How do smokers control their cigarette expenditures?

Nicotine & Tobacco Research Volume 7, Number 4 (August 2005) 625 635 How do smokers control their cigarette expenditures? Victoria M. White, Elizabeth A. Gilpin, Martha M. White, John P. Pierce [Received 22 April 2004; accepted 22 December 2004] When faced with high cigarette prices, smokers can potentially control cigarette expenditures by limiting consumption or seeking cheaper cigarettes. The present study examined both these options and whether the use of price-minimizing strategies (the second option) could counteract a further price increase without smokers having to reduce consumption. Data for 5,109 smokers who purchased manufactured cigarettes were from the 2002 crosssectional, population-based, random-digit-dialed California Tobacco Survey. We used logistic regression to examine which smokers used consumption-limiting or price-minimizing strategies, and multiple linear regression to determine how much price-minimizing strategies reduced the average price paid per pack. Overall, 32.3% of California smokers said they limited consumption and 74.1% used at least one of the five price-minimizing strategies identified: choosing cheaper retail outlets (61.1%), using promotional offers (35.2%), choosing cheaper brands (28.7%), purchasing by the carton (27.7%), and using low-tax or nontaxed sources (6.3%). Different groups of smokers used different strategies. Except for the use of promotional offers, all price-minimizing strategies significantly reduced the price paid per pack. Carton purchasers saved US$1.01/pack, and those buying from lowtax or nontaxed sources saved $1.23/pack. However, pack buyers were reluctant to purchase cartons, mostly because they thought they might smoke too much, or because they considered the upfront cost unaffordable. The average California smoker could potentially save $0.33 $0.66/pack or $6.00 $12.00/month by using other priceminimizing strategies. Reducing consumption by 3 cigarettes/day could save a smoker $18.00/month. Whereas price-minimizing strategies appeared to save money, cutting consumption could save even more. Thus further substantial tax increases would likely have the desired effect. Introduction The association between price and reduced cigarette sales has been well documented (Becker, Grossman, & Murphy, 1992; Chaloupka, 1998; Evans, Ringel, & Stech, 1999; Farrelly, Pechacek, & Chaloupka, 2003; Flewelling et al., 1992; Hu, Sung, & Keeler, 1995). Smokers have generally responded to price or tax increases by smoking less rather than by quitting (Biener, Harris, & Hamilton, 2000; Pierce et al., 1998). Such a strategy suggests that smokers cut down to help keep their total cigarette expenditures Victoria M. White, Ph.D., Centre for Behavioural Research in Cancer, The Cancer Council Victoria, Australia; Elizabeth A. Gilpin, M.S., Martha M. White, M.S., John P. Pierce, Ph.D., Cancer Prevention and Control, Moores Cancer Center, University of California, San Diego, La Jolla. Correspondence: John P. Pierce, Ph.D., Cancer Prevention and Control, Moores Cancer Center, University of California, San Diego, La Jolla, CA 92093-0645, USA. Tel: +1 (858) 822-2380; Fax: +1 (858) 822-2399; E-mail: jppierce@ucsd.edu within a desired budget. However, cigarette prices vary widely as a function of brand smoked, quantity purchased (pack vs. carton), and choice of retail outlet (Emery, White, Gilpin, & Pierce, 2002). Thus, by seeking cheaper-priced cigarettes, some smokers might be able to keep cigarette costs within budget without having to reduce the amount they smoke. The tobacco industry understands the association between increased cigarette prices and reduced demand (Chaloupka, Cummings, Morley, & Horan, 2002), and it has adopted marketing strategies to counter the effect of increased prices. In the 1980s, a multitiered pricing system was introduced, with smokers paying more for premium brands than for generic brands (Cavin & Pierce, 1996). More recently, the industry has increased the use of promotional or discount offers to offset the price of cigarettes. Feighery, Ribisl, Clark, and Haladjian (2003) showed that tobacco companies are regularly using buydowns, in which the discount during a ISSN 1462-2203 print/issn 1469-994X online # 2005 Society for Research on Nicotine and Tobacco DOI: 10.1080/14622200500184333

626 HOW DO SMOKERS CONTROL THEIR CIGARETTE EXPENDITURES? sale period is specified by the tobacco company, which reimburses the retailer the full price difference (Feighery et al., 2003). With one-quarter of stores offering some sort of discount on cigarettes (Terry- McElrath et al., 2002), smokers would be expected to be aware of and take advantage of such offers as a price-minimizing strategy. Also, in recent years, special tobacco discount stores have appeared in shopping malls, and these stores are likely to offer these special promotions (Feighery et al., 2003). Limited research has investigated the strategies U.S. smokers use to adapt to a cigarette price increase. A Massachusetts study examined smokers responses to a US$0.25/pack tax increase in the early 1990s (Biener, Aseltine, Cohen, & Anderka, 1998) and found that only about one-quarter (28%) said they switched to a cheaper brand, whereas less than one-fifth (17%) said they reduced the number of cigarettes smoked. A longitudinal study in the early 1990s looked at brand switching over a 2-year period in California smokers (Cavin & Pierce, 1996) and found that only one-third of smokers switched brands over this period, with only one-third of the switchers (or one-ninth of all smokers) switching to cheaper generic brands. Both studies showed that high-consumption smokers or those with relatively lower incomes were more likely to use these budgetcontrolling strategies. These results suggest that the purchasing behaviors of most smokers are relatively price insensitive. However, smokers may not be motivated to use price-minimizing behaviors unless the cost of cigarettes becomes much higher. In 1998, as a result of the Master Settlement Agreement, cigarette prices increased nationwide by about $0.70/pack. California voters also passed an additional $0.50/ pack excise tax increase that took effect in January 1999. These two events, coupled with slight price increases since then, have caused the average price of a pack of cigarettes in California to surge by 75%, from $2.33/pack in 1997 to $4.08/pack in 2002 (inflation adjusted; Orzechowski & Walker, 2003). Because of high cigarette prices, many smokers theoretically should seek to reduce the price they pay for cigarettes by switching brands, buying cigarettes in bulk, or seeking cheaper sources. However, as of late 1999, most California smokers bought their cigarettes by the pack from the more expensive retail outlets, and few tried to avoid the tax by buying from low-tax or nontaxed sources (Emery et al., 2002). In this article, we used data from the large crosssectional, population-based 2002 California Tobacco Survey to explore strategies smokers use to contain cigarette expenditures. We examined the fractions of smokers who said they controlled consumption because of price or who used price-minimizing strategies, and we characterized these smokers. We also looked for evidence that the smokers who used price-minimizing strategies actually paid less for a pack of cigarettes. Finally, we examined California smokers reasons for not engaging in one specific and highly effective cost-minimizing strategy: buying cigarettes by the carton. This information should further clarify whether price increases can be offset by price-minimizing purchasing strategies without smokers having to cut consumption to control cigarette expenditures. Method Data source Data were from the 2002 California Tobacco Survey, a large cross-sectional, population-based survey conducted every 3 years as part of the evaluation of the California Tobacco Control Program (Bal, Kizer, Felten, Mozar, & Niemeyer, 1990). Details and technical documentation for the California Tobacco Survey are available online (University of California, 2004). Briefly, the random-digit-dialed telephone interviews for the 2002 California Tobacco Survey were conducted between October 2002 and January 2003. Demographic information and the smoking status of all household adults were ascertained through a 5-min screener survey with a household adult (aged>18 years). An extended interview was conducted on a subsample of household adults, where the probability of selection was greater for those who had smoked in the past 5 years. Of those selected, a total of 20,525 people (cooperation rate563%) completed the extended interview, including 5,498 current smokers. Of the 5,498 smokers surveyed, 389 either did not provide complete information on their purchasing behaviors or did not buy their own cigarettes (e.g., got them free from others or smoked roll-yourowns); they were excluded from the sample. Thus this report is based on data from 5,109 smokers who purchased manufactured cigarettes. Data analyzed and definitions Smoking status for extended interview respondents was determined by asking if they had smoked at least 100 cigarettes in their lifetime and whether they currently smoked every day, some days, or not at all. Current smokers smoked at least 100 cigarettes in their lifetime and smoked every day or some days. Smokers indicated the average number of cigarettes smoked per day and were categorized into three groups: nondaily smokers, light daily smokers (,15 cigarettes/day), and moderate-to-heavy daily smokers (>15 cigarettes/day). Also analyzed were smokers intentions to quit: never expect to quit, will quit

NICOTINE & TOBACCO RESEARCH 627 sometime but not in the next 6 months, and will quit in the next 6 months. Smokers were asked whether they bought cigarettes by the pack or by the carton, the brand they usually bought, and the price of the pack or carton. Buying by the carton was considered a priceminimizing strategy. The price per pack for carton buyers was determined by dividing the reported carton price by 10, the number of packs in a carton. Cigarette brands were classified into premium brands (e.g., Marlboro, Camel, Winston, Virginia Slim) and discount or generic brands (e.g., Basics, GPC). All smokers who bought cigarettes by the pack were asked, Since cigarettes are usually cheaper by the carton, why do you buy them by the pack? This question was open ended, and smokers gave their primary reason for this purchasing behavior. Smokers who bought cigarettes were asked, Has the price of cigarettes influenced how much you smoke? Where you buy cigarettes? The brand you smoke? Respondents answered yes or no to each question. Whereas all three behaviors potentially minimize total cigarette expenditures, we call the first behavior consumption-limiting and the second two price-minimizing strategies. Smokers indicated whether they usually bought cigarettes in California, out of state, or over the Internet. Those buying cigarettes in California indicated whether they bought from convenience stores or gas stations, supermarkets, liquor or drug stores, tobacco discount stores, other discount stores, or tax-free outlets (i.e., Indian reservations, military commissaries). We considered buying from low-tax or nontaxed sources (out of state, Indian reservations, military commissaries, and over the Internet) a price-minimizing strategy. To assess use of promotional cigarette offers, another potential price-minimizing strategy, smokers were asked, About how often do you take advantage of promotional offers, such as dollar off, or two for the price of one? Respondents could indicate never, very rarely, or every time I see one. Data analyses Data were weighted to take into account the sample design and to account for nonresponse, thereby ensuring that estimates are representative of the California population with respect to sex, region, age, race/ethnicity, and educational level. Multivariate logistic regression analyses were used to examine the independent association between demographics and daily cigarette consumption level and the use of the consumption-limiting and priceminimizing strategies. Multiple linear regression analyses were used to determine whether the use of various strategies was related to the average reported price paid per pack (least square means, adjusting for demographics and consumption level). Variance estimation and tests of statistical significance were based on the jackknife procedure, a technique used to properly account for complex survey designs (Efron, 1982). For percentages, means, and odds ratios, 95% confidence intervals are reported. Results Of smokers in this study, 26.2 1.4% (weighted percentage 95% confidence interval) were nondaily smokers, 34.9 1.7% were light daily smokers, and 38.9 1.6% were moderate-to-heavy daily smokers. On average, smokers consumed 12.3 0.3 cigarettes/ day. Men made up 60.5 0.9% of current smokers, and 16.9 0.8% of smokers were aged 18 24 years, 48.4 1.2% were aged 25 44 years, 28.2 1.0% were aged 45 64 years, and the remaining 6.4 0.8% were aged 65 years or older. Only 8.8 1.1% of smokers smoked discount or generic brand cigarettes. Women (11.9 1.7%) were more likely to smoke discount or generic cigarettes than were men (6.8 1.1%). Use of price-minimizing strategies Besides the strategy of limiting consumption, we considered five different potential price-minimizing strategies. Table 1 shows the percentages of smokers who used each strategy, with the columns breaking out the total according to whether or not consumption was limited as well. These strategies were not mutually exclusive. The most frequently reported price-minimizing behavior was choosing a cheaper retail outlet, followed by taking advantage of promotional offers every time one was seen. Fewer than 30% of smokers indicated price affected brand choice, and a similar percentage said they bought cigarettes by the carton. Only 6.3 0.6% of smokers bought their cigarettes from low-tax or nontaxed sources: 3.1 0.6% bought out of state, 1.2 0.3% over the Internet, and the remainder from Indian reservations or military commissaries. Nearly onethird (32.3 1.5%) of smokers indicated that they limited consumption because of cost; the lowest relative level (ratio of columns) of this behavior was observed in the group buying by the carton, suggesting that carton buyers tend not to limit their consumption because of cost. The highest relative level was in the group choosing a cheaper brand, indicating that such smokers also tend to limit consumption to a relatively greater extent than do smokers using other strategies. Finally, nearly threequarters (74.1 1.6%) of all smokers used at least one of the price-minimizing strategies. Some smokers used multiple price-minimizing strategies: 28.4 1.6% used two strategies,

628 HOW DO SMOKERS CONTROL THEIR CIGARETTE EXPENDITURES? Table 1. Use of price-minimizing strategies and limiting consumption because of high cigarette prices (percentage with 95% CI). Limits consumption Price-minimizing strategy Yes No Strategy total Chooses cheaper outlet 28.0 1.4 33.1 1.5 61.1 1.7 Chooses cheaper brand 16.4 1.2 12.3 1.3 28.7 1.7 Buys by carton 8.2 1.0 19.5 1.3 27.7 1.6 Uses promotional offers 14.5 1.3 20.7 1.3 35.2 1.6 Uses low-tax or nontaxed sources 2.2 0.5 4.0 0.6 6.3 0.6 Uses at least one strategy 32.3 1.5 a 41.7 1.7 74.1 1.6 b a Percentage of smokers who said they limit consumption to control cost who used at least one price-minimizing strategy. b Percentage of smokers who used one or more of the price-minimizing strategies. 26.7 1.6% used three, and 16.3 1.0% used four or more. The price-minimizing strategies used most frequently by the same smokers were choice of retail outlet coupled with (a) use of promotional offers (26.8 1.6%), (b) choice of brand (23.5 1.6%), or (c) buying by the carton (21.0 1.4%). Characteristics of those using price-minimizing strategies Figure 1 examines the use of the various strategies, including limiting consumption, according to whether the smoker is a nondaily smoker, a light daily smoker (,15 cigarettes/day), or a moderate-toheavy daily smoker (>15 cigarettes/day). Light daily smokers were more likely to use each of the strategies than were nondaily smokers, and moderate-to-heavy daily smokers used all the price-minimizing strategies more than did light daily smokers. However, the moderate-to-heavy daily smokers were less likely to say they limited their consumption than were the light daily smokers. Table 2 shows the results of separate multivariate logistic regression analyses examining the relationship Figure 1. Percentage of smokers who employed various price-minimizing strategies and who limited consumption because of high cigarette prices in each consumption level group: non daily smokers, light daily smokers (,15 cigarettes/day, and moderate-to-heavy daily smokers (>15 cigarettes/day).

Table 2. Percentages and adjusted odds ratios for demographic variables, daily cigarette consumption for various price-minimizing strategies (left three columns), and limitation of consumption (rightmost column) among 5,109 California smokers. Characteristic Number of subjects a Chooses cheaper retail outlet or uses promotional offers when seen Chooses cheaper brand Buys by the carton or from low-tax or nontaxed source Limits consumption Percent a Odds ratio (95% CI) Percent a Odds ratio (95% CI) Percent a Odds ratio (95% CI) Percent a Odds ratio (95% CI) Gender Female 2,470 73.2 1.0 29.7 1.0 34.7 1.0 36.7 1.0 Male 2,639 67.1 0.75 (0.63 0.90) 28.1 0.96 (0.81 1.13) 25.6 0.64 (0.53 0.77) 37.3 1.09 (0.91 1.30) Age (years) 18 24 977 66.5 1.0 20.4 1.0 11.9 1.0 37.9 1.0 25 44 2,155 66.6 0.87 (0.70 1.08) 25.9 1.34 (1.07 1.70) 21.7 1.93 (1.43 2.60) 37.6 1.06 (0.85 1.32) 45 64 1,608 76.0 1.07 (0.82 1.40) 36.6 2.25 (1.76 2.88) 43.7 4.13 (3.09 5.53) 37.6 1.12 (0.87 1.46) 65+ 358 70.5 0.79 (0.51 1.23) 37.5 2.34 (1.62 3.38) 67.8 11.80 (7.41 18.79) 28.8 0.78 (0.52 1.17) Race/ethnicity Non-Hispanic 3,254 73.3 1.0 24.4 1.0 35.2 1.0 30.9 1.0 White Hispanic 884 57.2 0.58 (0.47 0.72) 31.1 1.14 (0.85 1.53) 14.9 0.64 (0.48 0.86) 47.6 1.78 (1.39 2.29) Black 368 80.8 1.53 (1.10 2.13) 33.7 1.17 (0.87 1.58) 18.9 0.56 (0.39 0.79) 45.0 1.28 (0.90 1.81) Asian/Pacific 337 68.6 1.16 (0.76 1.75) 33.2 1.83 (1.30 2.58) 31.5 1.46 (0.86 2.49) 34.3 0.98 (0.63 1.50) Islander Other 266 78.3 1.10(0.71 1.69) 35.8 1.18 (0.84 1.66) 44.7 1.69 (1.12 2.54) 43.9 1.71 (1.25 2.32) Income US$20,000 947 72.3 1.0 44.3 1.0 25.4 1.0 48.9 1.0 $20,001 $50,000 1,676 71.5 0.94 (0.70 1.28) 30.4 0.59 (0.47 0.75) 29.0 1.11 (0.82 1.50) 37.6 0.68 (0.55 0.84) $50,001 $75,000 869 68.4 0.82 (0.58 1.15) 23.8 0.42 (0.31 0.57) 30.7 1.44 (1.02 2.05) 35.0 0.65 (0.48 0.88).$75,000 1,224 65.7 0.75 (0.55 1.02) 15.5 0.27 (0.20 0.36) 31.3 1.41 (1.06 1.87) 27.1 0.47 (0.37 0.61) Unknown 402 66.4 0.81 (0.52 1.26) 26.3 0.47 (0.31 0.72) 31.6 1.16 (0.78 1.73) 34.6 0.62 (0.45 0.86) Consumption level Nondaily 1,255 45.4 1.0 22.6 1.0 9.0 1.0 37.6 1.0 Daily,15 CPD 1,734 72.9 3.16(2.40 4.15) 28.1 1.13 (0.87 1.47) 23.8 2.83 (1.93 4.14) 43.0 0.88 (0.72 1.09) Daily>15 CPD 2,120 82.6 6.37 (5.01 8.09) 33.4 1.81 (1.41 2.34) 47.4 6.82 (4.50 10.35) 31.6 0.56 (0.45 0.70) Intentions to quit In next 6 months 2,460 69.2 1.0 28.9 1.0 21.5 1.0 43.5 1.0 Sometime, but not 1,958 73.2 1.08 (0.88 1.32) 29.2 1.02 (0.86 1.22) 32.5 1.56 (1.28 1.89) 35.3 0.69 (0.57 0.83) in next 6 months Never expect to quit 458 62.6 0.78 (0.61 0.99) 28.1 1.04 (0.74 1.45) 52.1 2.64 (1.88 3.71) 15.4 0.25 (0.18 0.34) Limits consumption to control costs b No 3,346 62.0 1.0 19.6 1.0 32.3 1.0 Yes 1,763 82.2 3.59 (2.85 4.52) 44.2 3.17 (2.65 3.79) 24.0 0.84(0.66 1.05) Used at least one price-minimizing strategy b No 1,049 18.7 1.0 Yes 4,060 42.4 4.26 (3.23 5.61) Note. CPD, cigarettes per day. a Weighted but unadjusted percentages. b Limiting consumption included in analysis of price-minimizing strategies and vice versa. NICOTINE & TOBACCO RESEARCH 629 Downloaded from http://ntr.oxfordjournals.org/ at Pennsylvania State University on May 9, 2016

630 HOW DO SMOKERS CONTROL THEIR CIGARETTE EXPENDITURES? of the use of various strategies (dependent variables) to demographic characteristics and consumption level (independent variables). Preliminary analyses (available from authors) indicated similar profiles for some price-minimizing strategies, and they were combined for presentation (see column headings). Considerable overlap existed in the group buying from low-tax or nontaxed sources and the group buying by the carton; 76.2 6.4% of those who purchase from low-tax or nontaxed sources usually bought their cigarettes by the carton, compared with only 24.4 1.6% of all other smokers. Except for brand choice, males were less likely than females to use price-minimizing strategies. However, males were as likely as females to say they limited consumption. Older smokers, particularly those aged 65 years or older, were more likely than those aged 18 24 years to say that price influenced their brand choice and to purchase by the carton or from low-tax or nontaxed sources. Hispanics were less likely than non-hispanic Whites to say price influenced their choice of retail outlet or use of promotional offers and to buy cigarettes by the carton or from low-tax or nontaxed sources, but they were more likely to say they limited consumption. Blacks were more likely than non-hispanic Whites to say price influenced their choice of retail outlet or use of promotional offers but were considerably less likely to purchase by the carton. Asians were significantly more likely than non-hispanic Whites to say price influenced the brand they bought. Smokers with high household incomes tended to be less likely than low-income ( $20,000/year) smokers to choose cheaper brands or to limit their consumption but were somewhat more likely to buy by the carton or from low-tax or nontaxed sources. Moderate-to-heavy daily smokers (>15 cigarettes/ day) were significantly more likely to use priceminimizing strategies but significantly less likely to limit consumption, compared with nondaily smokers. Light daily smokers (,15 cigarettes/day) were more likely to choose a cheaper outlet, use promotional offers, buy by the carton, or use low-tax or nontaxed sources than were nondaily smokers. Smokers who never expect to quit were less likely to choose a cheaper retail outlet or use promotional offers but were more likely to buy by the carton or from low-tax or nontaxed sources, compared with those who expect to quit in the next 6 months. They were also considerably less likely to say they limited consumption. Smokers who expect to quit sometime, but not in the next 6 months, were more likely to buy by the carton or from low-tax or nontaxed sources and less likely to limit their consumption, compared with those who expect to quit in the next 6 months. Smokers who said they controlled costs by limiting consumption were much more likely than others to choose cheaper retail outlets or use promotional offers and to buy cheaper brands. Finally, smokers who engaged in any of the price-minimizing strategies were much more likely to limit consumption as well, compared with those not using any priceminimizing strategies. A few other findings are worth noting. Less than one-quarter (22.5 1.8%) of premium brand smokers but nearly 60% (58.4 5.4%) of discount or generic brand smokers said that price influenced their brand choice. Carton buyers were more likely (75.9 2.7%) to indicate that price influenced their choice of retail outlet than were pack buyers (55.5 1.9%). Retail outlets usually patronized Because choice of retail outlet was the most common price-minimizing strategy reported, we examined smokers usual retail outlet in more detail. Overall, the following percentages of smokers patronized the indicated outlets: convenience stores or gas stations (49.4 2.0%), liquor or drug stores (16.5 1.3%), tobacco discount stores (16.0 1.2%), supermarkets (5.6 0.7%), and general discount stores (5.2 0.7%). Smokers whose outlet choice was influenced by price were significantly more likely than other smokers to buy from tobacco discount stores (23.4 1.6% vs. 6.8 1.6%) and significantly less likely to buy at convenience stores or gas stations (47.5 2.0% vs. 59.1 3.5%), drug or liquor stores (15.5 1.4% vs. 20.4 2.4%), and supermarkets (4.2 0.9% vs. 8.5 1.4%). They also were more likely to buy cigarettes from low-tax or nontaxed sources than were other smokers (7.6 0.9% vs. 4.2 1.2%), but as indicated earlier, very few smokers used such sources. The average reported price paid per pack differed by type of outlet patronized after adjustment for demographics and daily cigarette consumption in a linear regression analysis: $4.06/pack for those usually buying at convenience stores or gas stations, $4.05/pack for those buying at liquor or drug stores, $3.94/pack for those buying at supermarkets, $3.51/pack for those buying from tobacco discount stores, and $3.48/pack for those buying at other discount stores. Price paid per pack for those using price-minimizing strategies Table 3 presents the adjusted mean reported price paid per pack for smokers using and not using various price-minimizing strategies. Prices differed considerably among the various strategies, with those buying from low-tax or nontaxed sources paying at least $1.00/pack less than those who said price influenced their choice of retail outlet. Except for taking advantage of promotional offers, all the

NICOTINE & TOBACCO RESEARCH 631 Table 3. Adjusted price paid per pack and savings from use of price-minimizing strategies. Price/pack (in dollars 95% CI) Price-minimizing strategy Strategy used Strategy not used Savings (dollars) Single strategy 1. Choice of retail outlet 3.70 0.04 4.06 0.04 20.36 2. Use promotional offers 3.80 0.04 3.85 0.04 20.05* 3. Choice of brand 3.53 0.07 3.96 0.03 20.43 4. Buy by the carton 3.10 0.05 4.11 0.05 21.01 5. Buy from low-tax or nontaxed source 2.66 0.12 3.91 0.02 21.25 Pairs of strategies used by at least 20% of smokers 1 and 2 3.73 0.05 4.09 0.06 20.36 1 and 3 3.46 0.07 4.12 0.05 20.66 1 and 4 3.04 0.06 4.27 0.04 21.23 Multiple strategies Only one 4.07 0.05 4.34 0.05 20.27 Any two 3.76 0.05 4.34 0.05 20.58 Any three 3.33 0.07 4.34 0.05 21.01 Any four or all five 2.84 0.11 4.34 0.05 21.50 Note. Table entries for price are least square means from multiple regression analyses of reported price paid/pack, adjusting for demographics, cigarette consumption level, and whether smoker said he or she controls costs by limiting consumption. *Not statistically significant. All other strategies significantly lowered the price paid/pack. price-minimizing strategies were associated with a significant savings in the amount smokers paid per pack. Buying by the carton and from low-tax or nontaxed sources saved over $1.00/pack. The savings generally increased with the use of dual strategies. Smokers who said price influenced their choice of retail outlet and brand paid $0.66/pack less on average than did those not using both strategies. In analyzing multiple strategies, we categorized respondents according to whether they used none, one, two, three, or four to five strategies. Thus the average adjusted price paid for those reporting using just one strategy (lower portion of table) can be higher than the prices in the top portion of the table, where we considered the percentage using each strategy, regardless of whether a respondent also used other strategies. For example, some of those reporting that their choice of retail outlet was influenced by price might also be carton buyers, which would reduce the average reported price for the group. By contrast, if those who reported using only one strategy were most often those who chose a cheaper retail outlet or used promotional offers (the most prevalent strategies), then their average price paid would be higher, because only one strategy was used. Reasons for buying by the pack instead of by the carton Given that purchasing cigarettes by the carton can result in at least a $1.00/pack savings, it is curious that only about 28% of smokers usually bought by the carton. Table 4 shows the main reasons smokers gave for buying by the pack instead of by the carton. Smokers most commonly said this purchasing strategy helped them to limit their smoking; nearly 40% of smokers thought they would smoke too much if they had a carton of cigarettes on hand. Nondaily and light smokers were significantly more likely to say this than were moderate-to-heavy smokers. Further, pack buyers who said they limited their Table 4. Reasons smokers give for buying cigarettes by the pack rather than by the carton (percentages with 95% CI). a Cigarettes smoked per day Overall (N53,561) Nondaily (n51,173),15 (n51,225) >15 (n51,053) Unweighted sample size 3,305 1,128 1,214 963 Reason Control the amount I smoke 39.6 2.1 42.6 3.2 42.5 3.1 32.5 3.3 Carton cost too much 14.7 1.5 7.1 1.5 15.9 2.8 21.9 3.0 Don t smoke enough for a carton 10.2 1.7 25.1 4.3 4.2 1.8 0.4 0.5 Pack more convenient 9.6 1.2 5.3 1.3 11.1 2.2 12.6 2.3 Cartons not available where I shop 8.9 1.2 5.6 1.4 9.9 1.9 11.6 2.6 Plan to quit soon, don t want leftovers 8.4 1.0 6.5 1.7 8.7 1.8 10.4 1.9 Don t care about price 3.0 0.7 1.8 0.9 2.6 1.0 4.8 1.5 For pack discounts, specials 2.4 0.6 0.7 0.6 2.5 0.6 4.1 1.8 Fresher by pack 2.2 0.5 3.7 1.3 1.9 0.7 0.9 0.6 a Weighted percentages. Percentages do not add to 100% because of rounding.

632 HOW DO SMOKERS CONTROL THEIR CIGARETTE EXPENDITURES? consumption were significantly more likely to give this reason than were pack buyers who did not limit consumption (45.5 3.8% vs. 37.6 2.4%, respectively). The greater upfront cost of a carton was the next most common reason given, by just under 15% of smokers. Daily smokers were significantly more likely to give this reason than were nondaily smokers. This reason was cited more often by smokers who said that price influenced their choice of brand (21.9 3.5% vs. 12.2 1.6%) or retail outlet (19.4 2.3% vs. 8.8 1.7%). Discussion The results indicate that about three-quarters of California smokers are indeed engaging in strategies to minimize the price they pay for a pack of cigarettes, with considerable variation in reported price paid depending on the strategies used and the retail outlet from which the cigarettes were purchased. The most frequently used strategy was choosing a cheaper retail outlet. This strategy, choosing a cheaper brand, buying by the carton, and buying from low-tax or nontaxed sources appeared to be associated with a significantly lower price paid per pack. Buying by the carton and from low-tax or nontaxed sources, which generally necessitate buying by the carton, tended to save the most (at least $1.00/pack). However, despite the potential savings, only about 28% of smokers bought their cigarettes by the carton, and nearly 40% of pack buyers said that their reason for not using this priceminimizing strategy was their fear that they might smoke too much. Apparently many smokers believe that if cigarettes were readily available, they would smoke more than they wanted. This behavior may be an example of consumers paying more to consume less (O Donoghue & Rabin, 2000; Thaler & Shefrin, 1981). Smokers who said price influenced how much they smoked were particularly likely to endorse this reason, supporting the idea that this strategy may help to control the overall amount of money spent on cigarettes. Further, because this explanation was particularly common among nondaily and light daily smokers, it might imply that such smokers are concerned about the potential for the amount they smoke to increase. Because their total cigarette expenditures are lower than those of heavier smokers, they also may be willing or able to pay a higher price to help limit their consumption. Of course, controlling consumption might also be motivated by health concerns. The next most common reason for buying by the pack was that the upfront cost for a carton of cigarettes was too high. This reason was particularly common for moderate-to-heavy smokers and for smokers who said price influenced their choice of retail outlet or brand. This explanation clearly indicates suboptimal economic behavior; however, it reduces the upfront cost of cigarettes considerably. The minimal outlay needed to buy a pack of cigarettes may be easily incorporated into the day s or week s budget by forgoing some other small purchase. Compared with lower-income smokers, those with higher incomes tended to buy cigarettes by the carton, but lower-income smokers were more likely to use other price-minimizing strategies. These findings are consistent with the perception that the upfront cost of a carton is unaffordable but with a desire by such smokers to control cigarette expenditures in other ways. A high percentage of smokers who said price influenced their choice of retail outlet still appeared to buy their cigarettes from the more expensive retail outlets, although they were more likely to use discount stores than smokers not giving this reason. In fact, in 2002, 60.6 1.7% of all California smokers bought their cigarettes by the pack at the most expensive outlets (convenience stores or gas stations, liquor or drug stores, or supermarkets), nearly the same percentage observed just after the 1998 1999 price increase (Emery et al., 2002). Although we found evidence that smokers who said price influenced where they bought their cigarettes were more likely to buy cigarettes from low-tax or nontaxed sources, the percentage of smokers doing so was very small (,6%). Given that the majority of smokers preferred to buy their cigarettes by the pack, for reasons of self-control and upfront cost, outlets requiring the purchase of more than one carton at a time (e.g., the Internet) are not likely to become attractive to the majority of smokers. However, some smokers may use these sources occasionally when they have convenient access to them or can afford it. Perhaps smokers choose the more expensive outlets because they are simply more convenient or because they more often feature promotional offers (Feighery et al., 2003). Another effective strategy to reduce the cost of smoking was to choose a lower-price cigarette brand, but only about 29% of smokers did so; generally, they were older smokers or those from low-income households. This percentage was similar to the 28% reported by Biener et al. (1998), following a price increase of $0.25/pack in the early 1990s in Massachusetts. That relatively few smokers used this strategy, even in the face of high cigarette prices, indicates high brand loyalty, perhaps because their image of themselves as a smoker is tied to the brand. They may smoke premium brands as a statement that they can afford it, or because they have a negative image of people who smoke discount or generic

NICOTINE & TOBACCO RESEARCH 633 brands. Finally, brand loyalty could be the result of taste preference. In multivariate analysis, we found no gender difference in the likelihood of saying price influenced the brand smoked. However, as shown in previous research (Cavin & Pierce, 1996), we found that women were more likely than men to smoke discount or generic brands, so this seems a contradictory finding. The survey question asked whether price influenced the brand smoked, not whether price influenced whether they smoked a discount or generic brand. Therefore, both men and women might have been influenced by price to smoke cheaper brands, but men might be more likely to smoke cheaper premium brands and women might be more likely to smoke discount or generic brands. The amount of money tobacco companies spend on retail outlet promotions has increased dramatically since the early 1990s (Feighery, Ribisl, Schliecher, Lee, & Halvorson, 2001). In 2002, around 35% of smokers took advantage of these offers every time they saw them. However, this strategy did not appear to save on the price per pack. One limitation of the present study is not knowing whether smokers who used this strategy factored their savings into the price they reported they usually paid for cigarettes. Perhaps they do not see these offers that often and reported the price they usually paid when not taking advantage of an offer. Thus we cannot rule out the possibility that taking advantage of promotional offers does save smokers money. Our results have additional limitations. Because we collected smokers reasons for their past purchasing decisions, postdecision rationalizations may have influenced some responses regarding cigarette purchasing behavior (Janis & Mann, 1977). For instance, a smoker s explanation that purchasing by the pack was to control the amount smoked might simply be a rationalization for this uneconomic purchasing decision. Average cigarette prices were determined from possibly inaccurate self-reports. However, these prices varied as expected and likely yield a fairly good indication of the relative benefit of the various price-minimizing strategies. Because we did not ask recent quitters whether price influenced their decision to quit, we cannot rule out quitting as the ultimate behavior change because of high cigarette prices. Smoking prevalence declined by 1.7 percentage points between 1999 and 2002 in California. Although quitting likely contributed to the decline, other factors such as lower smoking rates among the new cohort of young adults and migration into and out of the state might have played a role. Finally, we report the behaviors smokers used in 2002. Because comparable data prior to the major price increases were not available, we cannot determine whether smokers adopted these behaviors specifically in response to these increases. Clearly, longitudinal studies are needed that span a major price increase to fully understand how smokers change their behavior in the face of such an increase. Our results suggest there are several types of smokers, characterized by their price-minimizing behaviors. First, there are higher-income and some lighter smokers who may easily accommodate cigarette costs in their budgets and as a result are not likely to seek to minimize their cigarette costs. Second, there are older smokers with higher consumption levels and who appear to be resigned to smoking (thinking they will never quit). These smokers may strive to save as much as possible by smoking cheaper brands and buying by the carton at discount stores and other less expensive sources, and they may be less inclined to limit their consumption. Third, there are lower-income and some lighter smokers (e.g., Hispanics) who do not buy by the carton because they cannot afford the upfront cost but who use other price-minimizing strategies to control their cigarette expenditures. Our results suggest that a two-pack/day smoker could save at least $60.00/month off a total monthly cigarette cost of $244.00 by purchasing by the carton. Pack buyers could still potentially save $0.33 $0.66/ pack by using the other price-minimizing strategies (Table 3). For a 12.3-cigarette/day smoker (average for all California smokers in 2002), these strategies could translate to a monthly savings of $6.00 $12.00. Because a $0.50/pack tax increase would cost the 12.3-cigarette/day smoker another $9.33/month, some smokers could possibly absorb the tax increase by adopting one or more of the price-minimizing strategies and still not have to buy cigarettes by the carton or reduce consumption to keep within budget. However, as Table 1 shows, about one-third of those who say they limit consumption to control cost are already using price-minimizing strategies. Accordingly, consider a scenario in which the average California smoker cuts consumption by 3 cigarettes/day, or by about 25%. Conceivably, the smoker could maintain nicotine intake by taking more puffs and smoking more of each of the remaining cigarettes smoked (Scherer, 1999). The total monthly savings would be $4.08/pack63 cigarettes/day630 days/month420 cigarettes/pack5 $18.36/month. A decrease of 5 cigarettes/day would save about $30.00/month. Thus, short of purchasing in bulk, the best way for the majority of smokers to control total cigarette expenditures is by cutting consumption. The preceding calculations suggest that a few smokers not already using price-minimizing strategies could compensate for a new excise tax increase by adopting them. However, those already using multiple price-minimizing strategies would likely

634 HOW DO SMOKERS CONTROL THEIR CIGARETTE EXPENDITURES? have to cut consumption to keep total cigarette expenditures within budget. The lowest-income smokers (including some minorities) appear to have already limited consumption to control cost (Table 2, rightmost column). Money not spent on cigarettes would benefit a low-income smoker or ex-smoker in important ways (Busch, Falba, & Sindelar, 2004; Fox, 2004). According to Remler (2004), most economic theories would consider cutting consumption or quitting by lower-income smokers in response to a cigarette tax increase as making such a tax progressive rather than regressive. Higher-income smokers who can absorb the extra cost might not alter their behavior. Remler s article did not address substitution of lower-price brands or use of other price-minimizing strategies, but as our results indicate, in California these strategies may not be sufficient to counteract a tax increase without also cutting consumption. California smokers have experienced a statewide tobacco control program for over 13 years. Recent work by Farrelly et al. (2003) indicates that the presence of a well-funded tobacco control program has a strong effect on reduced levels of per-capita consumption over and above the effect of tax increases (Centers for Disease Control and Prevention, 1999; Laugesen et al., 2000). Cutting consumption because of other tobacco control measures (e.g., smoking restrictions, reduced acceptability of smoking in public) might allow smokers to more readily absorb an additional tax increase if they cut down before taxes were raised. The new tax would just bring them to the level of expenditure that they had tolerated previously. The majority of California smokers support further cigarette tax increases (Gilpin et al, 2003), suggesting that it is again time to use this tobacco control tool. 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