Positioning A Trillion $ Category (Cigarettes)

In 1900 cigarettes had a 2% share of the U.S. tobacco market.

The other 98% was dominated by plugs, pipes, and chewing tobacco.

This was not a supply problem for cigarette manufacturers.

The technological advances needed to produce cigarettes profitably at an effectively unlimited scale had been achieved in prior decades.

It was a demand problem. Rooted in perception.

Cigarettes occupied an unappealing position in the mind of consumers.

They were considered a “cheap commodity for the urban young” who could not afford more desirable alternatives.

A totally non-aspirational product. Unlike cigars, which were a potent symbol of wealth and power.

Like today, cigarettes were considered a “dirty habit”.

Smokers were characterised as “delinquent” or “degenerate” by increasingly vocal proponents of the temperance movement.

A form of tobacco consumption practised by the “disreputable” and “idle” in society. Its users were linked to petty crime.

The cigarette’s overweighted visibility made it an easy target, too.

Unlike pipes and cigars, mostly consumed in private drawing rooms and parlours, cigarettes were often smoked in public places — everywhere.

Activists were (rightly) shouting about the adverse health effects of cigarette smoking as far back as the late 19th century.

The pushback was smokin’ hot.

By the early 1920s, 16 states had implemented laws either prohibiting or limiting the sale or promotion of cigarettes.

Despite all of this, cigarettes would go on to command a 90% share of the U.S. tobacco market by 1950.

And, equally incredibly, grow the size of the tobacco market 100X.

This graph puts the cigarette’s U.S. ascendency into perspective. 👇

You can see a couple of major events there, like WWI and WWII, which were genuinely catalysing events for the adoption of cigarettes.

What this graph does not illustrate is why.

How could cigarette demand light up so dramatically?

A core factor was a change in perception. Cigarettes shifted from an undesirable to a desirable position in the mind of consumers.

Tobacco companies were a key driving force in engineering this shift.

This was loooong before ‘positioning’ was articulated into a coherent go-to-market concept by Al Ries and Jack Trout in the 1960s — when cigarettes reached their U.S. sales peak.

Positioning has always been a factor, whether utilised intentionally or not.

And, the tobacco companies nailed it.

They were among the first to identify and capitalise on a major shift in consumer advertising strategy from addressing ‘needs’ to ‘desires’.

Owning a position in the mind based on desire was critical.

Next, I’ll break down the major steps. 👇

🎩 The ‘Duke of Cigarettes’

James Duke is the ‘John Rockefeller of tobacco’ you’ve never heard of.

You’re probably familiar with artefacts of his family’s legacy… like Duke University. And, you know, untold pain and suffering caused by smoking diseases.

He’s credited with “almost single-handily inventing the modern cigarette”.

The toke invokin’ OG.

Duke grew cigarettes from a cottage industry into a market that went on to account for 1.4% of U.S. Gross National Product.

He did this initially through the growth of his own companies, and later via the formation of a Tobacco Trust that consolidated over 90% of the market into one entity he was in charge of.

A true titan of tobacco.

But, his cigarette empire didn’t start off with a spark.

In the late 19th century Duke had an overcapacity problem. A vast potential for production in his factories but not enough consumers to buy them.

Demand wasn’t there due to their perception problem.

Retention was not an issue. His product was literally addictive.

But if no one ain’t buyin’ it, no one ain’t gettin’ addicted.

From a positioning perspective, Duke’s major contribution to the cigarette category was identifying who the ‘golden cohort’ was on the adoption curve. And, executing a successful go-to-market strategy to attract them.

Duke’s segmentation methodology was pretty straightforward.

Most of society has a negative bias toward cigarettes. But, not everybody does. What are the attributes of those who don’t? And, have malleable minds?

That answer came quickly — young men and (horrifically) boys.

Duke realised promoting the merits of cigarettes on its own was not enough. It required the creation of new hooks and incentives, distinct from other tobacco products, to appeal to a younger demographic.

So, he set up an internal marketing department to figure this out.

Success was found in distributing coupons and collecting cards with each pack of cigarettes.

Cards featuring depictions of sport, adventure, Civil War generals, flags, and scantily clad “actresses” were popular to collect.

Duke’s young customers scrambled to collect the cards (a powerful psychological mechanic) and built both a habit and specific rituals around smoking together.

The distinctiveness of cigarettes in their appearance, usage, and packaging was a sharp contrast to the traditional forms of tobacco consumed by their parents and an object of generational identity.

Boys who were eager to leave the perception of childhood behind smoked cigarettes to signal they were now an adult. Smoking cigarettes represented an act of independence.

The fact cigarettes were machine-made was not hidden but actively advertised as a selling feature on the packaging. It embraced the new.

All of this combined to position the cigarette category as the “modern and independent” tobacco product for working-class coming-of-age boys/men.

🐪 Big Brands

In 1911 The Supreme Court ordered Duke’s Tobacco Trust to dissolve (the same day it ordered the Standard Oil Trust to dissolve).

This triggered the next phase of the cigarette adoption curve — early adopters.

In the aftermath of the Tobacco Trust’s dissolution, new companies emerged to build the first truly national cigarette brands.

By the 1920s three brands — Lucky Strike, Camel, and Chesterfield — commanded 80% of the U.S. cigarette market.

Each had distinct branding strategies, targeting multiple customer profiles, rooted in identity and youth.

To give you a flavour…

Lucky Strike debuted the slogan “It’s toasted” in 1917 (yes, over 40 years before Mad Men would have you believe).

This was based on the then cutting-edge advertising theory that consumers needed a “reason to buy” to spark their purchase.

In this case, the perception of a better taste. “Toasting makes it taste delicious, like toasting a loaf of bread”, the logic followed.

Lucky’s position in the mind became ‘the toasted taste cigarette’. Which, was communicated as a luxurious and premium experience.

Cigarette advertisements featured well-dressed, sophisticated men enjoying a smoke.

This imagery suggested smoking a Lucky was a refined and fashionable activity associated with success and social status.

The ‘toasted’ perception was also utilised to connote better comfort. That toasting somehow reduced throat irritation (and therefore coughing) — the ‘comfort cigarette’.

Doctors were employed in advertising creatives to not only communicate the ‘medical credibility’ of this position but also endorse the brand and cigarettes in general.

Another example….

Camel launched in 1913 and within a few years became the leading national cigarette brand with a 30% market share. Its pre-launch ‘viral’ ads developed national intrigue and anticipation — “the Camels are coming!”.

Camel’s packaging depicted a camel and pyramid in the background, suggesting foreign adventure and allure, which aligned(ish) with the perception of their “Turkish blend” feature.

No coupons or cards — or anything like that — were offered with the product.

Camel’s were communicated as a premium tobacco experience. Smokers were buying into the idea of ‘superior taste’. Not tertiary gimmicks.

This was a pivotal moment in cigarettes broadening their appeal to an increasingly wealthier and modern-life-leaning client base.

The successful "I'd walk a mile for a Camel" campaign communicated the perception of desirability, elusiveness, and superior quality.

This positioned camel as the “exotic cigarette”.

Significant because tobacco companies were quick to realise ‘taste was in the mind’ and not the material properties of the product.

Whilst the brands of this era did to some extent ‘duke’ it out amongst themselves for customers, the real breakthrough was the post-Tobacco Trust-era competitive dynamics.

That is, the collective noise and unrestrained creativity the brands created together, as a fellowship, promoting the cigarette category. A rising tobacco tide rises all cigarette tips.

This helped recruit new smokers across an increasingly growing set of demographics, by gradually eroding purchase-blocking assumptions and objections related to social status and experience.

A common theme across this era was portraying cigarettes as a premium offering, enjoyed by the well-to-do.

The cigarette category was collectively positioned as the ‘sophisticated and modern’ tobacco choice in various guises to consumers.

Dispelling prejudices that cigarettes were a low-quality product, used through a lack of choice, by ‘degenerates’ and ‘losers’.

🪖 The Great War

All cigarette brands benefited enormously from WW1, which further ignited demand for their product.

The young men, whom the likes of Duke and his tobacco-pushing contemporaries had recruited as cigarette smokers, headed off to the battle-torn fields of Europe.

They took the habit of cigarette smoking with them.

Images and stories of American soldiers smoking together on the front line became heroic and romanticised back home.

This was publicity gold — a critical lever to position a new category in the mind.

Prejudices against cigarette smoking began to break down. These heroes of battle could hardly be considered “degenerate” or “delinquent”.

The cigarette became a “commodity of morale” and a symbol of patriotism, heroism, and masculinity.

This view was cemented in public perception by General Pershing, the commander of the American Expeditionary Forces:

Now, cigarettes had real credibility. They were endorsed by Uncle Sam.

The increasingly wild claims brands made about their products (e.g. “Toasting removes dangerous irritants”) had more legitimacy.

A national effort took place to donate millions of cigarettes to soldiers, who were experiencing shortages.

These cigarettes were distributed by the U.S. government, which also purchased the entire output of certain U.S. cigarette factories to satisfy frontline demand and public perception.

The cigarette manufacturers did not sleep on this opportunity.

They devised highly-effective promotional campaigns that infused wartime patriotism and notions of heroism, masculinity, and duty into the perception of their cigarette brands.

Cigarettes were the ‘patriotic’ tobacco choice.

The big brands squeezed every drop out of the WW1-publicity gravy train. War-themed ads continued to be run even after WW1 had concluded.

This Chesterfield ad is from 1919.👇

By the conclusion of the Great War decade, U.S. per capita consumption of cigarettes had grown to around 700. From 54 in 1900. That’s 12X growth.

This was just the beginning of how cigarettes came to occupy a desirable space in the mind.

By the early 1960s, U.S. per capita consumption breached 4,300 cigarettes per year. 80X growth from 1900.

Deep dives for another day.

📘 Playbook

🎩 Duke - golden cohort phase

• Segmentation. Identified a customer persona with no negative bias toward the product (i.e. young men/boys).

• Incentivisation. Give that customer a reason to try/buy the product beyond the product itself (e.g. a card collection game).

• Uniqueness. Leant into the product’s modern unconventional differences (e.g. machine made). Created appeal rooted in identity.

Position owned in the mind: The ‘modern and independent’ tobacco product for coming-of-age boys/men.

🐪 Big Brand - early adopter phase

• Segmentation. Leveraged traction from the ‘Duke era’ to transition cigarettes into a premium-leant offering, targeting wealthier customers.

• Anticipation. Built anticipation of the product before consumers tried it. ‘Taste is in the mind’ — if consumers thought it should taste better, it did.

• Concept. Communicated a unique ‘reason to buy’ concept. “It’s toasted” or “I’d walk a mile for a Camel”.

• Imagery. Aligned the product with desireable aspirations of where their target consumer wanted to be on the social spectrum — sophisticated, modern, wealthy.

• Publicity. Leveraged a national event (WW1) to maximum effect by appropriating positive sentiment toward it with their brands.

• Credibility. Traded on the de facto endorsement of the U.S. government. Employed figures of upstanding social currency (e.g. doctors) to advocate the product.

• Fellowship. Raised the profile and perception of the cigarette category through highly-creative and novel advertising practices, born out of intense brand competition.

Position owned in the mind: The ‘patriotic and sophisticated’ tobacco product for modern Americans.

That’s it for today! I’ll be back in your inbox soon.

Martin 👋

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