EFFECT OF ADVERTISING ON THE SALES REVENUE AND PROFITABILITY OF SELECTED FOOD AND BEVERAGES FIRMS IN NIGERIA

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 revenue and profit of food and beverages companies listed in the Nigerian Stock Exchange over the period of 2000 to 2012 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 revenue 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.

The role of sales promotion in the form of advertising in promoting product and service awareness among consumers cannot be overstressed. Advertisement provides a platform for firms to create awareness about their products or services and how consumers can make the best out of such products. Olusegun (2006) opined that all advertisement must be honest and follow ethical standards and must not be perceived by the target consumer as lie; otherwise it can batter the image of a company and hinder it from building successful brands. Thus, for advertising to be effective, it must have an appeal, attract attention, command interest, inspire conviction and must provoke interest (Frank, 2005). In the same vein, Okeji (2008) posited that a good advert message should not be boring but rather reflect the lifecycle of the product. He concluded that advertising must be exposed in the right medium as this will enable organization to reach the right people with the right message.

A number of studies such as Herbert (1982), Nigel (1994), Gladson and Chinedu (2005) and Meshach (2007) have shown that advertising is a major competitive tool in establishing position in the market place. Companies use advertising not only to market and promote their products but to among other things wade-off competitors, improve their brands and create a vintage-point for their products in the presence of anticipated users, buyers or clientele. Persons, organizations, groups, government agencies and different sectors of many economies employ advertising to marshal messages to target.