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Marketing Of Services
A ri! "#$ "%&3

Assignment Secured Marks Ma( Marks

3 (Home)

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RJR's Eclipse: Rising from Premier's Ashes

Pursuing a Better Cigarette

In 1988, R. J. Reynolds Tobacco Company (RJR) capped a 10-year, $300 million in es!men! pro"ram by in!rod#cin" !$e %remier ci"are!!e in se eral !es! mar&e!s. Reynolds and o!$er !obacco companies $ad lon" dreamed o' a be!!er ci"are!!e, one !$a! (o#ld sa!is'y smo&ers (i!$o#! !$rea!enin" !$eir $eal!$ or irri!a!in" o!$ers aro#nd !$em. RJR (an!ed !o !ar"e! %remier !o(ard sop$is!ica!ed, #pscale, #rban, ed#ca!ed, older (o er-)*) smo&ers. T$ese smo&ers (ere $oo&ed on smo&in", b#! (ere loo&in" 'or an al!erna!i e or !ryin" !o +#i!. %remier (as a ery comple, prod#c! !o ma&e and !o #se. I! consis!ed o' a small al#min#m caps#le !$a! con!ained beads o' "lycerin impre"na!ed (i!$ !obacco 'la orin"s. T$e caps#le (as s#rro#nded (i!$ !obacco. -! !$e 'ron! end o' !$e ci"are!!e (as a carbon !ip !$a! !$e smo&er $ad !o bo!$ li"$! and $ea! properly d#rin" !$e li"$!in" process. -ir dra(n !$ro#"$ !$e ci"are!!e (as $ea!ed as i! passed !$ro#"$ !$e carbon. I! !$en passed !$ro#"$ !$e al#min#m caps#le ($ere !$e $ea!ed air ca#sed !$e "lycerin beads !o apori.e and carry !$e !obacco 'la or !$ro#"$ !$e ci"are!!e/s coolin" 'il!er !o !$e smo&er. 0eca#se only !$e carbon !ip b#rned in !$e process, !$e ci"are!!e did no! b#rn do(n li&e a !radi!ional ci"are!!e. -lso, beca#se no !obacco (as b#rnin", !$e ci"are!!e did no! emi! any 1side-s!ream1 smo&e. 0eca#se o' !$e ci"are!!e/s ne(ness, pac&a"es carried ins!r#c!ion boo&le!s !$a! described !$e ci"are!!e and e,plained $o( !o li"$! i! properly. 2#e !o %remier/s comple,i!y and de elopmen! cos!, RJR priced i! abo#! )* !o 30 cen!s more per pac& (abo#! )* percen!) !$an o!$er name-brand ci"are!!es. T$e company in!rod#ced !$e brand in %$oeni, and T#cson, -ri.ona, and 3!. 4o#is, 5isso#ri, in order !o !es! i!s mar&e!in" s!ra!e"y. I! dis!rib#!ed !$e ci"are!!es !$ro#"$ !$e normal ci"are!!e dis!rib#!ion c$annels. To promo!e %remier, RJR la#nc$ed an e,pensi e campai"n. Con!rary !o mos! ci"are!!e ads, %remier/s ads con!ained lo!s o' copy and 16#s! !$e 'ac!s.1 T$ey #sed !$e !a" line, 1T$e Cleaner 3mo&e,1 and enco#ra"ed smo&ers !o !ry %remier 'or a (ee&. To enco#ra"e !rial, sales promo!ions o''ered !(o or more pac&s 'or !$e price o' one. 7o(e er, despi!e all !$e !ime and money RJR p#! in!o de elopin" and in!rod#cin" %remier, smo&ers didn/! b#y i!. T$ey didn/! li&e !$e !as!e or !$e di''ic#l!y !$ey $ad in li"$!in" and smo&in" !$e ci"are!!es. Ra!$er !$an s!ic&in" (i!$ %remier 'or a (ee& in order !o "e! acc#s!omed !o %remier/s !as!e, smo&ers decided +#ic&ly a"ains! !$e brand. -'!er only 'i e mon!$s, 'ollo(in" cons#mer complain!s !$a! i! smelled li&e b#rnin" le!!#ce and smolderin" !ennis s$oes, RJR e,!in"#is$ed %remier.
If At First You Don't Succeed . . .

2espi!e %remier/s cos!ly 'ail#re, RJR con!in#ed !o p#rs#e i!s dream. 2#rin" !$e ne,! 'i e years, i! spen! an es!ima!ed $)00 million addi!ional dollars on researc$ and de elopmen! !o prod#ce a be!!er smo&eless ci"are!!e. 2#rin" !$ose 'i e years, smo&ers increasin"ly 'el! li&e o#!cas!s, as second$and smo&e became a bi""er iss#e and more places banned smo&in". In la!e 1998, !$e company anno#nced i!s plan !o in!rod#ce a ne( ersion in 199* called 9clipse. -ccordin" !o RJR, 9clipse !ar"e!ed ad#l! smo&ers o er 3* (i!$ a sli"$! s&e( !o(ard (omen. T$e !ar"e! smo&ers (ere 1people ($o en6oy smo&in" b#! ($o/d ra!$er no! smell li&e a smo&er1 and people ($o did no! (an! !o e,pose 'riends and rela!i es !o second$and smo&e. Reynolds did no!, $o(e er, see 9clipse as a nic$e prod#c!. I! claimed !$a! !$e ci"are!!e co#ld e en!#ally cap!#re a ) percen! s$are o' !$e na!ion/s 8: million smo&ers. RJR/s !op brand, Camel, $ad 6#s! a * percen! s$are, and ;ir"inia 3lims, a s!ron" %$ilip 5orris brand, $ad a ).8 percen! s$are. Reynolds !es!ed !$e ne( ci"are!!e 'or more !$an a year, in ol in" 1),000 smo&ers in )0 s!a!es in i!s researc$. I! claimed !$a! 9clipse scored (ell (i!$ smo&ers and !$eir nonsmo&in" 'riends and 'amily members, (i!$ more !$an 80 percen! o' bo!$ "ro#ps sayin" !$a! !$e ne( prod#c! (as a brea&!$ro#"$. -l!$o#"$ many smo&ers ($o !es!ed !$e prod#c! did no! belie e i! !as!ed as "ood as re"#lar ci"are!!es, !$ey indica!ed !$a! i! (as a reasonable !rade-o'' beca#se !$ere (as less second$and smo&e<abo#! 90 percen! less !$an s!andard ci"are!!es. 4i&e %remier, !$e 9clipse $as a c$arcoal !ip (rapped in 'iber"lass ins#la!ion. =$en !$e cons#mer li"$!s !$e c$arcoal, i! $ea!s !o abo#! 900 de"rees Celsi#s, similar !o a normal ci"are!!e/s b#rnin" !empera!#re. 7o(e er, !$e ins#la!ion con!ains !$e b#rnin", so only $o! air escapes as !$e smo&er dra(s on !$e ci"are!!e. T$e $o! air passes !$ro#"$ processed !obacco con!ainin" more !$an *0 percen! "lycerin !$a! apori.es a! !empera!#res belo( !$ose !$a! b#rn !obacco. >nli&e %remier, !$ere is no al#min#m caps#le. T$e $ea!ed "lycerin ma&es a smo&eli&e apor !$a! carries !$e !obacco 'la or and nico!ine. T$is is similar !o (a!er passin" !$ro#"$ co''ee "ro#nds in a co''ee ma&er, pic&in" #p !$e co''ee 'la or b#! lea in" !$e "ro#nds be$ind. T$e apor !$en passes !$ro#"$ a s!andard 'il!er in!o !$e smo&er/s mo#!$. 4i&e %remier, !$e ci"are!!e does no! b#rn do(n. T$e !obacco !as!e simply "oes a(ay once !$e $o! air $as done i!s (or&. T$e smo&er in$ales and e,$ales smo&e, b#! #pon e,$alin", !$e smo&e +#ic&ly disappears, m#c$ as a person/s smo&y brea!$ disappears on a cold mornin". T$e company claimed !$a! someone (al&in" in!o a room ($ere people (ere smo&in" 9clipses (o#ld no!ice only a 'ain! aroma. 4i&e %remier, 9clipse does no! b#rn !obacco? !$ere'ore i! prod#ces li!!le side-s!ream smo&e. 3!andard ci"are!!e smo&e is abo#! @* percen! !ars and rela!ed par!icles and abo#! )* percen! (a!er, "lycerol, and nico!ine. 9clipse/s smo&e is abo#! 8* percen! (a!er, "lycerol, and nico!ine and abo#! 1* percen! !ar. Abser ers poin!ed o#!, $o(e er, !$a! o!$er #l!ra-li"$! ci"are!!es on !$e mar&e! $ad e+#ally lo( !ar and nico!ine le els. In mid-199:, RJR anno#nced !$a! 9clipse (o#ld en!er !$e 'inal !es!in" p$ase in C$a!!anoo"a, Tennessee, a medi#m-si.e ci!y ($ere, i! ar"#ed, !$e smo&ers (ere #nder socie!al press#re beca#se o' second$and smo&e. T$e company mailed smo&ers !$ere a

1*-min#!e ideo in ($ic$ a 'emale smo&er complained !$a! second$and smo&e (as a''ec!in" $er marria"e !o a nonsmo&er, s!ainin" $er (alls and c#r!ains, and permea!in" $er clo!$es. T$e (oman !$en !old ie(ers abo#! 9clipse/s ad an!a"es. Reynolds o''ered a 'ree car!on o' 9clipse !o smo&ers ($o a"reed !o par!icipa!e in !$e !es! and !o a!!end disco ery "ro#ps o' *0B 100 people ($ere RJR represen!a!i es e,plained and demons!ra!ed !$e prod#c!. Ane spo&esperson no!ed !$a! "e!!in" cons#mers !o !ry !$e prod#c! (as ery impor!an!. 0eca#se 9clipse (as no! a !radi!ional prod#c!, i! re+#ired a non!radi!ional approac$. 2#e !o $i"$er man#'ac!#rin" cos!s, RJR priced 9clipse abo#! 10 cen!s per pac& abo e !$e price o' premi#m brands. I! spen! abo#! $110,000 on meas#red media in C$a!!anoo"a. 9arly ads s$o(ed a s!eamin" !ea&e!!le (i!$ !$e copy, 1Ima"ine a ci"are!!e !$a! smells li&e !$is.1 4a!er, !$e ad copy con!ained lines s#c$ as, 1T$e smo&e disappears. Co#r "irl'riend doesn/!.1 In mid-199@, Reynolds added a second !es! mar&e! in 4incoln, Debras&a. Ane ne(spaper ad !$ere s$o(ed a lone smo&er a! a !able o' 'riends (i!$ !$e !a"linesE 13mo&e !$a! disappears. Tas!e !$a! doesn/!.1 and 14ess second$and smo&e. 5ore 'irs!$and pleas#re.1 0illboards enco#ra"ed cons#mers !o 19n6oy smo&in" (i!$o#! smellin" li&e smo&e,1 13mo&e on yo#r co#c$, no! on yo#r porc$,1 and 13mell li&e yo#r colo"ne. Do! yo#r ci"are!!es.1 >nli&e !$e C$a!!anoo"a mar&e!, RJR limi!ed dis!rib#!ion !o abo#! $al' o' !$e !obacco sellers in 4incoln beca#se i! 'o#nd !$a! !$e prod#c! re+#ired e,plana!ion. In C$a!!anoo"a, i! learned !$a! #naided !rial led !o disappoin!ed smo&ers. I! also dropped !$e ideos, reali.in" !$a! smo&ers did no! (an! !o (a!c$ ideos, and added more (ri!!en ins!r#c!ions !o !$e pac&s. RJR also priced 9clipse comparably !o o!$er premi#m brands.
Disappointing Results

In la!e 1998, RJR anno#nced i! (as re!$in&in" 9clipse/s mar&e!in" s!ra!e"y, admi!!in" !$a! !$e ci"are!!e (as no! mee!in" e,pec!a!ions and posed a e,in" mar&e!in" c$allen"e. -l!$o#"$ some smo&ers li&ed 9clipse/s 'la or and !$e 'ac! !$a! i! did no! lea e a !obacco smell in !$eir $omes and cars. A!$ers panned !$e !as!e and complained abo#! $o( di''ic#l! i! (as !o li"$! !$e ci"are!!e. Ane !obacco dealer obser ed, 1T$ey (ere a no el!y 'or a ($ile. -nd a lo! o' people !ried !$em. 0#! no( !$e ne( $as (orn o''.1 Ane RJR spo&esperson no!ed, 1I!/s a di''eren! ci"are!!e. 3mo&ers see i!s a!!rib#!es b#! !$ey compare i! !o !$eir c#rren! ci"are!!es. T$ey need !o !$in& o' i! as a di''eren! smo&in" e,perience. I !$in& (e/ e se! (ron" e,pec!a!ions.1 T$e spo&esperson added, $o(e er, !$a! !$e company (as s!ill commi!!ed !o 9clipse. 1=e, by no means, $a e "i en #p. =e/ e p#! !oo m#c$ o' an in es!men! in i!.1 -s o' la!e 1999, Reynolds $ad no! anno#nced a decision as !o 9clipse/s '#!#re. 7o(e er, i! $ad !es! mar&e!ed !$e ci"are!!e in!erna!ionally. RJR !es!ed !$e brand in Fermany (i!$ !$e name 7i-G. I! licensed !$e !ec$nolo"y in Japan and 3(eden !o o!$er !obacco companies !$a! (ere commi!!ed !o mar&e!in" red#ced-smo&e ci"are!!es. In Japan, !$e ci"are!!es (ere called -irs. In 3(eden !$ey (ere called Inside. I! appears !$a! Japan Tobacco (!$e Japanese licensee) $as more con'idence in !$e prod#c! !$an many people in !$e >ni!ed 3!a!es. In mid-1999, Japan Tobacco (JT) ac+#ired RJR/s in!erna!ional opera!ions, incl#din" i!s Ferman prod#c!ion 'acili!y and !$e 7i-G brand. JT/s =eb si!e s$o(s an ill#s!ra!ion o' !$e ci"are!!e. C#l!#rally, Japan s!resses bein" poli!e and considera!e o' o!$er people. Ane obser er no!ed !$a! per$aps !$e ne( Japanese ci"are!!e is really a 1considere!!e.1
Questions : ( !ar"s #ac$ %

1. -naly.e RJR/s mar&e!in" s!ra!e"y 'or %remier. =$a! se"men!a!ion and !ar"e!in" problems do yo# seeH ). -naly.e RJR/s mar&e!in" s!ra!e"y 'or 9clipse. =$a! se"men!a!ion and !ar"e!in" problems do yo# seeH 3. 2o yo# belie e 9clipse mi"$! be more s#ccess'#l in 'orei"n mar&e!sH =$y or ($y no!H