Association for Public Policy Analysis & Management

Revenue of the vitamin and supplement-manufacturing sector in the U.S. has grown steadily from $10.61 billion in 2008 to $14 billion in 2013 (Statista, 2014). According to the recent surveys, almost 50 percent of American adults report taking a dietary supplement (NHANES 2010). The dilemma, however, is that there is little scientific evidence to support advertising claims made by dietary supplement manufacturers on their labels, and few consumers are sufficiently well informed about the scientific benefits and risks of using these products. Asymmetric information and lack of regulation in this market makes consumers vulnerable to claims of efficacy and improved health that can cause significant market inefficiencies.

This paper is, to the best of our knowledge, the first to estimate the impact of individual level exposure to vitamin advertising on demand for vitamins and mineral supplements. We match consumer level data from the National Consumer Survey (NCS) to data on vitamin advertising from Kantar Media for the period 2000-2009. The NCS includes detailed questions on vitamin/mineral supplement use and media behavior (television and print). By combining questions on which television programs respondents watch (and which magazines they read) with data on when and where advertisements air/appear, we are able to create a measure of potential exposure to print and television advertising for each individual.

To mitigate possible endogeneity bias from firm level targeting decisions, we saturate models with indicator measures for how often the respondent watches (reads) each program (magazine) thereby refining our targeting control measures. The identifying variation in our models comes from two different respondents who watch (read) the same programs (magazines), at the same frequency, but at different times of the year containing different number of ads (i.e., program/magazine survey wave ad variation).

We also examine heterogeneities by separately estimating demand for the seven most commonly consumed supplements (vitamins B, C and E, multivitamins, antioxidants, fish oil, and calcium). Given the uncertainty surrounding the efficacy of vitamins and supplements in treating and/or preventing illness, we examine demand for specific vitamins across the health distribution. We explore links between advertising for specific vitamins/minerals and the ailments they target drawn from the medical literature (e.g., calcium and osteoporosis) and test if the vitamin-specific advertising increases demand for those individuals with or without the ailment.

Overall, we find statistically significant effects of increased advertising on vitamin demand. A 10 percent increase in advertising exposure increases the probability of vitamin consumption by 0.7 percent and 4.0 percent for television and print advertising, respectively. When examining demand for specific vitamins, we find that a 10 percent increase in print advertising has a significant effect for all vitamins (ranging from 3.5 to 9.5 percent) while a 10 percent increase in television advertising only increases demand for multivitamins and fish oil supplements (0.29 and 1.7 percent, respectively). We also find evidence that advertising is creating demand for disease prevention (Vitamin E) or creates demand for both a therapeutic and preventative use (Vitamin B, Fish Oil).