Follow the Money: A Closer Look at US Tobacco Industry Marketing Expenditures

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.

Examining the Relationship between Youth-Targeted Food Marketing Expenditures and the Demographics of Social Media Followers

Background: To determine how many adolescents follow food/beverage brands on Instagram and Twitter, and examine associations between brands’ youth-targeted marketing practices and percentages of adolescent followers. Methods: We purchased data from Demographics Pro to characterize the demographics of Twitter and Instagram users who followed 27 of the most highly advertised fast food, snack, and drink brands in 2019. We used one-sample t-tests to compare percentages of adolescent followers of the selected brands’ accounts versus all social media accounts, independent samples t-tests to compare followers of sugary versus low-calorie drink brands, and linear regression to examine associations between youth-targeted marketing practices and the percentages of adolescent followers. Results: An estimated 6.2 million adolescents followed the selected brands. A higher percentage of adolescents followed the selected brands’ accounts (9.2%) compared to any account on Twitter (1.2%) (p < 0.001), but not Instagram. A higher percentage of adolescents followed sugary (7.9%) versus low-calorie drink brands (4.3%) on Instagram (p = 0.02), but we observed the opposite pattern for adults on Twitter and Instagram. Television advertising expenditures were positively associated with percentages of adolescent followers of the selected brands on Twitter (p = 0.03), but not Instagram. Conclusions: Food and sugary drink brands maintain millions of adolescent followers on social media.

Product Placement

Product placements represent the paid inclusion of branded products through audiovisual means within mass media programming. Placements reflect a “hybrid” characteristic that integrates key elements of advertising and publicity messages. Specifically, advertising messages are paid for and identify the brand sponsor; publicity messages are not paid for and do not identify the brand sponsor; hybrid messages are paid for and do not identify the brand sponsor. Given this hybrid characteristic, placements are attractive to brand sponsors: the “paid for” characteristic allows the brand sponsor to exercise control over the message (content, format, how it is presented, etc.); the lack of identification of the brand sponsor enhances the credibility of the perceived message source, thereby encouraging the audience to process the message as editorial content. In other words, the message is processed less defensively than, say, how the audience processes advertising messages. Product placements have registered impressive growth as evident from increased marketing expenditures devoted to placements, the expanding scope of placements (their popularity in TV programs, movies, songs, etc.), and the remarkable degree to which audiences embrace, accept, or tolerate placements worldwide. Historically, the United States has led the world market for product placements. PQ Media reports predict that the value of US product placements will reach an astounding $11.44 billion in 2019 from $7.39 billion in 2011. Several factors have contributed to this development, ranging from the fragmentation of media, decreased effectiveness of ads, and the general lack of regulation of product placements. For example, industry observers note the diminishing effectiveness of the thirty-second television ad. TV viewers often rely on devices such as digital video recorders (DVRs) to avoid or zip through commercials. Product placements have a strategic advantage over traditional ads in that they lie embedded within the editorial content that audiences actively seek. Additionally, exposure to product placements often occur in a setting (e.g., a movie theater) with a captive audience. When taken together, they provide ideal circumstances to influence audiences unobtrusively for commercial benefit using a message format that projects a non-commercial character. As a result, audiences are less likely to be aware of persuasive character of product placements and thereby process them differently than, say, how they respond to ads. It is noteworthy that ads engender instant audience awareness of their persuasive character, but this outcome is less likely for placements. Research indicates that the credibility of the message source decreases when audiences become aware of the sponsored nature of placement messages, compared to situations where they lack such awareness. However, empirical evidence also shows that this negative outcome or damage does not spillover to the sponsoring brand.

Determinants of Earnings Persistence and Predictability for Lodging Properties

Accounting earnings are used extensively in the lodging industry for the purposes of incentive contracting, credit assessment, and valuation but we know little about the attributes of lodging properties’ accounting earnings and their determinants. Two important attributes of accounting earnings are persistence and predictability, which have been identified as key components of sustainable earnings. In this study, we examine a sample for lodging properties over a lengthy time-period to investigate the property-specific determinants of the persistence and predictability of lodging properties’ earnings. We find that barriers to entry, measured by the relative amount of marketing expenditures, have a positive impact on these earnings attributes. We also find that revenue diversification has a positive effect on these attributes, presumably through its impact on earnings stability. Finally, we find that resource rigidity, as measured by operating leverage and labor intensity, have a consistent dampening impact on persistence and predictability.

Vaping versus JUULing: how the extraordinary growth and marketing of JUUL transformed the US retail e-cigarette market

BackgroundWhile national surveys showed declines in e-cigarette use in the USA between 2015 and 2016, recent reports indicate that JUUL, a sleekly designed e-cigarette that looks like a USB drive, is increasingly being used by youth and young adults. However, the extent of JUUL’s growth and its marketing strategy have not been systematically examined.MethodsA variety of data sources were used to examine JUUL retail sales in the USA and its marketing and promotion. Retail store scanner data were used to capture the retail sales of JUUL and other major e-cigarette brands for the period 2011–2017. A list of JUUL-related keywords was used to identify JUUL-related tweets on Twitter; to identify JUUL-related posts, hashtags and accounts on Instagram and to identify JUUL-related videos on YouTube.ResultsIn the short 3-year period 2015–2017, JUUL has transformed from a little-known brand with minimum sales into the largest retail e-cigarette brand in the USA, lifting sales of the entire e-cigarette category. Its US$150 million retail sales in the last quarter of 2017 accounted for about 40% of e-cigarette retail market share. While marketing expenditures for JUUL were moderate, the sales growth of JUUL was accompanied by a variety of innovative, engaging and wide-reaching campaigns on Twitter, Instagram and YouTube, conducted by JUUL and its affiliated marketers.ConclusionsThe discrepancies between e-cigarette sales data and the prevalence of e-cigarette use from surveys highlight the challenges in tracking and understanding the use of new and emerging tobacco products. In a rapidly changing media environment, where successful and influential marketing campaigns can be conducted on social media at little cost, marketing expenditures alone may not fully capture the influence, reach and engagement of tobacco marketing.

Marketing spending and aftermarket performance of IPO firms

Purpose Increasingly, marketing managers are asked to consider the financial implications, in terms of both book and market values, when making strategic decisions. The purpose of this paper is to investigate the role of marketing expenditures in explaining the variation in the aftermarket performance of a sample of firms conducting initial public offerings (IPOs). Design/methodology/approach Theories from marketing and finance – market-based assets (MBA) theory and signaling theory respectively – serve as the conceptual basis of this paper. The results of this study, based on a sample of 2,103 IPOs covering the 1996 to 2008 time period, suggest that increased marketing spending positively impacts aftermarket (i.e. stock price) performance. Findings The authors find that while short-run aftermarket performance is positively and significantly impacted by pre-IPO marketing spending, long-run firm performance measures do not appear to be impacted by pre-IPO marketing spending. Further, pre-IPO marketing spending does not incrementally reduce underpricing or improve long-run performance when the IPO takes place during extreme market conditions such as recessions or hot markets, and these results are important to the shareholders and potential investors in the firm. Research limitations/implications Theoretically this paper advances the literature on the marketing-finance interface by extending the MBA and signaling theories. For practice, the results indicate that spending more money on marketing before the IPO and disclosing this information produces positive bottom-line results for the firm. Originality/value While Luo (2008) documents a significant relationship between the firms’ pre-IPO marketing spending and IPO underpricing, few studies explore the impact of marketing spending on stock price performance beyond the first day of trading. This paper makes three unique contributions. First, the authors extend Luo’s study by investigating the effect of marketing expenditures on underpricing during extreme market conditions. Second, the authors are the first to examine IPO performance in the long-run as well as the short-run. Finally, the authors assess how long-run performance is impacted by marketing spending during extreme market conditions. The findings of this study has implications for managers and shareholders of firms considering going public through a traditional IPO.

Analytics Overuse in Advertising and Promotion Budget Forecasting

Several studies have recently raised a common concern in the field of management, which is the overspending in marketing activities. In this paper, we propose and empirically test that overspending in marketing investments is an unfortunate outcome of information overload, in a sense that managers who confront too many risk informants in their decision environment tend to overinvest in marketing activities due to the overemphasis on the environmental risk. In a longitudinal experiment, where we manipulated the amount of information through marketing analytics, we demonstrate that firms employing simple marketing analytics are less prone to increase their marketing expenditures due to the fear of losing customers, and have a lower expectancy that their competitors will increase their brand-level advertising and promotional expenditures, compared to firms using a combination of simple and complex marketing analytics. Moreover, we demonstrate that firms employing simple marketing analytics keep their overall marketing spending at a lower level, and spend less in brand-level marketing, especially in promotional activities, compared to when using a combination of simple and complex marketing analytics.

Analytics Overuse in Advertising and Promotion Budget Forecasting

Several studies have recently raised a common concern in the field of management, which is the overspending in marketing activities. In this paper, we propose and empirically test that overspending in marketing investments is an unfortunate outcome of information overload, in a sense that managers who confront too many risk informants in their decision environment tend to overinvest in marketing activities due to the overemphasis on the environmental risk. In a longitudinal experiment, where we manipulated the amount of information through marketing analytics, we demonstrate that firms employing simple marketing analytics are less prone to increase their marketing expenditures due to the fear of losing customers, and have a lower expectancy that their competitors will increase their brand-level advertising and promotional expenditures, compared to firms using a combination of simple and complex marketing analytics. Moreover, we demonstrate that firms employing simple marketing analytics keep their overall marketing spending at a lower level, and spend less in brand-level marketing, especially in promotional activities, compared to when using a combination of simple and complex marketing analytics.

Nothing for Money and Your Work for Free: Internships and the Marketing of Higher Education

American universities have significantly increased their marketing expenditures over the last decade. The high cost of education, reductions in government funding, and precipitous declines in the traditional college-aged population (18-21 year olds) are some of the key factors forcing universities to be more aggressive with the promotional techniques they use to attract prospective students. In this competitive marketplace, schools promote the attributes they believe will be most compelling to high schoolers and their parents, including academics, sports, campus life, and careers. Tied into this last factor is the promotion of internship opportunities. While some of these hands-on experiences lead to jobs, there are no guarantees that attending college and engaging in an internship will translate into full-time employment. Using content analysis and auto-ethnography, I examine how universities use internships to market higher education, and argue that this is a particularly pernicious practice within the area of media studies.