Improving Sales Revenue through Advertising: The Nigerian Experience

Transcription

1 Vol. 4, No. 2, 201, Improving Sales Revenue through Advertising: The Nigerian Experience Thomas D. Ayodele 1 Abstract The thrust of the paper was to find out the impact of advertising on sales revenue of Nigerian manufacturing companies and to find out how sales revenue of companies can be improved through the use of advertisement. The paper adopted the survey research method and primary data were used. The data were collected through the use of questionnaire served on 60 staff members of Cadbury Nig plc and Unilever Nig.plc, in which of the questionnaire copies were filled and returned for analysis. Simple percentages and frequency table were used for data analysis and F-ratio was used to test the various formulated hypotheses. It was found out that there is a positive and significant relationship between advertisement and sales revenue and that proper advertisement made will surely improve the sales revenue of the companies and hence overall profit level of the companies. It was therefore recommended that companies should see advertisement as a necessity and a strong tool for their growth hence should be ready to invest in that direction in order to boost their sales revenue and overall income of the companies by retaining customers and by wining other would be customers. Keywords: Advertising, Sales Revenue, Customers, Marketers, Products. 1. Introduction The role of advertising in increasing the sales volume of any company s product at any point in time cannot be over emphasized. It has constituted immensely to the increasing growth of many companies in various industries all over the world. This is due to the fact that it places positive image about company s products in the minds of potential consumers which eventually influences their buying behavior. As observed by Rao and Miller (197) advertising is a promotional tool which tends to remind, reassure and influence the decisions of the consumers on their acceptability of the offering product. Today, all over the world, companies are in a more competitive and faster-paced environment than were before, accelerating the need to understand the consequences of their marketing efforts. Marketers simply do not have the luxury any more to rest on their oars or to assess how a set of campaigns performed after months when they have been concluded. Rather, the market place is evolving so rapidly in many cases that knowing what is working and what is not, almost immediately it is happening has great value. For these reasons, marketers have begun to seek new and effective measurement tools to help them estimate impacts of their advertising mostly on sales revenues. However, it is often very difficult in Nigeria to have a regular and consistent increase in the sales revenues derivable from a product because of the political and social- economic instability in the country, which directly affects the standard of living and the purchasing power of the consumers. Therefore, the thrust of the paper is to find out the impact of advertising on sales revenue of Nigerian companies amidst the various challenges facing the companies and to investigate whether the Nigerian companies have benefited positively from advertising like any other companies outside the country. Cadbury Nig. Plc. and Unilever Nigeria Plc were used as case studies. 1 Phd., Department of Accounting & Finance Ajayi Crowther University, Oyo State, Nigeria 201 Research Academy of Social Sciences 11

2 2. Theoretical Framework The Concept of Advertising T. D. Ayodele Advertising can be defined as any paid form of non-personal communication which is directed to the consumers or target audience through various media in order to present and promote product, services and ideas (kotter and ketter, 200). This means that advertising is a branch of commerce which is used to create awareness for particular product and it must be paid for. According to Graham and Frankenberger (2000), advertising is a means of drawing someone s attention to something or notifying or informing somebody of something. This was corroborated by Lilien et al(1992) who viewed advertising as an act of telling people publicly about a product or service in order to persuade them to buy it. Arowomole and Ebeloku (2002) identify some of the attributes of advertising as follows: i. Non- personal- personal selling requires the seller and buyer to get in touch with each other, while nonpersonal selling involves the use of various media to reach the consumer or buyer. Advertising is therefore directed to group of people with no particular person in mind and so it is non-personal in nature. ii. Communication this means not only in speech or picture but any way one parson can pass information, ideas or feeling to another. Thus, communication uses all these senses of smell, touch, taste, sound and sight. And of all the five senses, only two (i.e. sound and sight senses) are really useful in advertising. iii. Information information is described as knowledge, fact or news. However, one should bear in mind that one person s information is another s scam, particularly when an advertiser talks about his product. Information comes in many forms like being complete, blare or deceptive. iv. Finance- If advertisement is created and placed on the media, the costs of creation and time or space in the media must be paid for. This is a major area in which advertising is different from public relations. However, some advertisements are not paid for by their sponsors. Free advertisements are exclusively for public service campaigns. v. Identified sponsor- this connotes that whoever is putting out the advertisement must tell audience who he or she is under the law, a sponsor must identify himself or herself as the person in charge of an advertisement and should be seen as such. Importance of Advertisement Advertising is a favorable representation of product to make consumers, customers and the general public aware of the product. It lets the potential buyers, general public and end users to be aware and familiar with the brands, their goods and services. According to Vakrates and Ambler (1996) many people think that advertising a product means to sell it, but in the real sense, the aim of advertising is to make the general public and the potential buyers, aware of goods, products and services available under a brand. In a successful business, advertising play an essential and important role. Though advertising does not mean selling of products and services but it helps in increasing the sales of such items. When the general public becomes conscious of the products and services under the identified brands they persuade people towards the brands and make them buy better brands (Erickson and Gary, 199). Advertising does not only create brands awareness in general public alone but also make business more popular within the circle of potential buyers. Advertising thus increases profit of the companies by escalating their revenues. Therefore the expenditure made on advertisement usually turns to good boost in earnings. Advertising and Sales Relationship Rao et al (197) and Simon and Johan (1980) evaluated the effectiveness of advertising on sales of small and large firms, and for multinational corporations. The results showed that advertising has influence on sales, though its relative effectiveness was not the same for all the categories of firms. 116

3 Kotler and keller (200) identified two models of advertising- sales response function which almost all advertisers always subscribe to. They are the concave downward function and the s-shaped response function. (i) The Concave Downward Function After reviewing many studies on the effects of advertising on sales, Simon and Johan (1980) concluded that the effects of advertising budgets follow the microeconomic law of diminishing returns. That is, as the amount of advertising increases, its incremental value decreases. The logic is that those with the greatest potential to buy will likely act on the first (or earliest) exposures, while those less likely to buy are not likely to change as a result of the advertising. For those who may be potential buyers, each additional advert will supply little or no new information that will effect their decisions. Thus, according to the concave-downward function model (as shown below), the effect of advertising quickly begin to diminish. Budgeting under this model suggests that fewer advertising naira may be needed to create optimal influence on sales Incremental Sales concave-downward response curve Advertising Expenditure Figure 1. The concave downward response curve Source-: George E.Belch (2003). (ii) The S- Shaped Response Function Many advertising managers assume the S-shape response curve which projects an s-shaped function to the budget outlay. Initial outlays of the advertising budget have little impact (as indicated by the essentially flat sales curve in range A from figure2 below). After a certain budget level has been reached (the beginning of range B), advertising and promotional efforts begin to have an effect as additional increments of expenditures result in increased sales. This incremental gain continues only to a point, however, because at the beginning of range C, additional expenditures begin to return little or nothing in the way of sales. This model suggests that a small advertising budget is likely to have no impact beyond the sales that may have been generated through other means (for example, word of mouth). At the other extreme, more does not necessarily mean better. Additional naira spent beyond range B has no additional impact on sales and for the most part, can be considered waste. As with marginal analysis, one would attempt to operate at that point on the curve in area B where the maximum return for the money is attained. Incremental Sales S-shaped response function Range A B C Advertising expenditure Figure 2: The S-Shaped Response Curve Source George E. Belch (2003). 117

4 3. Methodology Data Collection Method T. D. Ayodele Primary data were collected through the use of questionnaire served on 60 members of staff of Cadbury Nig Plc and Unilever Nig plc to elicit responses from them. Out of the 60 copies of questionnaire served. Fifty five () of them were returned filled; hence the returned copies were used for the analysis of data of the paper. 4. Data Presentation and Analysis The data collected for the study were presented and analysed with the use of frequency distribution tables. The stated hypotheses were tested with the aid of F-ratio. Table 1: Respondents Distribution by Designation Designation Frequency Percent Valid percent Cum. percent Valid Management Senior Staff Junior Staff Others Missing System Source- Authors computation with spss 17 Analysis, April From table 1, it shows that out of the total respondents consulted, 20 were of the management cadre in two companies, 16 were senior staff members, eight (8) were Junior staff while the remaining 11formed those in the casual labor category. Table 2: Whether Advertising will Increase Organization s Target Market and Boost Sales Response Frequency Percent Valid percent Valid strongly Agree Agree Undecided Disagree Strongly disagree Missing system Source- Authors Computation with SPSS 17 Analysis, April, From table 2 above, 22 respondents of the received questionnaire strongly attested that, advertising will increase organizations target market and boost sales. 17 respondents also agreed to the assertion. Only one respondent strongly disagreed while five respondents also disagreed with the submission and ten respondents remained undecided. 118

5 Table 3: Whether there is a Positive and Significant Relationship between Advertising and Sales Revenue Generated from Products of Companies. Response Frequency Percent Valid percent Cumulative percent Valid strongly agree Agree Undecided Disagree Strongly disagree Missing system Source Author s computation The analysis in table 3 shows that 17 respondents and 14 respondents strongly agreed and agreed respectively that there is a positive and significant relationship between advertising and sales revenue generated from companies products. These respondents form more than half (6.4%) of the responses analysed. Only four respondents disagreed while 14 respondents strongly disagreed and six respondents remained neutral Table 4: Whether Advertisement is a Strong Tool in Tapping into the Consumers Buying Power Response Frequency Percent Valid percent Circum. Percent Valid strongly agree Agree Undecided Disagree Strongly disagree Missing system Sources-: Authors computation with SPSS 17 Analysis, April, 201. From table 4, it can be deduced that, 16 respondents and 17 respondents strongly agreed and agreed respectively to the fact that advertisement is a strong tool in tapping into the consumers buying power. Nine of the respondents were undecided while 12 respondents disagreed with the statement. Only one respondent strongly disagreed. Hypothesis Testing The following Hypotheses were tested concerning the study by using the F -ratio (Anova) Hypothesis 1. H 0: Advertisement does not have any impact on the total sales revenue of a company. Between Groups Within Groups Anova Table Sum of Squares Df. Mean Square Sources- Author s computation with SPSS 17 Analysis, April, 201 F Sig

6 T. D. Ayodele From the result in the Anova table above, the sums of square for between groups and within groups are 2.9 and respectively. The F- statistic value which helps to tell about the overall significant of a model and its good fit shows a value of This result is greater than the T-table value of 2.8 at (3, 1) degree of freedom. Therefore, the result is highly significant. Hence we reject the mill hypothesis (Ho) and accept the alternative hypothesis, thereby supporting the assertion that advertisement does have an impact on the total sales revenue of a company. Hypothesis 2. H 0: there is no positive or any significant relationship between advertising and sales revenue. Between groups Within groups Anova Table Sum of D f Mean F Squares Square Sig. Sources-: Author s Computation with SPSS 17 Analysis April, 201. The result above shows that the overall result was very significant. The F-static value was 6.73 which was higher than the critical value of F of 2.7 at (4, 0) degree of freedom. Therefore since the F calculated is greater than the F-critical value, the null hypothesis is rejected and the alternative one is accepted. This means that there is a positive and a significant relationship between advertising and sales revenue.. Conclusion and Recommendations The findings so far revealed that advertising position of a product is strong in the mind of the consumers in order to encourage repeated purchase of the company s products. This also creates brand loyalty and product differentiation. It further discovers that advertising is a strong and a veritable tool capable of reaching and motivating large audience. As have been shown, it was discovered that advertising has a positive and significant relationship with the sales revenue of the two companies surveyed. Also it can be concluded that any advertisement conducted on a product usually yield viable result by boasting the sales value of such products. Therefore, the following recommendations were give among others. (i) Due to the competitive nature of macro environment within which the companies operate, the sales managers are advised to develop and formulate promotional programmes that will satisfy the needs of the consumers and would-be customers. (ii) Any money spent on advertisement should not be seen as wastage; hence, more advert campaigns should be relayed from different service providers so that the targeted customers can identify the companies products or services when making purchase decision. (iii) Regular and consistent up-to-date training on the companies product information should be given to the advertising agencies so that they can apply the current knowledge and skills to handle the adverts and also to ensure that product information is being emphasized towards the consumers. (iv) Market research and other product studies should be conducted regularly to enable the companies identify those areas where promotional activities are lacking and appropriate decisions taken. 120

7 (v) The companies should also regularly examine the segments of the market that have been appealing so as to hold strongly on to them and to look for ways of attracting more customers, increase sales and generate more revenue. References Aromowole, K.A., Ebeloku,A.I (2000). Theory and Practice of Modern marketing, Lagos: Sodipe Nig. Ltd. Erickson F. and Gary M. (199). Gaining Competitive Advantage through Discretionary Expenditures: the Returns to R and D and Advertising,: Management science, 38 (9), Graham and Frankenberger (2000). The Effects of Advertising Reputation and Extremety of claim of Advertiser Effectiveness, Journal of consumer Research, 17, ( ). Kotler P. and Keller, K.L. (200). Marketing Management, prentice Hall Lilien, Gary L, kotler Philip, and Moorthy, K. Sridhar (1992). Marketing Models, Englewood cliffs, NJ: prentice Hall. Rao,Ambar G. and Miller, P.B.(197). Advertising sales Response Functions, Journal of Advertising Research, Vol.1,No2, (7-1) Simon, Julian L. and Johan A. (1980). The Shape of Advertising Response Function, Journal of Advertising Research, Vol. 20. Pp Vacratas, Demetrios and Ambler, Tim (1996). Advertising Effects: a Taxonomy and Review of Concepts, Methods and Results from the Academic Literature, Marketing Science Institute, Report No