Vapor Trails

E-cigarette manufacturers ramp up marketing strategies for 2014

By  Erik J. Martin, CSP Correspondent

SCOTTSDALE, Ariz. -- From provocative Jenny McCarthy testimonials and colorful sports sponsorships to controversial Super Bowl spots and splashy giveaway promotions, electronic-cigarette makers are pulling out the big guns in recent months to push their products. And judging by many manufacturers’ marketing plans for 2014, they appear to be just getting warmed up.

Consider that ad spending in the smoking materials and accessories category (which includes e-cigarettes) jumped from $7.2 million in 2007 to $20.8 million in 2012, and e-cig makers shelled out over $15 million on TV spots in the first three quarters of 2013 compared to $1.1 million spent in the same period a year earlier, per Kantar Media.

In 2014, NJOY alone is committing approximately $31 million in marketing, including TV, radio, merchandising and promotion—“a big number for a small, independent company,” said Vito Maurici, senior vice president of sales and distribution for NJOY in Scottsdale, Ariz.

Lorillard’s blu made a big splash in recent months with TV spots and infomercials featuring star pitchmen like Stephen Dorff. But NJOY is competing hard with broadcast ads of its own—most notably its second-annual Super Bowl commercial that aired in select markets, this time touting the message, “Friends don’t let friends smoke” and featuring a catchy tune by Swedish DJ Avicii.

“Big tobacco would never send that message out,” said Maurici. “The reception in those markets where the spot aired was fantastic. The commercials are driving traffic into stores instead of retailers just carrying the brand and hoping consumers come in and ask for it.”

FIN also launched its “Rewrite the Rules” marketing campaign in 2013, which, in addition to print ads, digital promotions and a bus tour, included the company’s first national TV spots, depicting young-looking adult users enjoying FIN’s product in cafes and bars in a slow-motion montage.

The commercials encourage FIN’s consumer base to “take back some of the freedoms denied to traditional cigarette smokers,” said Jimmy Marston, senior vice president of sales for FIN Branding Group, Mobile, Ala. Thanks to the campaign, “we received positive exposure for our company and for the category in general, and we will build on this momentum in 2014 with many of the same successful images and taglines.”

Experts contend that the proliferation of ads within the past several months is a pre-emptive strike aimed at stamping brands into consumers’ consciousness prior to the FDA possibly curbing e-cigarette advertising—a move that many expect will happen, and soon.

Nik Modi, managing director for RBC Capital Markets in New York City, said e-cig makers are using a combination of tried-and-true marketing approaches like celebrity endorsements to contemporary tactics such as sponsoring music festivals to build brand loyalty. Blu, for example, has backed events like Bonnaroo and HARD Summer L.A., which hosted blu Vapor Lounge areas where adult consumers were able to try the product, charge their devices and use an interactive social-media photo booth.

“We know that authenticity matters to our customers, so our marketing campaigns needed to reflect that,” said Jason Healy, blu Cigs president in Charlotte, N.C. “It is not so much the product but the story or overall experience that customers relate to. This approach has really helped with expanding our brand recognition and loyalty.

“Branding is critical, but it can only stand separate from performance for so long,” he added. “We backed up our brand image with continuous consumer conversation and development based on that interaction and input. We feel our strategy relays a more authentic and genuine approach than we have seen from (our) competitors.”

One company that currently doesn’t believe in broadcast advertising is Logic. Instead, the major e-cig specialist is putting marketing emphasis on partnering with brick-and-mortar retailers by participating in loyalty and rewards programs and providing complimentary merchandise racks that allow c-stores to display up to four brands per fixture.

“Our opinion is that it’s not appropriate for underage consumers to be exposed to e-cigarette commercials, for the same reason there are no cigarette ads on TV,” said Miguel Martin, president of Logic Technology, Pompano Beach, Fla.

“Instead,” he said, “we want to interact with adult smokers within stores, which is the most effective and responsible way to market our products. We also don’t believe in discounting the price of our products.”

Considering that the industry is still in its early stages, there are no clear brand leaders yet, and consumers do not yet associate themselves with a particular product as they do with cigarettes. As a result, many brands can simply ride the industry’s growth to higher sales as consumers continue to try the products and new brands to find their preferences, according to Modi.

“However, an effective and unique marketing strategy—especially in a convenience store, which is the No. 1channel for e-cigs—is critical in building the brand equity required to be able to operate in this segment over the long run,” said Modi.

Marston agreed, noting that “c-stores are an integral part of our brick-and-mortar strategy, and the c-store segment currently represents our biggest growth opportunity.”

NJOY also recognizes that opportunity, as evidenced by its decision to launch the category’s first national buy-one-get-one-free promotion in January within select chains, including 7-Eleven, Circle K, Chevron, Hess and several others across the United States. The offer, which allows consumers to get two disposables for $7.99, runs through March or while supplies last.

While convenience stores will need to take into account the unique characteristics of their floor plans to determine an optimal marketing strategy, “we generally believe that the best method of merchandising e-cigarettes is to ensure that informational and robust point-of-sales materials are prominently positioned next to traditional tobacco products,” said Marston.

Consequently, FIN rolled out over 1,500 compact, two-tier acrylic countertop displays within retail stores in 2013 and is looking to expand these efforts in 2014.

“We found that they can increase turns by three to four times,” said Marston.

One strategy that will likely be employed more often by manufacturers is local and regional promotional tactics to win specific markets rather than target the national market, said Modi. For example, Logic has placed displays of their brand on taxi billboards throughout New York City and advertises its product as the top-selling e-cig brand in town on local radio stations—giving the company very high consumer awareness in that market.

“This strategy,” said Modi, “has led Logic to be the No. 1 brand in New York.”

But while localized marketing can win the battle, the war may ultimately be won by the players with the deepest pockets—namely, Big Tobacco.

Bonnie Herzog, senior tobacco analyst for Wells Fargo Securities LLC in New York City, predicted that the big 3 tobacco firms—with Lorillard, Altria and Reynolds now among the top 10 e-cig sellers—will “be everywhere in the next several months with their product offerings. The money spent behind the category in terms of advertising and marketing from the big national companies will make 2014 quite interesting.”