Advertisements Of Alcohol's Price example essay topic

I. Introduction In the United States, one of our greatest intrinsic liberties is that of free speech. Under this right, we are entitled to voice our opinion through any public media– so long as doing so does not present a ' clear and present danger' which outweighs our need for this freedom. As is the case with most liberties, decisions concerning the maintenance of free speech often come under great controversial scrutiny and government debate. With specific regard to advertisers, much legislation has been controversially passed limiting rights to certain methods of marketing that are deemed to be "deceptive. ' This of course, initiates concern over who gets to decide what is definitively "deceptive' and on what criteria.

In the case of alcohol advertising, an enormously debatable regulation in some states has for some time prohibited the advertising of liquor price. A common argument is that such advertising incites purchases of this dangerous product, particularly from minors. The counter-argument, with which I agree, maintains: (1) that there is insufficient evidence that price advertising increases alcohol sale among minors and (2) that it violates First Amendment rights to prohibit advertisers from openly stating their price as such is merely an exercise of free speech that only in the opinion of a few incites any public danger. The association of National Advertisers Incorporated has filed a ' friend of the court' (amicus curve) brief with the United States Supreme Court, urging the Court to strike down one such Rhode Island law that bans the advertising of alcohol price.

In one case, a Rhode Island alcohol retailer was fined $400 for using the expression "wow' in a newspaper ad. In that state, advertising for alcoholic beverages cannot contain any reference whatsoever to price. "This case involves two key issues for the advertising community,' Dan Ja fee, executive director of the ANA said in a statement that I read about. "First, whether the government can ban price advertising as a way to manipulate consumer behavior, and second, how much evidence the government must have to justify a ban on truthful commercial speech. ' In the 1995 case of Rubin vs. Coors Brewing Co., (1995), the Supreme Court of Rhode Island had invalidated a similar federal statute restricting advertising of alcohol content. In the subsequent case of Liquor mart, Inc. vs. Rhode Island, the Court was faced with having to decide whether a state may ban advertising prices for liquor.

As discussed previously, a primary issue considered in such a case is whether a state ban on advertising of retail liquor prices violates constitutional free-speech rights. Essentially, a case such as this one involves two key issues for the advertising community. Of course, the argument also inherently questions whether or not a ban on liquor price advertising could be extended to other products, such as guns or even red meat and butter, that may be deemed harmful. With this in mind, I focus my own argument in this paper on the following: (1) the Constitutional issues concerning price-ad banning and (2) assessing whether or not there really does exist (based on external research) enough data to signify that the public responds negatively to alcohol price advertising. II. Overview of Price Effect on Consumer Buying Behavior An examination of the substantive results of research that currently exists in this area suggests that an advertisement containing a reference price and a sale price is more effective in influencing consumer perceptions of price and value than an advertisement containing only a sale price.

But there is nothing to suggest that price advertising itself is more effective in consumer buying behavior. In fact, it is reasonable from what I read to deduce that failure to advertise price creates greater product curiosity. And since there is no viable measure by which to determine whether or not an adolescent will view as something as being expensive or inexpensive– there is no way to judge how price advertising or lack thereof will effect them. In most non-related advertising models, by creating an impression of savings, the presence of a higher reference price enhances subjects' perceived value and willingness to buy the product (Varadarajan 1986). Thus, if the reference price is truthful, the advertisement offers valuable price information to the consumer. In the case of price-advertising for alcohol, reference prices are rarely utilized (Varadarajan 1986).

In fact, for that matter– most price-aggressive and promotional campaigns atypical of contemporary marketing are obsolete within this particular industry. And most alcohol companies are more quality-conscious than they are price-conscious. With this realization, the very fact that price adveritsemnts are banned becomes more and more of an example of advertising and free speech themselves being banned. There is no deception or public threat made by a legal product advertising a legal price.

Other forms of advertising come under scrutiny because if a reference price is not truthful, a consumer may be encouraged to purchase as a result of a false sense of value. In this situation the advertisement is no longer informative but deceptive. Such can be rightfully regulated by government because a selling price labeled as a "sale price' alone, while offering less information, may actually result in a more informed decision compared to a deceptive comparative price advertisement, since consumers base their perceptions of the product on the characteristics of the product itself and on the actual selling price rather than on a fictitious reference price. But in the case of alcohol, the product characteristics are highlighted and the price advertise is general just an informative one. Hence, the banning of price advertising is equivalent to the banning of information itself. And of course, this is inherently counterproductive to the core goals of United States' democracy.

It must also be noted that research results of Lichtenstein and Bearden (1989) indicate that, for deep discounts from an implausible reference price, there could be a potential reduction in consumers' perceptions of value. In addition, Moore and Olshavsky (1989) found that fewer subjects choose an unfamiliar brand with a deep discount relative to a moderate discount. These suggestions alone imply that we can not even be certain that alcohol price advertising does not prevent certain purchases. If this is the case, how can the United States or exclusive state government possibly ban something that is not even a proven public danger? Of course, a selling price labeled as a "sale price' alone may still admittedly convey a message of savings or additional value to consumers. If consumers use the reference price provided in the advertisement to infer judgments about the product, their perceptions of the value associated with the product will be enhanced (i. e., acquisition value).

However, simply labeling a price as a "sale price' also appears to convey a perception of savings and may enhance perceptions of value. Therefore, the opportunity for deception exists if the retailer provides an exaggerated reference price or simply labels a price as a "sale price' when the "sale price' is not significantly lower than the previous price, misrepresenting the value and materially misleading the consumer. This practice may result in higher perceptions of quality and value, along with a reduction in search and an increase in the likelihood of purchase. It should be noted, however, that such is rarely the case in alcohol advertisement; and even where price promotions do influence purchasing behavior it is not in a deceptive or misleading fashion, nor is it even aimed at motivating underage people to make purchases..

Does Alcohol Price Incite Change in Drinking Behavior? A fundamental principle of economics is that of the downward-sloping demand curve, which demonstrates that as the price of any item rises, consumption of that item falls. Some economists have argued that the consumption of a potentially addictive item, such as alcohol, might be an exception to this rule. Numerous econometric studies confirm that this fundamental economic principle does apply to the demand for alcoholic beverages (Leung and Phelps 1991). However, further research is required on the possibility that the effects of price on alcohol consumption are not the same for all groups of drinkers. Economists use the price elasticity of demand to describe the sensitivity of consumption to changes in price.

The price elasticity of demand is the percentage change in consumption resulting from a I -percent increase in price. For example, a price elasticity of -0.5 implies that a 10-percent increase in price would reduce consumption by 5 percent. Leung and Phelps (1991) presented a detailed review of the extensive economics literature on the relationship between price and demand for alcoholic beverages. They concluded, based on pooled data from many studies, that the price elasticities of demand for beer, wine, and spirits are -0.3, – 1.0, and – 1.5, respectively. However, they also noted that recent research suggests that the demand for alcoholic beverages may be even more responsive to price than these estimates indicate.

Moreover, there is considerable variation in the price elasticities reported in the articles reviewed in this study, making generalizations difficult. The effects of price on alcohol consumption has also been explored by the National Bureau of Economic Research. This work has focused on consumption by youths because of the high incidence of alcohol-related problems, particularly drinking and driving, among young people (National Institute on Alcohol Abuse and Alcoholism 1990). Grossman and colleagues (1987) and Coate and Grossman (1988) provided the first estimates of the effect of price on alcohol use among young people.

The first of these studies examined youth alcohol consumption as reported in cycle I of the National Health and Nutrition Examination Survey (NHANES I), conducted from 1971 through 1974 by the National Center for Health Statistics. The second study uses data from cycle II, conducted from 1976 through 1980 (NHANES II). Both studies focused on the frequency of beer consumption by persons ages 16 to 21, because beer is the alcoholic beverage of choice among the young in the United States (Grossman et al. 1987; Coate and Grossman 1988).

The statistical procedure known as multiple regression was used to examine the effects of changes in beer prices, taxes, and MLDA's on youth alcohol demand, while holding constant other determinants of consumption, including age, sex, race, and family income. Both studies found that the fraction of youths who consume beer fairly frequently (one to three times per week) or frequently (four to seven times per week) falls more when price rises than does the fraction of youths who drink infrequently (less than once a week). It is therefore logical to assume that youths who are already familiar with alcohol's price will stop making purchases when that price increase. Those who are not familiar and who drink only occasion– will continue to make purchases.

I have noted that the same finding reportedly applies when the price responsiveness of youths who are fairly heavy drinkers (three to five cans of beer on a typical drinking day) or heavy drinkers (six or more cans on a typical drinking day) is compared with that of light drinkers (two or fewer cans on a typical drinking day). Based on NHANES II, Coate and Grossman (1988) predicted that increasing the tax on beer to offset the effects of inflation since 1951 would reduce the number of youths who drink beer frequently (about 11 percent of the sample) by 7.3 percent, while the number of fairly frequent drinkers (about 28 percent of the sample) would fall by 5.2 percent (figure 2). Here, we have an example of a more viable and more Constitutional way to detract children from buying alcohol. Combining this policy with one that first raises the tax on the pure alcohol in beer to the same level as that on the pure alcohol in distilled spirits could lead to much sharper reductions in consumption: a 32-percent reduction in the number of frequent drinkers and a 24-percent reduction in the number of fairly frequent drinkers. The reductions predicted from this combined tax policy were greater than those associated with an alternative policy simulation: a uniform MLDA of 21. Coate and Grossman (1988) predicted that the higher drinking age would have lowered frequent consumption by 28 percent and fairly frequent consumption by 11 percent from 1976 through 1980.

Laixuthai and Chaloupka updated this research to examine the price responsiveness of young drinkers after the change to a uniform MLDA of 21 for all alcoholic beverages. We used the 1989 nationwide survey of high school seniors conducted by the University of Michigan's Institute for Social Research as part of the Monitoring the Future program. The survey data contain drinking and socio demographic data. Data on alcohol prices and taxes, as well as MLDA'S, were added based on the young person's county of residence.

Other determinants of alcohol consumption, including age, sex, race, religious participation, income, and parental characteristics, were held constant. IV. Discussion & Conclusion The following facts are unavoidably clear: (1) the price of alcohol is not a major factor influencing the buying behavior of those who do not purchase alcoholic beverages in a regular basis, (2) Advertisements of alcohol's price do not sway public opinion about product as much as they do in other industries, and (3) price-advertising is not target towards luring youths or towards hurting the public– it is merely informative advertising. The First Amendment guarantees us the right to free speech except where such presents a ' clear and present danger.

' Advertising legislation generally only outlaws those ads which are deceptive or dangerous to the good of the public. Ads that show liquor prices do not serve as examples of either tort. Instead, they inform the public and exercise the basic tenants of free speech in the United States. We have no available means by which to measure what youth deem expensive or inexpensive and consequently, the Government has no Constitutional Right to so arbitrarily determine which industries may or may not advertise their products' prices.

In defense of bans on liquor price ads (Rhode Island's is 40 years old), advocates argue that the prohibition falls within the government's legitimate power to discourage alcohol consumption. Opponents who challenge the ban argue that the state may prohibit liquor, but cannot under the First Amendment interfere with the "free flow' of information contained in truthful price advertising. They also assert that there are other ways to restrict alcohol use and that such bans do little to stop it anyway. One of the main problems that I find in supporting the ban is that it relies on judges to consider people's personal alcohol budgets and drinking behavior with very little concrete information about such. In the Rhode Island case, Rebecca Partington, representing the state, said the government would not try to stop a newspaper article advising consumers where to get the cheapest prices. Individuals could exchange information on liquor prices on computer online services, she said.

But Justice Stephen Breyer pressed her on whether the state could ban advertising of prices for any product considered harmful to consumers. And another judge asked about a ban on advertising for butter. Partington's reply was reportedly that alcohol was unique, with a long regulatory history and, as a vice, has caused a number of social problems. But as I have shown, preventing companies form advertising their prices is not an effective nor is it a Constitutional means of pursuing such a goal.

And as I wrote previously, other judge asked about a ban on advertising for butter. If I am not mistaken, the number of heart attacks indirectly caused by butter has had a similar effect. And if I am correct again, alcohol is a legal and Prohibition is no longer in effect. Advocates of price -advertising bans have to realize that they can not have both legalized alcohol and illegal advertising of alcohol. The two contradict one another. The arguments the State of Rhode Island are ineffective and the data presented in this paper helps to prove such.

The time has certainly come to do away with such a barbaric and unconstitutional law product.