Sales and Advertisement Relationship for Selected Companies Operating in India: A Panel Data Analysis

The study tries to examine the growth pattern and trend of sales and advertisement expenses for the selected companies over a period from 1992-93 to 2006-07. Further it seeks to evaluate the effectiveness of advertisement expenses on sales of selected companies operating in India at aggregate and disaggregate levels. It also tries to analyse the behaviour of share of advertisement expenses in total sales for the above mentioned categories. The study is based on panel or pooled secondary data collected for advertisement expenditure and sales revenue of 134 randomly selected sample companies operating in India over the period from 1992/93 to 2006/07 which are further classified on the basis of amount of sales revenue as well as on the basis of type of product produced. In this study of Panel or Pooled data, Fixed Effect approach with and without dummy variables are applied to evaluate the effectiveness of advertisement expenses on sales. Further, annual compound growth rates and summary statistics are also estimated. The contribution has found that the growth rate of sales revenue of manufacturing and companies, whose sales revenue is more than 1000 crore, is highest inspite of the negative compound growth rate of advertising expenses of these two types of companies. Further, in case of non-manufacturing companies, it has been found that these companies are less popular among the consumers and they are also spending less on advertisements as compared manufacturing companies. While answering, how much advertisement expenses need to be incurred, the study concludes that to a large extent it depends on the nature and size of industries.