Author: Martyn Duffy
Title: Measuring the Contribution of Advertising to Growth in Demand: An Econometric-Accounting Framework
Journal: First published in: International Journal of Advertising, 1989, 8 (2), 95-110.
Objective: To evaluate the effect of advertising expenditures compared to price and income on alcohol consumption in the UK during 1964 and 1983.
Design: econometric study
Participants: national expenditure figures of alcohol expenditures of distilled drinks, wine, and beer / prices of these alcoholic drinks / income of the population / consumption rates between 1964 and 1983 in the UK are used.
Methods: An econometric model is used to explain alcoholic drinks demand by income, price and advertising. Differences between beer, wine, and distilled drinks are distinguished.
Findings: The data in the studies shows the unconditional demand elasticities for alcoholic drinks. We can see that the total consumption of alcoholic beverages (eg beer) in the UK benefit more from an increase in income (elasticity = .707 with stnd error=.151) and a decrease in prize (elasticity = -.360 with stnd error=.116) than an increase in advertising expenses (elasticity = .047 with stnd error=.022). Decomposition of the intra-group relative advertising expenditure effects on consumption rates show that these weak overall effect of advertising on demand is not due to substitution terms of beer, spirit and wine. It shows for example that an increase in beer advertising increases not only the consumption of beer (.089) the consumption of spirits (.033) and wine (.006) as well.
Conclusions Authors: The results show that the great expansion of alcohol consumption between 1963 and 1984, particularly of spirits and wine, owes little (if anything) to advertising of these products.
Remarks of EUCAM:
The study shows that the effect of advertising on the alcohol consumption of a population is small compared to the effect of income and price. It shows the important of availability of alcohol on a general population. However, does not tell us anything on the effect of advertising on young people.