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Smoking Gun
When impressionable teenagers light their first cigarettes, they initiate what all too often becomes a lifelong, life-threatening habit. The vast majority of smokers begin in their teens, yet the tobacco industry has consistently denied that it markets to young teenagers. In a study recently published in the Journal of the American Medical Association, HBS assistant professor Charles King III investigates whether, indeed, cigarette companies advertise to magazine readers between the ages of 12 and 17.
As King and coauthors Michael Siegel, of Boston University's School of Public Health, Carolyn Celebucki, and Gregory N. Connolly, both of the Massachusetts Department of Public Health, point out, prior studies provide only indirect evidence that magazine advertising targets youth markets. First, since most youth-oriented magazines have many more adult than youth readers, these studies do not exclude the possibility that cigarette advertisements in these magazines target adults, rather than youths. Second, these studies do not specifically examine advertising for the few brands that youths actually smoke.
The authors compared the advertising of cigarette brands most popular among youths (Marlboro, Newport, Camel, Kool, and Winston) with that of brands smoked almost exclusively by adults (Salem, Virginia Slims, Benson & Hedges, Parliament, Merit, Capri, and Kent) in 39 of the nation's highest-circulation magazines. They found that youth brands are more likely to advertise in magazines with a high percentage of youth readers. In contrast, adult brands are less likely to advertise in magazines with higher youth readerships.
Debunking the cigarette industry's long-held claim that the primary targets for their advertising campaigns are young adults (ages 18 to 24), and not 12- to 17-year-olds, the study clearly shows that cigarette advertising is significantly related to youth, but not young adult, readership.
King and his colleagues conclude that the study can be used as an important tool in the public health policy debate over cigarette advertising. "Based on the documentation in this and other studies of widespread and heavy exposure of youths to cigarette advertising in magazines," they write, "public health considerations argue that cigarette advertising in all magazines should be eliminated."
Stocking Up
Suppose you own a drugstore and a popular bathroom tissue manufacturer offers you a discount on its product. How much should you buy? If you stock up now, will the manufacturer have any incentive to give you a good deal later? Will your decision affect the competition between that brand and the other brands of bathroom tissue you sell? In a new working paper, "How Promotions and Stockpiling Affect Brand Competition," HBS assistant professor Samuel S. Chun looks at the ways in which retailers influence competition among manufacturers when they take advantage of special deals by stockpiling goods.
In exploring the complexities of the relationship between manufacturer and retailer, Chun shows how certain promotional practices deserve to be rethought. Conventional wisdom and past research, for instance, have led some to conclude that retailer stockpiling resulting from manufacturer trade deals will reduce the level of competition in the future. But Chun has written a set of complex formulas demonstrating that this is not a foregone conclusion.
Chun shows that the retailer who finds an optimal stockpiling balance can actually increase the intensity of brand competition. He suggests that the smart retailer, while taking advantage of deals offered by manufacturers, will not stockpile so much inventory that manufacturers will lose their incentive to offer another deal in the near future. Chun argues that manufacturers lose such inspiration when the market becomes saturated with their product. On the other hand, the retailer who doesn't stockpile at all risks getting an inferior deal the next time around.
Retailers' ability to control their inventory storage costs also plays an important role in this balancing act. As Chun writes, "A higher inventory holding cost decreases the retailer's ability to take advantage of trade deals in a strategic manner, which in turn diminishes the retailer's ability to affect brand competition."
"The natural compromise," Chun writes, "is to choose an intermediate level of inventory. That is, one that takes advantage of the deal in hand yet leaves enough unserved future demand to induce potentially better trade deals later on."
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