Effect Of Advertising On Profitability Of Selected Food And Beverage Company

ABSTRACT

Advertising is a prominent feature of modern business operations. One could encounter advertising messages, while watching TV, reading magazines, listening to the radio, surfing the internet or even simply working down the street, as advertising has a stimulating influence on purchasing behavior of the consumers. Empirical evidence has proven that advertising increases sales revenue of firms. Advertising provides a platform for firms to create awareness about their products or services and how consumers could make the best out of such products. This study evaluated the effectiveness of advertising expenses on the sales revenue and profitability of selected food and beverages firms in Nigeria. This study was based on secondary data collected for advertising expenditures, sales and profit of food and beverages companies listed in the Nigerian Stock Exchange over the period of 2004 to 2017 from the annual report and accounts of the firms under study. Among the objectives of the study is to determine the extent to which advertising costs impact on the sales revenue and profitability of the selected food and beverages companies in Nigeria. Correlational and Ordinary Least Square regression analysis study designs were adopted for the study. The first hypothesis test showed that advertising expenses has no positive significant relationship with the sales revenue of the companies. Further, the second hypothesis test showed a positive significant relationship between advertising and the profitability of the firms. This study concluded that advertising is one of the most important medium of communication influencing the companies‟ performance in more than one ways. But its influential strategic importance 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 and profitability promotion policy. Other factors which are important to increasing sales revenue and profitability such as sales promotion, personal selling, publicity etc which are crucial should be considered.

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TABLE OF CONTENTS

Cover page ﾿ i

Title page ﾿ ii

Declaration page ﾿ iii

Certification ﾿ iv

Dedication ﾿ v

Acknowledgement ﾿ vi

Table of contents ﾿ vii

List of tables ﾿ ix

Abstract ﾿ x

CHAPTER ONE

INTRODUCTION

1.1 ﾿ Background to the study ﾿ 1

1.2 ﾿ Statement of the Problem ﾿ 3

1.3 ﾿ Objectives of the Study ﾿ 4

1.4 ﾿ Research Questions ﾿ 5

1.5 ﾿ Statement of Hypotheses ﾿ 5

1.6 ﾿ Significance of the Study ﾿ 5

1.7 ﾿ Scope of the Study ﾿ 7

1.8 ﾿ Limitation of the Study ﾿ 7

1.9 ﾿ Definition of Terms ﾿ 8

1.9.1 ﾿ Advertising ﾿ 8

1.9.2 ﾿ Brand equity  ﾿ 8

1.9.3 ﾿ Brand loyalty  ﾿ 8

1.9.4 ﾿ Carryover ﾿ 8

1.9.5 ﾿ Expenses ﾿ 9

1.9.6 ﾿ Strategy ﾿ 9

1.9.7 ﾿ Profitability ﾿ 9

CHAPTER TWO

LITERATURE REVIEW AND THEORETICAL FRAMEWORK 

2.1 ﾿ Introduction ﾿ 10

2.2 ﾿ The Concept of Advertising ﾿ 10

2.3 ﾿ Objectives of Advertising ﾿ 12

2.4 ﾿ Criteria for Setting Advertising Objectives ﾿ 13

2.5 ﾿ Developing Advertising Message ﾿ 16

2.5.1 ﾿ Perception ﾿ 16

2.5.2 ﾿ Business Publication ﾿ 17

Factors that Determine the Choice of Media ﾿ 18

2.6 ﾿ Functions of Advertising ﾿ 22

2.7 ﾿ Types of Advertising ﾿ 24

2.8 ﾿ Testing of the Advertisement ﾿ 27

2.9 ﾿ Criticisms of Advertising ﾿ 28

2.10 ﾿ Measuring Advertising Effectiveness ﾿ 30

2.11 ﾿ Developing and Managing an Advertising Program ﾿ 31

2.12 ﾿ Deciding on the Advertising Budget ﾿ 31

2,14 ﾿ Empirical Review ﾿ 36

2.15 ﾿ Theoretical Framework ﾿ 39

2.15.1 ﾿ The sales effect model ﾿ 39

2.15.2 ﾿ The dynamic theory of profitability ﾿ 40

2.16 ﾿ Summary ﾿ 41

CHAPTER THREE

RESEARCH METHODOLOGY

3.1 ﾿ Introduction ﾿ 43

3.2 ﾿ Research Design ﾿ 43

3.3 ﾿ Population and Sample of the Study ﾿ 43

3.4 ﾿ Sources and Method of Data Collection ﾿ 44

3.5 ﾿ Technique of Data Analysis ﾿ 44

3.6 ﾿ Model Specification and Development ﾿ 46

3.7 ﾿ Justification of the methods ﾿ 47

3.8 ﾿ Summary ﾿ 47

CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS

4.1 ﾿ Introduction ﾿ 48

4.2 ﾿ Data Presentation ﾿ 48

4.3 ﾿ Descriptive Statistic ﾿ 49

4.4.1 ﾿ Test of Null Hypothesis One (Ho1) ﾿ 50

4.4.2 ﾿ Test of Null Hypothesis Two (H02) ﾿ 52

4.5 ﾿ Discussion of Findings ﾿ 53

4.6 ﾿ Summary ﾿ 54

CHAPTER FIVE

SUMMARY, COMCLUSION AND RECOMMENDATIONS

5.1 ﾿ Summary ﾿ 56

5.2 ﾿ Conclusion ﾿ 57

5.3 ﾿ Recommendations ﾿ 59

REFERENCES

APPENDIX