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IQOS Marketing Strategies – launching a product like a boss – 14M users in 3 years
(9 min read)

IQOS (I Quit Ordinary Smoking) – an innovative replacement for smoking cigarettes produced by Phillip Morris International. Instead of burning tobacco, users heat it with a device called IQOS.

It is said to be more healthy than smoking cigarettes and branded as a lifestyle product. It quickly stormed the market.

?Strategy & Tools

Highlights 

  • 2014 – the IQOS pilot project was launched in Nagoya, Japan and Milan, Italy.

  • 2015 – heated tobacco products market share in Nagoya reach 0.7% by the end of the pilot

  • 2015-2016 – expansion to 10 new cities in Switzerland, Russia, Denmark, Germany, and Monaco.

  • 2016 – IQOS is launched in more and more markets. The market share in Nagoya goes up to 5.2%. About 1 million people had converted to heated tobacco, while 70% converted fully od predominantly to the product.

  • 2017 - IQOS reached 5 million users. The market share in Japan reached 13.9% and in Korea 5.5%. In Japan, there were already 871,000 guided IQOS trials.

  • 2018 – The launch of IQOS 3 a cheaper variant of the product. 6.9 million users.

  • 2019/2020 - IQOS is already used by 13.6 million users, in 49 countries. 

  • October 2019 - Phillip Morris International is allowed to launch IQOS in the US, provided following strict marketing restrictions.

Who is IQOS owned by?

IQOS is owned by Philip Morris International, a Swiss-American company focused on making cigarette and tobacco products. The founder is Philip Morris, a British tobacco importer from the 19th century, and the CEO of the company (as of 2022) is Jacek Olczak, a Polish businessman.

Piloting as the basic element of the IQOS marketing strategies

The pilot in Japan showed the company what problems with the device the consumers face (different ritual, increased time to communicate benefits, willing to stay through the conversion process). After that, certain steps have been made regarding IQOS marketing strategies – the company has shifted from B2B to B2C model and identified that the best way to sell IQOS would be through presentations with ‘IQOS experts’.

Market testing

IQOS marketing strategies were based on solid market tests. PMI has tested the product response on small-enough markets. After it became promising in Nagoya, the product has been expanded to 12 major prefectures. Soon, the small production was unable to meet demand. There were lines in front of Japanese IQOS stores to purchase the device. 

A creative approach to product…

How a global tobacco company such as Phillip Morris International, with its deep pockets, could find its way to increased revenue in a world that's moving to strictly limit or eventually ban smoking? Sell a product that makes you quit smoking–IQOS. At least partially, because you’re still feeding a similar habit and take the addictive nicotine.

It’s worth mentioning that the same company experimented with tobacco heating product in the 80s but it wasn’t a commercial success.

…and regulations

IQOS opened a completely new possibilities for PMI to sell their products. For example, in Japan, e-cigarettes are banned and therefore - IQOS had no competition to fight with. On some markets, advertising a tobacco product such as IQOS is highly regulated but there, the company moved to Points-of-Sales and as direct approach as they could.

The Hook

When IQOS was introduced on new markets, many smokers would be interested, but at the same time–hesitant to try a product, especially if it was more expensive compared to traditional smoking.

That’s why PMI went heavily for ‘free trials’ of IQOS, which strengthened IQOS marketing strategies. You can use the product for 30 days for free and decide to buy or return it. It’s enough to form a new habit and check the benefits for yourself – less smell, feeling better for picking the slightly healthier alternative, and other.

That product tryout was often used as an incentive to quit smoking - you could get the device for tests in exchange for your pack of cigarettes or a lighter.

Philip Morris IQOS revenue

The total IQOS revenue as a reduced-risk product was around $1.53 billion in the second quarter of 2019. In 2019 IQOS sales boosted Philip Morris revenue by 10%. IQOS revenue from the European market jumped from $65 million in 2018 to $182 million in 2019.

Deep pockets

PMI is a corporation that makes around 10 billion USD per year. We might get excited for startup unicorns to get valued at $1 bn but PMI is valued at $140 bn. Such a behemoth can make it rain with their money to launch a new product.

At launch, IQOS was literally everywhere:

  • outdoor banners
  • product displays in everyday venues: gyms, coffee shops, barber shops, and other
  • high-end IQOS-branded cars
  • kiosks in shopping malls
  • sponsored IQOS launch events
  • sponsoring parties
  • sponsoring beach bars
  • sponsoring festivals: music, street food, beer fests
  • sponsoring fashion shows and events (Marie Claire, London Fashion Week)
  • fashion designers collaboration
  • sports sponsorship (Ferrari F1 Team)
  • sponsoring cultural events

Multiply that by 50 markets. I’ll let that sink in.

Direct presentations

As a part of the IQOS marketing strategies, customers were introduced to the product through direct presentations. In IQOS venues, many salespeople were actively using IQOS. You could also try it for yourself at IQOS lounges in their boutique shops or at sponsored events. 

On some markets, such as in Israel, you can buy HEETS packs for IQOS everywhere you would buy normal cigarettes but to get the heating device, you would need to either go to the local store or order it online with a direct delivery and a presentation.

Capitalizing on a certain problem solution

IQOS is mostly aimed at smokers, so they have a more healthy alternative. One of its features is less smell and according to some research, no passive smoking. Heating doesn’t produce smoke (only aerosol), so people around shouldn’t be affected by it.

In shopping malls, through the glass of premium-looking IQOS boutique stores, you could see people using the devices with similar gestures to traditional smoking. On IQOS-sponsored events, you could find venues in which you could ‘smoke’–even if it was forbidden to smoke cigarettes there. IQOS also launched a set of Friendly Spaces where you can smoke indoors–in restaurants, clubs, etc.

As a smoker, looking at those people, you’d get interested enough to try the product.

Influencer marketing and how popular is IQOS

IQOS relayed heavily on influencers and brand ambassadors. How popular is IQOS? Well, the #IQOS hashtag has over 540,000 posts on Instagram and it has been viewed (on Instagram and Twitter) over 179 million times.

Tailoring an old product to the modern world

Cigarettes are becoming quite an old school thing. IQOS seems like a natural next step for that–it’s still dangerous to health, but slightly healthier and without the usual cigarettes’ drawbacks. It looks good–the stores are well-designed and the device looks premium and techy. It’s advertised as a lifestyle brand (so were cigarettes since ever). It’s… cool.

Some controversies around the IQOS marketing strategies

There are certain controversies around the IQOS brand. For example, PMI was authorized to advertise in the United States only to existing smokers – not youth and nonsmokers. However, a report by Reuters suggests that IQOS has been aggressively marketed on social media to younger audiences. Some brand ambassadors weren’t even smokers. The concerns are also raised by the brand being presented as trendy and lifestyle at the events where they youth are gathering.

?Psychology

Framing

The biggest psychology play from Phillip Morris IQOS marketing strategies is framing. The product is sold as a way to quit smoking but in fact, it exchanges one form of nicotine addiction to the other. Many materials claim stuff like “9.7 million users have stopped smoking and started using smoke-free products.” This is true but it doesn’t solve the smoking problem.

Endowment effect

IQOS is significantly more expensive than cigarettes. However, the free tryout adheres to the effect that consumers are willing to pay more for products when they interact with it first.

Loss aversion

30 days is enough to get used to the new product. Since then, loss aversion might come into play–people prefer to avoid loses rather than acquire gains. Losing access to IQOS device after 30 days of trial might be painful.

Sunk Cost Effect

People are hesitant to get out of investments that aren’t working but have already eaten up a significant amount. After buying the slightly expensive IQOS device, you would continue to buy HEETS to keep using it, even if you’re not 100% satisfied.

Halo effect

IQOS is presented in positive aspects - it powers great events, sponsors attractive influencers, and makes well-designed venues. This positive impression can impact the general opinion on the brand and its products.

?Window of Opportunity

Most businesses can’t match Phillip Morris and their approach to the IQOS marketing strategies, but there’s plenty you can learn here. Finding your audience wherever it is and communicating to it contextually proves to be working. For IQOS, that is presenting the brand as a lifestyle product at concerts or fashion events. For your brand, it might be finding developers at meetups or Reddit.

All in all, creativity also plays a major role here – in finding ways around regulations, building products, and marketing in various areas.

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