THE EFFECT OF ADVERTISEMENT ON CONSUMER BRAND PREFERENCE
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CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
One of the most crucial operating decisions management must make is establishing a setting price for its products but this is quiet unfortunately that many firms are still mismanaging pricing causing lots of money and anticipated profit to be unexplored and wasted.
However in explaining the importance of pricing, Egbunike (2007:83) sustained that setting the price for an organizations product or service is one of the most difficult, due to some number of variety of factors that must be considered. The primary decision arises in virtually all types of organization, just to mention but a few of them such as manufacturers set prices for their products, they manufacture, merchandising companies set prices for their goods, service firms set prices for such services as insurance policies, bank loans etc.
A company’s survival and profitability depends upon its pricing decisions, thus price is the only element in the marketing mix that produce s revenue and thus ensures profit ability (kotler and keller 2006:475) Price adopted by firms must be able to cover all cost in the long run as well as to leave a profit margin to reward management.
The Price of a Product has a direct relationship with many operations of the firm’s activities. A price decision will affect demand and this in turn affects the revenue generated by the firm. Similarly, a firm which makes profit has the propensity of attracting more new capital. This shows that the public has confidence in the ability of the firm to yield return to them. So, the performance of management is usually measured by the amount of revenue it generates to satisfy the share holders of the organization.
It is evident that management has a big responsibility before them in setting and adopting the most advantageous pricing policy and the most effective profit plan for their firms, since prices are not set arbitrarily therefore management must focus on all the important factors in setting its price. Thus, it has become imperative to investigate the effectiveness of pricing policy and profit planning in Nigerian organizations.
1.2 STATEMENT OF THE PROBLEM
Hilton (1991:201) observed that both the market forces of demand and supply and the cost of production have a Significant bearing on determining prices. Equally he explained that there are other variables that influences pricing decisions according to him, this includes: Manufacturer’s pricing objective, economic situation, level of competition, and availability of close substitute.
For pricing to be effective, firms must incorporate all these factors in selecting the most advantageous price for it’s product. At times, firms are not in the habit of considering these factors and this has led to the shutting down of many factories, downsizing of workforce and in most cases, winding up of firm’s (Hilton, 1991:201).
Profit plan are made in form of budget and they help firms to forecast the level of profit, cost and revenue, they intend to generate in order to gain competitive advantage. Unfortunately many firms still do not prepare these plans, thus, this has led firms undertaking unplanned ventures resulting in escalation and inability of firms to foresee shortage in resources or finance or personnel needed in the future operation of the firm. Where no plans exist, there will be no basis for firm to compare or evaluate their performance.
Based on the foregoing, the problem of this study is in three (3) folds.
Firstly, the failure of some firms to incorporate factors such as economic situation, level of competition, availability of close substitute, among others in their pricing decisions, may have resulted to the minding up of several small scale manufacturing firm (SSMF) in Nigeria.
Secondly, it has been shown in accounting literatures that profit planning is a potential tool for achieving profit objectives and efficiency. which small scale manufacturing firms seems to ignore the use of profit planning ( or budget) in their operations. This has led to far reaching problem such as huge unforeseen operating cost as well as shortages in good financial and human resources. Thirdly, and most importantly, the problem that stringated this study is the knowledge gap, that is, it looks as if small scale manufacturing firms are not aware that pricing policy and profit planning impact positively on profit performance.
The motive of being in business is to produce for sale and profit. In order to remain in business, an organization must generate enough sales from its products to cover operating cost and post reasonable profits (Ayanwale, Adeolu, Alimi and Mathew, 2005). However, taking decision on sales is the most difficult to predict, estimates, or determine with accuracy, potential customers demands as they are uncontrolled factors external to an organization. Considering the importance of sales on business survival and the connection between it and customers, it is therefore, expedient for organizations to engaged in programme that can influence customers decision to purchase its products. This is where advertising comes into play in an organization that is into manufacturing of products. This is where advertising comes into play in an organization that is into manufacturing of products
Advertising is planned phenomenon. It has become an essential element of the corporate world and hence companies allot a considerable amount of revenues as their advertising budget. Experts in the field make use of their knowledge of advertising techniques to promote likeness on the part of the customers and to change their behavior towards a product at any time (Samuel, 1987). Most of the goods in the market that are been advertised are cooperative goods that wants to gain large share of the market. Hence, they used loaded language, which deliberately confuse rather than clarify experience of the goods to the customers. Advertising is an act of calling attentions to ones product, service need etc especially by paid attention in newspaper and magazines over radio or television.
The language of advertising differs from our normal speech because of difference in objectives, its syntactical structure has a psychological effect on customers as it plays on their mind, creating an artificial want and making use of their ignorance and emotions. This is achieved through the presentation of persuasive images such as social status, prestigious ambition and love (Samuel, 1987). Faced with the phenomenon of competing brands of products, it is easy to see the value and impact of advertising on the customers. Customers have limited financial resources and consequently spend the available money on commodities they value.
Advertising is interested in helping to raise the value attributed to a product, as in the case of completing brand products. There is the usual existence of several brands of the same products (Honeywell Flour for example), all priced competitively. However, before the purchase of competing brands, choice between products must be made first. For example, choice must be made between Honeywell Flour Mills Plc products and Flours Mills of Nigeria before choosing which brand of Honeywell Flour Mills Product and of which price range. The role of advertising in determining customer brand preference has been under studies for several years. However, some of the arguments, assumptions and policy options proposed are not based on an in depth understanding of the way advertising works with customers and its influence on markets.
This research work will look into how really advertising manipulate language to suite their purpose and possibly try to make customers aware of this confused state, which advertisers have put them. It will also be able to look on how advertising of goods using a persuasive language affects the customers buying behaviour of Honeywell Flour Mills Plc customers.
1.2 STATEMENT OF RESEARCH PROBLEM
A great number of customers seem not to appreciate the manner producers promote their product, especially the lack of knowledge of the products being promoted. Some customers expect advertisers to bring in services program for all the categories of customers.
The role of advertising in determining customer brand preference has been undermined by many firms over the years. Some firms spend huge amount of money advertising their product and still claim about indifference in their sales volume. This misconception seems to be based on an entirely understandable initiative reaction. How can advertisers claim that advertising does not increase consumption and sales and still spend so much money on it?
According to Ambler (2000), advertising has major influences on consumption volume of customers, as well as sales volume. Adverts may not necessarily bring about huge volume of sales in the short-run, but will certainly increase sales and profits in the long run if done properly. Even if some marketers believe that accurate knowledge about customers, how they buy, why they buy and where they buy – is unnecessary as it is possible to manipulate hopeless buyers into parting with their money in return for products that they do not want.
Successful advertisement skillfully engages to mind of the customer and motivate him to buy the product advertised. Moreover, advertiser sell more than products, it sells brand and if you are a large manufacturer of soap, you will not spend millions of advertising money to encourage people to buy just any soap. You want them to buy your soap and you want advert that will some how convince the public that your brand of soap is more desirable than any other.
Global companies that use a large number of agencies located in different countries and serving different divisions have suffered from uncoordinated advertising and image diffusion. Some large companies now use only a few agencies or event one that can supply global advertising and the result is integrated and more effective marketing communications and a much lower total communication cost.
In the light of the above statement, this research work will look at how effective advertising works on customers buying behaviour. It will also assess the impact of advertising towards solving the invading problems faced by companies to maintain their leadership position in the business environment.
1.3 OBJECTIVES OF THE RESEARCH
The objectives of this research work are:
- To determine the effect of advertisement on customer brand preference.
- Find out if advertising campaign carried out is persuasive to make customers to buy their product.
- To find out the relationship between advertisement and the buying behaviour of customers.
- To examine whether there is a correlation between advertising and enhanced sales and profit level.
1.4 RESEARCH HYPOTHESES
The following hypotheses will be tested in this research:
- There is a relationship between advertisement and customer buying behaviour.
- There is a correlation between advertising and enhanced sales and profit level of the company.
1.5 SCOPE AND LIMITATIONS OF THE STUDY
The scope of this research work is limited to the effect of advertising on customer buying behaviour with a case study of Honeywell Mills Nigeria Plc. Honeywell Mills Nigeria Plc was chosen as a case study because it is among the leading wheat milling industry in the country.
Some of the limitations of this research work are: firstly, time and finance constraints affected this research work in one way or the other. Secondly, is the lack of accessibility to relevant data to be used for the research work.
Finally, the attitude of most organisations in term of secrecy was a limitation to the research work. Some employees were not at ease in discussing their views regarding their advertising methods used on customers due to reasons best known to them.
1.6 SIGNIFICANCE OF THE STUDY
Though people often focus on the negative side when they discuss the effects of advertising, it is important to note that advertising does have its positive side. Advertising is any paid form of non-personal presentation and promotion of ideas, goods or services by an identified sponsor.
This research work is significant to managers of organization, government and students of higher learning or researchers. It is significant to managers of organization i.e. management at strategic level because it will assist them to verify the economic implication involved with advertisement and compare the cost plus benefit on the enhanced sales and profit level.
This research work is also significant to government because the economic importance of advertisement is it contribution to the growth or expansion of most businesses. As such it contributes to the economic growth and stability to the Nigerian economy due to tax accrued to the government as revenue generated.
Finally, it will serve as a source of literature to students of higher learning or researchers that want to write or improve on it.
1.7 SCHEMES OF CHAPTER
This research work is divided into five (5) chapters.
Chapter one on the research work is the introduction chapter. It consist of background to the study, statement of research problem, objectives of the study, research hypotheses, scope and limitations of the study, significance of the study and finally schemes of chapter.
Chapter two reviews all relevant literature relating to the study as well as the researcher’s views concerning previous works carried out on the effect of advertisement on customer buying behaviour.
Chapter three is on research methodology. It consists of introduction, sample and sampling method, sources and method of data collection, method of data analysis and hypotheses testing method.
Chapter four is on data presentation and analysis. It is the interpretation of the analysed data and also the testing of hypotheses formulated.
Finally, chapter five deals with summary, conclusions and recommendations of the entire research work.
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