Advertisement Cause Sales or Sales Cause Advertisement: A Case of Manufacturing Companies from Fortune 500

Abstract

Advertising is an important tool of marketing as it helps the business in achieving the competitive advantage by selling its products and overcoming the rivals. Companies spend money on the advertisements in order to make sure that the masses are aware of their products, features and advantages over those of the competitors. The present study builds on the literature already available by studying the linkages between advertisement spending and sales in the case of thirty nine manufacturing companies from the Fortune 500. The data used in the study is the secondary data taken from the annual reports of the companies. The study uses statistical tools including mean, median, std. deviation, regression, kurtosis, skewness and various econometric models. Taking six years data of thirty nine manufacturing companies, we present their descriptive statistics, regression, unit root test, Vector Auto Regressive, and Variance decomposition. Except for Vector Auto Regressive model, rest of the tools used clearly show that there is a significant relationship between advertisement expenditure and sales.

Keywords: Advertisement, Sales, Linkages, Fortune 500

JEL Classification: L60, M37, N60