THE IMPACT OF ADVERTISING ON SALES PERFORMANCE IN THE SOFT DRINK INDUSTRY

CHAPTER TWO

LITERATURE REVIEW

2.1 THE HISTORICAL PERSPECTIVE OF ADVERTISING

Marketing as a function of management refers to the conception and execution of activities to sell products, services or ideas to people in a mutually beneficial exchange situation. This means the marketer must aim at same direct or indirect profit organ, while the consumer must achieve a certain level of satisfaction obtained from the aforesaid product, service or ideas. Scientific marketing being what it is also required recording for practioners top learn from the experience, opinions and attitude of others.

Holloway and Hencock (1973) sees marketing as set of activities necessary and incidental to bringing about exchange relationship in our economic system. In ancient days, the simplicity of the society gave rise to the barter type of trade, those who had them, with something equally describe for exchange.

Barter even in its refined form cannot in the same measures compared with the complex strategies devised by marketers in our continuously day to day living. The forces of mass production, mass communication and multinationals have equalized the earth to one small village market with the attendant result that marketing has become even more complex and daunting.

This complexity has led to innovation of certain activities, designed to bring about and maximize the sales exchange situation in the form of marketing mix shown below:

Figure 2.1 Marketing Mix Model

Source: Hallow J.R. and Hancock G.A. marketing changing environment (London, John Wiley and Son’s Inc. (1973) promotion, which is a subject of the marketing mix.

2.2 ADVERTISING DEFINATIONS

Advertising, seen as a glamorous profession attract various scholars. However, these scholars view advertising from different angles. Alber Lasker defined advertising as a salesman in print. However, this definition was pronounced long before the advert of television and radio. In accordance with the international encyclopedia of social science, advertising can be defined as a means of making known about a product, service and idea in order to sell item or presenting the most persuasive possible selling message to the right prospect.

The American Marketing (AMA) defined advertising as a paid form of non personal presentation of goods, services or idea by an identified sponsor.

The British Institute of Marketing (BIM) defined advertising as the use of payment for space in publication which would be television, radio, cinema, posters and other outdoor advertising usually as a means of persuading people to have a particular course of action or to reach a point of view.

Above all, advertising can be viewed as a non personal communication directed at a targeted audience through various communication media such as television, radio, magazines, posters etc in order to present and promote products, services and ideas with the cost of media space being borne by an identified sponsor or advertiser.

In conclusion of the definitions above, the new of these definition amplified by analyzing the main phrase such as:

1. Any Form: Advert could take any form of presentation that is, it could be a sign, an advert in a newspaper, magazine, radio or television and any other form that can be thought of.
2. Non Personal: Advertising is done in a mass media, not a person to person basis like that of personal selling.
3. Goods, Service or Ideas: It is a not limited to goods and service only ideas, event and also people can be advertised to the audience for action to be taken.

2.3 TYPES OF ADVERTISING

It is pertinent that advertising can be identified with different uses it serves. These uses however are sometimes dependent and at time closely related.

[The American Marketing (AMA)]. The most pronounced types of advertising are:

1. CONSUMER AND BUSINESS ADVERTISING: Consumer advertising is that which is targeted to consumer of mass marketed products while business advertising is directed to people in business who in their operating capacity to buy and resell.
2. PROFESSIONAL ADVERTISING: It is directed to professionals such as doctors, lawyers, dentists and pharmacists etc who are in a position to promote products to their patients or consumers.
3. INSTITUTIONAL AND PUBLIC SERVICE ADVERTISING: It is intended to sell the consumers reasons for patronizing a firm’s product may be featured. Institutional advertising can do a lot to enhance the image of the company in the future.

The public service advertising is to sell an idea about a social problem of example, the campaign against, tobacco smoking. Some of these adverts are sponsored by government or by private firms to improve their public image or by masses as a public service.

In developing and advertising program, marketing managers must always start by identifying the target market and buyer motives. Then they can proceed to make the five major decisions in developing and advertising program, known as a five Ms:

1. MISSION – What are the advertising objective?
2. MONEY – How much can be spent?
3. MESSAGE – What message should be sent?
4. MEDIA – What media should be used?
5. MEASUREMENT – How should the result be evauated?

Geller (1953) said “the actual position of the consumer in our modern economic life behaviour is for being sovereign. Technological development which has produces multiplicity of similar products has made the consumer’s choice or selection difficult.

Making (1979) accept that advertising informs customers about a product and also sells the product. He then went on to say that the purposes of advertising are:

1. Create awareness
2. Remanding current and potentials customers

2.4 SETTING THE ADVERTISING OBJECTIVE

The very first step in developing an advertising programme is to set the advertising objectives. These objectives must flow from prior decisions on the target market, marketing positioning and market mix. The marketing positioning and marketing mix strategies defines the job that advertising goal or objectives is a specific communication task and achievement level to be accomplished with a specific audience in a specific period of time, however, advertising objectives can be classified according to whether their aim is to inform, persuade or remind.

1. Informative Advertising: This requires heavily in the pioneering stage of a product category, where the objective is to build primarily demand.
2. Persuade Advertising: This is merit able in the comparative stage, where a company’s objective is to build selective demand for a particular brand. Most advertising falls into its category. Some persuasive advertising has moved into the category of comparative advertising which seeks to establish the superiority of a brand through specific comparison of one or more attributes class. It has been used in such product categories as automobiles, beverages industries.
3. Reminder Advertising: Is highly important with nature products expensive advertisements in a magazine have the purpose of reminding people in most cases. A related form of advertising is reinforcement advertising. They have made the right choice. It should be noted that the choice of the advertising objective should be based on a thorough analysis of the current marketing situation.

2.5 ADVERTISING STRATEGIES MODEL

Strategy

Retail Wholesale

General Government Opinion Stakeholders

Public Leader

Source: Jones L.D. Advertising, women and Box tops (New York; Pleasant Villa) (1955).

Wright and Warner (1973) said that one of the functions of advertising is to create differentiation among brands that are otherwise difficult to distinguish, while Backman (1868) says that advertising plays a major information role because as products that are attention of new comers.

The main purpose of advertising is to improve attitude towards a brand literature revealed that consumer spending behaviour is influence by a large variety of inter-related and complicated factors specify products or services.

Business advertising may be further divided into:

1. Trade Advertising: This is aimed at retailers, wholesalers who buy product for resell.
2. Industrial Advertising: This refers to advertising for industrial products like machinery components, partially finished products, machine parts and consumable supplier, used by manufacturers in the production process.

1. METHODS OF ADVERTISING

2.6.1 OBJECTIVE OF TASK METHOD

This method requires that we first strike the objectives we want to achieve through advertising clearly defined objectives makes the measurement of the effectiveness of advertising more accurate. However, the estimate for achieving the set objectives may b e well beyond the company’s capability.

2.6.2 COMPETITIVE PARITY METHOD

All that is necessary here is to pick a company that we want to match in terms of the market share that is, patronize and then match or exceed the company’s advertising budget. However, this is based on the belief that the company we want to match must be doing the right thing to achieve it’s current market share.

2.6.3 PERCENTAGE OF SALE METHOD

The company can use the industry average or a percentage of its last years sales. It may be advertised to use the industry average even the percentage of sales used for advertising can fluctuate widely with the industry, their market share and market objective. In reality, the lowest percentage of sales in the industry may be too large for the financial strength, moreso, this method recognizes that a relationship exists between sales and advertising.

2.6.4 UNITS OF SALES METHOD

This variation from the percentage of sales method, in the sense that this method believed that a specific amount be budgeted for every units produced, for example, advertising in every bottle of soft drink (coke).

2.6.5 EMPIRICAL METHOD

This is the method based on trial and error. It has been suggested that it can determine an optimum advertising budget. Advertising done at various levels of expenditure in different least localities using the same concepts and media are tested to see if sales will vary with the level of advertising. A series of such trials should reveal the most efficient level of advertising expenditure.

The weakness of this method is that any sales result will be directly attributed to advertising. Moreso, cognizance is not taken of the different demographic and psychographic composition of the different listed localities.

2.7 THE AGENCY AND ADVERTISING RELATIONSHIP

The advertising agency and the advertiser should have a good relation with each other for effective execution of the advert campaign. The agency has to take the following into considerations for goods working relationship with the advertiser.

1. THE ACCOUNT EXECUTIVE: Should permit the client to visit the agency, inviting him behind the scenes allowing him to attend planned board meeting and establishing a working relationship between client and creative team no matter whether they are full time or freehand copywriters and visualizers.
2. The agency should have a simple system of paper work job sheet, job numbers and content reports which make instructions and communication easy and most importantly which make account simple to understand. No meeting or telephone conversation should go unrecorded without a contact report which clearly states decisions with identified responsibilities for further action.
3. The account executive should understand the structure of the business world and so appreciate how clients run their business.
4. The agency should be able to interpret the clients, policy as produce an advertisement that presents the company or its commodities to the right market at the same time establishing a correct impression or image of the organization.
5. The agency should familiarize with client with legal and voluntary controls. There are many laws and voluntary code relating to advertising of which the client is unaware and the agency should try to explain them to the client.

Through the above means, ill-feelings may be averse when the agency has to adopt a professional attitude to the clients expressed wish to be move competitive than is permitted or advised. A gentle programme of education may be necessary with some rather difficult clients and this could be done by sending them copies of various codes, trade description Act e.t.c

2.7.1 ADVERTISING AGENCY REMENURATION

There are three (3) methods of compensating agency in the advertising business and these are:

(a) COMMISSION: Most agencies derived the greater part of their income from commission received from placing advert in the media. The acceptable commission is 15% of the media rate. For example if the media rate is N20,000.00 the agency bills its clients N20,000 and deduct the commission of N3,000 and remit N17,000 to the media. This form of compensation is prone to abuse. An agency can recommend a media schedule that will fetch a lot of commission but of little benefit to the client.

(b) CHARGES FOR OUT OF POCKET EXPENSES. The agency adds 15% to the cost of input used for a client’s job. Such input as talents, studio rentals, taping, editing, filming, computer e.t.c attracts an additional 15% of cost as agency

(c) FEE ARRANGEMENT: In business to business advertising, the cost of placing advertisement in a business publication may be so small that the commission cannot cover the agency’s. the only way the agency can serve such client profitably is to charge a fee. If however the agency writes the less and reimburses from the consumer advisement.

2.8 ADVERTISING MEDIA

Advertising messages can only be communicated to the target audience through the media. A medium is this vehicle the conveys information and entertainment to the general public.

Media planning – It is the best specific schedule for the appearance of the advertisement in different media. How many times shall the message be delivered to the audience? During what time and on what days? At what location within the magazine and Newspaper at which time on radio or television? The media planer uses advertising research, experience as well as their own institution to shape the final media plan.

SCHEDULING –

The schedule shows the number of advertisement that are to appear in each medium. The size of the advertisement, the length and the date on which they are to appear all for maximum impact.

2.8.1 FORM OF ADVERTISING MEDIA

1. PRINT MEDIA

Basically, the print media consists of the newspaper and magazine. It is mainly on printing to achievement in the dallies or journals.

ADVANTAGES OF NEWSPAPER

(a) Newspaper provides intensive coverage of specific geographical market.

(b) They have very short deadline

(c) Newspapers are basically local

(d) They offer opportunity of freque3ncy

(e) They reach a well educated audience

(f) They offer great flexibility in terms of the size of advertisement

DISADVANTAGES OF NEWSPAPER

(a) They have short lifespan

(b) There is low production quality compared to magazine

(c) They have low demographic selectivity.

MAGAZINE

ADVANTAGES OF MAGAZINES

(a) They offer high fidelity colour production due to high quality of the paper

(b) Offer geographic and audience selectivity

(c) They enable the advertisers to see variety of artistic work

(d) Magazines have considerable amount of secondary readership.

DISADVANTAGES OF MAGAZINES.

(a) They have long deadlines, this unit flexibility in copy

(b) They are costly short messages cannot be targeted at widest possible audience.

2. ELECTRONIC MEDIA

The electronic media consist or radio and television. They are basically electronized to pass the information across.

A. RADIO

ADVANTAGES OF RADIO

(a) Radio is a high frequency medium enabling us to repeat our advertisement often

(b) It is a good supporting medium

(c) Radio advertisement gives a great flexibility

(d) It is very useful in mud areas where other media are not available

(e) It is very cheats to have a radio

DISADVANTAGES OF RADIO

(a) Product and services can only be heard but, cannot be seen, that is, products demonstration is not possible.

(b)It yields little media commission for the advertising agency.

B. TELEVISION

This is the most favourite medium for advertising in the developed world. It advertisers impact and also stimulates people to take action.

ADVANTAGES OF TELEVISION

1. It shows the product in colour and in use

2. It reaches a larger audience

3. It allows the product to be demonstrated because it produced sound, sight, motion and colour

4. It offers selectivity interims of programmes and time.

5. It covers a large geographical are as i.e satellites.

DISADVANTAGES OF TELEVISION

1. It is expensive

2. It involves high cost of production

3. The messages is not durable.

C. OUTDOOR MEDIA ADVANTAGES

1. It offers geographic selectivity

2. It has long life span

3. It has impact on the audience

DISADVANTAGES

1. It gives brief information on the message

2. It is not selective in nature, for example, everybody sees the message.

3. NON MEDIA DIRECT ADVERTISING

It has no media. The appeal is made directly to the prospective customer. For example, circular distributed at street corners e.t.c

A. MAILING LIST

At the heart of the direct mail is the mailing list. The more reliable the better the chance reaching prospect through it. To a company, the most reliable list is its customers’ list.

B. SPECIALIST

It includes an endless array of useful item are given free to target prospects. The advertiser’s name, address, telephone number e.t.c the aim is to give the recipients something that would remind them of the advertiser’s company and product any time the gift item is used. It also called remembrance advertising, for example, umbrella, calendar etc.

2.9 ADVERTISING AND THE CRITICS.

There are five principal criticisms for advertising and it will be worthwhile to discuss them briefly and also to establish whether the attacks are justified or they are just fallacies. They are usually made by t here groups of people.

1. Something to ride on or a comment to make this popular that is, Diabetes Association Reaction to the 7up promotion

2. Those who find it difficult to come to terms with the quantities involved by production distribution, sales and uses outside their immediate personal experience as the buyer of one item from shop once a week

3. Those who think it is unethical to persuade people to make purchase because this conflicts with free will the individual to buy what he or she likes.

The critics enumerated above can be attributed to one or more of the following five criticisms:

1. That advertising is parasitical

2. That advertisement is untrue and misleading

3. That advertising create false and materialistic demand for things people do not really need or want.

4. There is no need to go on advertising on establishment product.

5. Advertising causes costly competition and higher prices.

2.10 ROLES OF ADVERTISING

Gandi (1895 : 296) stipulates that advertising is a component of communication which makes a distinct contribution to the sales volume and profitability of an organization. Hence, advertising plays the following roles:

1. STIMULATES DEMAND

Advertising informs consumers about the market. It arouses latent needs, reinforce and strengthen the arouse road.

2. DEVELOPING BRAND PREFERENCES

Consistent advertising makes consumers to buy a company’s product, when those products succeed in delivering the desired or claimed value satisfaction.

3. INCREASE SALES TURNOVER

By stimulating demand and creating a brand preference, advertising positively influence the growth of a company’s sales volume

4. COMPETITIVE WEAPON

Advertising may provide for a company a weapon of considerable strength to counter the competitive maneuvers of rival companies.

5. ADVERTISING MAKES REMARKETING POSSIBLE

Advertising is the prime instrument of a company’s remarketing strategy.

The role of advertising is to stimulate and sustain the vigor and momentum of economic activities through the enhancement of the consumption behavior customers.

Anyawu (1993 : 99) in examining the role of advertising in the Nigeria context gave the following as the roles of advertising:

1. Advertising assists in industrialization by sustaining sales of company product.

2. It play a major role in agriculture by disseminating information about the availability of improved variety of seeds and plants.

3. It generates both employment and revenue for the people and government of Nigeria.

4. It enhances the consumption behavior of some Nigerians by exposing consumers to newer, better and cheaper products.

5. It assists in the sales of goods and services through:

- Enhancing brand recognition and acceptance

- Reading inaccessible buyers

- Encouraging and aiding personal selling

- Educating the public in terms or prices and qualities.

In view of tootelian and Geadeke (1986 : 398) advertising plays the following roles:

1. Awareness and knowledge: This is related to inform or ideas

2. Linking and preferences: This have to do with favourable attitudes or feelings towards the product.

3. Conviction and purchase: This is to produce a action and finally the acquisition of the products.

1. It stimulates sales
2. It measures sales and profits.
3. It provides information to consumers and helps item to know what is available, where and at what price
4. It reduces the cost and greatly benefits the consumers. Udell and Laczniak (1981:365-366).

THE ROLES OF ADVERTISING ALSO INCLUDE:

1. Notifying the public about available goods and services. It creates awareness for available product and services.

2. It accelerates economic growth and development thereby raising standard of living.

3. It creates preferences for products by emphasizing their unique benefit over other products to the consumer.

4. It provides any enabling environment for the sales of products and services on a large scale

5. It provide revenue for the media

6. It provides employment for the people

7. It promote locally made goods

8. It provides training ground for artisans

9. It promotes national growth and discipline

ACCORDING TO KOLTER (S.P) as quotes by National Concord Newspapers of Monday, June 17 (1996:9) the following are the roles of advertising:

1. To tell the market about your new product

2. To suggest new issues for your product

3. To inform the market about price change

4. To explain how a product work

5. To build brand preference.

6. To encourage switching to your brand

7. To charge your customer’s perception of your attributes.

8. To remind your customers that the product in question maybe needed in the near future

9. To describe available services

10. To remind the customers where to buy a product

11. To persuade your customer to purchase now

12. To build a proper company image

13. To persuade your customers to receive a sales call.

Other functions of advertisement as noted by awake magazine, August 22, (1998:8) include sponsorship of spirits, help to provide available and affordable media, encourages competition, keeps price low and enable people to make informed divisions.

2.11 IMPORTANCE OF ADVERTISING

According to Ogedengbe and Adesemoye (2003) There are two main reasons why advertising is important apart from its functions in the social structure.

These reasons are:

1. It aids business activities for societal growth, development and prosperity. As such, it ensures a good standard of living for the people at an affordable cost.

2. Advertising replaces costly method of communication if not for it, it may even be impossible to reach all members of the audience at a point in time.

2.12 CHARACTERISTICS OF ADVERTISING

Sanyaolu (2005) gave the following as the attributes of advertising:

1. It is a non personal communication

2. It is directed to a targeted audience through various media

3. The sponsor of advertisement is identifiable

4. It could be informative and / or ideas

5. The media cost, time cost and cost of advertising production are borne by the sponsor(s)

2.13 EVALUATION OF ADVERTISING

Evaluation is advertising activeness or performance refers to the management exercise aimed at relating advertising results to the established standards of performance and objectives so as to assess the of advertising performance.

2.13.1 MEASURES AND METHODS OF EVALUATING ADVERTISING EFFECTIVENESS.

There are broadly two (2) measures of advertising effectiveness names: sales response and communication response.

1. SALES RESPONSE

There can hardly be a better measure of advertising effectiveness than the sales response it generates. Sales response refers to the amount of sale which may be attributed to the advertising input. The following method may be used to determine the sales response:

a. Statistical studies

b. Sales decay constant

c. Saturation level

d. Response constant.

a. STATISTICAL STUDIES

In statistical studies, an attempt is made to find out the co – efficient of correlation between advertising expenditure and he sales revenue over a period of time, usually the financial year, which may indicate the positively or negatively of relationship. The advertising expenditure data may relate to the current year or past years or both the past years data may be taken into considered the cumulative except of advertising.

b. SALES DECAY CONSTANT.

In the absence of promotion, sales tend to decrease because of product obsolescence, competitive advertising and the other factors under relatively content market conditions, the rate of decrease is in general and constant that is a constant percent of sales is lost each year.

c. SATURATION LEVEL

Saturation level refers to the practical limit of sales that an be generated and represents the fraction of the market that a particular advertising can capture. It indicates the point beyond which sales generation is negligiable on account of additional advertising outlay.

d. RESPONSE CONSTANT

Response constant is determined as the sales generated per advertising rupee, when sales are at a level ‘s’ for example, where ‘m’ represents the saturation and ‘R’ is the responses content, the following relationship in general holds.

Sales per advertising rupee = R (m-s)

M

Brown and Thompson (1964:340-342)

2. COMMUNICATION RESPONSE

The effect of advertising can also be measured or evaluated in terms of its communication effect is that the advertisement that effectively communicate also generates sales and induces other desired action of consumer level.

Therefore, communication effect indirectly indicates effect. The communication responses is usually measured in terms of advertising influence on consumers knowledge, beliefs and connotations as indicated by readership / internship memory and attitudes.

The following methods may be used to determined communication effect.

1. Enquiry Test – In the enquiry test, the number of consumer enquires produced by an advertising copy / medium is considered measure of its communication effectiveness other area:

2. Recognition test

3. Recall test

4. Attitude test.

2.14THE RELATIONSHIP BETWEEN SALES AND ADVERTISING

In spite of all the criticisms about advertising, we can still identify ways in which advertising contributes immensely to the increase in sales of soft drink industry these are:

1. Advertising makes the prospect familiar with services or product

2. It reminds the prospect about the product.

3. It brings news of new product

4. It adds value to product

5. It increase the enthusiasm and confidence of the people in marketing process of that product.

6. Advertising reasons and help retain present customers

7. Advertising often guarantee post purchase reassurance

8. Advertising also win dealers. Retailers image are boost by the brand they sell.

In conclusion, advertising is the most single important promotion tool, any company can adopt to raise the level of its turnover as a matter of fact, advertising has a strong impact on the company’s sales due to its indispensable roles in communicating the company products or services with the target audience.

More so, in the recent time, may have been directing, their efforts towards advertising effectiveness based on the assumption that effective advertising brings about an increment in the level of the company’s sales but whichever way it can be viewed, advertising has gained more ground based on the premises that it can be directed to the target audience because it has originality due to its ability to show vividly the product shape, colours even product or services can be demonstrated in advertising. In a nutshell, many companies have been opting for advertising as the latest rule in town.

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