Refillable users “more sensitive to price” than cigalike buyers

Written by || 17 June, 2014 || Business news analysis |

elastic bands 300x180The sensitivity of U.S. vapers to e-cigarette pricing is much higher than smokers’ sensitivity to the costs of tobacco cigarettes, according to new research – and sales of refillable units are particularly likely to be affected by price increases.

For a paper in the BMJ’s journal Tobacco Control, a team from the University of Illinois at Chicago studied prices and sales of e-cigarettes at a range of U.S. stores between 2009 and 2012, using figures compiled by Nielsen, the gold standard of retail data.

They found that if prices of disposable e-cigarettes rose by 10%, demand dropped by 12%. A similar price rise for refillable products would drive sales down by 19%, although it would also increase the sales of disposables by 5%. But evidence for any positive effect of a price hike in disposables on sales of reusables was not statistically significant.

The researchers did not find a statistically significant relationship between higher tobacco prices and higher e-cigarette sales, either.

They concluded that “policies increasing e-cigarette retail prices, such as limiting rebates, discounts and coupons and imposing a tax on e-cigarettes, could potentially lead to significant reductions in e-cigarette sales.

“Differential tax policies based on product type could lead to substitution between different types of e-cigarettes,” wrote the authors of the study, entitled “The impact of price and tobacco control policies on the demand for electronic nicotine delivery systems”.

This sensitivity to prices, termed by economists the “price elasticity of demand”, was two to three times larger for e-cigarettes than for tobacco cigarettes, the researchers found. They suggested that this might partly be because many e-cigarette users are experimenters who will abandon the category or buy fewer products if the cost increases, although they also acknowledged that their survey might not represent the full picture, since it omitted online sales and vape shops.

The retailers covered included major grocery chains, drugstores and convenience stores, and the markets examined represented around 80% of the U.S. population.

The paper in Tobacco Control was included in a supplement produced by the State and Community Tobacco Control Research Initiative.

What This Means: It should be no surprise that vapers – a large proportion of whom are novices – are more likely to reduce or abandon their purchases when prices rise than are tobacco smokers, many of whom have been loyal to their habit for years despite increasing costs.

It is more surprising that it could be the users of refillable systems, rather than disposables, who are quicker to close their wallets; one might have expected the opposite, given the greater commitment of time and money involved in going down the refillable path in the first place. The data is not conclusive, however; and the omission of the important online and vape shop channels from the survey could explain this finding.

– Barnaby Page ECigIntelligence staff

Photo: Dave Bleasdale