EFFECTS OF ADVERTISING ON SALES PERFORMANCE OF

MANUFACTURING COMPANIES; A CASE OF

SLEEPING BABY

COMPANY.

BY

MUTUWA SHIELA

S13/BUW/BBA/074

A RESEARCH PROPOSAL SUBMITTED TO THE DEPARTMENT OF

BUSINESS ADMINISTRATION, FACULTY OF MANAGEMENT IN PARTIAL

FULFILLMENT OF THE REQUIREMENTS FOR THE A WARD

OF A BACHELOR OF BUSINESS ADMINSTRATION

OF UGANDA CHRISTIAN

UNIVERSITY

JANUARY MAY 2016

 CHAPTER ONE

1.0 Introduction.

This chapter will present the background to the study, problem statement, purpose of the study,
objectives of the study, the research questions, the scope of the study, the significance, and
operational definition of terms and finally the conceptual framework of the study.

1.1 Back ground of the study.

Nowadays competition among firms has grown stiffer as every firm seeks to achieve their
objectives, to enhance performance which can be translated through achieving greater sales and
profit. As a result, majority of the companies in the current society are adopting advertising as an
effort to boost their profits.

The basic goal of any organization is to increase its sales. Different method is used to achieve
this purpose it may be direct or indirect. Advertising is one of them. Sales promotion is diverse
collection of incentive tools, mostly, short term design to stimulate quicker and/or greater
purchase of particular products or services by consumers (Kotler, 2002).

Sales performance describes the trend of collections in terms of revenue when comparing
different periods. The sales may be in form of offering products or services to consumers. A
service is any activity or benefit that one party can offer to another that is essentially intangible
and does not result in ownership of anything (Kotler and Armstrong, 2002).

Sales volume is the core interest of every organization and is based on sales and profit. When
volume goes up profits rises and management in organizations is made easier

Advertising is a major component of integrated market communication and it considered to be

the most visible and expensive marketing activity. It is also considered to be among great
traditional promotional mix strategies which have been established by many companies
nowadays.
Advertisement is simple and easy to adopt and apply in the market and enhance the volume of
the sales (Hanssens, Parsons and Schultz, 2001). The budget portion of the organization relating
to the marketing department increases constantly (Mollahoseyni, 2012)

Advertisement has direct impact on the minds of the consumer to consume greater portion of the
product and quick consumption. Advertisement also increases the profitability of the
organization (Ailawadi and Neslin, 1998). Advertisement is beneficial in both short run and long
run businesses although in long run it is most valuable, it increase the value of the product and
organization (Pwaels, Silva-Risso & Hanssens, 2003).

Consumer promotion is a type of advertisement which consists of free samples, prizes for
contests winners, different packages and price plans. Advertisement is used to enhance the
consumption of the consumers (Kotler and Armstrong, 2002).

Advertisement consists of some kinds of advantages while some are communicative according to
their nature. Brand loyalty is major requirement of the advertisement. With the advertisement we
can easily enhance the loyalty of our customer.

In Latin, ad vertere means to turn toward. The purpose of advertising may also be to reassure
employees or shareholders that a company is viable or successful. Advertising messages are
usually paid for by sponsors and viewed via various traditional media; including mass media
such as newspaper, magazines, television commercial, radio advertisement, outdoor advertising
or direct mail; or new media such as blogs, websites or text messages. Modern advertising was
created with the innovative techniques introduced with tobacco advertising in the year 1920,
most significantly with the campaigns of Edward Bernays, which is often considered the founder
of modern marketing (Kazmi, 2005).

Advertising is a tool of marketing for communicating ideas and information about goods and
services to an identified group, which employs paid space or time in the media or uses another
communication vehicle to carry its message. It openly identifies the advertiser and his
relationship to the sales effort (Wanoff, 1997)
Advertising is also any paid form of non-personal communication about an organisation,
product, or ideas by an identified sponsor (George and Michael2007;P 17), There are various
forms of advertising like informative advertising, persuasive advertising, comparison advertising,
and reminder advertising. Informative advertising is used to inform consumers about a new
product, service or future or build primary demand. It describes available products and services,
corrects false impressions and builds the image of the company, (Kotler, 2010).Advertising can
be done through print media which includes newspapers ,magazines ,brochures ,Audio media for
example Radio, and visual media which includes billboards, and television (Kotler and
Armstrong 2010).

According to Clow and Blaack (2006), advertising represents an important mean by which
organisations communicate with their customers, both current and potential. Thus, having clear
objectives for advertising will aid operational decision making for advertising programs in
effectively convey the intended message to the audience. The objectives of an advertising
campaign may adopt many forms such as the following, increasing brand awareness of existing
brand or create awareness of new brand, building brand image, increases customer traffic,
increasing retailer or wholesaler orders, responding to inquiries from end users and channel
members, providing quality information.

Advertising plays a significant role in developing an international presence for well-known

brands around the world. If we were to make a list of some of the internationally well-known
brands, household brands such as Sony, Marlboro, McDonalds, Nike, Disney, Kodak, and Coca-
Cola are likely to come up (Hackley,2005). These are the companies that, as matter of fact, have
invested heavily and regularly in advertising to become the internationally renowned brand that
they currently are. It is quite impossible to conceive these brands in the same way had they not
relied on advertising mode of communication.

Advertisement in such a media as print (newspaper, magazines, billboards, flyers) or broadcast

(radio, television) typically consist of pictures, headlines, information about the product and
occasionally a response coupon. Broadcast advertisement on the other hand consists of an audio
or video narrative that can range from 15seconds spots to longer segments known as
infomercials, which generally last 30 to 60 minutes. (Busari 2002)
Advertisements can also be seen on the seats of grocery carts, on the wall of airport walkways,
on the sides of buses, airplane and train. Advertisements are usually placed anywhere an
audience can easily and/or frequently a access visual and/or video. (Busari 2002)

Sleeping Baby Company started in 1995 from Kampala, a capital city of Uganda. It thrived
greatly and enabled the opening of other branches to do branding and packaging in order to boost
production for the high demands of the products. This led to the startup of the Sleeping baby
factory Mbale branch in 1998 in the industrial division council by the signing of the
memorandum of understanding between the company and the division offices to meet one
anothers terms and condition. That led to good relationship of the company and the community
members up to date and it deals in the production of a variety of beauty products for example
smearing jelly, soaps, body lotions and. It also deals with the other domestic products like
cooking oils, beverages and plastic containers.

Sleeping baby advertises using visual media for example the television and the Audio the radio,
print media for example the newspapers. But there is some inefficiency in the way this
organization carries out its advertisements for example Sleeping baby adverts in the visual media
are done in local language i.e. (Luganda) a language that can only be understood by a few people
in the country, making the advertisement appealing only to a group of people. The
advertisements lacks the unique selling proposition in the statements used to differentiate their
products from competitors, they are done in the same way as the competitors making it hard to
differentiate its ads from others.

1.2 Problem statement

The use of advertising is effective to boost firms performance. This is evidenced from the usage
of advertising and the expenditure on advertising which has been increasing along years. In
Uganda, most companies are spending money in advertising their company products or services
brands and expect that consumers or those who read the advertisement will react positively
towards their products or service brand and hence increase their profitability , however there is
no measurement or evaluation of the effectiveness of advertising, whether it is able to boost the
sales of the products, or just simply to build brand awareness, to put it in simpler term, with the
amount of resources poured in for advertising. Does it actually boost up a firm performance is
questionable, For the last three years the sales performance of Sleeping Baby Company has been
going down despite the enormous advertising being done by the marketing department of the
company. there have been decline in sales performance for example, the external auditors
report(2013) revealed that Sleeping baby company had made profits of 105 million shillings, the
report of (2014) by the same audit firm showed that the profits in that year were 75 million, The
report recommended that management of the company should adopt extensive advertising of its
products using various channels available to increase their sales volume, such channels include,
through taking part in charitable funds in Uganda and even sponsoring sports, advertising using
radio, television and newspapers.

However a recent audit report presented by Wade & partners, the firm that the company
contracted to carry out the audit of 2015 revealed that the company profits had tremendously
reduced by almost half from that of 2014, the audit report( 2015) showed a profit of 38 million
shillings.

Despite all efforts advanced by sleeping baby through advertising regularly, the sales of the
company have not improved to the desired targets. It is incumbent upon this that the researcher
developed a desire to undertake a study to establish if there is any positive relationship between
advertising and sales performance of firms.

1.3 Purpose of the study

The purpose of the study will be to establish the effect of advertising on sales performance of
Sleeping Baby Company.

1.4 Specific objectives of the study

i. To establish the forms of advertising adopted by sleeping baby company.

ii. To access the level of sales performance in Sleeping Baby company.

iii. To investigate the relationship between advertising and sales performance in Sleeping
Baby company.
1.5 Research questions

i. What are the forms of advertising adopted by Sleeping Baby Company?

ii. What is the level of sales performance in Sleeping Baby Company?

iii. What is the relationship between advertising and sales performance in Sleeping Baby
Company?

1.6 Scope of the study

1.6.1 Geographical scope

The study will be carried out in sleeping Baby Company in Mbale, located along Maluku road in
industrial area.

1.6.2 Content scope

The study will concentrate on o information concerning advertising as the independent variable
and sales performance as the dependent variable.

1.6.3 Time scope

The study will be undertaken for four months,

1.7 significance of the study

The study may help the management of Sleeping Baby Company to discover the effect of
advertising on sales performance. This will help them to select better advertising medium and
procedures which will result into improved sales performance.

The study may be significant in adding on the existing literature on effects of advertising on
sales performance of firms hence providing reference for future studies carried out on the same
problem.

The research may be of great importance to me as a researcher because I hope to acquire

research skills which I can apply to conduct research in other subjects. Skills like developing
questionnaires, interacting with new people and get the necessary information and analyzing data
1.8 Operational definition of terms.

Advertising:

This is any paid form of non-personal presentation of idea, goods or services by an identified
sponsor.

Product:

This can represent anything a consumer acquires or might acquire to meet a perceived need. The
need not necessarily need to be satisfactory. Some product might not satisfy their needs.

Sales:

This is a process of selling something such as a product, ideas or services. It also covers the
number of goods or services sold at a given point in time.

Sales Volume:

This is used to measure the amount, usually in cartoons/crates of the product being sold at a
given point in time. This is commonly used as well with products but it could be as used within a
service company.

Sales performance

This refers to measuring the results of a firms policies and operations in monetary terms. These
results are reflected in the firms return on investments on assets, value added among others
1.9 Conceptual framework

Independent Variable Dependent variable

Advertising Sales performance

Informative advertising brand awareness

persuasive advertising building brand image

Reminder advertising. increasing retailers or wholesaler

orders
bbbb
providing quality information

Intervening variables

Government policies

Source: Adapted from: Pride, F et all (1989); marketing concept and strategies (sixth edition)
Boston Houghon miffin company

The diagram above shows the relationship between independent, dependent variables and
intervening variables. The independent and dependent variables will focus on how effective
advertising affects sales performance in manufacturing companies in terms of either
informative, Informative advertising persuasive advertising Reminder advertising leading to
brand awareness building brand image increasing retailers or wholesaler orders providing quality
information Whereas the intervening variable will affect both independent and dependent
variables.
 CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

This chapter will look at advertising as the independent variable, sales performance as the
dependent variable it will be presented in themes, that is, the concept of advertising, forms of
advertising, Classification of advertising, advertising media, steps in choosing an advertising
media, advertising budget process, concept of sales concept, sales performance and lastly, the
relationship between advertising and sales performance.

2.1 The concept of advertising

Advertising is a tool of marketing for communicating ideas and information about goods and
services to an identified group, which employs paid space or time in the media or uses another
communication vehicle to carry its message. It openly identifies the advertiser and his
relationship to the sales effort (Wanoff, 1997).

Frank (2005) defined advertising as the aim to persuade people to buy. Advertising can be
defined as the dissemination of information concerning an idea, service or product to compel
action in accordance with the intent of the advertiser. Advertising is a controlled identifiable
information and persuasion by means of mass communication media (Borden, 2007).

Advertising is any paid form of non-personal presentation and promotion of ideas and goods, or
services by an identified sponsor (Kotler and Arm strong 2010) .although advertising is used
mostly by commercial firms, it is also used by a wide range of nonprofit organizations,
professionals and social agencies that advertise their causes to various target publics (Philip
Kotler and Garry Armstrong).

Advertising is a non personal communication of information usually paid for and persuasive in
nature about products, services or new ideas by identified sponsors through various media (Arens
1986).advertising can also be defined as bringing a product or service to the attention of potential
and current customers. Advertising is found on one particular product or service. Thus an
advertising plan for one product might be very different from the other product.
Advertising is a message paid for by an identified sponsor and delivered through some medium
of mass communication. It is not neutral; it is not unbiased (Rusell et al., 2006).

2.2 Forms of advertising

Kotler and Armstrong, (1999). Classified forms of advertising into the following, persuasive,
informative, and reminder advertising.

2.2.1 Persuasive advertising

This is one used to build selective demand for a brand by persuading consumers that it offers the
best quality for their money. It persuades a customer to accept sales calls and to purchase now
(some persuasive advertising has become comparison advertising, in which a company directly
or indirectly compares its brand with one or more other brands.

2.2.2 Informative advertising

This form of advertising is used to inform the customers about a new product or feature and to
build the image of the company.

2.2.3 Reminder advertising

In relation to the above forms of advertising, this form is used to keep consumers thinking about
the product or service .it is important for mature products or services. It reminds customers that
the products May be needed in their near future, where to buy the product and maintaining top of
mind product awareness.

2.3 Classification of Advertising

The nature and purpose of the advertising differ from one industry to another or across situations.
Marketers advertise to the consumers market with national, local and direct-response advertising
which may involve stimulating primary or selective demand. They use industrial, professional
and trade advertising for business and professional markets. To better understand the nature and
purpose of advertising it can be classified by the following criteria:
a. National Advertising: Advertising done by a company on a nationwide basis or in most
regions of the country and targeted to the ultimate consumer market is known as national
advertising. The companies that sponsor these ads are generally referred to as national
advertisers. Most of the advertisements for well-known brands that we see on TV or in other
major media are examples of national advertising. It informs or reminds consumers of the brand
and its features, benefits, advantages and uses or reinforces its images. Mollahoseyni, A. (2012).

b. Retail/Local Advertising:

Another prevalent type of advertising directed at the consumer market is classified as retail/local
advertising. This type of advertising is done by major retailers or smaller local merchants to
encourage consumers to shop at a specific store or use a local service such as local financial
companies, bank, hospitals, fitness club, restaurants, show rooms etc. While the national
advertisers sell their products at many locations, retail or local advertisers must give the
consumer a reason to patronize their establishment. Retail advertising tends to emphasize
specific customer benefits such as store house, credit policies, services, atmosphere, merchandise
assortment and other distinguish attributes Pauwels, K., Hanssens, D. M (2003)..

c. Direct-Response Advertising:

Direct-response advertising is a method of direct marketing whereby a product is promoted

through an advertisement that lets the customer purchase directly from the manufacturer. Direct
response advertising has become very popular in recent years owing primarily to changing life-
styles. The convenience of shopping through the mail or by telephone has led to the tremendous
increase in direct-response advertising. Risso, J. S. (1999).

d. Primary and Selective Demand Advertising:

Another way of viewing advertising to the ultimate customers is in terms of whether the message
is designed to stimulate either primary or selective demand. Primary Demand

Advertising is designed to stimulate demand for the general product class or entire industry;
Selective Demand Advertising focuses on creating demand for a particular manufacturer's
brands.
Primary demand advertising is often used as part of a promotional strategy to help a new product
gain acceptance among customers. Products in the introductory or growth stages of their life
cycles often have primary demand stimulation as a promotional objective because the challenge
is to sell customers on the product as much as it is to sell a particular brand. Michal Register &
Judy Larkin, ( 2003)

e. Business to Business Advertising:

Sometimes the ultimate customer is not the mass consumer market but rather another business,
industry, or profession. Business-to Business advertising is used by one business to advertise its
products or services to another. It is categorized in three basic categories like industrial,
professional, and trade advertising. Mang, M.B. (1992).

2.4. Steps in choosing an advertising media

Armstrong specifies four major steps taken into consideration when choosing an advertising
media, these are deciding on reach, frequency and impact of the medium selected. Reach is the
percentage of people in the target market who are exposed to the ad campaign. Frequency is the
measure of how many times the average person in the target market is exposed to the message.

Media impact is the qualitative value of message exposure through a given medium for example
for products that need to be demonstrated, messages on television may have a great impact than
those on radio since television has both sound and sight. In choosing the type of media, the
reach, frequency and impact of the major media types include newspapers, televisions, direct
mail, radios and magazines. Media choice is affected by the media habits of target consumers
that is, media that reaches target consumer effectively. Nature of products that is some of
products and services are best advertised on televisions and color magazines.

Types of messages that is a major sale may require radio or television while a technical sale
requires magazines, and direct mailing or on line. Cost is another major factor in media choice.
This looks at the total cost of using a medium ad the cost per advert exposure
Selecting specific media vehicles with in each general media type such as specific magazines,
televisions , television shows or radio programmes ,a company must consider or complete the
cost over thousand persons reached by a vehicle, cost of producing adverts for different media
and also balance media cost measures against several media impact factors.

Deciding media timing is last step in choosing an advertising media. The company must decide
how to schedule the advertising over the course of a year. Continuity or pulsing patterns may be
chosen. Continuity means scheduling the adverts evenly within the given period while pulsing
means scheduling adverts unevenly over a period of time.

2.5 Advertising budget process.

Kotler and Armstrong further highlighted the process considered when crating the advertising
budget .stage in product life cycle, new products typically need large advertising budgets to build
awareness and to gain customer trail. Mature brands usually require lower budgets as a ratio to
sales.

Market share, high market share brands usually need more advertising as a percentage of sales
than do low market share brands. Building the market or taking the share from competitors
requires larger advertising spending than does simply maintaining current share. Competition
and clutter, in a market with many competitors and high advertising spending, a brand must be
advertised more heavily to be noticed above the noise in the market.

Advertising frequency; when many repetitions are needed to represent the brands message to
consumers, the advertising budget must be larger.

Product differentiation .A brand that closely resembles other brands in its product class requires
heavy advertising to set it apart. When the product differs greatly from competitors, advertising
can be used to point out the differences to consumers.

According to David et al 1988, effective advertising decisions are aimed at supporting the
marketing strategy for a companys products and also influences purchase decision. The first step
in creating effective advertisement messages is to decide what general messages will be
communicated to consumers. This involves developing an effective message strategy that begins
with identifying customer benefits which can be used as advertising appeals. You can then create
a compelling idea or concept that brings the message strategy to life in a distinctive and
memorable way. This in turn guides the choice of appeals to be used in an advertising campaign.

2. 6 concept of sales performance

2.6.1 Sales.

According to stein (2006) it is believed that the right sales approach consists of sales training that
supports a companys sales methodology and related processes.

Designing or adopting sales methodology is critical, without this methodology in place training
is a tactical attempt to a larger problem. The selling methodology must developed based on the
companys unique situation in their market, their customers , how the customers buy ,the
complexity and price levels of the products and services the company offers ,competitive
pressures , reporting requirements ,the participation partners and the skill level of their current
sales people (stein 2006).

In the past years some organizations have found that their sales process are becoming more
challenging while the performance of some of their sales professional who were past stars are
deteriorated. Selling complex products and services, versus selling commodities has always been
more difficult and sales professionals must have different skill sets (stein, 2006)

2.6.2 Sales performance

Sales performance is an integrated frame work that enables organizations to plan and model
sales strategies and ensure timely execution of sales initiatives while ensuring both front line
sales people and decisions-markers have visibility into performance . Sales performance
represents the next generation of best practices for sales. (Michael D, 2006).

Sales performance also refers to the total amount of firms output sold to the market especially
on monthly or annually basis .this is affected by many factors including customer relationship,
marketing management of the firm and sales force skills and motivation and even the pricing of
the goods and services (Amanda D.H 2002)
Advertisement has a direct relationship with the sales performance. Every organization fixed
their budget for the advertising complains. On the bases of the quality of the advertisement the
variations of the sales occur (Alvarez, 2005). Advertisement is the important tool that reduces the
risk related to the new products (Neslin, 1998). Advertisement according to the ICC (The
international Chamber of Commerce): Marketing tools which used to attract intention of the
customer by conveying the benefits relating to the product or service

Advertisement is simple and easy to adopt and apply in the market and enhance the volume of
the sales (Hanssens, Parsons and Schultz, 2001). The budget portion of the organization relating
to the marketing department increases constantly (Mollahoseyni,

2012) Advertisement has direct impact on the minds of the consumer to consume greater portion
of the product and quick consumption. Advertisement also increases the profitability of the
organization (Ailawadi and Neslin, 1998). Advertisement is beneficial in both short run and long
run businesses although in long run it is most valuable, it increase the value of the product and
organization (Pwaels, Silva-Risso & Hanssens, 2003).

Sales in business terms are the actual sales in money values, a company receives after necessary
collections are made from different sales channels of the original total production put on the
market (Mc Cathy et al, 1994) .it is sales that stimulate production in a company and
consequently profits which are affected by various factors some of which are controllable like
quality and others are uncontrollable like competition and general price changes.

Sales revenue is the total amount of money that the firm gets from the sale of all its goods and
services in a given period of time. This is usually six months or a year if a firm produced only
one product or service, the sales revenue will be the price of the product multiplied by the
number of products sold. In the case of more than one product or service the revenue from each
needs to be added together (wood, 1996).

The figure for sales revenue in profit and loss account does not necessarily mean that the firm
has received all the money because although they may have sold that quantity of the product,
they may still be owed some of the money as debtors )Baker 2001).
Sales performance refers to consistent and satisfactory turnover of goods and services produced
and put on the market by an organization or company. It is the sole economic goal of companies
to have as much goods sold on the market. This facilitates the rate of goods turn over and
consequently revenue and increased production.

2.7. Relationship between advertising and sales performance

The objective of advertising is to increase sales revenue hence improving sales performance
David et al (1988).

Effective advertising can increase sales of advertisers products, and by so doing increase their
profits. Advertising provides consumers and other prospects with information about different
products that are available to them. This enables consumers to compare and choose between the
products and encourages competition. Competition encourages companies to be more price and
quality conscious so as to retain customers and clients (Cambridge international college training
manual, 2000).

Advertising combines with a host of other influences to determine what contribution advertising
makes to the buyers purchase decision. The retailer john Wanamaker is said to have remarked
that he knew that only half of his advertising was effective but he was unable to know which half
it was.

It is through advertising or other forms of promotion that brands in different market segments
can effectively tell people in the market that a product is intended specially for them. Engel
1991, mc Gann and Russell, 1998).

The significance of advertising is to let customers know that an established brand is still around
and it has certain characteristics, uses and benefits. (Pride et al 1989).

Gordon (1993) states that companies advertise in order to compete in a new and aggressive way
with in the marker, to increase their market share through increased customer , utilize the low
cost way of teaching customers to create marketing approaches.
David et al (1988) recognizes that many scholars have heard different views on the effect of
advertising on sales performance .however most of them agree that effective advertising will
eventually increase revenue.

Jefikins (1990) has stated that in a competitive society there is not only competition between
rival advertisers but choice between their rival products and services. Also people forget very
easily and therefore the biggest advertiser in the world will get bankrupt very easily if he stopped
advertising

Dunn 1968 points out that the market needs and conditions are changing; therefore there is need
for creativity in selling. This will show the company what to produce so as to satisfy the needs of
the users. When companies produce such a commodity and they advertise, there is an automatic
high response in consumption. Thus showing the relationship between advertising and sales
performance.

Penchman 1992 found out that advertising has a greater potential of building awareness of
people hence obtaining a high preference in the market share because a big percentage of the
population has one or more of the mass medium such as radios and television. This fact
introduces the advertised company to many people.

Pride F et al (1989) observes that advertising often stimulates demand thus stimulating sales. For
advertising to have a direct relationship with sales revenue, the entire market mix must be
viewed by the customer as the right one. Engel et al 1991, mc Cathy and perveault( 1988).

Companies advertise to create familiarity with or of a product, which helps to create confidence
in it. If a product is simply made available, it is important to inform people of its existence.

The decision to advertise implies a decision to compete in a new and aggressive way with in the
market. This means the provider will no longer rely too solely upon personal sales man ship to
gain distribution. Instead he implies his readiness to and intention of speaking directly to
consumers in abroad countries. The decision to advertise also helps the marketer to expand his
share in the market. Advertisement helps in development and expansion of the market and the
consumer acceptance of the product hence there is a relationship between advertising and sales
performance.