Philip Morris U.S.A. And Marlboro Friday (a) (Condensed)

Abstract

This case is a condensed version of "Philip Morris U.S.A. and Marlboro Friday (A)" (UVA-M-0468). In July 1993, Philip Morris executives met to consider second-quarter data on U.S. tobacco sales. Three months earlier, the company had announced a 40-cent-per-pack promotion for Marlboro cigarettes, the number-one-selling cigarette in the world. On the day of the announcement, April 4, Philip Morris stock fell $14.75, to $49.375, while the Dow Jones Industrial Average fell 68.63 points. On June 4, the company announced an extension of the promotion through August 8. After eight months of consecutive share declines, Marlboro's share had rebounded by three points. Philip Morris executives now faced several important decisions: Should the Marlboro promotion be extended beyond August 8? Should the promotion be replaced with a permanent cut in wholesale prices? Should the prices of other Philip Morris premium brands be lowered? Finally, should the prices of the company's discount brands be altered in any way?

Excerpt

UVA-M-0657

Rev. Mar. 2, 2016

Philip Morris U.S.A. and Marlboro Friday (A) Condensed

In July 1993, Philip Morris executives met to consider second-quarter data on U.S. tobacco sales. Three months earlier the company had announced a $ 0.40 per pack promotion on Marlboro cigarettes, its flagship brand and the No. 1 selling cigarette in the United States and the world. The day of the announcement, Friday, April 2, 1993, Philip Morris stock fell $ 14.75 to $ 49.375, while the Dow Jones industrial average fell 68.63 points. The day soon came to be known as “Marlboro Friday.”

Philip Morris executives now faced several important decisions. Should the Marlboro promotion be extended beyond August 8? Should the promotion be replaced with a permanent cut in wholesale prices? Should the prices of other Philip Morris premium brands be lowered? Finally, should the prices of the company's discount brands be altered in any way?

The U.S. Cigarette Industry

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Keywords: brand management, pricing