The effect of advertising on customer behavior and retention

Abstract

This study examined the effect of advertising on customer behavior and retention. The objectives were: To ascertain the effect of advertising on customer behavior, to ascertain the effect of advertising on customer retention and to identify the role of advertisement on building consumer perception. Survey research design was adopted for this study. Primary and secondary sources of data were used. The primary data includes a structured questionnaire used target respondents who were customers of the reputable fast food in Ibadan while the secondary data encompass the use of related materials, journals and periodicals. The study recommended that Organizations should embrace and adopt the marketing concept that allows for being more effective than competitors in creating, delivering, and communicating superior customer value to their chosen target markets.

Chapter one

Introduction

1.1Background of the study

Organizations and companies have always confronted limitation of resources. Because of this limitation, it is necessary to use them economically and efficiently. One factor that makes a company differentiated from its rivals is how it uses its resources. One of the most important resources which organizations have in hand is financial resource such as their budgets, a part of which is allocated to advertising. The accomplishment of an advertising program requires money.

In today’s competitive business environment, no business can become a market leader unless they spent millions of naira in promotional purposes. The key purpose of advertisers is to achieve valuable consumers by influencing their thoughts, knowledge and buying behavior. There are various awareness modes of communication such as events, personal selling, public relations, direct marketing, word of mouth marketing, and advertising ((Fill, 1999); (Kotler, 2010)).

It is an obvious fact that every organization tends to move to a position where customer satisfaction is given a favourable consideration. In other words, customer satisfaction is a construct that must be met optimally for efficient and effective achievement of stated objectives, and for smooth continuation of business. Customer satisfaction is an integral part of organizational objectives that must be fulfilled for an organization to maintain its customers. Customers are valuable asset that must be properly kept satisfied. The existence of any business oriented organization is the performance of business activities that will flow from the organization to identified target customers through the provision of need satisfying packages in order to satisfy the needs of the customers, and achieve the stated objectives set by the organization. The satisfaction of the needs of the respective customers thereby gives room for an opportunity to retain the customer and create customer loyalty for continuous patronage. In a similar manner, customer retention is a strong indicator of organizational objectives. The level of customer retention dictates to some extent the level of achievement of organizational, objectives. In other words, if customers fail to patronize or repeat the purchase of the products of the organization, definitely sales and profitability of the organization will drop which will adversely affect the entire performance of the firm.

This particular thesis focuses on the advertisement and various spending of advertisements on different factors of consumer buying behavior. Consumer buying behavior is mostly affected by some factors which include culture, family and brand image. On the other hand, brand awareness also helps the customer to buy a certain product. Due to this fact, cosmetic companies focus on advertising the products. This report also put light on other factors which call also influence the buying behavior of the consumers such as life styles, purchasing power, technology, traditional culture and income. Advertisers spend much amount of investment while advertising their product so they keep their focus on these factors so that they can influence consumer mind with advertisements.

Perceptions of the brands and buying behaviors usually change from person to person. So it is important to find out the consumer behavior changes. Advertisement helps the company to create the awareness in their customers and ingredients the advertisements shape the perception of the customers either in the positive or in a negative way. People can perceive the quality of the products by gathering the information which they usually get through advertisements. The perception of the quality, awareness of the product and consumer opinion drives the consumer buying decision. Study critically evaluates these factors which shape the buying behavior and provides the deep insights towards the role of advertisements shaping the consumer behavior.

1.2 Statement of the problem

As companies are spending large amount of investment on the advertisement because they want to keep their product at the top of the customer’s mind. Advertisement has proven to be a successful tool for the communication but companies are still in the confusion that what kind of ingredients should be there and how do these advertisements will help to change the consumer buying behavior. The need to create and maintain customer satisfaction has been emphasized by researchers and academicians. This is because the realization of other business objectives leans on the level and degree of satisfaction received by the target market. This is the reason why organizations are focusing on customer satisfaction and customers‟ retention

1.3 Objective of the study

The objectives of the study are;

1. To ascertain the effect of advertising on customer behavior
2. To ascertain the effect of advertising on customer retention
3. To identify the role of advertisement on building consumer perception

1.4 Research question

1. Is there effect of advertising on customer behavior?
2. Is there effect of advertising on customer retention?
3. Is there role of advertisement on building consumer perception?

1.5 Research hypotheses

For the successful completion of the study, the following research hypotheses were formulated by the researcher;

H₀:  there is no effect of advertising on customer behavior

 H₁:  there is effect of advertising on customer behavior

H₀²: there is no effect of advertising on customer retention.

 H₂: there is effect of advertising on customer retention

H₀³: there is no role of advertisement on building consumer perception.

 H₃: there is role of advertisement on building consumer perception

1.6 Significance of the study

This particular research focuses on the effect of advertising on customer behavior and retention. It explores the factors which are affected by the advertisement and ultimately influence the buying behavior and retention of the consumers. The study will help the readers to understand the consumer behavior while purchasing the goods so that they can devise appropriate strategy to advertise their product in a best possible way. The study will also serve as a reference to other researcher that will embark on the related topic

1.7 Scope and limitation of the study

Scope of the study covers the effect of advertising on customer behavior and retention. The study is limited to food affairs and pepperoni in Ibadan

1.8 Organization of the study

This research work is organized in five chapters, for easy understanding, as follows. Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research question, research hypotheses, significance of the study, scope and limitation of the study, organization of the study definition of terms. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study

 1.9 Definition of terms

CUSTOMER: In sales, commerce and economics, a customer is the recipient of a good, service, product or an idea – obtained from a seller, vendor, or supplier via a financial transaction or exchange for money or some other valuable consideration.

CUSTOMER RETENTION: Customer retention refers to the ability of a company or product to retain its customers over some specified period

CUSTOMER BEHAVIOUR:  Consumer behaviour is the study of how individual customers, groups or organizations select, buy, use, and dispose ideas, goods, and services to satisfy their needs and wants. It refers to the actions of the consumers in the marketplace and the underlying motives for those actions.