When branding is minimized
After Australia forced cigarette marketers to use plain, mostly uniform product packaging, higher-quality brands lost market share to lower-tier competitors.
Findings from the data are consistent with differentiation among brands declining following the mandate, and consumers becoming more sensitive to the product’s price in many parts of the market. The researchers compared data across 16 brands, which they classified using three quality tiers consistent with the cigarette industry’s quality classifications: value, mainstream, and premium. Market share declined among premium and mainstream brands, but increased for value brands. Accompanying the declines in market shares, price sensitivity increased for mainstream and value brands across both grocery and convenience channels, according to the research. The only exception was short-term price sensitivity for premium and mainstream brands in the convenience channel, which was observed to decline following the mandate.
Prior to the introduction of the mandate, premium and mainstream brands had distinct packaging and brand-name recognition, which made them more socially valuable among smokers—even those who wished to quit, the research suggests. Those same marketing advantages had also attracted new consumers to take up smoking. “Given the addictive nature of cigarettes, once consumers enter the market, it’s difficult for them to leave,” the researchers write.
But stripped of those packaging advantages, premium and mainstream brands may have become less attractive—as may have been the case for smoking overall. These findings can provide insight for policy makers and regulators tasked with determining the effectiveness of potential and existing public-policy interventions.