Essays on Counter-Marketing and the Role of Brands Open Access

Wang, Yanwen (2014)

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Counter-marketing, such as excise taxes, educational advertising, and distribution restrictions, has been used to reduce the consumption of vice goods such as cigarettes and alcohol. Currently, there is substantial interest in extending counter-marketing efforts to additional categories that may pose health risks such as sugary sodas and high fat fast foods. While a substantial body of economic and public health research has documented the impact of various counter-marketing techniques at the category level, the role of marketing tactics such as branding is seldom considered.

The first essay of my dissertation, "The Unintended Consequences of Counter-Marketing Strategies", examines whether and how various counter-marketing techniques induce brand substitution, especially substitution to more dangerous products. My results show that uniform cigarette taxes designed to reduce cigarette sales have the unintended consequence of switching consumers towards higher nicotine content products. This dangerous switching occurs because a uniform cigarette tax provides an incentive for consumers to lower their price per unit of nicotine. This is a salient set of results because while excise taxes are the most potent counter-marketing tool, these taxes may also cause harm to a segment of consumers.

The second essay of my dissertation, "Does Brand Strength Moderate the Effectiveness of Counter-Marketing Technique," investigates how brand strength may moderate the efficacy of counter-marketing tactics. A notable feature of "vice" categories is the dominance of strong brands such as Coca-Cola, McDonalds, Marlboro, and Budweiser. I find that consumers who are loyal to strong brands such as Marlboro are less responsive to a cigarette excise tax increase and educational anti-smoking campaigns. However, these strong brand loyalists are more susceptible to smoke-free policies that limit smokers' options to publically consume cigarettes. My work extends the branding literature by looking into the role of strong brands in making brand-consumer relationships more resistant to counter-marketing. These results imply that counter-marketing efforts need to overcome not only the physical addiction of nicotine, but also strong psychological relationships between brands and consumers. This is of interest to both policy makers and big brands in targeted industries.

Table of Contents

Chapter 1

Chapter 2. 4

2.1 Introduction. 4

2.2 Literature Review.. 8

2.2.1 Economic Literature on Anti-Smoking Strategies and Category Sales. 9

2.2.2 Marketing Literature on Pro-Smoking Strategies and Category Sales. 10

2.2.3 Anti-Smoking Strategies and Market Shares. 11

2.2.4 Summary and Outstanding Issues. 12

2.3 Data. 13

2.3.1 Scanner Store Data. 13

2.3.2 Brand Advertising. 15

2.3.3 Counter-Marketing Strategies. 15

2.4 Model-Free Analyses. 16

2.5 Econometric Analysis. 18

2.5.1 Setup. 18

2.5.2 Estimation. 21

2.6 Results and Discussions. 23

2.6.1 Model Comparisons. 23

2.6.2 Results. 23

2.6.3 Elasticity. 26

2.6.4 Counterfactuals. 27

2.7 Discussion. 28


3.1 Introduction. 32

3.2 Literature Review.. 36

3.2.1 Marketing Studies on Cigarettes and Counter-Marketing. 37

3.2.2 Economic Literature on Anti-Smoking Interventions. 38

3.2.3 Branding and Brand-Consumer Relationship. 39

3.2.4 Literature Summary. 41

3.3 Data. 41

3.3.1 Purchases. 41

3.3.2 Brand Preference Segments. 43

3.3.3 Counter-Marketing Mix. 44

3.4 Model-Free Evidence. 46

3.4.1 Consumer Migration. 46

3.4.2 Quitting Patterns. 48

3.5 Model 48

3.5.1 Setup. 49

3.5.2 Heterogeneity and Brand Segments. 50

3.5.3 Expectations. 52 Economic Cost Expectations. 52 Convenience Cost Expectations. 53 Health Cost Expectations. 53 Evolution of Nicotine Addiction. 54

3.5.4 Dynamic Optimization Problem.. 55

3.6 Estimation. 57

3.7 Results. 60

3.7.1 Model Fit and Comparison. 60

3.7.2 Parameter Estimates in Expectations. 60

3.7.3 Reward Function Estimates. 62 Mean Estimates. 62 Heterogeneity of Brand Segments. 64 Heterogeneity of Income and Unobserved Heterogeneity. 66 Counter-Marketing Effectiveness across Segments. 66

3.7.4 Policy Experiments. 67

3.8 Discussion. 69

Bibliography 73

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