The Impact of Advertising Expense on Sales Volume: The Case of Moha Soft Drink Industries S.C.
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Date
2017-06
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Addis Ababa University
Abstract
Advertising is a prominent feature of modern business operations. One could encounter
advertising messages, while watching TV, reading magazines, listening to the radio, using the
internet or even simply walking down the street, as advertising has a stimulating influence on
purchasing behavior of the consumers. Advertising provides a platform for companies to create
awareness about their products or services and how consumers could make the best choice out
of such products. This study evaluated the impact of advertising expenses on the sales volume of
MOHA Soft Drinks Industries S.C. This study was based on secondary data collected for
advertising expenditures and sales volume of the company over the period of 2000 to 2015 from
its annual financial and sales reports. Among the objectives of the study is to determine the
extent to which advertising costs impact on the sales volume of the company under study. It also
seeks to study the nature of advertising as well as the relationship between advertising and sales.
Explorative research design was adopted for the study to get deep insight of the impact that
advertising cost has on sales volume of the company. Statistical regression analysis using
Ordinary Least Squares (OLS) and correlation analysis have been performed to test the
hypothesis of the study. The test result showed that advertising expenses has a positive
significant impact on sales volume of the companies; and also a test showed a positive
significant relationship between advertising and sales volume of the company. Other variables
which are not included in the model are explained by the error term in the model.
The study concluded that that there is a significant improvement in the sales of the company as a
result of advertising. It was recommended that organizations should educate the general public
through advertising on the uses, functions and benefits of their products. The company should
exhaustively advertise any change in the company which can increase sales volume. For
instance, if there is a price discount or new product development or a prize coupon, it should be
advertised.
Key words: Sales Volume, Advertising expense,
Description
Keywords
Sales Volume, Advertising expense