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.

Citation

Baidya, M., Ghose, K. and Maity, B. (2014), "An empirical investigation of the effect of advertising in shaping the relationship between sales and price of two entrepreneur brands in India", Asia-Pacific Journal of Business Administration, Vol. 6 No. 2, pp. 116-126. https://doi.org/10.1108/APJBA-02-2013-0010