Effectiveness and Contribution of Advertising Towards the Success of a Companys Sales - Essay Example

Introduction Every company strives to enhance the volume of its existing and potential s so as to elevate its selling capability. This requires vigorous efforts on the part of the company and associated personnel to induce the customers to buy more and encourage them to continue buying the company’s products. For this purpose, companies consistently get involved in conducting various advertising and marketing activities so as to enhance and sustain their existing and potential customer base. These activities not only demand substantial efforts but also magnanimous expenditures incurred in carrying out these efforts, quite eminent within the financial statements of these companies. This paper presents an insightful investigation of the effectiveness and contribution of advertising towards the success of a company’s sales. It manifests if at all the advertisement expenditures, exclusively lead to the sales elevation; or these efforts need to be blended with other suitable marketing activities so as to derive much better outcomes. It indicates the impact of advertising on company’s sales margin, while establishing facts from the theoretical material and draws out the potency of marketing activities in combination with proper advertisement towards the achievement of sales and profit targets. The Correlation Of Advertising Expenditures And Sales Success The effectiveness of advertising in precipitating a company’s sales success in relation to the other elements of marketing strategies happen to be matter of serious concern in today’s business domain. Corporations tend to squander millions on advertising along with other marketing activities in an anticipation to enhance their sales and profitability. If advertising alone can lead to the company to improved sales, new customer attainment and existing customer retention successfully, then it could subsequently save a lot of company’s funds and efforts exerted in conducting other marketing activities. Aaker (1991) states that the purpose of advertising is to distinguish a company’s product from others in the market hence establishing the product’s brand equity. The author signifies the concept of advertising with product differentiation and establishment of brand equity. Merino Srinivasan and Srivastava, (2006, p12) confirm this point as, “high brand equity firm may be able to differentiate themselves effectively in competitive environments, achieving both high prices and high customer loyalty increasing and stabilizing its sales revenues and profits”. Here also, high brand equity and product differentiation has been associated with each other for the sales success led by advertisement expenditures. It highlights that advertising can only lead to increased sales and profits once it is able to distinguish a company’s product in the market among its competitors and establish its strong brand equity. These two conditions will be accomplished only when the advertising efforts executed on the part of the company is effective enough to capture the attention of consumers and make them aware of the superior value that the product offers to them. Lumpkin, Dreoge and Dess (2002, p330) propound that “firms pursuing a differentiation strategy offer products or services that are viewed as unique and valued by customers. They achieve differentiation advantages when price premiums exceed the extra costs incurred in being unique”. Hence, if advertising is to lead to sales success, it has to be effective and deliver the message in the best possible way. Consequently, for an advertising effort to be effective, it should consider the value strategy that the company delivers to its customers. Merino, Srinivasan and Srivastava, (2006, p10) highlight the impact of advertising expenditure in a dynamic environment with changing consumer tastes and behaviour patterns with regard to purchasing. The authors state, “firms with high brand equity consistent with higher advertising expenditure …may achieve lower marketing costs (…customer acquisition and retention costs), build entry barriers to low-cost competitors, increasing and stabilizing their sales revenues, and profits”. This also links the effectiveness of advertising expenditure with high brand equity. If a company’s advertising campaign leads to high brand equity, it cuts down the cost on other marketing expenditures. By bringing down the costs, it can also lead the company to win against its competitors and hence eventually escalate the sales revenues. Liu and Forker (1990) also recognise advertising as a marketing activity that has a positive impact on the company’s sales. Lipczynski and Wilson (2001) maintain that advertising has the power to tell apart a company’s brand from competitors and foster brand allegiance in the minds of consumers. The crux of the theory, therefore, is that the advertising will only lead to sales success if it is effective enough to distinguish a company’s product, create brand equity, nurture consumer loyalty, cuts down costs and fosters its value strategy. In other words, advertising will not lead to enhanced sales and improved profits if it fails to accomplish the above outcomes. Here lies the significance of advertising effectiveness in meeting the end-results acknowledged in the theory. Even if a product is advertised vigorously in the market, distinguishing it from the competitors’ product, inspiring and inducing consumers, creating brand equity and purporting the company’s value strategy, the sales success cannot be guaranteed without the necessary ingredient of customer satisfaction. Advertising can only highlight the attributes of a product leading to an identity distinct from that of the competitors; it can only create and establish brand equity, cannot promise to sustain it; it can only instigate brand loyalty among consumers, cannot claim to cherish it; it can only induce consumers to try the product, cannot lead to customer retention, until and unless the product is capable enough to satisfy the consumers. If the value advertised cannot be associated with the product, the advertising is less likely to lead to sales success. The most significant element emphasised here is the element of customer satisfaction. This is basically a feeling that the customers derive out of the product usage, fulfilling their desire or solving their problems in a way perceived to be superior by them. Albeit this sense of fulfilment can only be evaluated after the use of final product by the consumer, yet it can be conceived and analysed by an organisation even before an idea is transformed into the form of product or service. Customer satisfaction needs to be driven with the help of several marketing efforts. The necessity for customer need evaluation, innovation, and differentiation arises when it comes to customer satisfaction. Lynn et al. (1999, p9) elaborate this point as, “firms that understand their customers’ problems, needs and wants, which can provide solutions to these problems, which can communicate those solutions to their target audiences and which can provide easy customer ordering will likely win in the marketplace”. It is therefore apparent that advertising alone cannot lead to sales success. Simon (1997) reflects that individual marketing activities are unlikely to enhance company’s sales, rather it requires the firm to combine all the marketing efforts vigorously to create a positive impact on sales and profits. A combination of marketing activities involves evaluation of the needs of customers, efficient pricing, valued product and strong promotional activities. This combination of marketing activities will make the company’s advertisement campaigns more useful towards the improvement of sales and profit margins. A company can blend various elements of marketing together or accentuate on a single aspect. For instance, by cutting down costs and lowering the product prices as compared to the competitors, the company can thrust its sales upwards. A company can also win and retain more customers by simply providing them what they need with superior value and satisfaction. Furthermore, the advertisement can also lead to sales success if it is combined with proper distribution and channelling arrangements. Hence, advertising can lead to sales success in a better vein, once it is coalesced with other marketing elements, as appropriate. Improvement in sales can be achieved either through new customer acquisition or by means of existing customer retention. New customers could be induced to buy the product with the help of advertisement or through positive publicity on the part of satisfied consumers, while existing customers could only be stimulated to purchase repeatedly if the product continues to provide them the sense of satisfaction and value amongst the competitors. In this way, the customer satisfaction does not only keeps a customer to make repetitive purchases but also ameliorates the company’s sales by brining in more customers. The advertising combined with other constituents of marketing mix can undoubtedly lead the company to satisfy its customers and keep them coming back to buy the product. This, in the truest sense, is the establishment of customer loyalty and confidence in the company’s products, which will certainly lead to sales success in the form of new customer acquisition and existing customer retention. Blattberg and Deighton (1996) suggest that the impact of a marketing activity can be best analysed after the evaluation of customer attainment and retention records. Hence, if the company becomes able to attract more customers and retain the old customers, it simply indicates that its marketing and advertisement campaigns have extremely been effective towards the sales success and profit maximisation. Kandampully and Duddy (1999, p51) propound it as that; “organisations must… constantly strive to develop and maintain their customers’ loyalty or, as true in the majority of relationships, risk losing it to someone else”. Losing the customers simply mean decline in sales, which in spite of advertising efforts on the part of the company will lead to failure if it does not stimulate and cherish customer satisfaction and loyalty. The advertising efforts of the company can only lead to sales success if it pays full consideration to the ethical values involved in advertising the product. Klempner (2004) propounds that companies are increasingly advertising their products beyond ethical values. He illuminates that the firms advertise their products to the extent of manipulation and pandering. A company needs to project its product in the minds of consumers as attractively as possible, however it should avoid manipulating the advertisement to promote false attributes of the products. Health concerns, social values and actuality are some of the ethical values that should be considered while advertising the product. The company should focus on the real product values, rather than promising something not found in the product because this leads to no results or success. Through manipulation, companies can attract customers for a while but cannot retain them. Hence, ethical values are strongly linked to customer satisfaction. Just let the consumers perceive what they would actually derive from the product. Conclusion The paper attempts to evaluate and canvass the impact of advertising on the success of a company’s sales. The critical analysis of the theory shows that although advertising expenditures have a positive impact on the enhancement of sales margin, yet the efforts and expenditures are likely to be in vain unless the advertising is efficient enough to generate desired outcomes. The advertising should be able to accentuate the distinctness of the company’s product, enhance brand equity, upraise consumer loyalty, bring down costs and highlight its value strategy. For the success of advertising, the advertising should be in compliance with the actual value proposition of the product being offered to the customers. The most significant element for the success of advertisement is the element of customer satisfaction. The customers can only be satisfied if they are provided with what they need in a much better way than the competitors do. Hence, to conclude it can be said that in order to attract, retain and satisfy the customers, a company needs to blend various elements of its marketing strategy viz. pricing, product value, packaging and other ingredients along with effective advertisement. References Aaker, David A. (1991), Managing Brand Equity. New York, The Free Press Blattberg, Robert C. and John Deighton (1996), “Manage Marketing by the Customer Equity Test,” Harvard Business Review, July-August, 136-144 Geoffrey K. (2004), “Ethics And Advertising”, Cardiff Centre for Ethics, Law and Society, CCELS web site, accessed 31 July 2006: http://www.ccels.cardiff.ac.uk/pubs/klempnerpaper.html Kandampully, J. and Duddy R. (1999), “Competitive Advantage Through Anticipation, Innovation And Relationships”, Management Decision, Vol. 37, No. 1, pp. 51–56 Lumpkin, G.T., Dreoge, G. D. and Dess, G. G. (2002), “E-Commerce Strategies: Achieving Sustainable Competitive Advantage And Avoiding Pitfalls”, Organisational Dynamics, Vol. 30, No. 4, pp. 325-340 Liu, Donald J. and Olan D. Forker (1990), "Optimal Control of Generic Fluid Milk Advertising Expenditures," American Journal of Agricultural Economics, November, 1047-1055 Lynn G.S., Maltz A.C., Jurkat, P.M. and Hammer M.D. (1999), “New Media In Marketing Redefine Competitive Advantage: A Comparison Of Small And Large Firms”, The Journal Of Services Marketing, Vol. 13, No. 1, pp. 9-20 Lypczynski, J. and Wilson, J. (2001), Industrial Organisation. An Analysis of Competitive Markets, Harlow: Financial Times-Prentice Hall Merino, M., Srinivasan, R. and Srivastava, R. (2006), “Advertising, R&D And Variability Of Cash Flow And Intangible Firm Value”, Working Papers Simon, H. (1997), “Hysteresis in Marketing — A New Phenomenon?” Sloan Management Review, 38:3 (Spring), pp.39-49 Read More