THE EFFECT OF ADVERTISING ON SALES PERFORMANCE OF CONSUMER GOODS

ABSTRACT

This study evaluates the effectiveness of advertising expenses on the sales revenue and profitability of Unilever Nigeria Plc. This study is based on secondary data collected for advertising expenditure, sales revenue and profitability of Unilever Nigeria Plc over the period of 1996 to 2009 from the annual report and accounts of the company under study. Among the objectives of the study is to evaluate the extent of the effect of advertising on the sales revenue of the company. Correlational and regression analysis study designs were adopted for the study. The contribution of the first hypothesis has found that advertising expenses has depicted significant relationship between advertising and the sales revenue of the company. Furthermore, the second hypothesis result has shown that advertising has no significant effect on the profitability of the company. This study concluded that advertising is considered as one of the most important medium of communication influencing the company’s performance in more than one ways. But its influential strategic important could be suppressed by other factors which also try to receive equal attention at time of deciding any sales and profitability strategy. It is therefore recommended that not only advertising should be given adequate attention while formulating strategies relating to sales revenue and profitability promotion policy. Other factors which are crucial to increase sales revenue and profitability such as; sales promotion, personal selling, publicity etc which are crucial should be considered.

  CHAPTER ONE

                                                  INTRODUCTION

1.1         Introduction

Modern marketing calls for more than developing a good product, pricing it attractively and making it accessible. Companies and individuals must also communicate with present and potential stakeholders, and the general public. For most companies and individuals, the question is not whether to communicate but rather what to say, how to say it, to whom and how often. But communication gets harder and harder as more and more companies clamour to grab the consumer’s increasingly divided attention. To reach target markets and build brand equity, holistic marketers are creatively employing multiple form of advertising.

In Nigeria over the years, companies and individual service providers have been trying to improve on the creativity in their adverts so as to meet world standard and again create the necessary awareness that a product needs.

1.2       Background of the Study    

Advertising is a form of communication intended to persuade its viewers, readers or listeners to take some actions. It usually includes the name of a product or service and how that product or service could benefit the consumer, by persuading potential consumers and customers to purchase or to consume that particular brand. Modern advertising developed with the rise of mass production in the late 19th and early 20th centuries.

Advertising could also be seen as an element of a marketing communications program. It is usually not the only one-or even the most important one in terms of building brand equity. The marketing communication mix consists of six major modes of communication.

1.         Advertising:  Any paid form of non personal presentation and promotion of idea, goods or services by an identified sponsor.

2.         Sales promotion:  A variety of short term incentives to encourage trial or purchase of a product or service.

3.         Events and Experiences:  Company sponsored activities and programs designed to create daily or special brand-related interactions.

4.         Public Relation and Publicity:  A variety of programs designed to promote or protect a company’s image or its individual products.

5.         Direct Marketing:  Use of mail, telephone, fax, e-mail or internet to communicate directly with or solicit response or dialogue from specific customers and prospects.

6.         Personal Selling:  Face-to-face interaction with one or more prospective purchasers for the purpose of making presentations, answering questions and procuring orders.

The above listed are the elements of a marketing communication mix of which advertising is one. Therefore, the researcher wants to really find out the role that advertising plays in the mix hence, the topic “The Impact of Advertising on the Sales Performance of Consumer Goods”. A case study of Unilever Nigeria plc and proffer a solution applicable in this present time to ensure that advertising impacts positively on sales.

1.3       Statement of the Problem

The purpose of this research work is to thoroughly evaluate the impact of advertising in relation to performance in sales and create strategies that will commensurate with increased sales due to the use of advertising of products and services of consumers goods.

1. One of the major problems today in many companies is how to strike balance between advertising and profitability.
2. Another problem facing some firms is how to design an advert strategy that will yield increase in sales.
3. Some organizations are also confronted with how and when to draw up and effect the strategies that concern advertising of their products.
4. The problem of effective management of adverts in a way that will bring economic value to the organization is also involved

1.4       Objectives of the Study

The objectives of this research work are to:

1. Identify various advertising strategies that will be useful for the management in decision making.
2. Evaluate the advertising strategy that will increase sales turnover.
3. Find out whether advertising is impacting positively or negatively to sales.
4. Find out how the company that is Unilever Nigeria Plc determines its advertising model

1.5       Research Questions

The following research questions have been developed:

1. How can an organization use advertising to stimulate consumers?
2. Does effective advertising lead to increase in sales performance positively?
3. Does your advertising commensurate with product satisfaction?
4. What advertising strategy does your company use to control its market value?

1.6       Statement of Hypothesis

Kerlinger F. (1976) defines hypothesis as a conjectural statement of a relationship between two or more variables. Hypotheses are usually gotten from research questions/problems and can be regarded as tentative solutions to research questions. Therefore, the researcher will test the following hypotheses

Hypothesis I

Null hypothesis (H0):  Advert cost will not have a positive impact against sales revenue

Alternative Hypothesis (H1):  Advert cost will have a positive impact against sales revenue

Hypothesis I1

Null hypothesis (H0):  Effective advertisement will not have a positive impact on profit

Alternative Hypothesis (H1):  Effective advertisement will have a positive impact on profit

1.7       Significance of the Research Study

This research work has much significance but some of them are:

1. This research work will improve and expand the knowledge and understanding of the researcher on issues surrounding or pertaining to advertising
2. It will provide relevant information for management of any organization in making decision related to advertising.
3. It will help in seeking solution to all problems that arise from poor advertising.

1.8       Justification of the Study

The research work is rightly carried out because of the following reasons:

1. It will educate, especially advert personnel on how adverts are really impacting to company’s goods and services, sales revenues.
2. It will serve as reference material to any scholar/student who is willing to know or to add to his/her knowledge and insight of what the real impact of advertising is.

1.9       Scope of the Study

It is generally known that advertising covers a wide range area, but for the purpose of this research work, it will be limited to studying the impact of advertising on the sales performance of consumer goods in Unilever Nigeria plc.

Thus, effort will be made towards finding out if the advertising cost of Unilever Nigeria Plc is either positive or negative on revenues and profit of the organization. The researcher intends to find out by looking into a ten year period of performance by the organization.

1.10                 Definition of Terms

1. MARKETING: This is the task of creating, promoting, and delivery of goods and service to consumers and businesses.
2. PRODUCT:  Anything that can be offered to a market to satisfy a want or need.
3. PRICE/PRICING:  This is the amount of money for which goods or services is brought or sold, as selected by the company as final price from its range of prices.
4. COMMUNICATION:  this is the act of delivering and receiving messages from people. This includes newspaper, magazine, radio, Television e.t.c.
5. ADVERTISING:  A form of Communication intended to persuade its viewers, readers, or listeners to take some actions on a product or service.
6. STRATEGY:  These are plans designed to achieve a long term aim and objectives.
7. SALES TURNOVER:  This is the rate at which goods are sold.
8. CONSUMER:  Is a person who buys goods or services that is, the final person who uses a product.
9. SATISFACTION:  It is a feeling of fulfillment that is gotten from the use of a product.
10. COMPANY:  This is referred to as a firm. That is, commercial business.
11. MANAGEMENT:  An act of managing (i.e planning, staffing, controlling etc) all resources available to the business for the achievement of goal and objective of a company.