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Kenan Institute 2022 Annual Theme: Stakeholder Capitalism
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Market-Based Solutions to Vital Economic Issues
Research
Jun 3, 2022

Soda Taxes and Marketing Conduct

Abstract

Soda taxes are an increasingly popular policy tool, used to discourage purchases of sugar-sweetened beverages. This study analyzes how marketing conduct and its effectiveness might change after soda tax introductions. Prior studies on the effect of soda taxes focus on price increases but neglect other, managerially relevant marketing conduct tools, such as promotional frequency, promotional discount depth, and feature promotion frequency. This study documents how the marketing conduct and its effectiveness changed with the introduction of the tax across more than 200 retail stores in five markets. The findings related to price changes are consistent with prior literature; in addition, the study reveals a substantial, hitherto overlooked decrease in promotional frequency (-28%), promotional depth (-11%), and feature promotion frequency (-26%) compared with matched control markets, exacerbating the tax’s negative sales effect. Introducing a soda tax also considerably influences the marketing conduct’s effectiveness, such that consumers become less sensitive to changes in regular prices, feature promotions, and the depth of the promotional discount but respond more to the presence of promotions. Importantly, changes to marketing conduct and effectiveness do not align (e.g., while consumers become more sensitive to promotion frequency, managers tend to reduce them), a highly relevant insight for policymaking.

Note: Research papers posted on SSRN, including any findings, may differ from the final version chosen for publication in academic journals.


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