An empirical investigation of the effect of advertising in shaping the relationship between sales and price of two entrepreneur brands in India

Abstract

Purpose - The purpose of this paper is to see the role of advertising in the middle of sales-price relationship of two entrepreneur brands in India. Design/methodology/approach - Quarterly data on sales (in units), advertising (net of inflation) and price (net of inflation) have been compiled for two entrepreneur brands over a period 2007-2012. First, elasticity of price is estimated by regressing sales on price. Next, the response of price elasticity to advertising is captured using a semi logarithmic regression model. Findings - Results reveal that price and sales are inversely related and advertising influences price elasticity negatively. Practical implications - Findings suggest that entrepreneurs/managers should allocate more funds to advertising and at the same time should charge a higher price point in order to increase revenue. Originality/value - By showing a new way of how to measure the effectiveness of advertising beyond traditional ones (inform, persuade or remind) of two entrepreneur brands this research definitely adds some value in the literature of marketing.