THE ROLE OF ADVERTISING ON THE PERFORMANCE OF SALES OF BEVERAGES IN NIGERIA (CASE STUDY: NIGERIAN BREWERIES LIMITED)

Description

CHAPTER ONE 
INTRODUCTION

1.1     BACKGROUND OF STUDY

This research is on the role of advertising on the performance of sales of beverages in Nigeria  (case study: Nigerian breweries limited). The role played by advertising on the performance of sales of beverages in Nigeria cannot be overstressed as it has consistently brought about public awareness to Nigerians on new products and also rebranded old products. Advertisements in general has being providing 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. Therefore, for advertising to be effective, it must have an appeal, attract attention, command interest, inspire conviction and must provoke interest (Frank, 2005) by members of the public. In the same vein, Okeji (2008) agreed that a good advert message should not be boring but rather reflect the lifecycle of the product, he concluded that advertisements should be carried out in such away that the products and services are advertised using the right medium as this will enable the organization, business or company to be able to reach the right audience with the right message.

Studies have been carried out by a number of researchers such as Herbert (1982), Nigel (1994), Gladson and Chinedu (2005) and Meshach (2007), which has shown that advertising is a major competitive tool in establishing position in the market place. Companies use adverts 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 public. This is because a well-crafted advertisement program can be a cost-effective way to disseminate messages and build brand preferences which is sure to increase sales.

Advertisements of products and services is a global trend, in which companies spend so much money to ensure they stay relevant to their target market, such is visible in Nigeria as companies rely on sales promotion (advertisements) to get their existing and prospective consumers informed about their products and services. Advertising has grown over the years to become the most prominent and easily understandable to firms and the general public (Haruna, 2005). It is therefore not surprising that resources committed to advertisement by firms in Nigeria have grown astronomically over the years as studies by Akanbi and Adeyeye (2011) have posited that in Nigeria, advertising is more prominent among manufacturing firms, especially those in the food and beverages sector as awareness regarding their products can reach the consumers more rapidly through this channel. They also argued further that the companies listed under food and beverages sector stand distinct as a model for the use of advertisement to rapidly reach out to consumers. This can be substantiated by the revelations made by Kingsley (2012) who explained that Euro Monitor International in its recent findings showed that the Nigerian food and beverages sector was ranked one of the best-performing segments of Nigeria’s manufacturing industry.

Production companies are established with the sole aim of profit making, no matter how little, for companies in Nigeria, several avenues of promotions are constantly being explored to ensure the right prospective customers are reached as this is key to ensuring that they remain relevant in the market, based on this fact this study is important as it investigates the role of advertising on the performance of sales of beverages in Nigeria using Nigerian bottling company as a preferred case study.

1.2     Statement of the problem

Companies in Nigeria, particularly those in the manufacturing sector consider advertising their products as an inevitable tool for survival in the highly competitive market. Empirical evidence has proven that most products in Nigeria have close substitutes that are either locally produced or imported. This implies that companies would have to rely heavily on advertising to create a brand and distinguish it from other products in the minds of consumers. Thus, advertising in Nigeria has become the gateway to survival and the acquisition of market share. However, the need for survival, the desire to control larger market share and the dream of creating brand loyalty in the minds of consumers have made successful manufacturing companies in Nigeria, like the food and beverages firms, to pay much attention to advertising programs without recourse to the extent to which advertising has been able to commensurately improve their performance.

Despite the fact that the advertising budget of the food and beverages sector had grown over the years to constitute a reasonable chunk of expenditure for the companies, little research attention has been paid to understand if advertising has actually led to more profit for these brands in Nigeria. The study by Akanbi and Adeyeye (2011) which sought to establish the effect of advertising on the sales volume of Nigerian Bottling Company Plc utilizing composite data from the annual accounts and reports of the Company from 1999-2009. This particular study is unique and significant because it attempted to overcome the deficiencies of the previous studies by intending to rise up to the current realities by utilizing the data sought from Cadbury Nigeria Plc and Nestle Nigeria Plc both in food and beverages sector in Nigeria from 2000 to 2012.The previous studies used primary data which does not adequately capture relationships. Further, this study equally tried to establish stationarity test for the secondary data utilized for this study to avoid the results being spurious which the previous studies had failed to establish. This study therefore hopes to fill these gaps.

It is an established fact that advertising plays a very significant role in creating product or service awareness in the market place especially for new products by brands, this is supported by David and James (1982) who argued that advertising is one easy way to educate existing and prospective consumers about a product or service. Although it is common for people to relate the performance of a company with the priority it gives to advertising, people tend to forget that advertising budgets are a huge source of costs for the organization. In fact, the amount of resources committed by firms to advertising has steadily grown over the years because of the increased awareness and sophistication of consumers (Kotler, 2009).

1.3     Aim and Objectives of the study

The aim of this study is to understand the role of advertising on the performance of beverages in Nigeria with focus on Nigerian Breweries PLC.

The specific objectives of this study are as follows;

1. To examine the main objectives of advertising products to consumers.
2. To examine the different advertisement platforms that are used especially for beverage products.

• To examine the types of adverts that can be done for products especially beverages.

1.4     Research Questions

The research questions key to this study are as follows;

1. Does advertisements guarantee increase in sales performance of beverages?
2. Is there any relationship between advertisement and sales?
3. Can product awareness still be possible without advertisements?

1.5     Research Hypothesis

From the above-mentioned research questions, some hypotheses shall be tested in this study. They are as follows:

H₀: Advertisements guarantee increase in sales performance of beverages

H₁:  Advertisements cannot guarantee increase in sales performance of beverages

H₀:  There is no relationship between advertisement and sales.

H₁:  There is a relationship between advertisement and sales.

1.6     Significance of the study

This study is very important as its benefits are numerous, a major importance is that it will contribute to existing knowledge which will be of immerse benefits to students and academicians who will want to know more about advertisements as it relates to the beverage industry and those who will want to further this study. The study is expected to contribute to the not-so-well-developed body of knowledge regarding the association between advertising and sales by empirically ascertaining the role advertising is currently playing as regards to driving sales for advertised beverages in the market. Similarly, the study also hopes to expand the frontiers of knowledge in the area of conducting its analysis through the use of techniques that have been hitherto overlooked by previous researchers on the effect of advertising on the sale of beverages in Nigeria.

Despite the fact that the advertising budget for food and beverage companies have continually grown over the years to constitute a reasonable chunk of expenditure for the food and beverage sector in Nigeria, little research attention has been paid as regards to the role advertising has truly being paying and also knowing if some advertisement platforms have been very helpful in driving more sales to the brand.

The importance of the findings of the study to the managers of manufacturing firms in Nigeria, especially those in the food and beverage sector could not be quantified in that it would provide evidence with respect to the justification of managers increased resource commitment to advertising in Nigeria over the years as data will be gotten from the public on their perception as regards to advertisements. The findings would equip managers with better insights on how to juxtapose the benefits of increase in advertising expenditure vis-à-vis sales revenue and net profit. Furthermore, the study will also be expected to be of immense utility to shareholders whose primary goal is to maximize their wealth. The findings of the study would help shareholders in their bid to monitor managers and ensure that only costs that could ensure the maximization of shareholder’s wealth were incurred by managers on behalf of shareholders.

The outcome of the study might also be of beneficial to the government and its agencies in the process of making decisions. For instance, the findings of the study could guide the Advertising Council of Nigeria to understand the burden that advertising might constitute to the long-run growth and survival of firms in Nigeria, its benefit notwithstanding.

1.7     Scope of the study

The scope of this study is on Lagos state which is in focus because it has a large population of Nigerians who patronize beverage products that are produced around them in large quantities.

1.8     Limitation of the study

The research comes with a few challenges which include ability to source relevant literatures to substantially back this research findings, and financial expenses incurred in putting this research together.

1.9     Definition of Terms

The following are relevant definitions as regards to this study gotten from Oxford online dictionary

1. Advertising: The activity or profession of producing advertisements for commercial products or services.
2. Advertisement: A notice or announcement in a public medium promoting a product, service, or event or publicizing a job vacancy.
3. Consumer: A person who purchases goods and services for personal use.
4. Market: A demand for a particular commodity or service.
5. Producer: A person, company, or country that makes, grows, or supplies goods or commodities for sale.
6. Product: An article or substance that is manufactured or refined for sale.
7. Sale: The exchange of a commodity for money; the action of selling something.