CHAPTER ONE
INTRODUCTION
Background to the Study
We live in a world that is dynamic and complex. The business environment is becoming more complicated everyday and as such, decision making is becoming more and more challenging and risky. Business organizations are failing due to poor decisions made. Investors are losing a lot of money and are not happy about that. In other instances, organizations are springing up in great numbers; some are successful in the marketing of their products and services, while others are trying to keep up to reach their target audience. Likewise, consumers are also faced with the challenge of making choices due to indecisiveness, skepticism, indifference and confusion which are among the key sales killers in the business world.
However, the consumer perception challenge is the first and greatest hurdle that advertising must cross. Perception guides all activities of the consumer from the people he associates with to the product he buys. In the business world, it has always been about what people say about the product or service and not what the marketer says. How a consumer perceives each different brands in a category determines which brand he chooses. A lot of companies spend so much of their money on advertising; sales promotion, point of purchase displays and other marketing communications only to discover that many people do not even remember the product or the promotion. On the other hand, whether consumers ultimately purchase the marketer’s brand also depends on whether the promotion and marketing communication variables facilitate purchase.
Today, reports about the current economic crisis have been terrific and scaring. The economy is dwindling and having ripple effects on local businesses. More companies have been recently reported to have shut down their operations while some are planning their exit due to the harsh condition. In the presence of these, the few companies in operation are engaged in a vicious fight to gain the souls of consumers. For them to succeed, they need to understand what makes potential customers behave the way they do.
This study therefore seeks to determine the effect of advertising on consumer brand preference of Indomie instant noodles- a product of de-united food industries ltd. The brand Indomie has a variety of flavors such as onion flavor, chicken flavor, suya flavor and so on. Due to the vast number of competing brands, massive budget have been allocated to the advertising of Indomie noodles which the research makes effort to determine its effect on consumer brand preference.
1.2 Statement of the Problem
The role of advertising in determining consumer behavior and brand preference has been undermined by many firms in Nigeria over the years. Some firms spend huge amounts of money advertising their products and still claim about indifference in their sales volume. This misconception seems to be based on an entirely understandable initiative reaction: how can advertisers claim that advertising does not increase consumption and sales and still spend so much money on it?
According to Vivekanathan (2010), marketers’ main objectives are getting new customers and retaining the existing ones to increase their market share and sales volume. The cost of getting new customers is five times greater than the cost of retaining the current customers. To do so, marketers are exhausting a huge amount of money, energy and time to advertise their product, services and ideas with the aim of making sure that the customers will develop a special preference for their brands. Even though advertising is more expensive than any other promotional strategy, companies still allocate a considerable part of their resources into it with the hope that it will earn the best return on investment. This research study is mainly focused on determining the effect that advertising has on brand preference of consumers that directly or indirectly contributes to repeat purchase, sales growth and increase in profit. The study has made hard efforts to see whether advertising has brought about any significant effect on repeat purchase, sales growth and profit.
1.3 Objectives of the Study
The major objective of this study is to determine the effect of advertising on consumer brand preferences. Specifically, this study is designed to:
Determine the effect of advertising on repeat purchase
Determine the effect of advertising on sales growth
Determine the effect of advertising on profit
1.4 Research Questions
This study was guided by the following research questions:
To what extent does advertising affect repeat purchase?
To what extent does advertising affect sales growth?
How does advertising affect profit?
1.5 Hypotheses of the Study
In this study, the following null hypotheses are formulated:
Ho1: advertising does not significantly affect repeat purchase
Ho2: advertising does not significantly affect sales growth
Ho3: advertising does not significantly affect profit
1.6 Significance of the Study
This research study hopes to determine the effect of advertising on consumer brand preference. This study is dedicated to the subject area of consumer brand preference that results in repeat purchase, sales growth and profit with regards to advertising influence on it. It will help to gain in-depth knowledge about the subject matter and will be of great benefits for both academic and practical side. The conclusion drawn from this study will provide feedback for marketers about the effects of its advertising and it will also find out the areas which other researchers can explore into.
1.7 Scope of the Study
This study was conducted in Akwa Ibom State with visits to Dufil Company (marketing unit) in Trans-Amadi, Port Harcourt, Rivers State. The study is limited to the opinions of both Dufil staff members and the final consumers of Indomie noodles. This study is conducted to determine the effect of advertising on consumer brand preference as it relates to repeat purchase, sales growth and profit.
1.8 Limitations of the Study
During this research, several challenges were encountered. First, the research topic was difficult to research due to its broad nature that required deep investigations. Second, materials for the research were insufficient which slowed down the research. Third, the funds for embarking on the research were insufficient-insufficient money to obtain enough materials- posed a big threat to the research. Also, the response of both Dufil staff members and final consumers were discouraging. It took a lot of pleading and convincing to get the opinions of the staff; and much explanation and interpretation for consumers to understand and answer the questionnaires.
1.9 Definitions of Terms
Advertising: Advertising is defined as any paid form of non-personal communication or information about goods, services and ideas by an identified sponsor disseminated through the mass media.
Consumers: Consumers are peopling who purchase and use goods or services to satisfy particular needs and wants.
Brand preference: This is the subjective, conscious and behavioral tendencies which influence consumer’s predisposition toward a brand.
Repeat purchase: This is the buying of a product by a consumer of the same brand name previously bought on another occasion.
Sales growth: This is the amount by which the average sale volume of a company’s products or services has grown, typically from year to year.
Profit: This is the ratio of profit for a given year to the amount of capital invested or to the value of sales.
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