From 2011-2013 there were 15,548 fewer high school smokers and 82.55% of adult smokers in South Carolina started smoking before the age of 18. This case study will show how advertising and promotion has an effect on young adults either using or avoiding tobacco products specifically cigarettes. Even though there are ads and organizations against tobacco use and tobacco products, sales continue to increase. Why? Because there are people out there who are still purchasing cigarettes. There could be two possible reasons as to how they are profiting: price and promotion. It can also be the area of sales as well; point of purchase. I want to focus on the Lorillard Tobacco Company’s brand Newport. I want to know how this particular brand continues to make a profit and how their marketing plan is effective in selling to a younger generation. I will also discuss promotional strategies in hopes of gaining insight on profit increase. The plan is to figure out the tobacco’s industry advertisement plan, how it’s structured to last even though it doesn’t have a positive effect on society.
Table of Contents
List of Tables ii
List of Figures iii
Review of Literature 5
Appendix A: Table 1 10
Appendix B: Figures 1&2 11
List of Tables
Table 1. Cigarette and Promotional Expenditures 2011 13
List of Figures
Figure 1. Camel Ad 1960 15
Figure 2. Point of Purchase 17
Tobacco companies like Lorillard Tobacco Company who holds the brand Newport, makes billions of dollars off of advertisement, primarily focusing on young adults. There are organizations whose primary mission is to end smoking within young adults. Organizations such as Truth, whose main goal in society is to end tobacco advertisement in hopes of creating a positive impact on society. Truth advertisements are just as catchy as a cigarette commercial gaining the attention of teens and adults alike on the negative effects of smoking.
With advertisements from organizations like Truth, how is it that Newport and other cigarette brands are still profiting in sales? How are cigarettes still on the market? Is it the price? Or is it the clever way they choose to promote their products? Is it where they put their products?
This case study will analyze how tobacco companies specifically their brands, and how their use of advertisement is harmful to society. Primarily focusing on South Carolina from 2011-2013 we will analyze all possible outcomes as to why advertisement has an effect on South Carolina consumers.
There’s one trend that is circulating within the tobacco industry as well and it’s called the E-cigarette. Particularly targeted towards the youth, the E-cigarette is a battery-operated device designed to deliver nicotine with chemicals in vapor form. This product is supposed to be a “safer alternative” because of the vapor smoke instead of regular smoke. This product doesn’t contain tobacco smoke instead nicotine. Drugabuse.gov (2015) found that nicotine is a highly addictive drug and nicotine can be a gateway drug leading to other addictions to other substances.
So why publicize such items that can bring about significant wellbeing imperfections to buyers? How much money is brought into big time tobacco companies?
Review of Literature
Point of purchase utilizes displays designed to catch a shopper’s eye most likely where a payment is made such as a checkout counter. Various types of point of purchase displays include window displays, counter displays, floor stands, display bins, banners and all types of open and closed cases. These displays are created and prepared by the manufacturer for distribution to wholesalers or retailers who sell the manufacturer’s merchandise. Manufacturers will sometimes discount the cost of merchandise or compensate the retailer for using a point of purchase display.
Feighery, Schleider, Clark & Ribisl (2004) found that in 2001 11.2 billion dollars was spent by cigarette companies to market their products and approximately 85% was spent on retailer and consumer incentives to stimulate cigarette sales in stores.
Therefore, the manufacturer cuts down on the cost of merchandise leaving the retailer to eagerly sell cigarettes. Goldberg, Davis, & O’Keefe (2006) found that promotional allowances lead to special stocking, shelving and displays of cigarettes and cigarette products.
Offers such as “buy two packs, get one free” cause the customer to feel as if they are buying for the price of one encouraging their addiction. Making them feel as though they’ve gotten it rather they are ripped off. Harming their wellbeing and the arrangement of these items is influencing society. According to Seidenberg, Caughey, Rees, and Connolly (2010) tobacco advertisement are located within 1,000 feet of schools which provides its exposure to youth. Seidenberg, Caughey, Rees, and Connolly (2010) also found that the size of an advertisement affects the visibility of the message for example a small sticker vs. a large poster.
In 1960, the RJ Reynolds Company launched an ad for Camel brand cigarettes. (See figure 1 appendix B) Notice, there’s a young athlete featured in the ad with a pack of Camel brand cigarettes this is a relatable description. This ad is something that young adults can relate to, which cause the increase in profit for tobacco products in 1960.
Bates and Rowell (1998) found that companies advertise in sports magazines and sponsored motor racing as innovative ways to market to youth. In fact, alongside Marlboro, Camel had the best crusade of the 60’s.
According to FTC.gov (2011), cigarettes that were reported sold or major manufacturers just gave away decreased by 8.1 billion units (2.9 percent) from 2010 to 2011.
Point of Purchase
As seen in figure 2 (refer to Appendix B), cigarettes are placed strategically behind the counter at the customer’s eye level. Anybody tall enough to see (preferably young adults and adults) this display is set up so that customers are tempted to purchase. Lavack and Toth (2006) stated:
“Consumer purchasing decisions made at the point of sale naturally included brand decisions; however, for occasional smoker, the point of sale also represents the place where decisions may be made regarding whether or not to purchase cigarettes” (2006).
Point of Sale
Point of sale is the location of where sales are made. On a larger scale point of sale might be a mall, market, or city. On a smaller scale, retailers consider point of sale to be the area surrounding the counter where customers pay. Products in figure 4 are positioned in a way that they will sell. Attracting targeted markets eye by providing an eye level view of cigarettes and products similar to it.
Jancey and Jones (2002) found that the tobacco industry claims that tobacco advertising is not aimed at those under age. It’s prevalent that cigarette advertising and promotions play a major part in a child’s decision to smoke. Children are easily wowed and they are more vulnerable to thinking that if it’s okay for their favorite football player to smoke then they should to.
So in fact, the location itself in a store can influence just about anybody but it’s more persuading for the youth. Adults are aware of the side effects so they don’t fall as easily as the youth to the advertisements, they purchase because they feel it would coincides with their budget, to relieve stress etc.
Using secondary data from CDC.gov, Scdhec.gov and Ftc.gov. The CDC will provide national statistics, scdhec.gov will provide South Carolina’s statistics and The FTC (Federal Trade Commission) will be used to aid in analyzing advertisement and promotions within tobacco companies. Focusing on the state of South Carolina between the years 2011-2013 and the use of tobacco products the effects of advertisements on young adults will determine all data.
The charts from the CDC, FTC, and SCDHEC will provide the necessary numbers to determine the effects of advertisements on youth. Figures and tables will be provided as well to show examples of how POS (point of sales) and POP (point of purchase) also has an effect on youth purchases of tobacco products. Refer to the appendix for figures and tables.
The outcome of this analyzation is that cigarette advertisements will not stop. These cigarette companies know the effects of what they are producing but they don’t care. The advertisements have made them billions of dollars. In result, they won’t stop advertising because it’s big money to be made within tobacco companies and they still have a current market of people who still purchase tobacco products.
Young adults have decreased profit for tobacco companies and now there aren’t any advertisements out there that can persuade the youth to purchase cigarettes. Truth, an organization against cigarette advertisement has done a great job with spreading the message to the youth about cigarettes. Referring to table 1 (Appendix A), we look at how advertising is spent in thousands between magazines, point of sale, promotion allowance through retailers and wholesalers.
Figure 3 in appendix B refers to the average retail price for popular brands like Camel, Newport and Marlboro. The average price for a pack of cigarettes in $6.52 making it an attractive price for consumers in lower middle class who enjoy a smoke or two.
To conclude, there are organizations like Truth who are creating advertisements to educate the youth about tobacco and its harmful effects. On the other hand tobacco companies will continue to make money because there are adults who are addicted to the nicotine, an addicting chemical that actually makes it hard for them to quit. Young adults and children shouldn’t smoke period and these advertisements aren’t helping neither.
From 2011-2013 the cigarette reign was coming to an end, so there wasn’t as much advertisement like in the 60s and 70s. The market is ready for a healthier approach to life everyone wants to live a longer life. Certain states have banned cigarette smoking in restaurants and other public places to help with the cutting down of smoking.
Advertisement costs, profits and economic environments have an impact on the purchase of tobacco products. Also idolization has an impact as well on cigarette purchase, cigarette companies have accounts to ensure that their advertisements are at most the best in order to attract who they want to attract. They will do whatever it takes advertise to the youth.
CIGARETTE ADVERTISING AND PROMOTIONAL EXPENDITURES FOR 2011. (2013, May). Retrieved April 9, 2016, from http://www.ftc.gov
Donovan, R. J., Jancey, J., & Jones, S. (2002). Tobacco point of sale advertising increases positive brand user imagery. Tobacco Control, 11(3), 191-194.
EX-99.1. (n.d.). Retrieved April 11, 2016, from http://www.sec.gov/Archives/edgar/data/1424847/000119312514057392/d679368dex991.htm
Explained, T. (1998). The truth about the tobacco industry… in its own words. Action on Smoking and Health (ASH), 16.
Feighery, E. C., Ribisl, K. M., Schleicher, N. C., & Clark, P. I. (2004). Retailer participation in cigarette company incentive programs is related to increased levels of cigarette advertising and cheaper cigarette prices in stores. Preventive medicine, 38(6), 876-884.
Goldberg, M. E., Davis, R. M., & O’Keefe, A. M.. (2006). The role of tobacco advertising and promotion: themes employed in litigation by tobacco industry witnesses. Tobacco Control, 15, iv54–iv67. Retrieved from http://www.jstor.org/stable/20748081
Lavack, A. M., & Toth, G.. (2006). Tobacco point-of-purchase promotion: examining tobacco industry documents. Tobacco Control, 15(5), 377–384. Retrieved from http://www.jstor.org/stable/20748037
Seidenberg, A. B., Caughey, R. W., Rees, V. W., & Connolly, G. N. (2010). Storefront cigarette advertising differs by community demographic profile.American Journal of Health Promotion, 24(6), e26-e31.
Appendix A: Table 1
CDC: Center of Disease Control; an agency of the U.S. Department of Health and Human Services.
FTC: Federal Trade Commission
SCDHEC: South Carolina Department
POS*: Point of Sale
Cigarette Advertising and Promotional Expenditures for 2011
Magazines Point of Sale Promo Allowances (Retailers) Promo Allowances
Costs ($) $23,254 $76,613 $356,991 $401,006
Appendix B: Figures 1 & 2