Introduction: While much of the concern with tobacco industry marketing has focused on direct media advertising, a less explored form of marketing strategy is to discount prices. Price discounting is important because it keeps the purchase price low and can undermine the impact of tax increases.
Methods: We examine annual marketing expenditures from 1975 to 2019 by the largest cigarette and smokeless tobacco companies. We consider three categories: direct advertising, promotional allowances, and price discounting. In addition to considering trends in these expenditures, we examine how price discounting expenditures relate to changes in product prices and excise taxes.
Results: US direct advertising expenditures for cigarettes fell from 80% of total industry marketing expenditures in 1975 to less than 3% in 2019, while falling from 39% in 1985 to 6% in 2019 for smokeless tobacco. Price-discounting expenditures for cigarettes became prominent after the Master Settlement Agreement and related tax increases in 2002. By 2019, 87% of cigarette marketing expenditures were for price discounts and 7% for promotional allowances. Smokeless marketing expenditures were similar: 72% for price promotions and 13% for promotional allowances. Price discounting increased with prices and taxes until reaching their currently high levels.
Conclusions: While much attention focuses on direct advertising, other marketing practices, especially price discounting, has received less attention. Local, state and federal policies that use non-tax mechanisms to increase tobacco prices and restrict industry contracts with retailers are needed to offset/disrupt industry marketing expenditures. Further study is needed to better understand industry decisions about marketing expenditures.
The impact of product based reward promotions: Which sales strategies are more effective for retail companies, price discounts or point incentives?
