5 ms·

What’s missing in this discussion is how much marketing and ad dollars figure into pricing of goods especially among goods that are hard to differentiate. Inste

What’s missing in this discussion is how much marketing and ad dollars figure into pricing of goods especially among goods that are hard to differentiate. Instead of thinking how much cheaper Kirkland (and other private labels) is compared to branded goods, we should really think about the economic excess of marketing in general.

tgb 8y ago
Here's my pet conspiracy theory: cigarette companies in the US colluded to get themselves banned from marketing, thereby saving themselves tons of money. Some research suggests marketing mostly just shifts spending from one brand to another rather than from one product category to another, so the whole industry is better off not marketing but without a government enforcing that, any individual company could defect from the pact. And marketing was a way for cigarette companies to subsidize things like public transportation and was arguably their only positive contribution to society apart from taxes. In reality, I don't think this adds up (why haven't they done the same in the EU and other jurisdictions? didn't they also have to pay massive fines? etc.).
- Waterluvian 8y ago
  That's a fascinating theory that I'll be mulling about for a while. My immediate thought is that smoking overall is falling and falling, so maybe advertising does more than shift brand loyalty of existing customers. Semi-related: I was pretty convinced that smoking was at maybe 5% in Canada based on my observation that almost nobody where I've worked and gone to school smoked. Turns out it's closer to 25%, which was shocking. I came to realise that smoking must be very very concentrated among specific demographics as to insulate me from it. Got me thinking about how my perception of advertising for smoking may also be very very off.
  - gotocake 8y ago
    My immediate thought is that smoking overall is falling and falling, so maybe advertising does more than shift brand loyalty of existing customers. Smoking in the United States and other developed nations is declining, but it’s rising worldwide. Tobacco companies simply shifted their focus to poorer, less educated nations and they’re taking in the money. https://en.m.wikipedia.org/wiki/List_of_countries_by_cigarette_consumption_per_capita https://en.m.wikipedia.org/wiki/List_of_countries_by_cigaret... While smoking rates have leveled off or declined in developed nations, especially among men, in developing nations tobacco consumption continues to rise.
    - chillacy 8y ago
      But that seems to support the correlation between marketing spend and smoking, since marketing is banned in the US but legal elsewhere right?
    - rfwhyte 8y ago
      I'd imagine a factor in the rising rates in developing nations is the due to the fact that 40%+ of global tobacco sales come from state owned firms. China's state owned China Tobacco company is the world's largest tobacco company and earns profits in excess of $16 Billion annually. Very little incentive to cut smoking rates when smoking is contributing billions to state coffers.
      - gotocake 8y ago
        That’s a very good point, but of course the government is going to have to pay in some fashion for the health impacts of smoking. It’s sort of a weird situation for a government to be in, making profit from tobacco and shouldering the inevitable externalities. I don’t know the specifics of how that breaks down though, or if it’s still a net profit center. Of course it may not matter in the sense that cronyism could ensure the burdens are placed on one group, and the benefits concentrated in another. I don’t know enough about China though, to say more.
  - myth_drannon 8y ago
    People in Quebec smoke much more than in Ontario.
  - Marsymars 8y ago
    I had a similar reaction when I looked at the smoking rates for Canada after reading this WashPo piece: https://www.washingtonpost.com/national/americas-new-tobacco-crisis-the-rich-stopped-smoking-the-poor-didnt/2017/06/13/a63b42ba-4c8c-11e7-9669-250d0b15f83b_story.html https://www.washingtonpost.com/national/americas-new-tobacco...
- QuantumGood 8y ago
  Marketing also increases market size, and creates more customer base size variance between competitors (bigger risks, bigger rewards).

tgb 8y ago

Here's my pet conspiracy theory: cigarette companies in the US colluded to get themselves banned from marketing, thereby saving themselves tons of money. Some research suggests marketing mostly just shifts spending from one brand to another rather than from one product category to another, so the whole industry is better off not marketing but without a government enforcing that, any individual company could defect from the pact. And marketing was a way for cigarette companies to subsidize things like public transportation and was arguably their only positive contribution to society apart from taxes. In reality, I don't think this adds up (why haven't they done the same in the EU and other jurisdictions? didn't they also have to pay massive fines? etc.).

Waterluvian 8y ago
That's a fascinating theory that I'll be mulling about for a while. My immediate thought is that smoking overall is falling and falling, so maybe advertising does more than shift brand loyalty of existing customers. Semi-related: I was pretty convinced that smoking was at maybe 5% in Canada based on my observation that almost nobody where I've worked and gone to school smoked. Turns out it's closer to 25%, which was shocking. I came to realise that smoking must be very very concentrated among specific demographics as to insulate me from it. Got me thinking about how my perception of advertising for smoking may also be very very off.
- gotocake 8y ago
  My immediate thought is that smoking overall is falling and falling, so maybe advertising does more than shift brand loyalty of existing customers. Smoking in the United States and other developed nations is declining, but it’s rising worldwide. Tobacco companies simply shifted their focus to poorer, less educated nations and they’re taking in the money. https://en.m.wikipedia.org/wiki/List_of_countries_by_cigarette_consumption_per_capita https://en.m.wikipedia.org/wiki/List_of_countries_by_cigaret... While smoking rates have leveled off or declined in developed nations, especially among men, in developing nations tobacco consumption continues to rise.
  - chillacy 8y ago
    But that seems to support the correlation between marketing spend and smoking, since marketing is banned in the US but legal elsewhere right?
  - rfwhyte 8y ago
    I'd imagine a factor in the rising rates in developing nations is the due to the fact that 40%+ of global tobacco sales come from state owned firms. China's state owned China Tobacco company is the world's largest tobacco company and earns profits in excess of $16 Billion annually. Very little incentive to cut smoking rates when smoking is contributing billions to state coffers.
    - gotocake 8y ago
      That’s a very good point, but of course the government is going to have to pay in some fashion for the health impacts of smoking. It’s sort of a weird situation for a government to be in, making profit from tobacco and shouldering the inevitable externalities. I don’t know the specifics of how that breaks down though, or if it’s still a net profit center. Of course it may not matter in the sense that cronyism could ensure the burdens are placed on one group, and the benefits concentrated in another. I don’t know enough about China though, to say more.
- myth_drannon 8y ago
  People in Quebec smoke much more than in Ontario.
- Marsymars 8y ago
  I had a similar reaction when I looked at the smoking rates for Canada after reading this WashPo piece: https://www.washingtonpost.com/national/americas-new-tobacco-crisis-the-rich-stopped-smoking-the-poor-didnt/2017/06/13/a63b42ba-4c8c-11e7-9669-250d0b15f83b_story.html https://www.washingtonpost.com/national/americas-new-tobacco...
QuantumGood 8y ago
Marketing also increases market size, and creates more customer base size variance between competitors (bigger risks, bigger rewards).