Sales Drive Advertising Expenditures: Evidence for Consumer Packaged and Durable Goods in Germany

Juliane A. Lischka, Stephanie Kienzler, Ulrike Mellmann
2014 International Journal of Marketing Studies  
The relation between sales and advertising is both complex and diverse. Whether advertising activities drive or follow sales is still unclear. We uncover this relation distinguishing between consumer packaged goods (CPG) and durable consumer goods (DCG) industries. We fit vector autoregressive models to sales and advertising expenditures of four CPG and three DCG industries in Germany from 1991 q1 to 2009 q4. Findings reveal that advertising expenditures do not increase total sales of
more » ... according to the distribution hypothesis. According to the deterministic view, advertising budgeting is often influenced by previous sales and partly by future sales expectations. We conclude that past sales and partly sales expectations may change company and marketing goals that eventually affect the use of strategic communication instruments such as advertising. We argue that one of the reasons for the ambiguities could be ascribed to the high level of data aggregation that might obscure differences in the advertising-sales relation for different industries. We therefore suggest analyses on meso, i.e., industry level. Our research objective is to disclose the advertising-sales relation for product groups with long and short purchase frequencies on industry level. By doing so, we pick up on a connotation of the distribution hypothesis stating that advertising can affect sales only within a sector or product category. Additionally, we take into account that properties of durable versus consumer packaged goods differ considerably which affects consumers' buying habits, advertisings' effectiveness, and firms' advertising behaviour, accordingly. Last but not least, since none of the above mentioned frameworks (activist vs. deterministic view, distribution hypothesis) acknowledges diametrical developments of advertising and sales curves, we incorporate research on the usage of advertising decision models. Future-oriented budget setting
doi:10.5539/ijms.v6n1p31 fatcat:v4zxqiok2rajjnfeyn254dxkle