company sold !6A billion cigarettes in the Onited States for a profit of V6&6 billion while selling o%er 0;; billion cigarettes abroad for a profit of V@&D billion mar$ing the first time that the companyIs international sales made more profit than domestic ones&;D ,y the year !""" predicts 7F4 Geoffrey ,ible the company will be selling a trillion cigarettes worldwide&;0 MTheyI%e got a good buffer& .o matter how badly things go in the Onited States international sales will carry them along M says >llan Kaplan a tobacco analyst at Merrill 2ynch H 7o&;J !K 2al ,hadur Shastri 3nstitute of Management .ew 'elhi
3n ;KKD Philip Morris bought a controlling interest in the Polish go%ernmentIs largest cigarette factory for V60! million&;K > year later the company paid V@"" million to ta$e a controlling interest in Me5icoIs second largest cigarette ma$er 7igatam *see Me5ico case study+& The acquisition strengthens the companyIs already formidable presence in Me5ico *Marlboros currently ha%e 6" percent mar$et share+!" which it had gained through a pre%ious license agreement with 7igatam to produce mar$et and distribute its Marlboro Merit Parliament and Nirginia Slims brands& The acquisition will also help the companyIs efforts to produce low#cost cigarettes for e5port to .orth >merica and >sia ## 7igatam has o%er the past few years been e5ploring strategies to increase its presence in o%erseas mar$ets especially in 7hina&!; 3n 'ecember ;KK0 Philip Morris announced that it would build a cigarette plant near ,ucharest -omania to begin production of its Marlboro 2HM and ,ond Street cigarettes&!! >s 7hairman ,ible puts it MGe are still in the foothills when it comes to e5ploring the full opportunities of many of our new mar$ets&M!6
BRI)ISH AM0RICA/ )1BACC1 (BA)# Bro'n I 4illiamsonHs $arent 9om$any, Britis% Ameri9an )o<a99o (BA)#, is t%e 'orldHs se9ond largest multinational 9igarette 9om$any3 4it% su<sidiaries in C@ 9ountries, !? BA) 9ontrols around ;@ $er9ent of t%e glo<al 9igarette market3!@ )%e 9om$any and its su<sidiaries and affiliates manufa9ture more t%an %alf t%eir 9igarettes in Asia, Australia and Latin Ameri9a3 In ;EE7, t%e 9om$anyHs international to<a99o o$erations made a $rofit of K! <illion on sales of K!=37 <illion3!C In ;EEC, t%e 9om$any under'ent a reorgani:ation in '%i9% Britis% Ameri9an )o<a99o Com$any, Britis%Ameri9an )o<a99o +ermany, Sou:a Cru: (Bra:il# and Bro'n I 4illiamson all merged to <e9ome a single entity -- Britis% Ameri9an )o<a99o (Holdings# Ltd3 )%e $ur$ose of t%e merger 'as to im$roBe t%e 9om$anyHs marketing efforts, Ges$e9ially e>$orts and t%e deBelo$ment of international <rands3G!7 All of t%e 9om$anyHs o$erations are run out of t%e 9om$anyHs United Kingdom offi9e, e>9e$t for t%ose of Ja$an, Me>i9o, Sout% Korea and t%e United States, '%i9% are %andled at Bro'n I 4illiamsonHs Kentu9ky %ead&uarters3 In t%e 9ourse of t%e merger, BA) also esta<lis%ed t%e Consumer and Regulatory Affairs 1ffi9e to G9ounter t%e anti-smoking lo<<y and Bigorously adBo9ate t%e 9om$anyHs Bie's around t%e 'orld3G!D ,>T which has long been the most international in outloo$ of all the tobacco multinationals is also intensifying its strategy of acquiring and building production capacity around the world& 3n ;KKD ,>T spent V!A million to upgrade its M2iberation FactoryM in 7ambodia in order to boost production for both the domestic and e5port mar$ets&!K 3n 8anuary ;KKJ ,>T purchased a controlling interest in Te$el the Tur$ish state cigarette monopoly& The purchase gi%es the company a quarter of the worldIs ninth largest cigarette mar$et ## Tur$s consume nearly ;"" billion cigarettes a year& ,>T will in%est V;@A&D million in return for a A! percent share of Te$el which will e%entually ha%e the capacity to produce !A billion cigarettes a year& ,>T also acquired a @K#year e5clusi%e license to sell Te$elIs popular Samsun and Ceni :arman cigarette brands&6" 6" 2al ,hadur Shastri 3nstitute of Management .ew 'elhi
3n ;KK0 ,>T purchased 7igarrera 2a Moderna *72M+ Me5icoIs biggest cigarette ma$er for V;&0 billion *see Me5ico case study+& This was one of the largest foreign in%estments e%er made in Me5ico6; and ,>TIs most e5pensi%e purchase e%er&6! 72M produces both Me5ican cigarettes and international brands ## sold under licensing agreements with ,>T competitors ## such as 7amel Ginston 'unhill and Salem&66 MThis acquisition offers us the rare opportunity to buy a siLeable and %ery profitable player in a growth mar$et M says Martin ,roughton chair of ,>T&6@ The purchase will consolidate the companyIs dominance of the 2atin >merican mar$et where it currently holds a D" percent share *almost double that of Philip Morris+ and significantly increase its ability to boost e5ports to the Onited States and >sia& ,>T also sees Mconsiderable opportunitiesM to e5port tobacco leaf from Me5ico Mparticularly because the country is outside the O&S& import quota M says a -euters report&6A
RJ Reynolds -8 -eynolds the worldIs third largest multinational cigarette company has recently fallen further behind Philip Morris and ,>T& Saddled with a huge debt load *the result of a failed ta$eo%er bid in the late ;KJ"Is made famous in the boo$ ,arbarians at the Gate+ -8- saw its international tobacco profits decline A percent in ;KK0 to V0AK million on sales of V6&A0 billion& This drop howe%er mas$ed a @6 percent increase in sales in 7entral Furope and a ;6 percent increase in the ,altic -epublics and 7ommonwealth of 3ndependent States&6D The companyIs recent troubles ha%e spar$ed speculation among Gall Street analysts that the company may enter into an international alliance with ,>T that would in%ol%e a merger of the two companiesI international tobacco di%isions&60 >lthough smaller than its two ri%als -8 -eynolds is still a huge multinational company with subsidiaries affiliates and licensing agreements in A0 countries&6J The company which controls around @ percent of the global cigarette mar$et has seen a 0A percent increase in its international sales since ;KK" reaching V6&@ billion in ;KK0&6K 3nternational sales now account for @; percent of -8-Is total tobacco sales&@" 3n ;KKA -8 -eynolds significantly boosted its o%erseas operations adding facilities in Finland Nietnam Poland and TanLania where it paid VAA million for a controlling share of the TanLanian 7igarette 7ompany& The purchase was the largest single foreign in%estment in TanLania since the country achie%ed independence in ;KD;&@; -8 -eynolds has ambitious plans to rehabilitate the formerly state#owned companyIs 'ar Fs Salaam plant which will soon produce @ billion cigarettes annually ma$ing it one of the biggest plants in >frica& The company hopes to use its new base in TanLania to challenge ,>TIs %irtual monopoly in the Fast and Southern >frican region&@! 3n .o%ember ;KK0 -8 -eynolds opened a new VK million plant in Tunisia to manufacture Ginstons and Monte 7arlos for TunisiaIs %oracious smo$ers ## D! percent of Tunisian men and J percent of women smo$e& MTunisia ran$s si5th in the cigarette mar$et in >frica M says -eynolds F5ecuti%e Nice President Klaus 2angner& MThis new alliance will allow -eynolds to be the leader of foreign tobacco firms in Tunisia and to reinforce its position in .orth >frica M he says&@6 The company is also a huge player in Tur$ey where its factories account for half of the countryIs cigarette e5ports 6; 2al ,hadur Shastri 3nstitute of Management .ew 'elhi
6&6
THE TO*"CCO INDUST ! "ND !OUTH SMOKIN(
4ne of the important aspects of ,ill S#!" is that it puts the tobacco industry)s publicly stated position on youth smo$ing to the test& >s you all $now the industry has consistently claimed that it is opposed to underage smo$ing that it does not mar$et its products to children that smo$ing is an adult choiceW and that tobacco companies will co#operate with anyone who wishes to ma$e tobacco products less accessible to minors& For people who wor$ in public health these claims ring hollow/ we ha%e seen too many ad%ertising campaigns that appear to target children and too many industry mar$eting documents discussing the perceptions of teenagers&-ather than concentrate on these specific e5amples 3 would li$e to concentrate on the big picture/ the structural reasons why tobacco companies are dri%en to focus their mar$eting energies on young people& )%e 09onomi9s of 8out% Smoking X X 6ess than one-third of smokers 73$89 start after age $#. :n & "8 of smokers start after age 24. Y ;<ounger Adu t Smokers: Strategies and :pportunities=>
Tobacco addiction has been described as a pediatric disease because an increasing percentage of smo$ers *roughly J"E in 7anada in ;KK@+ ta$e their first cigarette before the age of ;J& Moreo%er as the O&S& Surgeon General noted in a ;KK@ report on youth smo$ing People who begin to smo$e at an early age are more li$ely to de%elop se%ere le%els of nicotine addiction than those who start at a later age&W >s :ealth 7anada noted in a study released in 8anuary of this year 6AE of 7anadian smo$ers aged ;A to ;0 report ha%ing smo$ed their first cigarette by the age of ;!& Ghat is more brand loyalty de%elops early in a young person)s smo$ing career so that e%en mar$eting efforts that actually are designed to promote brand#switching are ine%itably li$ely to be s$ewed towards young people& >s -8- put it in the early ;KJ"s F%en if a brand falls from grace among younger adult smo$ers the increasing consumption rate of the aging franchise can carry the brand)s performance for years thus e5tending its life cycle&W Please note that -8- li$e tobacco companies around the world regularly uses the euphemism younger adult smo$erW to refer to underage smo$ers& .ow before anybody suggests that the economics of youth smo$ing are somehow different in 7anada than in the Onited States let me just pro%ide a few e5amples from 7anada&
6!
> ;KJ! document obtained by the ,&7& go%ernment from ,ritish#>merican Tobacco files in Guildford Fngland discusses 7anadian mar$et trends in detail& The document notes the wide discrepancy between the number of smo$ers who intend to quit in the near future *about @"E+ and the low percentage who actually succeed *;&JE in ;KJ;+& This o%er%iew also includes the following passage about starters/ :ur information on starting is imited since )e do not conduct research )ith peop e under the age of $". ?o)e.er= a of our data and especia & starting rates among peop e o.er the age of $" suggest that starting is up since the @71 aunch of ; ights.> 3ncidentally e%en in ;K0D it was illegal to sell cigarettes to ;A#year#olds in 7anada& 3n ;KJA an 3mperial Tobacco document described a ProblemW faced by the 7anadian tobacco industry *see >ppendi5 >+/-rofit gro)th has camouf aged the rea it& that 3anadian cigarette smokers are increasing & ess enchanted )ith being smokersA Despite short-term upturns 7eg. .ia ; ights>9= fe)er and fe)er 3anadians )i smoke in the futureA A though )e ha.e historica & done things )hich had an inf uence on the si!e of the tota industr&= these efforts ha.e not been co-ordinated= p anned and fu & integrated into our ;norma > acti.itiesA Something@s got to change. There are only two significant ways to influence the o%erall siLe of the tobacco industry& 4ne is to con%ince worried smo$ers not to quit for e5ample by offering them (health reassurance) cigarettes such as so#called (light) cigarettes as the (ne5t best thing to quitting&) The second approach is to step up efforts to recruit new smo$ers who will o%erwhelmingly be underage& The record indicates that 7anadian companies ha%e tried both&3mperial Tobacco has been far more successful than its competitors at attracting new smo$ers as 3masco 7hairman Purdy 7rawford reported proudly to his colleagues from ,>T companies in other countries in 4ctober ;KJJ/ (.5.6. B(mperia 5obacco 6imitedC has a )a&s focused its efforts on ne) smokers be ie.ing that ear & perceptions tend to sta& )ith them throughout their i.es. (.5.6. c ear & dominates the &oung adu t market toda& and stands to prosper as these smokers age and as it maintains its high & fa.orab e &outhfu preference.$B#C 3ndeed 3mperial)s share of the 7anadian cigarette mar$et has gone from slightly o%er one#third in the mid#;K0"s to around 0"E at present&Finally let me quote from a particularly telling document dated >ugust ;KK; a Switching >nalysisW by 3mperial Tobacco)s Mar$et >nalysis Group& Two things jump out from this document& >s you will probably hear again in a few minutes tobacco companies ha%e consistently maintained that their mar$eting efforts are directed only towards encouraging adult smo$ers to switch brands& So how does 3mperial Tobacco define switchersW for its internal Switching >nalysisW=
66
%hen )e ta k about a s)itcher )e are ta king about someone )ho has been smoking his usua brand for ess than $2 months. 5he definition inc udes starters 7did not smoke before9 and smokers that had no regu ar or particu ar pre.ious brand. 3n other words by a linguistic sleight of hand 3mperial Tobacco re#defined underage starter smo$ers as brand switchers&W2ater in the same document the author e5plains why young people are so important to 3mperial Tobacco)s mar$eting department/ 5rends sho) us that s)itching decreases )ith age. (n $**, the annua s)itching rate among smokers aged under 2" is doub e the s)itching rate of tota smokers 72,8 .ersus $,89 and more than three times the s)itching rate of smokers aged 3" and o.er 7189A <oung smokers e/periment )ith different brands )hen the& start smoking and after age 2" the& sett e for a particu ar brandA 5herefore= if our trademarks are re e.ant to smokers under 2"= the& )i choose our trademarksDbrands and remain )ith them )e past the age of 2". F%en if tobacco companies actually attempted to target their mar$eting efforts e5clusi%ely at ;J# to !A#year#olds who already smo$e it is hard to see how this could be done without ma$ing cigarettes more attracti%e to underage non#smo$ers or e5perimental smo$ers& Moreo%er the financial incenti%e to recruit underage smo$ers more effecti%ely than the competition is o%erwhelming& Marketing to 8out% Gi%en the strong economic incenti%e for tobacco companies to recruit underage smo$ers what e%idence is there that 7anadian tobacco companies ha%e actually gone out and done so= The courts e5amined this issue in some detail in the early ;KK"s when the tobacco industry challenged the federal 5obacco -roducts 3ontro Act& 3 would just li$e to quote a brief passage from the Supreme 7ourt of 7anada decision in ;KKA that o%erturned large parts of that legislation/ -erhaps the most compe ing e.idence concerning the connection bet)een ad.ertising and consumption can be found in the interna marketing documents prepared b& the tobacco manufacturers themse .es. A though the appe ants steadfast & argue that their marketing efforts are directed so e & at maintaining and e/panding brand o&a t& among adu t smokers= these documents sho) other)ise. 4ne of the notorious e5amples was Project Plus1Minus conducted by Kwechans$y Mar$eting -esearch 3nc& in ;KJ! on behalf of 3mperial Tobacco& This study e5amined in great detail why children e5periment with cigarettes how they begin to smo$e and how they become addicted& > few quotes from the study highlights to gi%e you a fla%our of the detailed wor$ in%ol%ed/
6@
Serious smoking main & starts in the $4-$# age group. (t is entire & socia in nature= and is hea.i & dependent on actua or percei.ed peer group pressure and the desire to conformA Starters no onger disbe ie.e the dangers of smoking= but the& a most uni.ersa & assume these risks )i not app & to themse .es because the& )i not become addictedA :nce addiction does take p ace= it becomes necessar& for the smoker to make peace )ith the accepted ha!ards. 5his is done b& a )ide range of rationa i!ationsA 5he desire to 4uit seems to come ear ier than before= e.en prior to the end of high schoo A ?o)e.er= the desire to 4uit= and actua & carr&ing it out= are t)o 4uite different things= as the )ou d-be 4uitter soon earnsA Apart from the - a&er@s= E/port and du 0aurier parent brands and firsteche on e/tensions= there )as .er& itt e regard for other brands. 5he ikes of 0atinEe= 2othmans and -eter Fackson )ere )ithout an& positi.es among &oung smokers. +e .edere and 3ra.en )ere better= but not b& much. 3n short in ;KJ! 3mperial Tobacco)s mar$eting consultants were e5plaining in detail how young people get ta$en in by the glamour of cigarettes Y a process that was seen as %ery positi%e indeed for the company& The single most popular brand and the one that seems to ha%e become the customary badge among young males in particular but among females %ery commonly too was Player)s 2ight& That this brand went from introduction to this incredibly lofty posture in so relati%ely few years is truly a mar$eting success story& 3mperial Tobacco was not a passi%e participant in the glamoriLation of Player)s 2ight among young people& From the taste and the nicotine deli%ery to the pac$age imagery and the image positioning through ad%ertising the brand was made to systematically appeal to young people in particular young males& The emphasis was on autonomy on outdoor acti%ities of interest to this age group such as s$iing and $aya$ing/ 5he acti.it& sho)n Bin ad.ertisementsC shou d be one )hich is practiced b& &oung peop e $1 to 2, &ears o d or one that these peop e can reasonab & aspire to in the near future. .ow possibly tobacco company witnesses will tell this committee that their industry shouldn)t be judged today on the mar$eting strategies they employed !" years ago& The problem is these mar$eting strategies still seem to be in effect today& The first e5ample 3 would li$e to point out is 3mperial Tobacco)s Go Cour 4wn GayW *Z On monde [ ta mesure \+ campaign for Player)s cigarettes& This campaign is underway as we spea$< theoretically it is a sponsorship ad about car racing but cars are nowhere in e%idence& Ghat is in e%idence are all the usual elements of Player)s mar$eting/ autonomy outdoor acti%ities youthful models&
6A
Industry-S$onsored 8out% A99ess *rogrammes There is one last point 3 would li$e to touch on& 3n 7anada as in other countries the tobacco industry sponsors so#called youth access programmes W in which retailers are reminded not to sell tobacco products to minors& The most recent incarnation of this approach is the 7anadian Tobacco Manfuacturers) 7ouncil)s 4peration 3'W programme& Gi%en the powerful economic incenti%es that tobacco companies ha%e to recruit underage smo$ers the e5istence of these programmes may seem surprising& Some people ha%e ta$en these initiati%es as proof that the tobacco industry really is interested in effecti%e action to pre%ent young people from getting addicted to their products&,ut when you are dealing with the tobacco industry things are not always as they appear& 3n the Onited States the Tobacco 3nstitute Y which was the equi%alent of the 7TM7 until the courts forced it to disband recently Y set up a programme similar to 4peration 3' W which it called 3t)s the 2aw&W :ere is how the 3nstitute described the purpose of its youth programme *which also included boo$lets for parents and other material+ in a ;KK; internal document& 5he &outh program and its indi.idua parts support 5he (nstitute@s obGecti.e of discouraging unfair and counterproducti.e federa = state and oca restrictions on cigarette ad.ertising= b&: pro%iding on#going and persuasi%e e%idence that the industry is acti%ely discouraging youth smo$ing and independent %erification that the industry)s efforts are %alid& -einforcing the belief that peer pressure Q not ad%ertising Q is the cause of youth smo$ing& SeiLing the political center and forcing the anti#smo$ers to an e5treme *as happened when the antis attac$ed the industry at the time of the launch&+
3n other words the purpose of the Tobacco 3nstitute)s youth programme was not to deal effecti%ely with youth smo$ing but rather to forestall effecti%e go%ernment regulation& The same approach has been used in many other countries& 3n ;KKA Philip Morris Senior Nice President Ste%e Parrish e5plained to his company)s board of directors how the tactic had been used in Poland and -ussia& These industry#sponsored campaigns are fairly consistent around the world in some important respects/ ;& They focus on legal restrictions on underage smo$ing emphasiLing that smo$ing is an (adult) choice& Onfortunately teenagers rarely feel li$e waiting before engaging in (adult) beha%iour especially if that beha%iour is presented as being attracti%e and glamorous&
6D
!& They rarely if e%er pro%ide meaningful information about the disastrous health effects of smo$ing or the dangers of becoming addicted& 6& They ne%er point out the tobacco industry)s role in encouraging youth smo$ing& This is not to say that go%ernments should refrain from efforts to limit the sales of tobacco products to minors& Fnforcement programmes ma$e sense as ong as the& are part of a comprehensi.e p an that inc udes serious efforts to reduce &outh dema7d for tobacco products and inform the pub ic as a )ho e H smokers and non-smokers= &outh and adu t H about the magnitude of the hea th risk from tobacco= about the addicti.e nature of cigarettes and about the track record of deception of the tobacco industr&. >ttempting to deal with youth smo$ing solely through P- initiati%es li$e 4peration 3' is li$e relying solely on the arrest of small#time drug pushers to curb the cocaine trade&
6&'
CH"N(E IS POSSI*LE
Though 3 am not impressed by 4peration 3' there is one important step go%ernments could ta$e to ensure real change in tobacco company beha%iour towards $ids& The go%ernment should establish a system of penalties to ensure that tobacco companies lose money e%ery time a young person becomes addicted to cigarettes& This would be similar to the so#called (loo$#bac$) pro%isions that were included in the Mc7ain ,ill in the Onited States and %arious other proposed legislation in ;KK0 and ;KKJ& The penalties should be large enough to actually constitute an effecti%e deterrent& 7ompanies could be fined the equi%alent of three times the profits they would be e5pected to ma$e from a new underage smo$er during that smo$er)s lifetime for e5ample& Onder this system tobacco companies would ha%e a %ested interest in pre%enting youth smo$ing& 3ndeed indi%idual tobacco companies would ha%e an interest in denouncing competitors who were engaged in mar$eting to $ids& Nery rapidly 3 thin$ you would see the tobacco industry re#adjusting its promotional strategies and its products to ma$e them unattracti%e to youth&
60
6&)
CONCLUSION
The mar$eting of tobacco products to young people is not a frea$ occurrence caused by the presence of a few bad apples among tobacco industry mar$eting e5ecuti%es& The recruitment of underage smo$ers is in fact crucial to tobacco companies) long#term profitability& Sales to minors represent a relati%ely small portion of the industry)s profits in any gi%en year& :owe%er most of the industry)s long#term profits will come from customers who were recruited before reaching adulthood& 3ndustry statements about appropriate strategies to combat youth smo$ing ha%e to be seen in the conte5t of this business reality& 3 urge this committee to be creati%e in loo$ing at ways to curb the tobacco epidemic&
6&-
*I( TO*"CCO/S (LO*"L E2P"NSION
O&S& tobacco companies ha%e a long history of deceit deception and duplicity in their relentless pursuit of profit& These companies ha%e hoo$ed generations of >merican smo$ers using the tools of manipulati%e ad%ertising disinformation campaigns refuting the health consequences of smo$ing and political lobbying& 3n the process they ha%e grown into enormous multinational conglomerates& 3n recent years as smo$ing has declined in the Onited States they ha%e begun to loo$ elsewhere for growth& 'rawing on their e5periences in the Onited States these companies are ha%ing great success abroad& The Onited States is now home to two of the worldIs three largest multinational cigarette companies and is the worldIs largest e5porter of cigarettes& ; 4%erseas these companies use ad%ertising and mar$eting techniques that ha%e long been banned or restricted in the Onited States& They also apply political and economic pressure to circum%ent other countriesI public health laws often under the guise of Mfree trade&M >nd in countries where mar$et access is difficult due to go%ernment regulations the multinational tobacco companies are allegedly complicit in cigarette smuggling in an attempt to gain mar$et share& Ghile cigarette sales fell by @&A percent in .orth >merica between ;KK" and ;KKA they increased by A&D percent in Fastern Furope and J percent in the >sia#Pacific region& ! ,y the turn of the century per capita consumption in de%eloping countries will be greater than that of de%eloped countries says the Gorld :ealth 4rganiLation *G:4+& 6 MThere is no time to lose M says ,arbara Bolty of the G:4& MMultinational Rcigarette companiesS are flooding Rde%eloping countriesS with ads that say smo$ing is e5citing glamorous and Gestern& The situation is only going to get worse as more women and children start smo$ing&M @ 3f current trends continue the Onited StatesI success in reducing domestic tobacco use will be more than offset by the o%erseas acti%ities of the tobacco companies with dire global public health consequences& Since O&S& tobacco companies are not bound by any borders in their insatiable dri%e for new customers the Onited States must thin$ globally and act locally in its efforts to control these companies if it hopes to stem the tide of death and disability in the rest of the world& 6J 2al ,hadur Shastri 3nstitute of Management .ew 'elhi
6&1
Country :ong Kong 3ndonesia Malaysia Malaysia Malaysia Pa$istan Philippines ,ulgaria ,ulgaria ,ulgaria 7Lech -epublic -omania -omania Slo%a$ -epublic Me5ico
TOP M" KETE S IN SELECTED COUNT IES

Com$any Philip Morris Philip Morris -othmans ,>T -8,>T Fortune Tobacco *-8- 2icensee+ Philip Morris 6 -othmans A ,>T 0 Philip Morris K Philip Morris @ -8K Philip Morris 6 7igarrera 2a J Moderna *,>T Subsidary Philip Morris @ Philip Morris ; -othmans D ,>T 6 Philip Morris ;" Philip Morris D Philip Morris 6 Philip Morris 6 Philip Morris @ V;&! Million V; Million VK@; """ V6&6 Million V!&; Million V;&! Million V;&J Million V!K&K Million Rank K ;" ; ! @ ! J Ad S$ending LL V;!&K Million VD&6 Million V6D&! Million V;K&0 Million VK&A Million V;&D Million V;0&K Million
,ahrain Kuwait Kuwait 2ebanon 2ebanon 4man ?atar Saudi >rabia O>F
V6;" """ V@ Million V;&! Million V@&A Million V!&6 Million VA;6 """ V@;0 """ V6&A Million V;&0 Million
UU Spending amounts are for ;KKD for >sian Furopean and 2atin >merican countries and for ;KKA for Middle Fastern 7ountries& Sources/ >d%ertising >ge< ;" .o%ember ;KK0 and ;; .o%ember ;KKD&
6K
!37
BI+ )1BACC1HS +L1BAL R0ACH
666 .enotes a Su<sidiary or (a9tory 66 .enotes a Li9ensing Agreement
State >ndora >ngola >rgentina >ruba >ustralia >ustria >Lerbaijan ,angladesh ,arbados ,elgium ,oli%ia ,raLil ,ulgaria 7ambodia 7ameroon 7anada 7anary 3slands 7hile 7hina 7ongo 7osta -ica 7roatia 7uracao 7yprus 7Lech -epublic 'enmar$ 'ominican -epublic Fcuador Fgypt Fl Sal%ador Fiji @"
RJ Reynolds 99 99 99 99 999
*%ili$ Morris 99 999 99 999 99
BA) 999 999 999
999 99
999 99 999
999 999 999 999 999 999 999 999 999 999 999 999
999 999 999
999
999 999 99 999 999 99 99 99 999 999 999 99
999 999 999
999 999 2al ,hadur Shastri 3nstitute of Management .ew 'elhi
Finland France Germany Ghana Greece Guatemala Guinea Guyana :onduras :ong Kong :ungary India 3ndonesia 3taly 3%ory 7oast 8apan 8ordan KaLa$hstan Kenya 2ithuania Macedonia Malawi Malaysia Malta Mauritius Me5ico .etherlands .ew Bealand .icaragua .igeria Pa$istan Panama Papua .ew Guinea Peru Philippines Poland Portugal
999 999 999 999 99
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999 999 999 999 999 999 999 999 999 666 999
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999 999 666 99 99 99 99 999
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99 999 999
999
@;
Puerto -ico -omania -ussia Senegal Sierra 2one Singapore Slo%a$ia Slo%enia Solomon 3slands South >frica South Korea Spain Sri 2an$a Surinam Sweden SwitLerland Taiwan TanLania Thailand Trinidad Tunisia Tur$ey Oganda O$raine O&K& Onited States Oruguay OLbe$istan NeneLuela Nietnam Cugosla%ia Bimbabwe
999 999 999
999 99
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999
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999
Sour9es: T$ba88$ e9$rter, June ;EED, GInternational Cigarette Manufa9turers,G *%ili$ Morris ;"k?"@M RJ Reynolds ;"k-?"@M Wh$ O:7s Wh$m. N$rth "meri8a , (/e' 8ork: .un I Bradstreet Ltd3, ;EE7#
@!
)o$ Marketers in Sele9ted Countries

Country :ong Kong 3ndonesia Malaysia Malaysia Malaysia Pa$istan Philippines ,ulgaria ,ulgaria ,ulgaria 7Lech -epublic -omania -omania Slo%a$ -epublic Me5ico Com$any Philip Morris Philip Morris -othmans ,>T -8,>T Fortune Tobacco *-8- 2icensee+ Philip Morris 6 -othmans A ,>T 0 Philip Morris K Philip Morris @ -8K Philip Morris 6 7igarrera 2a J Moderna *,>T Subsidary Philip Morris @ Philip Morris ; -othmans D ,>T 6 Philip Morris ;" Philip Morris D Philip Morris 6 Philip Morris 6 Philip Morris @ V;&! Million V; Million VK@; """ V6&6 Million V!&; Million V;&! Million V;&J Million V!K&K Million Rank K ;" ; ! @ ! J Ad S$ending LL V;!&K Million VD&6 Million V6D&! Million V;K&0 Million VK&A Million V;&D Million V;0&K Million
,ahrain Kuwait Kuwait 2ebanon 2ebanon 4man ?atar Saudi >rabia O>F
V6;" """ V@ Million V;&! Million V@&A Million V!&6 Million VA;6 """ V@;0 """ V6&A Million V;&0 Million
UU Spending amounts are for ;KKD for >sian Furopean and 2atin >merican countries and for ;KKA for Middle Fastern 7ountries& Sour9es: AdBertising AgeM ;" /oBem<er, ;EE7 and ;; /oBem<er, ;EEC
@6
C%a$ter=
I/)0R/A)I1/AL 06*0RI0/C0
=3;
0UR1*0A/ U/I1/ .IR0C)I70
Onder the current draft of the FO 'irecti%e on tobacco ad%ertising many of the e5amples of indirect ad%ertising cited abo%e should be prohibited& The 'irecti%e co%ers/ Many form of commercial communication with the aim or direct or indirect effect of promoting a tobacco product including ad%ertising which while not specifically mentioning the tobacco product tries to circum%ent any ad%ertising ban by using brand names trademar$s emblems or other distincti%e features of tobacco products&M :owe%er the 'irecti%e does permit brand#stretching pro%ided that the appearance is clearly distinct from that of any tobacco product& >rticle 6&! of the 'irecti%e states/ Paragraph ; Rbanning all forms of tobacco ad%ertisingS shall not pre%ent the Member States from allowing a brand name already used in good faith both for tobacco products and for other goods or ser%ices traded or offered by a gi%en underta$ing or by different underta$ings prior to to be used for the ad%ertising of those goods or ser%ices& :owe%er this brand name may not be used e5cept in a manner clearly distinct from that used for the tobacco product without any further distinguishing mar$ already used for a tobacco product& The future of brand#stretching therefore rests on the definition of Mclearly distinctM& Gi%en the inadequacy of the OK %oluntary agreement to control tobacco ad%ertising as demonstrated with the e5ample of the 7amel boots ad cited abo%e this wording is inadequate as it still allows the brand name to be used& :owe%er under >rticle A the 'irecti%e allows indi%idual member states to go further than the minimum requirements currently set out in the draft te5t& >rticle A states/ This 'irecti%e shall not preclude Member States from laying down in accordance with the treaty such stricter requirements concerning the ad%ertising or sponsorship of tobacco products as they deem necessary to guarantee the health protection of indi%iduals& The Go%ernment should therefore be urged to adopt stronger measures in order to pre%ent the e5ploitation of potential loopholes in the 'irecti%e by the tobacco industry& The tobacco industry needs to recruit new smo$ers e%ery year to replace those who die from tobacco#related diseases& The industryIs %ery sur%i%al depends on new teenage customers& Few people start smo$ing as adults& Thus children are the industryIs most significant target& The tobacco industryIs own documents *see bo5+ demonstrate this proposition& 3t is therefore little wonder that tobacco companies spend billions of dollars in their efforts to entice children into smo$ing&
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3n ;KJ@ a tobacco company mar$et researcher wrote in a pre%iously secret internal report/ MCounger adult smo$ers ha%e been the critical factor in the growth and decline of e%ery major brand and company o%er the last A" years& They will continue to be just as important to brands1companies in the future for two simple reasons/ The renewal of the mar$et stems almost entirely from ;J#year#old smo$ers& .o more than A percent of smo$ers start after age !@& R>ndS the brand loyalty of ;J#year#old smo$ers far outweighs any tendency to switch with age&&& ,rands1companies which fail to attract their fair share of younger adult smo$ers face an uphill battle& They must achie%e net switching gains e%ery year to merely hold share&&& Counger adult smo$ers are the only source of replacement smo$ers&&& 3f younger adults turn away from smo$ing the industry must decline just as a population which does not gi%e birth will e%entually dwindle&M Coung >dult Smo$ers/ Strategies and 4pportunites -&8& -eynolds Tobacco 7ompany !K February ;KJ@& 7hildren around the world are surrounded by ad%ertisements portraying tobacco use as fun sophisticated modern and Gestern& 3n many countries cigarette ad%ertisements dominate the radio stations most popular with teenagers& Tobacco ad%ertising e5ploits the %ulnerabilities of youth by offering tobacco as the means to a positi%e self#image and as the $ey to acceptance by their peers& >d%ertising also sends the message that smo$ing is an MadultM beha%iour and offers cigarettes as a badge of independence and maturity& Tobacco ad%ertising con%eys the message that smo$ing is the $ey to social success and upward mobility a powerful draw for young people& This is despite the fact that in many de%eloped countries smo$ing rates are significantly higher among the poor and less educated& Some tobacco companies ha%e used cartoon images in their ad%ertising with %ery successful results& The M8oe 7amelM campaign catapulted 8oeIs brand of cigarettes from one smo$ed by less than ;E of O& S& smo$ers under age ;J to a one#third share of the youth mar$et within three years& That same cartoon camel was found to ha%e a high le%el of recognition among three#year#olds who were as familiar with him as with
'&6
US" . F EEDOM OF CHOICE
3n the Onited States the tobacco industry began aggressi%ely targeting women with the introduction of a MwomenIs cigaretteM in ;KDJ& Githin si5 years the number of teenaged girls smo$ing had more than doubled& The same patterns are being repeated in a host of other countries& Tobacco companies say that tobacco ad%ertising is only used to promote brand switching among smo$ers& :owe%er studies suggest that the more cigarette companies ad%ertise the more people especially young people start or continue to smo$e& Studies show that adolescents smo$e the most hea%ily ad%ertised brand in a proportion far greater than among adults& 7igarette ad%ertising also reinforces en%ironmental stimuli to smo$e&
@A
Tobacco ad%ertising and promotion aims at e5panding the mar$et for their products specifically through the targeting of those populations among which there is greatest potential for growth including youth& 7igarette ad%ertisements undermine and deflect smo$ersI concerns about safety and ser%e to reassure smo$ers or potential smo$ers that cigarettes are not harmful& Many people do not ta$e the ris$s of smo$ing seriously partly because ad%ertising portrays smo$ing as innocent and benign& Tobacco companies claim that they should ha%e the freedom to ad%ertise their products& :owe%er most smo$ers begin smo$ing when they are too young to understand the ris$s and by the time they are old enough to ma$e an informed choice their addiction undermines their freedom of choice& Ghen unfair and untruthful commercial speech is not restricted other important freedoms are placed in jeopardy including childrenIs freedom from deception misrepresentation and psychological manipulation by ad%ertising& Product placement is another means of increasing the social acceptability of smo$ing& Tobacco companies pay large sums of money to film companies so that their cigarettes will be used in feature films& For e5ample a prominent >merican actor was paid OS V A"" """ to ensure the placement of one companyIs cigarettes in his films& Product placement payment can also influence script writing decisions& 2ois 2ane in Superman mo%ies was a smo$er but the comic boo$ 2ois 2ane ne%er smo$ed] S$onsors%i$ >s more countries around the world mo%e to ban tobacco ad%ertising tobacco companies are quic$ to di%ert their attention to the sponsoring of sports and cultural e%ents& This gi%es them an ideal opportunity to reach large audiences of young people& 3n addition to cle%erly circum%enting tobacco ad%ertising bans companies attempt to use these e%ents to impro%e their image& 3n many de%eloping countries roc$ concerts with their enormous following of young fans ha%e been a magnet for tobacco industry sponsorship& 3n countries where cigarette ad%ertising is banned or restricted sponsoring li%e or tele%ised concerts enables the companies to get around local regulations& 3n Taiwan one multinational tobacco company sponsored a concert with a popular teen idol in which the only accepted admission Mtic$etM was fi%e empty pac$ets of the companyIs cigarettes& Through the promotion of sports e%ents tobacco companies gain widespread e5posure for their brands and are able to lin$ tobacco with health and athletic prowess& Coung people seeing cigarette logos lin$ed with health e5citement speed and triumph are li$ely to lose sight of the reality of death disease and addiction& > ;KK@ ad%ertisment by Formula 4ne race promotors directed to the tobacco industry claimed that the M&&&Formula 4ne car is the most powerful ad%ertising space in the world&M
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(ree Cigarette +iBea'ays Gith an addicti%e product it doesnIt ta$e much to hoo$ a new customer& For the tobacco companies the e5pense of gi%ing away free samples is o%ershadowed by the potential for long#term gains especially from new young customers& >lthough some countries ha%e already banned free cigarette samples this practice still continues in many countries& >t roc$ concerts and discos around the world attracti%e young women hand out popular brands of international cigarettes& 3n some cases those who accept a lit cigarette on the spot are rewarded with a free gift& > multitude of other e5amples where young people ha%e been targeted for free cigarette samples ha%e been reported around the world particularly in less de%eloped countries& Ghen children become wal$ing cigarette ad%ertisements/ 7igarette#,randed Merchandise& >nother popular means of $eeping cigarette brands in the public eye and circum%enting restrictions on ad%ertising using cigarette logos on other products such as caps and T#shirts& Many of these products are popular with children around the world and they soon become wal$ing cigarette ad%ertisements& 7ounterad%ertising can be a useful addition to a tobacco control campaign& 3n countries around the world young people are e5posed to highly effecti%e tobacco ad%ertising on a daily basis& Tobacco companies spend billions of dollars each year to promote tobacco products an amount which dwarfs the resources a%ailable to most tobacco control programmes& Thus one important requirement for an effecti%e pre%ention programme is to seriously limit the ability of the tobacco industry to hoo$ a new generation of smo$ers through ad%ertising& >t the same time a number of countries ha%e produced anti#tobacco ad%ertisements for distribution %ia mass media& Many of these ads are targeted at young people with the aim of de#glamoriLing tobacco& There are often possibilities for free distribution of these ads in the form of public ser%ice announcements& :owe%er they are only useful if they are seen and not broadcast only during times when most %iewers are asleep& 3n some situations carefully selected paid counter#ad%ertising campaigns may be worth the cost& 3n the OS> 'octors 4ught to 7are *'47+ pioneered the concept of using paid counterad%ertising to ridicule brand name tobacco ad%ertising and promotion& :ealth interests can ne%er hope to match the spending by tobacco interests on paid media ad%ertising and probably should not try& :owe%er paid media ad%ertising when used with precision can be an effecti%e tool in a comprehensi%e effort to discourage tobacco consumption& 4ne way of funding this would be to use a portion of increased cigarette ta5es for this purpose& F5amples of this strategy may be seen in se%eral states in the OS> as well as in other countries such as >ustralia France and .ew Bealand
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CHI/A: )H0 LAS) (R1/)I0R
For the cigarette companies the 7hinese mar$et represents the pro%erbial mother lode a potential sa%ior from declining sales at home& 4ne out of e%ery three cigarettes smo$ed in the world today is smo$ed in 7hina& 4ne third of all 7hinese adults *D0 percent of men and @ percent of women+ or close to 6A" million people already smo$e an estimated ;&0 trillion cigarettes per year& ; >s one multinational cigarette company e5ecuti%e puts it MThin$ing about 7hinese smo$ing statistics is li$e trying to thin$ about the limits of space&M ! The human toll in 7hina from smo$ing is staggering& 2ung cancer and other smo$ing# related diseases are the most common causes of death in 7hina accounting for some 0"" """ fatalities per year which is projected to rise to 6 million by the year !"!A& 6 > recent study of middle#aged men in Shanghai showed that !; percent of deaths were attributed to cigarette smo$ing& @ >nother study in the 8ournal of the >merican Medical >ssociation stated that smo$ing# related illnesses could e%entually $ill ;A" million current smo$ers in 7hina& A Since smo$ing rates among women and youth are comparati%ely low they are sure to be a target of the foreign tobacco companies& >s tobacco control e5pert 8udith Mac$ay notes Mthe greatest single opportunity for pre%ention of non#communicable diseases in the world would be to pre%ent a rise in smo$ing among girls and women in 7hina&M D 7hinaIs huge mar$et has made it the prime target of the multinational tobacco companies& :istorically 7hinaIs cigarette mar$et has been highly protected with foreign multinationals barred from operating in the country& 4%er the past ;A years howe%er as 7hinaIs economy has begun to open up the tobacco sector has been transformed& :ungry for technology mar$eting strategies and capital the state#owned 7hina .ational Tobacco 7orporation *7.T7+ has begun to form joint %entures and other unprecedented partnerships with foreign tobacco companies& :a%ing signed these agreements M7.T7 is e%entually doomed to go the way of all the Fastern Furopean and South >merican monopolies ta$en o%er by the transnationals M says Mac$ay& 0 >lthough 7.T7Is primary concern is ma$ing money for the state it used to be $nown for its willingness to ac$nowledge the dangers of smo$ing and 7.T7 officials met often with health wor$ers to discuss anti#smo$ing education programs& That all began to change in ;KJJ health wor$ers say when it signed its first joint %enture with -8 -eynolds& J Philip Morris recently entered into a number of joint %entures with 7.T7 to grow tobacco as part of an agreement to produce and sell Marlboro cigarettes in both domestic and foreign mar$ets& K -8 -eynolds has built a cigarette factory as part of a joint %enture with 7.T7 to produce !&A billion 7amels Ginstons and Golden ,ridges *a local brand+ annually&
@J
;" ,ritish >merican Tobacco is in%ol%ed in a project to increase leaf production with seeds that the company has de%eloped in other countries& 4ther foreign companies ha%e been in%ol%ed in a number of initiati%es ranging from the introduction of new tobacco seeds to the importation of high speed cigarette ma$ing equipment to the construction of tobacco processing factories& Smuggling is also helping foreign cigarette manufacturers enter the 7hinese mar$et *see MSmuggling/ 'e%eloping ,rand 2oyaltyM abo%e+& Many obser%ers belie%e that the multinational companies are in%ol%ed in smuggling as a way for them to de%elop brand loyalty prior to the full opening of the 7hinese mar$et& Smuggling also encourages more people especially young people to smo$e since smuggled cigarettes are cheaper often selling at one third the cost of legal cigarettes& 7hina accounts for about 60 percent of the worldIs tobacco leaf production and generates about 6; percent of the worldIs cigarettes& ;; >lthough 7hinese tobacco e5ports currently represent only about D percent of the world total analysts say the country is rapidly emerging as a major e5porter& 3n ;KK0 tobacco e5ports reached 0D """ tons %alued at a record V@J" million& ;! Gith increasing e5ports to the mainland meanwhile :ong Kong has become the regionIs largest e5porter of cigarettes&Smo$ing in most public areas in 7hina is restricted including in schools theaters department stores museums and stadiums and on public transportation and all domestic flights& Onfortunately the ban is often ignored& The fine for smo$ing in public places is just ;" yuan *about V;+ or less than the cost of a pac$ of imported cigarettes& ;6 The wee$ prior to the ;"th Gorld 7onference on Tobacco or :ealth in ,eijing in >ugust ;KK0 a group of ;6J ministerial#le%el officials signed a highly publiciLed pledge not to smo$e in public places and promised to persuade their aides and children to quit& This was considered an important accomplishment since many leaders ha%e reached a ripe old age and continue to smo$e sending a false message that smo$ing is not necessarily bad for your health& 7hina has passed laws banning tobacco ads on tele%ision radio and in the print media and requiring that all tobacco ad%ertisements include the warning/ MSmo$ing is haLardous to your health&M 7igarette ad%ertisements are forbidden from encouraging youth smo$ing and health warnings must co%er a minimum of ;" percent of the ad%ertisementIs space& ;@ ,y ;KK0 6"" cities including ,eijing had become MTobacco >d%ertisement#Free 7ities&M >ccording to a Ministry of Public :ealth spo$esman M4ur aim is dri%e out tobacco ad%ertising from our cities one by one until all the ad%ertising is eradicated from 7hina&M 3n legislation adopted in the early ;KK"s :ong Kong banned tobacco ads on TN and radio and in cinemas& 3n ;KKK the ban will be e5tended to print media and billboard ad%ertising& These actions notwithstanding cigarette ma$ers ha%e little trouble s$irting the ad restrictions& :istorically 7.T7 has done %ery little ad%ertising& Cet with the growing presence of multinational tobacco companies cigarette ad%ertising has increased dramatically *see M>d%ertising 3ll#:ealthM abo%e+& ,y simply lea%ing the word McigaretteM out of their ads foreign companies ha%e circum%ented 7hinaIs ad%ertising laws leading to a slew of billboards promoting the pleasures of the MMarlboro GorldM and similar sentiments&
@K
;A Philip Morris *which is the biggest single source of ad%ertising re%enue in 7hina;D+ -8 -eynolds and ,>T ha%e also spent millions of dollars in recent years on other forms of ad%ertising including promotional gi%eaways and sponsorship of music and sports e%ents& 7ash#strapped soccer bas$etball or tennis associations will ta$e the money where they can get it and the foreign tobacco companies ha%e plenty to gi%e& Such sponsorship of sporting e%ents is of great concern to tobacco control acti%ists since it is so widespread and ma$es the lin$ between cigarettes and healthy acti%ities& The tobacco industry accounts for appro5imately ;" percent of all go%ernment ta5 re%enues representing the largest single industrial ta5 source& ;0 F%en so cigarettes continue to be relati%ely cheap in 7hina& 2egally imported foreign cigarettes cost a little o%er V; per pac$ and many local brands are significantly cheaper& > ;KK6 study showed that an additional penny ta5 on each pac$ of cigarettes sold would generate about VKD@ million in re%enues or the equi%alent of the go%ernmentIs annual health budget& ;J Tobacco control acti%ists are pushing for higher ta5es in order to discourage smo$ers& Onfortunately proposals to raise the cigarette ta5 by half a cent ha%e been defeated in the national parliament on at least two occasions& ;K >s is often the case the go%ernment is torn between the desire to conser%e its biggest single source of ta5 re%enue and an obligation to protect the populationIs health& Studies ha%e shown howe%er that in the long term it is in the countryIs health and economic interest to control tobacco use since the re%enues raised from the tobacco industry do not co%er the economic and health related costs of smo$ing& The G:4 estimates for e5ample that in ;KK6 7hina gained V@&K billion in cigarette ta5es but lost V0&J billion in producti%ity and additional healthcare costs& !" 4n a household le%el the economic costs of cigarette smo$ing are equally astounding& > study of smo$ing habits in the Minhang 'istrict in ;KK6 showed that smo$ers spent an a%erage of D" percent of their personal income and ;0 percent of household income on cigarettes& !; > study of peasants outside Shanghai found that the a%erage farmer spent more on tobacco and rice wine than on grain por$ and fruit& !! There is still a great need in 7hina for public education regarding the ris$s of smo$ing& -ecent studies ha%e found that few people $now that smo$ing can cause lung cancer& 4ne study showed that 6A percent of school students actually thought that smo$ing was good for your health& !6 3t doesnIt help that role models continue to smo$e in public& For e5ample about AA percent of male medical wor$ers continue to smo$e& !@ .owhere are the sta$es for tobacco control efforts higher& >s Mac$ay notes M3f multinational tobacco companies could capture the 7hina mar$et it wouldnIt ma$e a difference if e%ery >merican stopped smo$ing tomorrow&M
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MALA8SIA: BRA/. S)R0)CH0.
4%er the past decade the Malaysian go%ernment has implemented a number of tobacco control measures including raising ta5es banning smo$ing in most public places and setting ma5imum limits for tar and nicotine in cigarettes& The 7ontrol of Tobacco Products -egulations ;KK6 also prohibited all direct ad%ertising& :owe%er indirect ad%ertising is still allowed& The tobacco industry quic$ly e5ploited the indirect ad%ertising loophole and Malaysia has now become a showcase of tobacco brand#stretching& -esearch in ;KKD re%ealed that four of the top ten ad%ertisers in Malaysia had a cigarette brand in their names/ Peter Stuy%esant Tra%el ,enson H :edges ,istro 'unhill >ccessories and Salem 7ool Planet& ,>T which owns the licence for ,enson H :edges cigarettes outside the OK was one of the first to test the indirect ad%ertising route& Faced with a declining mar$et share the company opened the ,enson H :edges ,istro in Kuala 2umpur and ad%ertised the cafe on tele%ision& Two years later sales of ,enson H :edges cigarettes had stabilised and the ,enson H :edges ,istro was one of the most frequently recalled TN commercials& ,>T is now de%eloping a range of coffee products also carrying the ,H: logo which may be e5tended to other countries& The official ,>T policy is that the gold#coloured coffee#house and coffee brands are entirely separate from the companyIs tobacco operations& :owe%er the shopIs manager sees the situation differently/ M4f course this is all about $eeping the ,enson H :edges brand name to the front& Ge ad%ertise the ,enson H :edges ,istro on tele%ision and in the newspapers& The idea is to be smo$er#friendly& Smo$ers associate a coffee with a cigarette& They are both drugs of a type&M ;; The net effect of indirect ad%ertising has been to undermine the law and other tobacco control measures to the e5tent that the number of smo$ers in Malaysia is increasing by around 6E per year& The Go%ernment has now recognised the problem and the :ealth Minister has said that the country must Mwor$ toward banning indirect ad%ertisements of tobacco productsM&
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(RA/C0: )H0 BRA/. M1.0L
Onder the ;KK; loi F%in all tobacco ad%ertising both direct and indirect was banned with effect from 8anuary ;KK6& The law bans the mar$eting of brand name deri%ati%es e5cept those produced before ;KK" by companies without legal or financial lin$s with tobacco manufacturers& 3n ;KKA the French national tobacco control organisation 7.7T sued Furopromotion a company which ad%ertised Peter Stuy%esant Tra%el modelled on the cigarette brand logo& 7.7T was able to show that the tra%el agency was lin$ed to the tobacco brand of the same name and successfully argued that the ad%ertising campaign was a Mblatant case of indirect ad%ertising for tobaccoM& 'espite this and other prosecutions the tobacco companies ha%e persisted in trying to ad%ertise their products in France through indirect ad%ertising&;!
A;
C%a$ter?
/A)I1/AL 06*0RI0/C0
> company can learn a great deal by analysing loyalty in its mar$et& 3t should study the characteristics of the hard# core loyals if any& This would pin#point the target mar$et& ,y studying its soft#core loyals the company can pin#point which brands are most competiti%e& ,y loo$ing at customers who are shifting away from its brand the company can learn about its mar$eting wea$nesses& The reason why people are witching brands so often may be studied& This may gi%e ideas for new product de%elopment& For e5ample& NaLir Sultan Tobacco *NST+ company made a thorough study of the smo$ing population of the country in the year ;K0K and identified a segment of the mar$et consisting of modern educated youth who were not happy with the brands of cigarettes e5isting then& This was the middle#priced filter cigarette group where %arious brands *Gills Four Square -egent etc&+ were trying a 7atch all StrategyI& .ormally smo$ers are loyal to one brand of cigarette li$e 7harminar Gills Filter or Scissors& ,ut this group was not loyal to one specific brand& NST also found out through further in%estigation that the segment cherished youthfulness and liberation& NST responded to this opportunity by introducing 7harms cigarette in a denim pac$ which symbolised youthfulness and liberation& The spirit of freedom was emphasised in their ad%ertise# ments& 7harms created history in cigarette mar$eting in 3ndia by becoming e5tremely popular in a short duration& 2et us see another e5ample from international arena& 7oca# 7ola 7ompany in order to respond to the Pepsi challenge wanted to catch the youth by introducing a new co$e in place of their traditional co$e& The new co$e was rated better in taste compared to Pepsi 7ola in blind tests with the labels tapped& ,ut the new 7ola when introduced into the mar$et was not accepted by the consumers for the simple reason that the loyal customers of the old co$e would not touch anything other than the former 7o$e from the 7oca#7ola 7ompany& 4n popular demand they had to bring bac$ the old 7ola into the mar$et besides the new co$e& > similar thing happened to 7inthol in 3ndia& Ghen the .ew 7inthol was introduced the loyal users of the soap wanted the 4ld 7inthol bac$& Godrej responded positi%ely by declaring through media that the consumers could choose either old or the new 7inthol and made both of them a%ailable in retain outlets& 3n the tooth#paste mar$et a number of companies tried to challenge the uncrowned monarch 7olgateI& ,ut for many people tooth#paste means only 7olgate& Though Promise and 7lose#up ha%e had some success in the tooth#paste mar$et 7olgate continues to control a %ery large share of the mar$et because of the brand loyalty it has created among consumers& 3n the case of baby#care items mothers ha%e undi%ided loyalty to 8ohnson H 8ohnson products& That is why e%en hea%y#weights li$e Ponds or Gipro could not get a foothold in the baby#care mar$et& 4nly an understanding of the loyalty status of different segments of the consumers would help the company de%elop better mar$eting strategies& The measurement of brand loyalty is not %ery difficult& The following questions are indicati%e of the type of questions as$ed in a sur%ey research to measure brand loyalty&
A!
Ghat is the brand of ^^^^^^^^^^^^ *P-4'O7T+ you are using currently= :ow long ha%e you been using this brand= Ghat was the brand you were using earlier= 7ould you please tell the reasons why you switched o%er to the current brand=
>nswers to the abo%e questions can throw light on a number of issues li$e loyalty status of consumers switching pattern of consumers from one brand to another and also the reasons for switching& 3f a number of people are switching away the brand being studied one could find out the dominant reasons for the change and ta$e correcti%e actions& > sur%ey of this type done at least once a year would re%eal a number of things that could be e5tremely useful to the mar$eting e5ecuti%es& Furthermore companies use panel data such as the data collected by 3ndian Mar$et -esearch ,ureau *IMRB+ from its :ousehold Purchase Panel which monitors the purchase beha%iour of ;" """ housewi%es across si5 metros in 3ndia& 3T7 has set up through 3M-, a smo$ers panel to understand loyalty status of smo$ers& M1.0 another mar$eting research firm maintains a rural household panel& >ttempting to formulate mar$eting strategies for a firm by merely loo$ing at the sales figure will not help a great deal& 3t might e%en be misleading because the growth in sales might ha%e come about due to o%erall mar$et growth or on account of non#a%ailability of a competing brand during the period under consideration& 3n many companies mar$eting strategy formulation e5ercise simply means meddling with figures such as mar$et share demand forecast ad%ertising and promotion e5penditure etc& Some other companies go a little further to understand the competitorsI strengths wea$nesses and their major strategies& Nery few companies spend their time and energy to understand the consumer and the way the consumer decides on a specific brand which can help the planners de%elop better mar$eting strategies& This could be the di%iding line between successful companies and the also#rans&
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)1BACC1 A.S HA70 IM*AC)333 1/ 41M0/
MGomen belie%e that cigarette ad%ertising does not affect them& 3nstead they thin$ that cigarette companies spend so much money on ad%ertising because it affects others M said Mary :rywna project coordinator for the 'i%ision of 7ancer Pre%ention and 7ontrol at Georgetown Oni%ersity Medical 7enter& She presented her study of ;DJ students at a womenIs college in .ew 8ersey *conducted while she was at -utgers Oni%ersity+ at the ;!Ath annual meeting of the >merican Public :ealth >ssociation held in 3ndianapolis last .o%ember& :er study found that women are affected by tobacco ad%ertising& Gomen in the study completed a self#administered questionnaire querying their opinions on magaLine e5posure body image concerns cigarette ad%ertising and smo$ing norms and ris$s& Twenty#si5 percent of the women were current smo$ers 6@ percent were nonsmo$ers who had tried smo$ing and @" percent were nonsmo$ers who ne%er tried smo$ing& Most of the smo$ers first smo$ed when they were ;A years old and started smo$ing regularly at age ;0& The majority of the women were white *AK&J percent+ with the second largest group being >sian >mericans *;A&K percent+&
A6
-espondents agreed that the purpose of cigarette ad%ertising was to/ create brand loyalty *JA&0 percent+ ma$e you switch from one brand to another *0D&J+ ma$e you smo$e more *0"&J+ ma$e you start smo$ing *D6&;+ ma$e you renew the habit *@0&0+ and pre%ent you from quitting the habit *@A&J+& Ghen as$ed what brand they had seen the most in ad%ertisements A6 percent said Marlboro !D&! percent said 7amel J&J said Nirginia Slims 0&A said .ewport and @&A percent said Mother&M Si5ty#fi%e percent of the current smo$ers said they smo$ed Marlboro ;A percent said .ewport was their brand of choice ;A percent were not brand loyal and A percent smo$ed other brands& Many of the women recogniLed that each brand has its own image& >nd the popularity of Marlboro#a brand targeted to men#was attributed to the idea that MitIs not cool to be a girl anymore&M MGhat 3 found more interesting about the results from the focus group was how easily they described and related to the image they saw in brand ad%ertising along with the finding from the questionnaire that they indeed smo$e the most ad%ertised brand Marlboro M said Ms& :rywna& MThese students place %ery little confidence in the ability of ad%ertisers to alter their beha%ior yet they can describe the image associated with the most popular brands and they smo$e them]M 'uring focus groups both smo$ers and nonsmo$ers said that cigarette ad%ertising does not accurately reflect real smo$ers and that smo$ing is an unattracti%e beha%ior& Smo$ers had no problem admitting in the focus group that they were addicted to the tobacco& ,ut in their responses to the questionnaire smo$ers re%ealed that although they belie%e that smo$ing is an unattracti%e beha%ior they continue to smo$e because of social aspects the MbuLLM they got enjoyment and to help alle%iate stress in their li%es& 3t is obser%ed that image oriented brand ad%ertising is appealing to female smo$ers and to some degree is successful& Coung women smo$e the most ad%ertised brands and belie%e that the purpose of ad%ertising is to encourage brand loyalty Tobacco Gars in 3ndia 7igarette#ma$er Godfrey Phillips 3ndia 2td *GP3+ is planning to launch new brands in the premium $ingsiLe segment& The company plans to in%est !A per cent of its net profits into new brand launches in the ne5t two years& 3n the regular segments the company is planning brand e5tensions& 4n Friday the company launched Four Square Gold in the 0@ mm mini $ings category in the city& The a%owed intention is to ta$e on Gills from the 3ndian Tobacco 7ompany *3T7+ stable which is the only player in this segment& 3n Mumbai Gills sales are around A" to A! million stic$s and nationwide its sales are in the region of ;"" to ;6" million& Further it is predicted that in the ne5t ;! months GP3 has planned a target sales figure of around ;" to ;A per cent of GillsI sales adding that in the ne5t four months they would be spending -s 6&A crore in promoting the brand& The new product which was two years in the ma$ing has an e5tra long filter of ;A mm and is a%ailable at -s ;0&A" for a pac$ of ten& 2ast year GP3 launched its
A@
largely rural brand -ed H Ghite in Mumbai in an attempt to go in for a brand positioning change& 3n Mumbai Goldfla$e from 3T7 holds the lionIs share of the mar$et selling D" million stic$s& Four Square special comes second with AA million stic$s and Gills is third& 3ncidentally the company is planning to discontinue the use of film stars and other cult personalities for promoting -HG with a %iew to discourage minors from smo$ing he said adding that it would replace it with an ad%ertisement campaign targeted at adults& This is part of an o%erall strategy being pursued by the company in its commitment to social responsibilities& GP3 has three major cigarette brands # Four Square -HG and 7a%ender# which brings in K" per cent of the re%enues of the company& Phillips Morris of the OK ma$ers of Marlboro cigarettes holds a sta$e of 6D per cent in GP3 the 'elhi#based KK Modi group has a sta$e of 66 per cent while the remaining is with financial institutions and the public& (our S&uare +old starts mega mini 'ar G>- clouds are gathering o%er the mini $ing cigarette segment now that Godfrey Phillips 3ndia *GP3+ has launched its Four Square Gold in Mumbai across !0 """ retail outlets& GP3Is debut in long filter *0@mm+ will ta$e on 3T7##which puffs on 0" per cent of the total mar$et##and its mini $ing brand Gills .a%y 7ut& Priced at -s ;0&A" for a pac$ of ;" its trade margins too are on par with Gills& The brandIs edge is that it offers the __?uality of Gold Fla$e at the price of Gills& 3ts filter length is longer than Gills and its blend offers a smooth smo$e##which is the way the world is going anyway mar$eting GP3 predicts& :e sees the brand notching ;6#;A million stic$s per month for Mumbai alone& >n all#3ndia launch will ta$e place in phased manner& 3n ;KJ0 Four Square Kings was on par with Gills& Then the e5cise structure changed and Gills cut its price and changed into mini $ing& This placed the GP3 brand in direct conflict with goliath Gold Fla$e& 3t concerted guerilla mar$eting tactics from the house of 3T7 since their Mumbai launch on 'ecember ;& >n e5ample/ the brandIs point of purchase material is being brought down in persuasi%e manner across retail outlets he says& 3tIs no secret that P4Ps are the main brand recall aids with smo$ers who tend to buy cigarettes e%en two to three times a day& Gell 3T7 seems to ha%e its guard up this time& Ghile Four Square Gold has laser perforations Gold Fla$e 2ights was launched a short while ago and %aunts its _laser perforationsI& >nd in 4ctober Gills launched a !"s pac$##usually !"s are seen as enhancers of brand aura< in mid#.o%ember it came out with a ; ! 6## consumer loyalty programme& 7ounters from GP3 would hardly be feasible gi%en 3T7Is huge muscle and brand arsenal says Mr ,arooah& Says an 3T7 spo$esperson/ __3tIs premature to say if Four Square Gold is a threat& >nyway we are aggressi%ely running the Gills ; ! 6 offer *and P4Ps+ across the country##not just Mumbai&II Ghile Four Square King and Four Square Special are smo$ed by the @"#year#plus Gold aims for the upwardly mobile !A#6A#year old& :ong Kong#based design consultants Tony McKnew and .achtigali ha%e created an i%ory white pac$ with the traditional squares in gold underlaid by gold pinstripes which ma$e the pac$ loo$ slimmer& 3nstead of the usual patriarch ad%ertising of _one ad for parent brandI the new ad commercial from 4gil%y H Mather is brand#specific& 3t in%ites consumers to _F5plore the refreshing new taste of Four Square Gold&I Frames pan across sea s$y dolphins& 3tIs shot on the ,ahamas
AA
waters by renowned photographer Stephen Frin$ the same chap whoIs done documentaries on nature marine life and yes the Titanic for channels li$e 'isco%ery& The storyline unra%els a young 3ndian director who leads an international film crew for an ad%enturous and challenging shoot on water& Ghy water= 3t cues into smoothness freshness and possibilities for ad%enture and unlimited action& >ll these fit with Four SquareIs core brand %alues of daring dynamism with a spirit of outdoor ad%enture& ,rand loyalty influences on consumer beha%ior& The new millennium is not just a new beginning< it is a continuation of trends in human beha%ior that ha%e been following cyclical patterns throughout our countryIs history& 8ust because we ha%e entered a new era does not mean we ha%e to start from scratch when it comes to interpreting why certain consumers are loyal to certain brands and what type of factors influence these allegiances& Customer May Be 1'ed Un9laimed Money ,rand 2oyalty is the consumerIs conscious or unconscious decision e5pressed through intention or beha%ior to repurchase a brand continually& 3t occurs because the consumer percei%es that the brand offers the right product features image or le%el of quality at the right price& 7onsumer beha%ior is habitual because habits are safe and familiar& 3n order to create brand loyalty ad%ertisers must brea$ consumer habits help them acquire new habits and reinforce those habits by reminding consumers of the %alue of their purchase and encourage them to continue purchasing those products in the future& The image surrounding a companyIs brand is the principal source of its competiti%e ad%antage and is therefore a %aluable strategic asset& Onfortunately many companies are not adept at disseminating a strong clear message that not only distinguishes their brand from the competitorsI but distinguishes it in a memorable and positi%e manner& The challenge for all brands is to a%oid the pitfalls of portraying a muddled or negati%e image and instead create a broad brand %ision or identity that recogniLes a brand as something greater than a set of attributes that can be imitated or surpassed& 3n fact a company should %iew its brand to be not just a product or ser%ice but as an o%erall brand image that defines a company)s philosophies& > brand needs more than identity< it needs a personality& 8ust li$e a person without attention#grabbing characteristics a brand with no personality can easily be passed right o%er& > strong symbol or company logo can also help to generate brand loyalty by ma$ing it quic$ly identifiable& From the design of a new product to the e5tension of a mature brand effecti%e mar$eting strategies depend on a thorough understanding of the moti%ation learning memory and decision processes that influence what consumers buy Theories of consumer beha%ior ha%e been repeatedly lin$ed to managerial decisions in%ol%ing de%elopment and launching of new products segmentation timing of mar$et entry and brand management& Subsequently the issue of brand loyalty has been e5amined at great length& ,randing is by far one of the most important factors influencing an itemIs success or failure in the mar$etplace and can ha%e a dramatic impact on how the Mcompany behind the brandM is percei%ed by the buying public& 3n other words the brand is not just a
AD
representation of a companyIs product< it is a symbol of the company itself and that is where the core of brand loyalty lies&
?36
TOP 3 TECHNI+UES TO *UILD * "ND LO!"LT!
;3 Ma$e sure your product or ser%ice >2G>CS G3NFS more than the customer e5pected& !3 ?uality/ 3tIs hard to build long term brand loyalty when your short term quality is below par& =3 ,latantly increase your ad frequency of any ad that has been tested to be successful until youI%e reached the point of no more increased return and then ease off !AE& ?3 -emember that brand loyalty can be ways that youIre able to tap into the daily1wee$ly1monthly habits of your customers beha%ior& :ow can you ma$e your product or ser%ice part of your customers routine= @3 Ma$e your customer a MFM,F-& Gi%e them the feeling of true ownership in your product or ser%ice by ma$ing them proud to own it& C3 >.SGF- your phone under 6 rings and with a smile& -emember that your telephone etiquette is part of your brand& 73 Fducate your employees and1or contractors to the importance of how they are also the brand and what that means and how they can impact customer opinion so easily&
)&'
D" K SIDE OF TO*"CCO CONSUMPTION
The number of people worldwide who die each year from tobacco#related disease will rise from the current 6&A million to ;" million by the year !"!A& > majority of these deaths will occur in the Third Gorld and Fastern Furope& Gi%en current trends more than ;"" million people will die from tobacco#related illness o%er the ne5t 6" years e5ceeding the toll from >3'S tuberculosis automobile accidents maternal mortality homicide and suicide combined& The Onited States is home to two of the worldIs three largest multinational cigarette companies and is the worldIs largest e5porter of cigarettes& 3n recent years Philip Morris -8 -eynolds and ,ritish >merican Tobacco *,>T+ ha%e registered double#digit growth in international cigarette sales with Philip Morris and -8 -eynolds now selling more cigarettes abroad than they do in the Onited States& Philip Morris already ma$es more profit selling cigarettes abroad than in the Onited States and -8 -eynolds and ,rown H Gilliamson *,>TIs O&S& subsidiary+ will soon do the same& More and more of these cigarettes are being manufactured o%erseas the result of two decades of hea%y spending on ad%ertising buying newly pri%atiLed cigarette companies setting up joint %entures and building distribution and sales networ$s& 3n ;KK0 for e5ample only ;J percent of the cigarettes -8 -eynolds sold o%erseas were made in the Onited States& > number of factors ha%e dri%en this o%erseas e5pansion including/ the opening up of formerly socialist economies< cheaper labor and transport costs< the attempt by these A0 2al ,hadur Shastri 3nstitute of Management .ew 'elhi
companies to shield an increasing proportion of their assets from lawsuits in de%eloped countries< and the desire to locate cigarette manufacturing plants closer to sources of tobacco leaf an increasing proportion of which is being purchased o%erseas& This o%erseas e5pansion has transformed the tobacco industry around the globe& 7urrently Philip Morris -8 -eynolds and ,>T each own or lease plants in at least A" different countries spanning all corners of the globe& Ghere%er O&S& cigarettes go smo$ing rates rise& Smo$ing rates in 8apan South Korea Thailand and Taiwan rose ;" percent higher than they would ha%e following the massi%e inflow of >merican cigarettes after the O&S& Trade -epresentati%e forced these countries to open their mar$ets to O&S& tobacco e5ports& Multinational cigarette companies are among the worldIs largest ad%ertisers& >s more and more countries adopt restrictions on direct cigarette ad%ertising these companies ha%e de%ised new and creati%e ways to s$irt these bans& ,y sponsoring sporting e%ents and teams roc$ concerts and discos these companies get e5posure without %iolating bans against direct ad%ertisement& The companies also put their logos on clothing lines racing boats bac$pac$s coffee and e%en tra%el agencies& They also distribute free samples and promotional items on college campuses shopping malls and other places where young people gather& The cigarette companies spend millions of dollars on lobbying acti%ities to a%oid incurring the legal political regulatory and cultural problems they face in the Onited States& Osing their significant economic and political clout they influence legislation fight ad%ertising restrictions try to downplay the health effects of smo$ing and corrupt the political process& :istorically the cigarette companies ha%e been able to rely on the full support of the O&S& go%ernment to help them sell cigarettes around the world& This support reached its ape5 in the ;KJ"s when the O&S& Trade -epresentati%e wor$ing hand#in#glo%e with the tobacco companies used the threat of sanctions to pry open $ey mar$ets in 8apan South Korea Taiwan and Thailand& >lthough the O&S& 7ongress has ta$en some steps to end these abuses the cigarette companies are finding new ways to pry open foreign mar$ets again under the guise of Mfree#trade&M They ha%e sought to condition 7hinaIs entry into the Gorld Trade 4rganiLation on the opening up of its cigarette mar$et and are lobbying for passage of the Multilateral >greement on 3n%estments which would gi%e them e5panded powers to challenge countriesI tobacco control measures& Fach year about a third of all cigarettes entering into international commerce are illegally smuggled escaping ta5es and import restrictions& There is widespread belief among analysts and some substantial e%idence from court cases in 7anada and :ong Kong that the tobacco companies facilitate and benefit from this smuggling& Smuggling encourages people to smo$e especially youth by ma$ing cheap cigarettes a%ailable and helps to de%elop brand loyalty among customers in countries where trade barriers will soon be lifted&
AJ
'uring the recent O&S& 7ongressional debate on tobacco legislation the cigarette companies often in%o$ed the plight of the >merican tobacco farmer to argue against increased ta5es and other tobacco control measures& :owe%er these companies ha%e been using use more and more foreign#grown tobacco in both their O&S& and foreign factories& Most of what they purchase o%erseas comes from three large O&S&#based corporations that dominate the global trade in tobacco leaf ## Oni%ersal 7orporation 'imon 3ncorporated and Standard 7ommercial 7orporation ## which ha%e begun to play a major role in financing o%erseas tobacco production&
AK
C%a$ter@
1BJ0C)I70S
M"IN O*;ECTI<ES
@3;
*;+ To study the changes in the brand loyalty in response to change in price and also to find out price elasticity& 7igarette is one of the products where Go%ernment is neither interested in increasing the domestic consumption nor interested in curbing consumption& 3n order to generate more re%enue Go%ernment increases the e5cise duty on cigarettes on e%ery year which in turn brings about the increase in price of cigarettes& The basic assumption that Go%ernment follows behind following a policy of steep and continuous increase in e5cise duty on cigarettes is that the demand for cigarette is price inelastic& :owe%er whether cigarette in 3ndia is price elastic or not is an empirical question which should be addressed scientifically& 3n order to gain some insight into the problem some firsthand research was needed and that is why the first stone to build the presented research was laid here& .ationwide research on this topic could yield some interesting facts and finding but due to the paucity of time and labor in%ol%ed therein we limited our scope to >hmedabad city only& ;&4ne more thing that goes along with the change in price is brand loyalty& Many a times change in price comes out to be swift in brand loyalty& So the objecti%e was to measure change in brand loyalty too& !& To study the change in brand loyalty in response to change in income& 3ncome which depicts affordability of a consumer is the crucial factor in determining buying beha%iour& 7hange in income changes the buying beha%iour of a consumer and so do the brand loyalty& :ence our objecti%e was to study this change& 6& To study the effect of freebies scheme on brand loyalty& @& To study the aggregate effect of all the factors discussed abo%e on brand loyalty&
A& To study the importance that cigarette smo$ers attach to %arious attributes *price taste filter etc&+ while buying& D& To study the effecti%eness of a good ad%ertisement of a new brand in terms of its ability to attract consumers loyal to other brands&
-&6
SUPPLEMENT" ! O*;ECTI<ES
;& To study the effect of non#a%ailability of fa%orite brand on the brand loyalty of smo$ers& !& To study the impacts of new brand *price of which may be less than equal to or more than the price of their fa%orite brand+ on the brand loyalty of smo$ers& 6& @& D" To study the reasons for starting smo$ing& To $now the role of reference groups in selection of brand of a cigarette& 2al ,hadur Shastri 3nstitute of Management .ew 'elhi
C%a$terC
H8*1)H0SIS
(;# There is no significant relationship between brand loyalty and age group& SUB H8*1)H0SIS: *>+ ,rand loyalty is not affected by change in price& *,+ There is no significant difference in brand loyalty among the %arious income groups due to change in price* price increases by !AE+& *7+ ,rand loyalty is not affected by change in income& *'+ ,rand loyalty is not affected by scheme of free gift introduced by other brand& *F+ There is no significant difference in brand loyalty between regular smo$ers and occasional smo$ers& (!# People gi%e more importance to taste as compared to other attributes& (=# 'oes the good ad%ertisement of the new brand help in switching the brand loyalty&
D;
C%a$ter7
R0S0ARCH .0SI+/
T!PE OF ESE" CH.
3&%
'escripti%e method has been used in this research for the collection of data& >s the research is related to the study of consumer beha%ior which can more effecti%ely be studied through direct questions e5perimental research will not be much effecti%e& >lso considering the time constraint descripti%e research is the most suitable design for this research&
3&6
SOU CE OF D"T".
To o%ercome the limitations of incompatibility obsolescence and bias i went for the primary data& 7onsidering the time and geographic constraints 3 found sampling method of data collection suitable for the project&
3&'
D"T" COLLECTION METHOD.
'ata has been collected through questionnaire method& The questionnaire was designed in such a way to co%er as many aspects of consumer beha%iour as possible&
3&)
S"MPLE SI=E.
Total ;;A persons were contacted and inter%iewed& 4ut of these ;A questionnaires were rejected due to incompleteness conflicting answers etc& Therefore the final sample siLe was of ;""&
3&-
S"MPLIN(.
:ere 3 ha%e studied the consumer beha%ior of the people of .ew 'elhi& Githin the city 3 ha%e collected samples from different areas& This is to reduce the biasness which may come through difference in the le%el of income attitude lifestyle etc& of the people in different areas&
D!
C%a$terD
R0S0ARCH A/AL8SIS I .ISCUSSI1/
,efore starting the actual research 3 prepared a questionnaire for pilot study& 3 inter%iewed a random sample of ;A respondents& Through the pilot study 3 came to $now which questions were wrongly worded which were ambiguous which needed to be added or to be subtracted etc& 4n the basis of feedbac$ of this study 3 modified the questionnaire& The modified questionnaire was then submitted to our project guide Prof& P&K&,ansal for his suggestions& >fter gi%ing a due consideration to Prof& P&K&,ansal)s suggestions 3 prepared the final questionnaire in accordance with the objecti%e of the research& The final questionnaire was used in the research after getting Prof& ,ansal)s appro%al& 3 selected different areas of the city to do study so that the place bias could be reduced to the best possible e5tent& 3 contacted respondents personally and got the information as per the questionnaire& Sometimes it happened that people told lie when as$ed about their regular brand total e5penditure on cigarettes etc& So 3 ha%e discarded their questionnaires& To reduce the magnitude of this problem 3 selected respondents whom we saw smo$ing at the shop so that the brand name e5penditure etc& can be %erified& Many of my questions were designed to cross chec$ the answers of the respondents& 3 tried to ma$e the questionnaire as comprehensi%e as possible to co%er %arious aspects related to our research& 3 ha%e used 7onstant Sum Method in one of the questions& The questionnaires were handed o%er only to those respondents who showed desire to fill up them on themsel%es whereas in most cases 3 ha%e filled up the questionnaires as per their answers& So that they might not feel boredom or confusion in filling up the questionnaires&
>&%
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S"MPLE DESI(N
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Q)ABL0 ;R
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The gra$% ; below shows that ma5imum number of respondents were in the age group of ;J#!@ and the least number of respondents were in ;!#;0 and A; and abo%e age group& The gra$% ! shows that ma5imum number of respondents were in D""; Q;!""" income group while the minimum number of respondents were in the income group below 6"""&
Q+RA*H ;R
Q+RA*H !R
From all the abo%e graphs we can notice that out of ;"" respondents the ma5imum number of smo$ers were in the age group of ;J#!@ years who were students and graduates&
D@
>&6
FO MUL"TION OF H!POTHESIS
H8*1)H0SIS ; STEP %. :"/ There is no significant relationship between the brand loyalty and age group& :;/ There is a significant relationship between the brand loyalty and age group& )a<le s%o'ing <rand loyalty among Barious age grou$s >GF1ST>TOS A;>.' >,4NF .4& E .4& E .4& E .4& E .4& E ,->.' 24C>2 @ @@&@@ !" D"&D; !6 0K&6; ;D J"&"" 0 00&0J .4T ,->.'A AA&AD ;6 6K&6K D !"&DK @ !"&"" ! !!&!! 24C>2 T4T>2 K 66 !K !" K ;! # ;0 ;J Q !@ !A # @" @; # A" T4T>2 .4& E 0" 0"&"" 6" 6"&"" ;""
Q)ABL0 !R
>&'
;&
WHO IS * "ND LO!"L0

>t the %arious le%el of price rise *from ;AE to !AE+ cigarette smo$ers should either opt for smo$ing less quantity of the same brand or there should not be any change in the current buying pattern but he must not go for another brand& Similarly at the %arious le%el of increase in income they should either opt for smo$ing more quantity of the same brand or there should be no change in the current buying pattern but he must not go for the other brand &
>ccording to our definition brand loyalty is determined by following criteria/
!&
6& :e should not switch o%er to other brand if other brand introduces the scheme of free lighter *worth -s&!A+ in return for ten empty pac$ets of its brand& The cigarette smo$ers who will pass all the abo%e three criteria will be considered as a brand loyal& I7ter4relati$7shi9 "m$7? The Three Criteria O@ *ra7d L$yalty.4 3n testing the hypothesis of brand loyalty among the %arious age groups we ha%e ta$en the three criteria& There should be some relationship among these criterion otherwise o%erall picture will not be analytical in the nature& For this purpose we ha%e tested the relationship between the brand loyalty and change in price *here ma5imum change is !AE+ brand loyalty and change in income *here ma5imum change is 6"E+ brand loyalty and effect of free gift scheme introduced by other company& /13 1( R0S*1/.0/)S *ASSI/+ I/ )HR00 CRI)0RIA
DA
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*9#9+ *9#9+`! *C#C+ *C#C+`! *B#B+ *B#B+`! *9#9+*C#C+ *C#C+*B#B+ #;;&@ ;!K&KD 06&KD #;" 0 J 6 #J ;"" @K D@ K D@ !DC #;"&D ;;!&6D ;"&@ K&@ ;&@ ;"J&;D JJ&6D ;&KD ;;@ D"&! J@&J ;&J D0&! =!D ;"D 0!&J 0A&! @&! J@&J =?= *9#9+*B#B+ ;!"&J@ JK&@@ KK&D@ "&J@ JK&"@ =EE3D
Q)ABL0 ?R
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77 D@ E=
r* 5&y + a R b*9#9+*C#C+1R b*9#9+`! b*C#C+`!S`;1!S r* y&L+ a R b*C#C+*B#B+1R b*C#C+`! b*B#B+`!S`;1!S r* 5&L+ a R b*9#9+*B#B+1R b*9#9+`! b*B#B+`!S`;1!S Therefore& r 5y a 6!J1*6J0&! U !JD+`;1! a "&KJD r yL a 6@61*!JD U @!6&!+;1! a"&KJD r 5L a 6KK&J1*6J!&! U @!6&!+`;1! a "&KJJ There is a positi%e relationship among all the three criteria& 3t is of utmost importance because if any one is negati%e then effect of positi%e relation can be nullified by the effect of negati%e relation and o%erall picture cannot throw light on the effect of indi%idual criteria on the brand loyalty& >s all are %ery near to ;& it suggests that the trend between the %arious criteria is almost perfectly positi%e linear relationship& >s there is a positi%e interrelationship between all the three criteria& we can go ahead by ta$ing their indi%idual effect on the brand loyalty&
S)0* !:
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C"LCUL"TION OF CHI4S+U" E
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S)0* =: 2e%el of significance a a AE S)0* ?: 'egree of freedom a *r#;+*c#;+#! a *!#;+*A#;+#! a @#! a ! >t a a AE& and degree of freedom a ! 7tab a A&KK;
DJ
S)0* @: :ere 7 cal c 7tab So our hypothesis is accepted& So there is no significant relationship between the age group and brand loyalty& ,ut if we analyse the data from the table& we can notice that number of brand loyal increases when we mo%e from age group ;!#;0 to ;J#!@ years& Similar is the case when we mo%e from age group ;J#!@ to !A#@" years& Thereafter& brand loyalty stabilises at around J"E& ,y which& we can conclude that there is no direct relationship between brand loyalty and age group& ,ut upto age group !A#@" yrs& it increases from @AE to J"E and thereafter stabilises for other groups& SUB-H8*1)H0SIS QAR Ste$ ;: :"/ ,rand loyalty is not affected by change in price& :;/ ,rand loyalty is affected by change in price& )ABL0 SH14I/+ /13 1( BRA/. L18AL A) 7ARI1US *RIC0 CHA/+0 ST>TOS17:>.GF 3. P-37F ,->.' 24C>2 .4T ,->.' 24C>2 ;AE K! J !"E J0 ;6 !AE 00 !6 T4T>2 !AD @@
T4T>2
;""
;""
;""
6""
Q)ABL0 CR
DK
WHO IS * "ND LO!"L WITH P ICE0

>&1
ESPECT TO CH"N(E IN
:ere change in income of cigarette smo$ers and schemes of free gift from other brands are ignored& :ere the emphasis is to $now the effect of only change in price on the brand loyalty& Gith respect to increase in price& person going for two options *less quantity of the same brand or no change in the current buying pattern+ will be considered brand loyal& S)0* !: CALCULA)I1/ 1( CHI-SSUAR0 1BS0R70. 06*0C)0. (R0SU0/C8 (R0SU0/C8 (1-0#T! (1# (0# K! J J0 ;6 00 !6 ="" JA&66 ;@&D0 JA&66 ;@&D0 JA&66 ;@&D0 ="" @@&@K @@&@K !&0K !&0K DK&6K DK&6K !==3=? (1-0#T! 0
0.521388 3.03272 0.032697 0.190184 0.813196 4.730061 9.320245 Q)ABL0 7R
:ere 7 cal d7 tab So our hypothesis is rejected& So brand loyalty is effected by change in price&
0"
>&3
INCOME EL"STICIT!
3 ha%e calculated income elasticity for the respondents who opted for smo$ing more quantity of the same brand if their income increases& >nd the result is as follows/ I/C1M0 0LAS)ICI)8 3.74MF 3.7-F>SFS ,C ;"E >NG& 3.7-F>SF 3. ?TC& 4F ,->.' S>MF ;&A!A ;&6A
Q)ABL0 DR
!"E 6"&A"E
6"E @"&AAE
;J&;JE
3.74MF F2>ST373TC ;&J!
The abo%e data shows that as income rises from one le%el to other& a%erage consumption of the same brand increases& but at the decreasing rate *for e&g& 6"&A Q ;J&;J d @"&AA Q 6"&A+ and because of that income elasticity is decreasing& SUB H8*1)H0SIS: Q .R Ste$ ;: :"/ ,rand loyalty is not affected by scheme of free gift introduced by other brand& :;/ ,rand loyalty is affected by scheme of free gift introduced by other brand& A+0 4IS0 BRA/. L18AL ST>TOS >GF G-4OP ;!#;0 ,->.' 24C>2 .4T 24C>2 J ;J#!@ !K @ 66 !A#@" !J ; !K @;#A" !" " !" A;H>,4NF T4T>2 J ; K K6 0 ;""
,->.'; K
Q)ABL0 ER
>&>
INCOME4WISE * "ND LO!"L
0;
ST>TOS
3.74MF G-4OP ca6""" 6"";# D""" D"";# ;!""" !0 ; !J ;!"";#;D""" d;D""" ;K ; !" ;K 6 !! T4T>2 K6 0 ;""
Q)ABL0 ;"R
,->.' 24C>2 .4T 24C>2 T4T>2
;K ; !"
,->.'; ;"
4%o Is Brand Loyal 4it% Res$e9t )o (ree +ift S9%eme 1f 1t%er BrandF :ere& respondents who opted for no change in the current buying pattern will be considered as the brand loyal& There is no need to test the abo%e hypothesis by ta$ing help of chi#square& From the table itself& we can directly conclude that scheme is ineffecti%e for switching the brand loyalty of cigarette smo$ers irrespecti%e of their age group and income group& SUB H8*1)H0SIS: Q0R S)0* ;: :"/ There is no significant difference in brand loyalty between regular smo$ers and occasional smo$ers& * p; a p! + :;/ There is significant difference in brand loyalty between regular smo$ers and occasional smo$ers& * p; d p! + p;aproportion of brand loyal among regular smo$ersa"&0! p!aproportion of brand loyal among occasional smo$ersa"&D;
0!
>&5 * "ND LO!"LT! "MON( THE E(UL" "ND OC"SSION"L SMOKE S S)A)US *A))0R/ SM1K0RS R0+ULAR /13 ,->.' 24C>2 .4T 24C>2 T4T>2 AK U 0;&KA !J&"A 1CASSI1/AL /13 ;; 0 U D;&;; 6J&JK )1)AL /13 0" 6" U 0"&"" 6"&"" ;""&""
Q)ABL0 ;;R
,->.'!6 J!
;""&"" ;J
;""&"" ;""
:ere& a person is said to be brand loyal if he passes all the three criterion defined earlier i&e& / ;& !& 6& change in price change in income gift scheme introduced by other brand of cigarette
S)0* !: p;a"&0! n;aJ! p!a"&D; n!a;J B cal a *p; # p!+ 1 *P` ?`*;1n; T ;1n!++;1! a "&K!@ P` a * n;Up; T n!Up! + 1 * n; T n! + a "&0" ?` a ; # P` a ; Q "&0" a "&6" S)0* =: 2e%el of significance aAE S)0* ?: B tab at right tailed test a ;&D@A >s :; is p; d p! & it is right tailed test&
06
S)0* @: >s B cal c B tab & :" is accepted& 3f we notice the data of table& we can directly conclude that both category of smo$ers are brand loyal& but the percentage of regular smo$er is higher than the occasional smo$ers& ,rand loyalty ratio among two categories of smo$ers is 0!E and D;E respecti%ely& 3t means that occasional smo$ers can also be brand loyal& H8*1)H0SIS ! S)0* ;: :"/ people gi%e more importance to taste as compared to other attributes :;/ people do not gi%e more importance to taste as compared to other attributes
>&%A
P EFE ENCE TOW" DS "TT I*UTES

>TT-3,OTFS P-37F T>STF F32TFT4,>774 P43.TS ;K6" @KJ6 ;66K JK6
>'NF-T3SFMF.T !DD 4T:F-S T4T>2 AJK ;""""

4T:F-S/ *>-4M>& F->G->.7F& 7424O-& P>7K>G3.G+
Q)ABL0 ;!R
0@
Preference towards attributes

6000 5000 4000 3000 2000 1000 0 ADVERTISE MENT
?; 2 @" /13 !KA K@A A6" ;0" !A 6A !""" U ;@&0A @0&!A !D&A J&A ;&!A ;&0A
Points
FILTER
TOBACCO
PRICE
TASTE
Attributes The abo%e chart shows that the most important factor in buying the cigarette is taste and its weightage is around A"E and price is secondary factor which has got around !"E weightage& Thus& we can conclude that taste is more important than price and all the other attributes& A/AL8SIS 1( *R0(0R0/C0 )14AR.S A))RIBU)0S )ABL0 SH14I/+ A+04IS0 *R0(0R0/C0 )14AR.S A))RIBU)0S
A))RIBU)0S A+0 +R1U* ;! ;D - !? ;7 /13 U /13 U P-37F !@A !0&!! 0!" !;&J! T>STF @"A @A&"" ;A!J @D&6" F32TF@A A&"" !6@ 0&"K T4,>774 @" @&@@ 6A6 ;"&0" >'NF-T3SFMF.T KA ;"&AD ;;; 6&6D 4T:F-S 0" 0&0J 6A@ ;"&06 K"" 66"" !@ - ?" /13 A"" ;A6A @@A !0A 6" ;;A !K"" U ;0&!@ A!&K6 ;A&6@ K&@J ;&"6 6&K0 @; I AB170 /13 ;0" A0" JA AA A ;A K"" U ;J&JK D6&66 K&@@ D&;; "&AD ;&D0 )1)AL /13 ;K6" @KJ6 ;66K JK6 !DD AJK ;"""" U ;K&6 @K&J ;6&@ J&K6 !&DD A&JK
OTHERS
Q)ABL0 ;=R
0A
From the abo%e graph& we can conclude that taste is the most important attribute for the consumers of all age groups& For A; and abo%e age group& taste has got the highest weightage *around D6E+& X Price has emerged as second important attribute for all the age groups e5cept for @;#A"& >ge group ;!#;0 is more price conscious than any other age group& 3t can also be noticed that weightage of price decreases as we mo%e from age group ;!#;0 to age group @;#A" and thereafter it increases slightly& This indicate that price becomes somewhat important for A; and abo%e age group people& X X The ad%ertisement has little impact on the respondents of all age group& For the age group @;#A"& filter emerged as second important attribute& I/C1M0-4IS0 *R0(0R0/C0 )14AR.S A))RIBU)0S
A))RIBU)0S I/C1M0 +R1U* OP=""" /13 U P-37F T>STF F32TFT4,>774 @D" @D ="";-C""" C"";-;!""" ;!"";;C""" /13 U /13 U /13 U N;C""" /13 U )1)AL /13 ;K6" @KJ6 ;66K JK6 !DD AJK ;""""
Q)ABL0 ;?R
U ;K&6 @K&J6 ;6&6K J&K6 !&DD A&JK
@!A !;&!A AJA !"&JK ;KA K&0A !DA ;!&"A
@AA @A&A KK" @K&A ;6;" @D&0K ;;D6 AJ&! ;"DA @J&@; A" 6A A !60 ;;&JA 6A" ;!&A" 6@A ;0&6 6A0 ;D&!6 6;" ;;&"0 ;"6 A&;A !A; ;;&@; J0 6&;; 6" ;&A J; 6&DJ
6&A ;K@ K&0 " " DJ JD !""" 6&@ @&6
>'NF-T3SFMF.T " 4T:F-S " ;"""
;AJ A&D@ ;D@ J&! ;J; J&!6 !J"" !""" !!""
This table e5plains that for the respondents whose income is below 6"""& price and taste are almost equally important& They are more price conscious compared to other income groups people& 3mportance of price in buying beha%iour decreases as income increases up to -s&;D""" and thereafter it remains almost same& This indicates the in%erse relationship between the importance of price and income group&
0D
>&%%
H8*1)H0SIS Q= R S)0* ;:
"D<E TISEMENT
H": )%e good adBertisement of t%e ne' <rand %el$s in s'it9%ing t%e <rand loyalty3 H;: )%e good adBertisement of t%e ne' <rand does not %el$ in s'it9%ing t%e <rand loyalty3 Main reason <e%ind starting smoking X 3n question number !; of the questionnaire< we as$ed the respondent& what did ma$e you start smo$ing= The result was as follows/ R0AS1/ (1R S)AR)I/+ SM1KI/+ R0AS1/S F-3F.' 73-72F T4 S:4G 4FF 4OT 7O-34S3TC -F23FF TF.S34. /13 1( R0S*1/.0/)S @A K 4F;! 4F;6
>'NF-T3SFMF.T J T3MF P>SS T4T>2 ;6 ;""

Q)ABL0 ;@R
From the abo%e table& we can conclude that friend circle is the main reason behind starting smo$ing& >d%ertisement has %ery little impact on the person to start smo$ing& so ad%ertisement is not the boost factor at the initial stage&
00
>&%6
EFFECT OF EFE ENCE ( OUP ON * "ND SELECTION
X 3n ?&!!& we as$ed the respondents from where did they come to $now about the brand& which they smo$e regularly& The result was as follows/ I/(LU0/C0RS F-3F.'S /13 R0S*1/.0/)S DA 1(
>'NF-T3SFMF.T !; S:4P 4G.FT4T>2 ;@ ;""

Q)ABL0 ;CR
The abo%e table shows that around DAE of respondents came to $now their regular brand from their friends& 4nly !;E of the respondents ha%e selected the brand after loo$ing its ad%ertisements& 3n short& reference group *friends and shop owners+ has strong effect on the selection of the brand& X 3n ?&!6& we ha%e as$ed the respondents whether they are aware of the ad%ertisements of the other brands& The result was as follows/ A4AR0/0SS 1( A.70R)IS0M0/) 1( 1)H0R BRA/.S A4AR0 /13 R0S*1/.0/)S CFS .4 0J !! 1(
T4T>2 ;""
Q)ABL0 ;7R
:ere& the respondents were shown cuttings of some popular ad%ertisements and were as$ed whether they ha%e shown them earlier& >round 0JE respondents answered positi%ely& This means that they are aware of the ad%ertisements of other brands but still prefer their regular brand& This shows that they ha%e $nowledge about %arious brands but their buying decision is not affected by the ad%ertisement of other brands& The main reason behind showing the cutting of ad%ertisements and pac$ets of %arious brands& was to help them to recollect whether they ha%e seen it before& 4ur questionnaire was somewhat lengthy& so the idea of showing ad%ertisement was succeeded in capturing the attention of the respondents& 0J 2al ,hadur Shastri 3nstitute of Management .ew 'elhi
X Ghile showing the %arious ad%ertisements& we ha%e as$ed the respondents& what does influence them in the ad%ertisement= The result was as follows/ I/(LU0/CI/+ (AC)1R I/ A.70R)IS0M0/) *AR)ICULARS /13 R0S*1/.0/)S M4'F2*S+ !; FF>TO-FS ;! 74.TF.T ;J 4NF->22 P-FSF.T>T34. 6" .4 3.F2OF.7F ;K ;"" 1(
Q)ABL0 ;DR
Most of the respondents influenced by the o%erall presentation of the ad%ertisements& Coungsters are mainly influenced by the model*s+ or punchline *logo+ of the brand& Mainly& the respondents who opted for logo or punchline tried to match their personality with the model or slogan *li$e Made for each otherW or 'isco%er a passionW+& So it is a psychological effect of ad%ertisement on the respondents&
0K
X 3n ?&!A& our main aim was to find out whether the good ad%ertisement of the new brand help in switching the brand loyalty& Ge as$ed the question that if respondents would come across to the ad%ertisement of the new brand& which satisfy their choice about what influence them most in the ad%ertisement& what would be their reaction= The result was as follows/ R0AC)I1/ )14AR.S A.70R)IS0M0/) R0AC)I1/S T-C 3T /13 R0S*1/.0/)S !; 1(
>SK13.?O3-F F4-;! 3T 3G.4-F 3T T4T>2 D0 ;""

Q)ABL0 ;ER
>bout D0E of the respondents replied that e%en though it may ha%e all the factors which they wanted in the ad%ertisement& they will not switch to the new brand only for the reason that its ad%ertisement is good& From the abo%e analysis& we can conclude that our hypothesis is rejected and good ad%ertisement of the new brand does not significantly attract the cigarette smo$ers to switch their brand&
J"
C%a$terE
(I/.I/+S
5&% "<E "(E E2PENDITU E ON CI(" ETTE *! THE STUDENTS

(U 1( )H0IR .IS*1SABL0 I/C1M0# CLASS (U S*0/.I/+ 1/ CI+AR0))0# "#;" ;"#!" !"#6" 6"#@" @"#A" A"#D" D"#0" MI. (R0SU0/C8 7ALU0 >i fi (i>i 93f A ;A !A 6A @A AA DA @ A 0 A @ 6 ! 6" !" 0A ;0A ;0A ;J" ;DA ;6" K!" @ K ;D !; !A !J 6"
Q)ABL0 !"R
'isposable income a poc$et money T part time1full time job earning Mean 9 a Xfi5i 1 Xfi a K!"16" a 6"&D0E Median a M a n1!th item a6"1!th a ;Ath M a 2 T R*n1! Q cf+1f U wS Ghere 2a!"& na6"& cfaK& fa0& wa;" M a !J&A0E Thus a%erage spending on cigarette by students *who smo$e cigarettes regularly+ are around 6"E& Total number of students was @" out of ;"" respondents& 4ut of @" students& 6" students were regular smo$ers and the remaining were occasional smo$ers& >%erage spending on cigarettes by the occasional student smo$ers was below ;"E of their disposable income&
J;
5&6
M" KET SH" E OF <" IOUS * "NDS
M1S) *R0(0RR0. BRA/.
BRA/. G322S 72>SS37 G42' F2>KF F4OS?O>-F ,-3ST42 4T:F-S
/13 1( R0S*1/.0/)S 60 !" !; J K A ;""

Q)ABL0 !;R
3n our research& the Gills brand emerged as the most popular brand of cigarette which accounts for around 60E and Gills classic and Gold Fla$e were running nec$ to nec$ at !"E& 4ther brands of cigarettes include AAA& Marlboro& -othmans& etc&
5&'P ICE OF NEW * "ND "ND E"CTION OF CI(" ETTE SMOKE S

R0AC)I1/ *RIC0 1( /04 C1M*AR0. )1 BRA/. L0SS 0SUAL T-C 3T 6@ !6 >SK >.'K J 3.?O3-F F4- 3T 3G.4-F 3T A0 DK T4T>2 ;"" ;"" BRA/. AS R0+ULAR M1R0 ;A 0 0J ;""
Q)ABL0 !!R
J!
The abo%e table shows that if the price of new brand is less than the regular brand of smo$ers& then 6@E of smo$ers will try for the new brand& 3f it is equal& then !6E smo$ers will try it& 3t means that price is important for about 6@E of respondents& while around D"E to 0"E respondents ignored the new brand irrespecti%e of their price& For the 7igarette 7ompany& They are strong brand loyal& ,ut others either try the new brand or inquire for it& 3f price is more& the number of smo$ers who opt for trying the new brand are less than if the price is equal to their brand& So far as the new company is concerned& the company should $eep low price of the cigarette as compared to their competitors so that brand loyal people at least try for new brand& 3f desired taste be pro%ided simultaneously& then it may be possible to ma$e them switching to the new brand& 4n the detailed study of this table& 3 also found that mainly youngsters *age group of ;!# ;0 and ;J#!@+ and low income group people *upto -s&D"""+ will opt for trying the new brand if its price is less as compared to their regular brand& 4n the other hand& people with high#income group *particularly abo%e -s&;D"""+ ha%e shown their readiness to try the new brand e%en if its price is more than their regular brand& Coungsters also show their readiness out of curiosity and to $now its taste& pro%ided its price is not too high as compared to the regular brand& From the analysis it can be concluded that youngsters are mainly brand switchers because they are at the initial stage of smo$ing and they are not habituated to a particular brand& Their tendency is to taste %arious brands and choose their fa%orite brand as the one which is not too costly and at the same time pro%ides other attributes which are required for a good brand of cigarette& This age group is more price conscious as compared to age group of !A#@" yrs because youngsters *upto the age of !@yrs+ ha%e limited poc$et money or less earning&
5&) *U!IN( "ND CONSUMPTION P"TTE N OF SMOKE S "MON( <" IOUS "(E ( OUPS
BU8I/+ *A))0R/ A+0 +R1U* ;! - ;7 ;D - !? !@ - ?" ?; 2 @"
E(UL"
C1/SUM*)I1/ *A))0R/: L0SS )HA/ ;" CI+AR0))0S *0R .A8
@; I)1)AL AB170 /13 U /13 U /13 U /13 U /13 U /13 U 4.F 4- TG4A ;""&"" ;6 J;&!A ;; 0J&A0 K DK&!6 6 D"&"" @; 00&6D P3F7FS G:42F P>7K " "&"" ; D&!A 6 !;&@6 @ 6"&00 ! @"&"" ;" ;J&J0 4T:F-S " "&"" ! ;!&A" " "&"" " "&"" " "&"" ! 6&00 T4T>2 A ;D ;@ ;6 A A6
Q)ABL0 !=R
J6
The abo%e table gi%es information about the regular smo$ers who smo$e less than ;" cigarettes a day& >s we mo%e from age group of ;!#;0 to A; and abo%e& smo$ers prefer to buy cigarettes in a pac$ instead of buying indi%idual pieces& Coungsters who fall in the age group of ;!#;0 and ;J#!@ prefer to buy indi%idual pieces& e%en though they ha%e to pay higher price only because they cannot ta$e it home& C1/SUM*)I1/ *A))0R/: ;" A/. M1R0 CI+AR0))0S *0R .A8 BU8I/+ *A))0R/ A+0 +R1U* ;! - ;7
;D - !? /13 U D DD&D0 6 " K 66&66 "&""
!@ - ?"
?; - @"
/13 U 4.F 4- TG4; ;""&"" P3F7FS G:42F P>7K " "&"" 4T:F-S " "&"" T4T>2 ;
/13 U /13 U @ @@&@@ ! 66&66 @ ; K @@&@@ @ ;;&;; " D DD&D0 "&""
@; I)1)AL AB170 /13 U /13 U ; !A&"" ;@ @J&!J 6 " @ 0A&"" ;@ "&"" ; !K

Q)ABL0 !?R
@J&!J 6&@A
The second table gi%es information about the smo$ers who smo$e ;" or more cigarettes a day& Osually cigarette smo$ers& who smo$e more than ;" cigarettes a day& buy in a pac$& >s we mo%e from age group of ;!#;0yrs to A; and abo%e& the ratio of cigarette smo$ers buying cigarettes in a pac$ increases& The interesting point is that this ratio is higher as compared to the ratio of cigarette smo$ers who smo$e less than ;" cigarettes a day&
5&- EFFECT OF NON "<"IL"*ILIT! OF F"<O ITE * "ND ON * "ND LO!"LT!

1*)I1/S A+0 +R1U* ;!-;7 ;D-!? /13 U /13 U > 6 66&66 ;! 6D&6D , " "&"" 6 K&"K 7 ; ;;&;; @ ;!&;! ' A AA&AD ;@ @!&@! K 66
!@-?" /13 ;" ! K J !K
?;-@" U /13 6@&@J ;" D&K" ; 6;&"6 6 !0&AK D !"
U A" A ;A 6"
@;V /13 D " ! ; K
)1)AL U DD&D0 "&"" !!&!! ;;&;; @; D ;K 6@ ;""
>aG4 T4 >.4T:F- S:4P >.' ,OC S>MF ,->.' ,aSM4KF ,3'3 7aP4STP4.F ,OC3.G 'a,OC >.4T:F- ,->.' 4F 73G>-FTTF Q)ABL0 !@R
J@
From the abo%e table& Ge can analyLe that as the age group increases& respondents to their sample siLe increases for option >& Similarly& it is a decreasing trend for option '& >s we mo%e from age group ;!#;0 yrs to A; yrs and abo%e& E number of respondents opting for option > increases& -e%erse is the situation for option '& This shows that non# a%ailability of a fa%orite brand has much effect on the youngster to switch their brand& 4%erall picture shows that around 6@E of respondents go for another brand of cigarette& means switching their brand& There are also respondents who either smo$e bidi or postpone buying at that time because they do not want to switch the brand& The o%erall picture can be represented by graph as shown below/ >%ailability of fa%orite brand is most important for the smo$er& 3f it is not a%ailable then around 6@E will go to another brand and around !AE who are brand loyal but may be dissatisfied with the non#a%ailability of their fa%orite brand& 4nly @;E respondents are strong brand loyal with respect to a%ailability of cigarette at a shop&
5&1
;3
ESULT OF THE H!POTHESIS

Brand loyalty %as no dire9t relations%i$ 'it% t%e age grou$3
.umber of brand loyal rises with the increase in the age group& ,rand loyalty is low in age group ;!#;0 because they are new smo$ers& so they tend to taste %arious brands $eeping price in mind& Ghile in age group ;J#!@& it is high as compared to ;!#;0 age group& because they are habituated to a particular brand to some e5tent& For the same reason& number of brand loyal increases in age group !A#@"& Thereafter it stabilises for the ne5t two age groups& !3*eo$le giBe more im$ortan9e to taste as 9om$ared to ot%er attri<utes3 Ge wanted to $now the most preferred attribute in a cigarette for the smo$ers& Ge used 74.ST>.T SOM MFT:4' to get the answer& Ge found out that for all the income groups as well as age groups taste is the most important attribute& Price is emerged as the second important factor& Students and people whose income is below 6""" -s& >re more price conscious than other age groups and income groups& Pac$aging has no impact on smo$ers& =3)%e adBertisement of ne' <rand does not %el$ in s'it9%ing t%e <rand loyalty3 >ttracti%e ad%ertisement of the new brand does not influence cigarette smo$ers to switch their brand& F%enthough the most attracti%e model*s+ or o%erall good presentation of ad%ertisement is pro%ided by new brand& they will stic$ to the regular brand& So it fails to attract the significant smo$ers of other brand&
JA
C%a$ter;" X X
C1/CLUSI1/
>d%ertisement does not ha%e much impact on the non#smo$er to start smo$ing& Friend circle is the main reason behind starting the smo$ing&
X -eference group *friends and shop owners+ has strong effect on the selection of particular brand& X > cigarette smo$er will not shift from one brand to another on finding the ad%ertisement of the other brand more attracti%e& X >%ailability of fa%orite brand is of utmost importance for a cigarette smo$er& 3f it is not a%ailable& then around 6@E of the respondent will switch to other brand and ;KE will postpone their buying or may be dissatisfied with the company& So the deli%ery of the cigarettes on time to %arious outlets *shops+ is %ery important&
JD
C%a$ter;;
LIMI)A)I1/
.o study is fully complete in itself Q said the elders& F%en then& not ta$ing opportunistic shelter in this pro%erbial saying& 3 am fully aware of the many lacunas in this piece of sur%ey presented in the foregoing pages& The sample siLe should ha%e been much larger in each category of persons sampled& Some more intriguing questions must ha%e been addressed to the indi%iduals& The sample space includes 'elhi only& 3f it could haa%e ta$en worldwide it would ha%e gi%en the true reflection of the loyalty factors in the world& :ad these three deficiencies been not there& the outcome of this sur%ey should ha%e been more interesting and fruitful than what it is in the present form& The master factor for these three deficiencies was paucity of time&>s this is only a pilot sur%ey of small sample siLe& The same can be e5panded to a more efficient and highly useful study& >s the (proof of the pudding is in eating)& 3 sincerely hope and wish that this pudding will pro%e tasteful and informati%e to the readers&
J0
BIBLI1+RA*H8 I R0(0R0/C0S
Bi<liogra$%y
;& !& 6& @& A& 7ooper -& G& %inning at Ie) -roducts= ;KK0 Perseus Press& >rnold ' Publishing& 5he ?andbook of +rand 0anagement ;KK0 >ddison#Gesley
Fngel F 8ames and ,lac$well -oger *;KK6+ 7onsumer ,eha%ior 0th edition Prentice :all 3nternational& 4tt 3reating Demand 0th edition 3rwin1McGraw#:ill Publishing&
2oudon 'a%id 2 and ,itta >lbert 8 'ella *;KK6+ 7onsumer ,eha%ior/ 7oncepts and >pplication @th edition Mc Graw :ill boo$ 7o& 2td
D& 0& J& K&
>nasael :enry *!"";+ 7onsumer ,eha%ior and Mar$eting >ction Dth edition Thomas >sia P%t& 2td& Schiffman G 2eon and Kanu$ 2eslie 2aLar *!"""+ 7onsumer ,eha%ior 0th edition Prentice :all 3nternational& :iebing -&G&H3&S&G&7ooper 5he Successfu 0arketing - an=$**7 McGraw# :ill Publishing& 7espedes F&N& 3oncurrent 0arketing= :ar%ard ,usiness School Press
JJ
Referen9es
;& !& 6& @& A& D& 0& MFuture communication restrictions in ad%ertisingM ,>T& ;K0K& 'oroLyns$i& >& ,ritish Medical 8ournal& ;KKD/ 6;!/ AKK M7ommunication from the >d%ertising Standards >uthority& !"1!1KJ 7oo$& .& -iLla papers brand manager& cited in/ Tobacco mar$etingIs last gasp= -e%olution Feb& ;KKJ
'irect mar$eting # Marlboro& Mar$eting @ Sept& ;KK0 :arbottle& F& 2etter in Mar$eting& ;A 8anuary ;KKJ .u$i& P& Tobacco firms brew up coffee to beat ad ban& Sunday Times ;J 8anuary ;KKJ J& Peter Stuy%esant push fuels ire of French group& Gall Street 8ournal& K >pril ;KK0& K& ,onn& '& Tobacco promotion bans will wor$& The 2ancet p;J6;& !"#!0 'ecember ;KK0 ;"& .orway puffs away on unad%ertised tobacco& Gall Street 8ournal *Furope+ ;"1D1K0 ;;& Ghita$er& S& quoted in/ Tobacco mar$etingIs last gasp= -e%olution& Feb& ;KKJ
'e<sites
http/11www&riLla&co&u$1 *-iLla cigarette papers+ http/11www&circuitbrea$&com1 *2uc$y Stri$e+ www&clar$&net1pub1$!1cameltrophy *7amel Trophy >d%enture+ http/11www&west&de1 *Sports in association with Gest+ www&asiaconnect&com&my1bates1retail1 *,H: ,istro in Malaysia+ www&tobacco&org1-esources1tobsites&html *General site listing tobacco sponsorships+
JK
SU0S)I1//AIR0
;& !&
.ame / >ge Group / d+ @;#A" years e+ A; and abo%e
a+ ;!#;0 years b+ ;J#!@ years c+ !A#@" years 6& Fducational ?ualification /
a+ 3lliterate b+ Op to ;!th standard c+ Onder graduate @& 4ccupation / a+ ,usinessman b+ Ser%iceman e+ others *specify+
d+ Graduate e+ Post graduate
c+ Professional d+ Student
3f answer is (student) & what is your source of income = Amt3 in Rs3 a+ Poc$et#money b+ Part1Full time job c+ ,oth a+ and b+ ^^^^^^^^^^ ^^^^^^^^^^ ^^^^^^^^^^
A& 3ncome group R 3f respondent is dependent& then income of his family will be considered&S / a+ 6""" H ,elow b+ 6"";#D""" c+ D"";#;!""" D& :ow often do you smo$e = b+ 4ccasionally 2al ,hadur Shastri 3nstitute of Management .ew 'elhi d+ ;!"";#;D""" e+ ;D""; and abo%e
a+ -egularly *'aily+ K"
0&
:ow many cigarettes on an a%erage do you smo$e = Per day -egularly 4ccasionally 999 Per wee$ Per month
J& 3f answer to ?uestion .o& D is occasionally& do you smo$e the same brand e%ery time = Ces .o do you smo$e regularly= ,rand+
K& Ghich single brand of cigarette ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ ;"& Since how ^^^^^^^^^Cears
long ha%e you been smo$ing=*Mention -egular ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
;;& Ghich brand of the cigarettes ha%e you tried so far = a+ Gills .atural 2ight b+ Gills 7lassic c+ Gills 7lassic Mild d+ Gills 7lassic Menthol e+ Gills Filter Tripped f+ ,ristol g+ 7a%anders h+ Marcopolo Prince Filter i+ :olly Good j+ President $+ 2ondon Filter l+ Four Square Special Fiter m+ Four Square King n+ Gold Fla$e o+ ,enson H :edges p+AAA q+ -othmans r+ 3ndia King s+ Gudang Garam t+ >ssos u+ G24,F %+ Sunlight
;!& Ghat factors do you consider important in buying any brand of cigarette& Please gi%e points to attributes out of total ;"" points& Attri<utes *oints Attri<utes Aroma (ragran9e Color )o<a99o )otal *ri9e )aste (ilter Pac$aging AdBertisement
K;
*oints ;6& :ow much do you buy at a time = a+ 4ne or two pieces b+ Ghole pac$
;"" (one %undred#
7+ 4thers
;@& Ghat price do you pay for buying *indi%idual piece1pac$ +of * Mention -egular ,rand a M-, + = -s&^^^^^^^^^^^^^^^^^^ ;A& 3f the price of ^^^^^^^^^ *M-,+ is increased by following percentages& with the price of other brands remaining the same& what would be your reaction =
In9rease in $ri9e <y .o& ;& -eaction Start smo$ing less ?ty& of same brand& *to what e5tent specify in E+ !& 6& Shift to other brand .o change in buying pattern -s^^^^^^^^^^^^^^^^^^ ;AE !"E !AE
;D& :ow much do you spend on cigarettes monthly = ;0&
3f your income increases by following percentages& what would be your reaction = In9rease in in9ome <y
.o& ;&
-eaction Start smo$ing more ?ty& of same brand& *specify in E+
;"E
!"E
6"E
!& 6& ;J&
Shift to some high %alue brand .o change in buying pattern 3f you find a new brand at a shop what will you do =
K!
If t%e $ri9e of ne' <rand is .o& ;& !& 6& ;K& a+ b+ -eaction Try it >s$ and inquire for it 3gnore it 3f you don)t find the ^^^^^^^*M-,+ at a particular Shop& what would you do = Go to another shop and buy same brand Smo$e bidi c+ Postpone buying at that time d+ ,uy another brand of cigarette Fqual to M-, More than M-, 2ess than M-,
!"& 3f the brand other than ^^^^^^^^^^^^*M-,+ introduces the scheme of free lighter *worth -s&!A+ in return of ;" empty pac$ets of that brand& what will be your reaction = a+ Shift to that brand A.70R)IS0M0/) !;& Ghat did you ma$e start smo$ing = a+ Friend circle b+ To show off *for status+ c+ 4ut of curiosity d+ -elie%e of tension e+ >d%ertisement f+ Time pass to $now about b+ .o change in current buying pattern
!!& :ow did you come ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^*M-,+ = Through& a+ Friends b+ >d%ertisement
c+ Shop owner
!6& >re you aware of the ad%ertisements of brands other than ^^^^^^^^^^^*M-,+= *Narious >d%ertisements from magaLine will be shown+ Ces !@& Ghat influences you in the ad%ertisement= a+ Models b+ Features of the product e+ .o influence K6 2al ,hadur Shastri 3nstitute of Management .ew 'elhi c+ 7ontent li$e punch line& 2ogo etc& d+ 4%erall presentation of >d%ertisement .o
!A& 3f you come across an ad%ertisement of new brand which has you choice in ?ue& !@& would you a+ Try it b+ >s$1inquire for it c+ 3gnore it
K@

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Brand Loyalty of Cigarette Smokers: A study

Submitted by SUSIL KUMAR SAHU (77 !"""#

Susil $umar Sahu -oll .o/001!"""

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

Susil Kumar Sahu

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

4H8 IS )H0 *R1BL0M C1/SI.0R0. 41R)H I/70S)I+A)I1/F

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

Loyalty - Attitude, Be%aBior, and +ood S9ien9e:

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

%&) * "ND E+UIT! , * "ND LO!"LT! ME"SU EMENT "ND M"N"(EMENT

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

%&- LO!"LT!. HOW SECU E IS THE * "ND/S CUSTOME *"SE0

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

%&1 PUTTIN( IT "LL TO(ETHE . THE M"STE * "ND E+UIT! INDE2

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

OSP de%elopment and testing

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

WHO IS LO!"L CUSTOME 0

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

EFFECT OF * "ND4ST ETCHIN(

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

LO!"LT! IN THE M" KET PL"CE

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

41RL.S )1BACC1 I/.US)R8

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

THE TO*"CCO INDUST ! "ND !OUTH SMOKIN(

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

*I( TO*"CCO/S (LO*"L E2P"NSION

TOP M" KETE S IN SELECTED COUNT IES

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

BI+ )1BACC1HS +L1BAL R0ACH

666 .enotes a Su<sidiary or (a9tory 66 .enotes a Li9ensing Agreement

*%ili$ Morris 99 999 99 999 99

BA) 999 999 999

999 999 999

999 999 99 999 999 99 99 99 999 999 999 99

999 999 999

999 999 2al ,hadur Shastri 3nstitute of Management .ew 'elhi

999 999 999 999 99

99 999 999 99 999

999 999 99 999 999 99 999

999 999 666 99 99 99 99 999

999 999 99 99 999 999

2al ,hadur Shastri 3nstitute of Management .ew 'elhi

999 999 999

999 999 999 999 999 999 99 999 99

I( TO"CCO/S (LO*"L E2P"NSION

TOP 3 TECHNI+UES TO UILD "ND LO!"LT!