Quantifying brand loyalty: Evidence from the cigarette market.

Area of Science:

• Economics
• Public Health
• Consumer Behavior

Background:

• New York State implemented a tax on cigarettes sold on Native American reservations in 2011.
• This policy change created a quasi-experiment by significantly increasing the price of premium cigarettes relative to untaxed Native brands.

Purpose of the Study:

• To quantify brand loyalty in the cigarette market.
• To analyze consumer response to a significant price increase for premium cigarette brands.

Main Methods:

• Utilized data from the New York State Adult Tobacco Survey.
• Employed data from the Nielsen Homescan Panel for comprehensive analysis.

Main Results:

• The relative price increase led to substantial decreases in premium cigarette purchases.
• A significant majority (approximately 75%) of premium brand consumers exhibited brand loyalty, continuing their purchases despite the price hike.

Conclusions:

• Tax policies can influence consumer purchasing behavior for tobacco products.
• Brand loyalty remains a powerful factor, even when faced with substantial economic incentives to switch.