Premier Classic Essay, Research Paper

LAKSON TOBACCO COMPANY LIMITED

Nature and Status of Business

Lakson Tobacco Company was incorporated in Pakistan on February 10, 1969 as a public limited company and its shares are quoted on the Karachi and Lahore stock exchanges. The principal activity of the company is the manufacture and sale of cigarettes and tobacco.

Operating Results For 1998-99

Lakson Tobacco Company has maintained a growth momentum, both in turnover and profits. Sales revenues and profits increased by Rs. 1,878 Million and Rs. 30 Million respectively, as compared to last year. During the year 98-99 the company’s contribution to the national exchequer in the shape of excise duties and sales tax rose to Rs. 8.669 Billion as compared to Rs. 7.657 Billion in the previous year. The component of excise duties and sales tax paid during the year was equivalent to 62.20% of domestic sales turnover for cigarettes.

Leaf Tobacco

The 1998 tobacco crop was adequate to meet industry’s requirement and that of the company. The Company was able to procure the required to procure the required quantity at competitive prices.

Future Outlook

Lakson Tobacco Company will seek to consolidate its position in the face of challenges and current difficult economic situation and will strive to further improve its quality, volume and profitability. Effective cost control measures will be continued, with increasing emphasis and expansion of distribution coverage will receive continued focus in the ensuing year.

Performance of the company in 1998-99

During the year 1998-99, after Tax profits of the company rose to Rs. 180 Million as compared to last year profit of Rs. 150 Million. This shows a healthy increase of 20%.

Smuggling Threat

The growing availability of smuggled and counterfeited brands across many product categories, including cigarettes, negatively impacts both the operations of legitimate manufacturers of these products and the amount of duties and taxes collected by the government. This industry according to rough estimates by industry’s analyst has risen to about 20 Billion Rupees a year. The company looks forward to more stringent government action to curtail these activities.

Factories

The company has presently five manufacturing plants located at Kotri (Sindh), Korangi (Karachi), Qadirabad (Sahiwal), Mandra (Rawalpindi) and Swabi (N.W.F.P.).

PREMIER CLASSIC

History

World-wide operations started in 1701 for Premier Classic in London. Premier Classic is being manufactured by Lakson Tobacco Company under license from Premier Classic International in Pakistan this year on the 13 November 1999. Presently it is only being manufactured at Kotri.

Marketing Environments

Microenvironment

LTC has a very strong financial base. The company has no financial constraints on its Research & development. The Company’s R&D department, continuously strives to improve the quality of products.

The company’s personnel department offers incentives to the sales people by offering them more bonuses on performance.

The Company has excellent relations with media people. The company has a very strongly knitted network of marketing intermediaries.

They have 580 distributors country-wide and the physical distribution is very efficient.

The company has a good supply line of raw materials. It acquires raw material both locally and also imports them from other countries.

Macro Environment

Demographic Environment

With a population of around 160 million, Pakistan is one of the most populous countries of the world. It ranks 9th amongst the world’s most populous countries and with a population growth rat of around 3.5 %, it is likely to become the fifth largest nation population wise.

Age

18-36 years of age people are the main target market and young and middle aged people are the main customers. As Premier Classic is best suited for achievers and experiencers, who want to try new things in life. People above the age of 40 stick to one brand and they are more brand loyal so they hesitate to try new cigarettes and continue smoking ‘Gold Leaf’ or any other brand they are loyal to.

Gender

The male population, because in our society females are do not smoke in our culture.

Income

Above Rs.10000/=. Because Premier Classic, is of high quality but its price is medium, so everybody earning Rs.10, 000 /= plus can buy it easily.

Occupation

People associated with every profession having income above 10000/= is likely to buy “Premier Classic”. Most of the Young Executives and businessmen are likely to use the brand because most of the blue-collar workers may not be economically able to buy the cigarette.

Economic Environment

The price of Premier Classic is adjusted according to economic situation of Pakistan. As it offers a pack in 24/-Rs as compared to Gold Leaf which is available for 34/- Rs.

Technological Environment

Lakson Tobacco Company is using the same technology as they were using before the launch of Premier Classic.

Political Environment

Frequent changes in our government policies affects LTC’s macro environment, as every government changes policies. Like when the Government increases the sales tax the companies have also to increase the prices of cigarettes.

Premier Classic made a lot of research before fixing their prices, because if the company has to increase the price, it becomes quite difficult for the company to satisfy the consumer.

Cultural Environment

Premier Classic ad shows on the title picture a man wearing a Tuxedo with a lady wearing a western dress and gives a look of high social class. Due to shift in our cultural values and beliefs and shift towards western side, they create an image of “Premier Classic” for high social class. Premier classic is best suited for lifestyles of achievers and experiencers, as they want to try new things in life. Premier Classic shows the personality of an executive person who belongs to high social class and having high personality and lifestyle.

The best benefit of Premier Classic is its good taste, high quality and medium price.

Measuring & Forecasting Demand

The main market for Premier Classic is to capture 20% of the users of Gold Leaf.

We use the formula

Q = n * p * q

Where

Q = quantity required.

n = number of users

p = price per unit

q = quantity demanded

As the consumption of Gold Leaf is 350,000,000 million sticks per month % of this quantity is 70,000,000. So the number of users is 70,000,000/500(no. of sticks/month) = 140,000 users.

Putting these values

Q = 140000 * 1.20 * 500 = Rs. 84,000,000 Per month

BCG MATRIX

As a new product we can place Premier Classic in the ‘?’ segment of the BCG matrix because of it is a new product.

4 P’S OF PREMIER CLASSIC

PRODUCT

Premier Classic is a white in color except its filter, which is brown, Its tobacco is mostly imported and more than 90% comes from North America. Its filter is imported from Austria and the cigarette paper is imported from France and other European countries.

Consumer Benefit

Main function: To provide satisfaction and relaxation in a cigarette.

Physical Properties:

? White in color with Brown filter.

? Cigarette becomes bad if kept for long on shelf.

? Perishable in nature.

Features – Consumer Benefits

Features Consumer Benefits

Tobacco High Quality. Tastes great and gives a great deal of satisfaction.

Medium Price The pack has a very affordable as for its price.

Quantity Loose cigarettes are easily available at shops.

PLACE

Premier Classic is easily available at all places throughout the country. It is easily available in small pan shops as well as large departmental stores. There are five factories all over Pakistan where Premier Classic is manufactured:

? Dadu District, Sindh

? Korangi Industrial Area, Karachi

? Sahiwal, Punjab

? Mandra – Rawalpindi

? Swabi, NWFP

Distribution Network

There are 580 distributors of Lakson Tobacco Company all over the country.

These distributors supply both to the wholesalers and retailers in their respective areas.

Lakson Tobacco Company uses a Contractual Vertical Marketing Strategy. This strategy consists of independent firms at different levels of production and distribution who join together through contract to obtain economies of scale.

This strategy shows that a distributor or retailer of a Premier Classic cannot sell Pakistan Tobacco Company’s product and likewise a PTC distributor or retailer cannot sell LTC products.

PRICING

Before pricing the product, Lakson Tobacco Company considered its internal and external factors.

Internal Factors

Marketing Objective

The marketing strategy is to introduce a brand, which can compete with gold leaf. As their objective is to target middle and upper-middle class so the company priced the product directly to attract that class and positioned it as a medium priced product. Because of their medium price strategy they want to penetrate in the Gold Leaf market share so they have not created high price. They introduced the product in the price bracket of Capstan, which is a competitor of Gold Leaf, which is in the upper price bracket.

They adopted the “Penetration” marketing strategy. They priced it medium to increase demand. In this case profits are less. They are adding value by giving gift packs to make it long term.

Marketing Mix Strategy

The company adopted the pricing strategy of “Target Costing”. As the objective is to fill the gap of Rs. 20-25/- price bracket. LTC controlled the expenditure as to make such cigarette, which fixes into this price bracket. They have not created much profit margin so as to establish a good position in the market because the cigarette which they are competing has a strong brand loyalty.

Cost

The cost of production in making Premier Classic is not too much as LTC is already a market leader in Tobacco industry and has the machinery and plants to manufacture a new product easily.

Fixed Cost

The fixed cost is low as the company has already a good market share in other products and earning profits. They are using the same plant and factory for producing Premier Classic so the fixed costs are not very high.

Variable Cost

Variable cost is high in case of Premier Classic, as the whole material used in manufacturing Premier Classic is imported, that includes tobacco from USA, Paper from France, and Filter from Austria.

External Factors

Market and Demand

Lakson Tobacco Company set the price of Premier Classic by looking towards the existing market and demand of the products in the market. The demand is to have a high quality cigarette with medium price. Other competitor brands, Capstan is a medium price and medium quality cigarette. So, looking towards the economic conditions of the country, a demand for a cigarette of medium price and high quality was present.

The pricing of Premier Classic is done as

H M L

H Premium High Value Simple Value

M Over charging Medium Value Good Value

L Off False Economy Economy

Monopolistic Competition

Premier Classic is launched, as there is a monopolistic competition as it is a large segment of cigarette market, which is only catered by Gold Leaf. Premier Classic has shown high quality, high and attractive features and styles to have an edge in competition. With an attractive packaging it has been able to create a high image and value in customers minds.

Consumers Perception about Price and Value

Lakson Tobacco Company has decided a right price for Premier Classic as after buying it the consumers get something of value that is good quality cigarette with medium and economical price. The consumers perceive that the price is less than the product’s value, because its price is much less than the competitor’s brand Gold Leaf.

PROMOTION

A. Identifying the Target Audience

The company has started with a clear target audience in mind. They have targeted the people above 18 years and having an income of Rs. 10,000/- and above.

Male Population 51% 66.3 million

Above 18 years 59%of total male population

Target Audience

? Above 18 years of age

? Male adults of Pakistan

B. Communication Objective:

To create awareness, knowledge and liking among the target market.

C. Designing Message

In order to get their desired response, the marketer communicator has used the following appeals.

They have shown the rational appeal by showing the good quality, strong heritage, a tradition of excellence exclusively with distinction.

The message is structured such that they have emphasized on good quality, status symbol and an inspiration to acquire these qualities.

Print Ad:

Use of eye-catching picture, contrast, distinctive color, (a combination of dull gold, skin brown and black have been used. They have used attractive male and female models in both their print and TV ads.

They have used both the personal and non-personal channels for communication.

Personal

1. Sales representatives

Non-personal

A. Print Media

? Neon signs

? Magazines

B. Broadcasting Media

? Television

C. Display Media.

Bill Boards, Shop Boards, Shades.

Three different sizes of billboards have been used and have been placed on major roads of the city.

? 10 feet * 20 feet

? 15 feet * 40 feet

? 25 feet * 75 feet

Message Source Shown in the Ad

The source used in this message is a highly professional who serves as a reference for the target segment.

Promotion Mix Strategies

Promotion mix of Premier Classic consists of the following

1. Personal Selling

2. Direct Marketing

1. Personal Selling

The company has placed 20 stalls all around the city. They offer free cigarettes to the smokers and brief them about the brand. These stalls have been placed near the offices, Malls and densely populated areas of the city. The company’s sales force convinces the people to use the brand by telling them the good qualities of the brand.

The objective of their personal selling campaign is to entice consumers to try the cigarette. They’ve tried to lure the consumers of “Gold Leaf” cigarettes.

The tools used for consumer promotion

1. Sample: They offer free cigarettes to people for trial.

2. If the consumer likes the product, he is offered to buy the cigarette pack by the sales staff. With the pack, an envelope is given, that has three cheques that the consumer can use to win gifts in future.

3. Cheques: There are three different types of cheques. Each one carries different points.

? First cheque for 50 points

? Second cheque for 100 points

? Third cheque for 150 points

For each 50 points

? 50 points 5 packs of Premier Classic

? 100 points 10 packs of Premier Classic

? 150 points 15 packs of Premier Classic

When the consumer sends in the cheques to the Head Office, they are fed into a database that has all the names of the people sending the cheques and computerized draws are held for the prizes.

After that you will receive a free gift, which will be sent by mail.

These coupons are equipped with stamped postage paid envelopes.

Premiums

They are offering to their club members high priced beautiful lighter of low prices.

Advertising Specialties

They are presenting Calendars with their name and TV advertisement printed on it.

2. Direct Marketing

Lakson Tobacco Company used the “Incentivised Selling Teams” for brand introduction. The team members are not ordinary but highly trained salespeople. These people visit different places, such as offices, shopping Arcades and entertainment spots and offer cigarettes to people who already smoke. In return the consumer is offered a beautiful box having a pack of cigarette, a cigarette lighter and a telephone diary.

Initially the target was to sell the packs to 60% of the smokers asked. Instead 91% of them have accepted to buy the packs. Out of 91%, 73% were the smokers smoking cigarettes priced above Rs. 30/-.

Patronage Reward

Lakson Tobacco Company is offering their Premium Classic Club Membership to those who are frequent users of Premier Classic.

To become a member of PCC member, you will have to send, each of the three cheques (coupons), with the required Premier Classic pack tops. When you send all these cheques, you become a member of the club. Every member will have a Premium Classic Gold Card.

The members of the PCC are offered a variety of activities from time to time.

? Special promotional offers. For example Pack promotions.

? Periodic draws for foreign trips

? Dinners at exclusive restaurants.

? Gift vouchers of well-known designer outlets.

? Invitations to special entertainment programs such as concerts, festivals.

? Special discounts on selective products and services, upon presenting the PCC cards.

Points Of Sale

Their POS material includes:

? Tube shades

? Cigarette Dispensers

? Buntings

? Posters

? Shop Boards

? Shades

Premier Classic Customer Service Center

In its endeavor to provide customer satisfaction to the customers, Lakson Tobacco have established a customer service center at the company’s Head Office.

For all the queries regarding cheques, PCC membership etc., or any suggestions or comments, the customers can call us at any time on all weekdays between 9 a.m. & 5 p.m.

Advertising Strategy

Their strategy comprises of two elements.

1. Creating the advertising message

Message strategy

Message strategy of Premier Classic identifies the customer benefits for its user’s appeal. These benefits include quality satisfaction, pleasure pride and a symbol of status.

Message Execution

Lifestyle of a very successful man is shown. His strong personality shows that he is from the group of achievers.

Message theme CENTURIES OF GREAT TASTE.