Impact of advertising on sales: correlation between advertising and sales
Over the last years, advertising has intensely affected sales of products and services - Impact of advertising on sales: correlation between advertising and sales introduction. Advertising is a major player not only in a company’s sales targets, but also to purchase decisions of consumers as well as a country’s economy. Therefore there is need to understand the correlation that exists between advertising and sales so as to determine the impact that ads bring to sales volumes. This paper will explain the effects of advertising on sales while regarding the correlation between adverting and sales.
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Impact of advertising on sales: correlation between advertising and sales
Advertising gives one the right to choose what to and what not to buy. For a long time now, it has played a big role in the development of sales and marketing. As well, it plays a crucial role as it allows manufacturers be able to reach their customers in a more direct manner with information on their new services, products and prices. Additionally, it helps manufacturers get rid of the need for more specialized sales personnel who are meant to provide expertise on products, services and their prices (North Carolina Central University, 2008).
The effect created by advertising to the public is significantly increasing as much as the level of advertising as well as the coverage continues to grow. Advertising not only contributes to sales volumes, it also offers information while also educating consumers about various products and services in the market. For instance, despite being designed for the major purpose of selling, it adds on the costs of the product and services. As a result, manufacturers tend to do anything with the aim of convincing buyers to buy their products and services and this may include altering the truth (North Carolina Central University, 2008).
Impact of advertising on sales
In the United States, car makers and household product firms tend to spend more on advertising. This is done either directly in the mass media or indirectly through mails, coupons among others. Determining the success of advertising on sales can be done by subtracting the costs incurred in an advertising campaign from the cost of sales. If the results are positive, then it means that the advertising is a success and that it has in turn impacted positively on sales. In other words, advertising hugely reduces the efforts which are done on sales (North Carolina Central University, 2008).
The basic patterns that come about as a result of advertising are regularity of advertising activities within manufacturing companies and the correlation between advertising and market influence. Moreover, when there is more advertising, the price of a company’s output and profits is likely to increase. Thus, the higher the intensity of advertising, the higher the sales will be achieved. Additionally, sales output is also likely to increase when there is convenience and more information of the goods, services and their prices as advertised (North Carolina Central University, 2008).
This can be realized through the advertising power where consumers will be able to consider other alternative types and more affordable goods and services as advertisements will provide them with an inexpensive way that will enable them to search and learn more about specific goods and services as well as their prices. This will further be enhanced since consumers will e able to not only rely on advertising but also gather their own information depending on their own need (North Carolina Central University, 2008).
Unlike most consumers, producers have the ability to tell the true quality of their products and services. Subsequently, when the producer has a high quality experience with the goods and services they offer, it is likely that the consumers who give their products and services a try will purchase them again. On the other hand, when the quality of the services and products is low, then most consumers will end up not purchasing such products or services. Thus, the sales level will be hugely affected (North Carolina Central University, 2008).
Subsequently, as a tool for persuasion, advertising works to convince such consumers into buying their products and services. In other words, advertising has a positive impact on the sales of high quality goods. This may be attributed to the fact that most high quality sellers are able to afford to extensively advertise as they are likely to get the repeat business from consumers. As well, high advertising by manufacturers, companies or business firms signals high quality thus attracting more consumers which in turn increase sales (North Carolina Central University, 2008).
Advertising is one of the important tools that marketers usually use in a bid to heighten their sales. Even though advertising increases customers’ awareness about products, it does not necessarily mean that it will directly impact on the sales growth of the advertised products. However, there still exists a correlation between advertising expenditure and the revenue generated from sales which implies that advertising also factors in the generation of sales (Newspaper Association of America, 2007).
What it more, it has been established that advertising is a very important tool used in the provision of information to consumers. It is through advertising that consumers are able to get the useful information that they usually require before making the decision to purchase a particular product. Therefore advertising stimulates consumers to choose particular products over others since with a more informed and educated mindset, they will be able to purchase products that they know about rather than going for products that they have little or no information about (Newspaper Association of America, 2007).
Since consumers may opt to purchase a particular product instead of another one because of the information gained from advertising, this means that advertising also contributes to the boost in product sales to some extent. Thus, net gains in direct sales can be generated through the promotion of a company’s products and services which can only be made possible through advertising (Newspaper Association of America, 2007).
Advertising also aggravates indirect sales for a company’s first level suppliers who usually incur the advertising expenses. This goes to show that the expenses incurred in the advertisement of a company’s products and services still generate sales gains be it directly or indirectly to various distribution channels of that particular product or service (Newspaper Association of America, 2007).
Even though advertising has an impact on boosting sales it is however evident that the intensity of an ad does not necessarily increase or reduce sales. According to Tellis, in the book Effective understanding, merely intensifying the level of advertising will not directly mean that the sales of that particular product will be increased dramatically. On the same note, reducing the level of advertising or even stopping it does not mean that the sales of a particular product or service will dramatically fall as a result of the change in advertising (Tellis, 2004, p.16).
However, the impact that advertising has on sales can be measured up in terms of advertising elasticity. Thus the elasticity of sales to advertising is usually measured according to the percentage in sales for a 1% change in advertising. The correlation here works on the assumption that if the expenditure on advertising increases by 1%, then the sales volume would also increase by 1% (Tellis, 2004, p.16).
This implies that contrary to the belief that advertising has a great impact on the sales force; advertising is not such a powerful factor in stimulating the purchase decisions of consumers. However, it is just a subtle factor that needs to be planned with skill while being very careful so as to maximize the potential impact on sales. Advertising does impact on the volume sales but not as highly as it is assumed even though some exceptional advertising campaigns do impose remarkable impacts on sales volumes (Tellis, 2004, p.16).
What is more, the impact of advertising on sales is considered subtle because the effect it creates is usually felt for a short period while it can also be biased if the method or analysis used is wrong. Therefore reasons given for the subtle nature of advertising include the fact that the effects of advertising are not fully instant, it might take some time before the impact generated by an ad is felt on the sales volume of the advertised product or service (Tellis, 2004, p.17).
This means that some of the effects of advertising only occur over a time period and still the effect over this time period needs to be analyzed with care. Besides, if one compares the effect of advertising on sales and that of price or promotion the effect of advertising is notably slight. Further still, the possibility of bias is higher in advertising more especially if it coincides with sales promotion that is not properly controlled and this would give advertising a stronger image than what it really is (Tellis, 2004, p.18).
Advertising contributes greatly in the creation of awareness about a particular product or service. As a result therefore, consumers may be influenced to make their purchase decisions in a market with various choices after getting information about the product from an advertisement. Advertising does increase sales volumes but the difference created is only subtle even though some exceptional ad campaigns do boost sales volumes greatly.
Newspaper Association of America. (2007).The comprehensive economic impact of advertising expenditures in the United States. Retrieved December 3, 2008 from http://www.naa.org/Resources/Articles/Public-Policy-The-Comprehensive- Economic-Impact-of-Advertising-Expenditures-in-the-United-States/Public- Policy-The-Comprehensive-Economic-Impact-of-Advertising-Expenditures-in- the-United-States.aspx
North Carolina Central University (2008). Advertising, Market power and information. Retrieved December 3, 2008 from http://www.it.nccu.edu.tw/faculty/kmchen/homepage/%E7%94%A2%E6%A5%A D%E7%B6%93%E6%BF%9F(%E4%B8%80)/ch20.ppt.
Tellis G., J. (2004). Effective advertising: Understanding when, how and why advertising works. SAGE