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Impact Of Advertising On Profitability Of Business Organizations In Asaba Urban




The study was to examine the impact of advertising on profitability of business organizations in Asaba Urban. To achieve the essence, the study was divided into five chapters. Three research questions were raise and answered in the study, related literature were reviewed in the study. The study used a descriptive survey. The population for this study consist of two hundred and twenty four (224) private business owners, sample of the study comprises of hundred and twenty five (125) private business owners which were randomly selected out of two hundred and twenty four (224) private business owners. The instrument for data collection was questionnaire which was validated by two lecturers from the department of Accounting education, school of business education, and a measurement and evaluation in school of education. The method of data collection was mean and standard deviation to answer the research questions. The findings revealed that adverting increase the turnover rate business organization, motivate customers to patronize business organization and advertising persuade customers to patronize business organization.  Based on the findings, it was recommended among others that the advert should be used to aid the customers to identify the company’s products or services when they are marking a purchase decision, the business organization should be aware of the fact that there are times when the effective use of advertisements are needed and the business organization should ensure that advertising agencies place their product adverts on stations and place where the consumers will easily identify with them make a purchase.

Chapter one


Background to the Study

Advertising is a veritable tool for entertainment but, more importantly, the idea of entertainment must be geared towards securing the attention of the consumer and arousing his interest in the advertised product to compel desired action. It consists of non-personal forms of communication conducted through paid sponsorship, it is used for long-term building of the organization’s image (institutional advertising) long-term  buildup of a particular brand (brand advertising ) information dissemination about sale service or evident ( classified advertising ), announcement of a special sales (sale advertising ) and advocacy of a particular cause (advocacy advertising).

Advertisement in such a media as print (newspaper, magazines, billboards, flyers) or broadcast (radio, television) typically consist of pictures, headlines, information about the product and occasionally a response coupon. Broadcast advertisement on the other hand consists of an audio or video narrative that can range from 15seconds spots to longer segments known as infomercials, which generally last 30 to 60 minutes. Advertisements can also be seen on the seats of grocery carts, on the wall of airport walkways, on the sides of buses, airplane and train. Advertisements are usually placed anywhere an audience can easily and/or frequently access visual and/or video (Busari, Olannye  & Taiwo, 2012). Advertising create awareness about a product and service to the prospective customer and hence stimulate interest and buying decision which increase sales revenue and profit. Advertisement may be paid and non paid promotional tools in form of print, audio and video advertisement.

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Profitability on the other hand is composed of two words, namely, profit and ability. The term profit is explained as revenue minus cost (direct and indirect cost) and the term ability indicates the power of a business entity to earn profits (Tulsian, 2012). The ability of a concern also denotes its earning power or operating performance. The profitability may be defined as the ability of a given investment to earn a return from its use. Profitability is a relative concept whereas profit is an absolute connotation. Despite being closely related to and mutually interdependent, profit and profitability are two different concepts. In other words, in spite of their generic nature, each one of them has a distinct role in business.

In explaining the relationship between the advertising expenditure and the profitability of business, Akanbi and Adeyeye (2011) examined the relationship between advertising and sales volume of Nigerian Bottling Company Plc between 1999 and 2009 and conclude that there is a significant relationship between advertising and sales volume of the company. In supporting the view of Akanbi and Adeyeye (2011), Olufayo, Ladipo and Bakare (2012) evaluate the relationship between advertising and patronage of a new product using Nestle Plc as a case study. Olufayo, Ladipo and Bakare (2012) posit that there is relationship between advertising and consumer patronage as well as between budget allocation to advertising and sales volume of the firm.  Dauda (2015) in his study observe a  reservation with respect to relationship and significant of advertisement in explaining increase in sales revenue and profitability as observed by Olufayo, Ladipo and Bakare (2012) Akanbi and Adeyeye (2011) by examining the effect of advertising on the sales revenue and profitability of selected food and beverages firms in Nigeria, He therefore assert that advertising is one of the most important medium of communication influencing the companies performance in more than one ways but that its influential strategic importance could be suppressed by other factors such as sales promotion, personal selling, and publicity, public relation which also try to receive equal attention at time of deciding any sales and profitability strategy.

 Statement of the Problem

The business world is highly competitive with every business organizations jostling for a share of the market and striving to increase their sales revenue and profitability. Advertising techniques employed by one firm are easily becoming outdated with new strategies and the surging growth in E-marketing tools through the worldwide web introduced by another firm. This high competition has rendered most advertising effort ineffective and the sales revenue vis-à-vis the profitability of companies in Nigeria had dwindled instead of increasing. The goal of this study is hence to study the effectiveness of advertisement in improving profitability of business organization in highly competitive financial industries in Nigeria.

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Extensive study on the impact of effective advertisement on sales revenue and profitability has been carried out over the years and various recommendation made on how to increase profit through effective advertisement. Previous studies have used various data analysis techniques to establish relationship between advertising cost and organization sales and profitability. For example Dauda (2015) uses a stationary test, ordinary least square and correlation techniques to analysis a time series data based on the flaw identify in Akanbi and Adeyeye (2011)  he however create a room for  further complexity and study in examining the proportion of impact that advertisement have on profitability in relation to other promotional tools.

This study will therefore attempt to understand whether the advertisement have any influence on the profitability of business organization in Nigeria and whether such influence is significance enough to justify the importance of advertisement in an organization.

Purpose of the Study

The purpose of the study is to find out the impact of advertising on profitability of business organizations in Asaba Urban.

Specifically, the study carried out to;

  1. Find out if advertising increase the rate of turnover or sellers of products bought by customers who are exposed to it relative to those who are not.
  2. Determine if advertising can motivate consumers to patronize business organization.
  3. To find out if advertising can persuade customers to patronize business organizations.

Research Questions

The following research questions guided this study.

  1. To what extent can advertising increase the turnover rate of business organization in Asaba Urban?
  2. To what extent does advertising motivate customers to patronize business organization in Asaba Urban
  3. To what extent can advertising persuade customers to patronize business organization in Asaba Urban


The following   hypotheses formulated to guide this study;

  1. Advertising does not have any significant impact on the profitability of business organization.
  2. Advertising has a significant impact on the profitability of business organization

Significance of the Study

This study will be of immense benefit to; business organization, consumer assessment, the study will also be of benefit to shareholders.

This study will benefit business  organizations in the sense that organizations will fit in with the business and that understanding the customer is the beginning of wisdom. To Survive in this era of competitive market, practitioners need to re-assess, restate and, if need be, reconstruct the whole concept of advertising.

Today, consumer assesses things in the light of experience and reason and affects a lot of comparative analysis in most cases before taking a particular decision. At times also, there are certain things that some consumers believe should not be aired in the public. These types of advertisement messages are looked at as moral outrage in advertising. Moreover, certain advertisements make people develop a taste for products they cannot afford. Therefore, since Modern Corporation depends on effective communication for survival and success, it is important to investigate properly the influence of advertising in the success   of business organization.

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Furthermore, the study is also expected to be of immense utility to shareholders whose primary goal is to maximize their wealth. The findings of the study would help shareholders in their bid to monitor managers and ensure that only costs that could ensure the maximization of shareholders‟ wealth were incurred by managers on behalf of shareholders.

Scope of the Study

This study is delimited to the   impact of advertising on profitability of  business organizations in Asaba Urban. The study covers, turnover rate of the business organization, motivation of customers and persuasion of customers.

 Limitation of the Study

The study is limited to time incurred by  the  researcher,  availability of data. Part of the data for this study will be gotten from secondary source. This study was extracted from annual reports and accounts of the companies. This entailed a huge sum of money to execute and had effect on the scope. Limited accessibility to information in the organization due to confidentiality being maintained which strained accessibility of data there was also a lack of cooperation from some staff interviews as they had to go out of their work schedule to respond. The limitations however did not affect the data collected to undertake the study.

Definition of Terms

The following terms were in view of their operational meanings:

Advertising:  It is any paid message presented through various media, such as television, radio, magazine, newspapers or billboards by an identified source. Advertising is a means of creating awareness about a company product and services as well as stimulating buying and re-buying decision.

Marketing Strategy:  It means marketing actions by management to off-set actual or potential actions of competitors. Marketing strategies consist of various marketing tools used by business organization to sell its products and services. Marketing strategies includes the marketing mix of price, Promotion, place and product; green marketing, telemarketing, online marketing and other tools  of making product and services attractive as well stimulate purchase.

Profitability:  It is defined as either accounting profits or economic profits. Accounting profits mean net income, while economic profits mean net worth. Profitability is the difference between the turnover or sales and the operating cost of business organization

Non Personal; There are two ways to sell anything, personal or non-personally. Personal selling requires the seller and buyer to get together while non-personal selling involves the use of  various media to reach the consumer/buyer. Example television advertising

Business organization: A business organization represent a any institution set up to put resources together toward providing utilities with the sole aim of making profit.

Pages:  64

Category: Project

Format:  Word & PDF               

Chapters: 1-5                                          

Source: Imsuinfo

Material contains Table of Content, Abstract and References.


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