I am, by training, an econometrist. After leaving university I read a lot of books on the topic because it was still a very new area of study. It was new because until then all calculations had to be done manually.
One of the books I still have was written by Smallensee (get reference). His study was specifically related to the issue of advertisings effect on sales. Whilst he did not concentrate on the cigarette market he concluded that advertising seldom affects the market size for a product category, it does however, affect the sales of brands in the product category. His conclusion stuck with me because I was a market researcher in the liquour industry at the time and often heard brand managers claim that the advertising for their brand will not only grow its market share, but also the whole category.
Smallensee noted the exceptions to this ‘rule’ being that:
- The product type is new,
- The brand itself is the category (monopoly),
- The category itself has not been advertised before – which is really a combination of the first two exceptions.
I have not come across any evidence that the total volume of cigarette advertising increases or decreases the size of the total market.
In fact, in my opening chapter … the authors of the French … conclude that current anti-smoking advertising is not decreasing cigarette consumption. In fact, this is what they want to improve. To put it simple: the ban on smoking advertising is not working – even anti-smoking advertising and pack messages are not working.
So, why is cigarette smoking decreasing?
Well, it is not decreasing. I quoted the WHO saying that there are two trends underlying tobacco consumption:
- A Decrease in smoking among the wealthier people in the wealthy nations,
- An Increase in smoking among the poor (people and nations).
This leads to an increase in total cigarette consumption because there are more poor people than less poor people on earth, and the poor is becoming more faster than the wealthy.
Obviously one might deduce from this that anti-smoking actions are working because these are more applied in the wealthier countries. But, even this is not really true because the poor people in those countries are smoking more.
This brings us back to the argument that the price of cigarettes should not be increased because this will penalise the poor people who need their cigarettes. Does this imply that the anti-advertising measures are also selectively applied to the wealthy people? By its very nature this cannot happen. They are applied to all people (smokers and non-smokers).
So why do we see a decline in smoking among the wealthier people? Simply because we saw an increase in smoking during World War II when the governments were distributing cigarettes, and smoking became ‘fashionable’. So comparisons of trends are working of a artificial high base.
See chapter (to be written).
I will stop this chapter for the time being so that I can add references as I find them (if I find them).