THE IMPACT OF ADVERTISMENT ON THE SALES PERFORMANCE OF
INSURANCE COMPANIES IN UGANDA
ACASE STUDY OF EXCEL INSURANCE COMPANY
BY
BBOSA ROGERS SAVIO
07 / U / 7400 / EXT
SUPERVISOR
MR. SATURDAY JOHN
ARESEARCH REPORT SUBMITTED TO MAKERERE UNIVERSITY IN PARTIAL FULFILLMENT FOR THE REQUIREMENTS OF THE AWARD OF THE DEGREE IN BACHELOR OF COMMERCE OF MAKERERE UNIVERSITY
JUNE 2011
DECLARATION
This project is thoroughly original and never has it been submitted to any institution of higher learning for any award. All the information contained in this work is based on my own findings.
O7 /U/7400 /EXT
207015094
Signature……………………………………..
BBOSA ROGERS SAVIO
Date:………………………………………………..
APPROVAL
This is to certify that BBOSA ROGERS SAVIO carried out this research under my supervision
…………………………………………… …..…………………………………
MR SATURDAY JOHN DATE
(SUPERVISOR)
DEDICATION
This work is humbly dedicated to my dia mum, Sisters; Nakiyingi Winnie Kyabaggu, Mrs Nalunkuuma Arlen Kabunga andMrs Nabbosa Jackie, Mr Kabunga John Roger, My brother Bbosa Alex Salim, and my Family at large whose overwhelming support and encouragement have enabled the production of this work, Glory be to God!
ACKNOWLEDGMENT
I am grateful to the management of Excel Insurance Company especially the Internal Audit Department who provided me with the information in compiling this research project.
Thanks to my supervisor MR SATURDAY JOHN for his kindness and tireless guidance during the research process.
Special thanks to the entire staff of the Department of Distance Education under the Institute of Adult and Continuing Education.
And finally special thanks to my precious friends especially Nanfuka Noor (Nana), Kayiga Charles, Sebbaale Henry, Andy, Nantumbwe Dorothy, Nalumu Sarah, Muteza Micheal, Kenneth, Were Francis, Eric, Gadaffi, Farouk and Humphrey who have encouraged and helped me academically and in one way or another, each one in his own way and accepting me without any condition throughout my years of my course.
GLORY BE TO GOD!
TABLE OF CONTENTS
DECLARATION………………………………………………………………………...... i
APPROVAL……………………………………………………………………………………….ii
DEDICATION…………………………………………………………………………………….iii
ACKNOWLEDGMENT…………………………………………………………………………iv
TABLE OF CONTENTS…………………………………………………………………………v
LIST OF TABLES………………………………………………………………………………...vii
ABSTRACT………………………………………………………………………………………..viii
CHAPTER ONE
1.0 Introduction…………………………………………………………………………………...... 1
1.1 Background ……………………………………………………………………………...... 1
1.2 Statement of the problem………………………………………………………...... 2
1.3 Purpose of the study……………………………………………………………………………...3
1.4 Objectives of the study…………………………………………………………………………..3
1.5 Research Questions………………………………………………………………………………3
1.6 Scope of the study………………………………………………………………………………..3
1.6.1 Subject scope…………………………………………………………………………………...3
1.6.2 Geographical scope……………………………………………………………………………..3
1.6.3 Time scope…………………………………………………………………………….………..4
1.7 Significance of the study………………………………………………………………….……...4
CHAPTER TWO
2.1INTRODUCTION……………………………………………………………………………….5
2.2ADVERTISING…………………………………………………………………………………5
2.2.1Forms of Advertising………………………………………………………………………7
2.3SALES PERFORMANCE……………………………………………………..………….…….8
2.4RELATIONSHIP BETWEEN ADVERTISEMENT AND SALES PERFORMANCE………………10
2.5CONCLUSION………………………………………………………………………………………..12
CHAPTER THREE
3.1 INTRODUCTION………………………………………………………………………………13
3.2 RESEARCH DESIGN………………………………………………………………………….13
3.3 SAMPLING DESIGN…………………………………………………………………………..13
3.3.1 Population of the study………………………………………………………………………..13
3.3.2 Sampling method…………………………………………………………………….………..13
3.3.3 Sample size…………………………………………………………………………………….14
3.4 DATA COLLECTION…………………………………………………………………………14
3.4.1 Data sources…………………………………………………………………………...... 14
3.4.2 Data collection Methods………………………………………………….…………………...15
3.4.3 Data collection instruments………………………………………………………………..…...15
3.5 DATA ANALYSIS………………………………………………………….…………………..15
3.6 LIMITATIONS OF THE STUDY……………………………………………………………….16
CHAPTER FOUR
4.0 INTRODUCTION……………………………………………………………………………...17
4.1 DEMOGRAPHIC CHARACTERISTICS………………………………………………..……17
4.2 FINDINGS ON THE FORMS OF ADVERTISEMENT USED……………………………….19
4.3 FINDINGS ON THE SALES PERFORMANCE……………………………………………….20
4.4 FINDINGS ON THE RELATIONSHIP BETWEEN ADVERTISEMENT AND SALES PERFORMANCE……………………………………………………………...……….……………21
CHAPTER FIVE
5.1 SUMMARY OF FINDINGS………………………………………………………………...…..24
5.2 CONCLUSION…………………………………………………………………………….……24
5.3 RECOMMENDATIONS…………………………………………………….…………….…….25
5.4 AREAS OF FURTHER RESEARCH………………………………………..…………….……25
APPENDICES
Appendix 1: Questionnaire to the respondents of Excel Insurance Company………...……….26
REFERENCES……………………………………………………………………………………..30
LIST OF TABLES
TABLE 1: Distribution of sample size……………………………………………………14
TABLE 2: Class distribution of the sample………………………………………………17
TABLE 3: Class of respondents…………………………………………………………..17
TABLE 4: Academic Qualification of respondents………………………………………18
TABLE 5: Period of employment of respondents………………………………………..18
TABLE 6: Forms of Advertisement used in Excel Insurance Company………………..19
TABLE 7: Trend of sales for the past five years………………………………………….20
TABLE 8: Advertisement budgets for the years 2006 – 2010……………………………21
TABLE 9: Sales of Excel Insurance Company for 2006 – 2010…………………………21
TABLE 10: Computing the relationship between the two variables……………………22
ABSTRACT
The study was about establishing the impact of advertisement on the sales performance of Insurance Companies in Uganda with Excel Insurance Company as the case study. The study was initiated after it was revealed that the sales performance of the Insurance industry was deteriorating, this was evidenced by the low contribution to the Gross Domestic Product.
The study followed a descriptive survey design that was qualitative and quantitative in nature. A sample of 40 respondents were selected out of the 160 employees of Excel Insurance Company using stratified random sampling out of which 35 responded to the questionnaires which were the major instrument in data collection. Both primary and secondary data sources were used.
The study revealed that there are many forms of advertisement used in Excel Insurance Company that included radios adverts, TV adverts, Bill boards, posters among others.
As for the level of sales trend, it was found out to have been declining but a strong positive relationship was established between advertisement and sales performance. It was concluded that the decline in sales was partly due to the amount invested in advertisement and recommended that factors like increasing branches, quality of the services should be looked at in order to overcome the problem.
CHAPTER ONE
1.0Introduction
This chapter presents the background to the study, statement of the problem, purpose of the study, objective of the study, research questions, and scope of the study and significance of the study.
1.1 Back ground of the study
Excel Insurance Company Limited is a fully locally owned corporation with 100% Ugandan shareholding. The Company was incorporated in 1997. Excel Insurance is one of the fast growing insurance companies in Uganda and the region. It is registered under the Insurance Act of Uganda and is authorized to underwrite all classes of general Insurance Business and is a corporate member of the Uganda Insurers association and the Insurance Institute of Uganda. The Company has 64 branches country wide.
According to Koutsoyiannis (2002) advertising is one of the means of sales promotion.
Advertising is a policy variable which has been utilized at different levels depending on the objective of the firm and the market structure under which it operates (Okoboi, 2000). The organization promotes itself by advertising (Macibi, 2003) there are two forms of advertisement, which are, informative and persuasive advertisement (Koutsoyiannis, 2002). Advertisement is defined as any paid form of non-personal presentation and promotion of ideas,goods and services by identified person or sponsor (Kotler, 1985). He also notes that advertising has become an important factor in any organizational setup.
Performance is the quantitative or qualitative assessment of the degree at which the organization functions and those employed therein to achieve the general or specific objectives assigned to them (Lysons, 1998). However,Sales Performance describes the trend of such collection in terms of revenue comparing different periods(Mc Cathy, 1994). Sales Performance is the ability of an organization to make a profit after costs and overheads (Malcolm, 2003).
Scheme and smith (1980) insists that it is not enough to produce a good service or product and you don’t market it, advertisement makes it accessible to customer, stimulates consumption, purchase and conversely the sales performance improves. William J.S et al (1998) states that, fundamentally, the only reason for advertisement is to sell a product, service or an idea. Advertisement also facilitates the introduction of a new product/service, expands the industry and the company sales,building goodwill for the firm hence improving its reputation regarding the service/product and consequently improved sales performance. Advertisement is one of the major tools that companies use to persuasively communicate to target market to improve its sales performance. Advertisement leads to increased demand hence increased sales (Michael Baker).
1.2 Problem statement
The Insurance industry in Uganda is experiencing undesirable sales performance as evidenced by the low insurance coverage which is only 0.5% of Uganda’s Gross Domestic Product. The major factors contributing to this undesirable sales performance are probably; low levels of awareness, general poverty levels and low incomes of the clients (Annual Insurance Market report 2009).
In an effort to increase sales performance, managements of some insurance companies like Excel Insurance Company,Rio insurance company among others have tried to run adverts over televisions and newspapers but the sales performance is still undesirable and if the situation continues, some of the insurance companies may be pushed out of business.
1.3 Purpose of the study
The study was to establish the effect of Advertisement on the sales Performance of Insurance Companies in Uganda with Excel Insurance Company as the case study.
1.4Objective of the study
- To find out the forms of Advertisement used byExcel Insurance Company.
- To establish the level of sales performance of Excel Insurance Company.
- To establish the relationship between Advertisement and sales performance of Excel Insurance Company.
1.5Research questions
- What are the forms of advertisement in Excel insurance company?
- What is the level of sales performance of Excel Insurance Company?
- What is the relationship between advertisement and sales performance of Excel Insurance Company?
1.6Scope of the study.
1.6.1Subject scope
The research involved advertisement and sales performance as independent and dependent variables respectively.
1.6.2 Geographical scope
This study was conducted in Excel Insurance Company located on Crest house, Plot 2D Nkrumah Road, Kampala.
1.6.3 Time scope
The study covered the period of 5years from 2006 to 2010.
1.7 Significance of the study.
- The study findings will offer a basis for organizations of evaluating advertisement techniques towards enhancing organizational sales performance.
- The findings will provide an insight to influence positively the techniques of advertisement, hence a basis for policy and decision design in marketing mechanisms regarding advertisement which constitute a big proportion of the organizations’ transactions.
- Being an academic study it will generate knowledge in the field of insurance and help in amending the areas badly affected.
CHAPTER TWO
LITERATURE REVIEW
2.1 INTRODUCTION
This chapter highlights the ideas put forward by some of the researchers about the subject under investigation and their findings.
2.2 ADVERTISEMENT
Advertising is a policy variable which has been utilized at different levels depending on the objective of the firm and the market structure under which it operates. Advertisement like price, product/service variation and any other policy variable, aims at the attainment of the goals of the firms. In this respect, the use of advertising by firms is governed by similar considerations to the application of other competitive weapons (Okoboi, 2000). Similarly according to Macibi (2003), the organization promotes itself by advertising. The organization sells what it needs through advertising and focused advertisement helps to reach the right people. It reflects the priorities and philosophy of the organization; small organizations use the adverts to sell themselves.
Advertising is a form of communication intended to persuade an audience (viewers, readers or listeners) to purchase or take some action upon products, ideas or services. It includes the name of a product/services and how that product/service could benefit the consumer to persuade a target market to purchase or to consume that particular brand. These messages are usually paid for by sponsors and viewed via various media. Advertising can also serve to communicate an idea to a large number of people in an attempt to convince them to take a certain action. (Louis V. Gertner, 2007)
Advertising is also another aspect of widening the market base by going through the media. The way aproduct/service is packaged also determines its demand and this increases the market share hence sales performance (Alm, 2000).
Commercial advertisers often seek to generate increased consumption of their product/services through branding, which involves the repetition of an image/product name in an effort to associate related qualities with the brand in the mind of consumers. Non-commercial advertisers who spend money to advertise items other than a consumer product/service include political parties, interest groups, religious organizations and governmental agencies. Non-profit organizations may rely on free modes of persuasion, for example, a public service announcement (Bitner Jo Mary, 2006).
Advertisement is the non-personal communication of information usually paid for and usually persuasive in nature about products (goods and services) or ideas by identification sponsor through various media (Arenes, 1996). Advertisement is any paid form of non-personal communication about an organization, product, service or idea from an identified sponsor (Blench & Blench, 1998). Also advertisement is the paid non-personal communication from an identified sponsor using mass media to persuade and influence an audience (Wells, burnett & moriaty, 1998).
Bechman (2009) states that, in each industry, there is a certain amount of advertising expense that must be incurred by each firm in order to stay in the market and maintain its market share. Larger firms have the advantage of being able to spread this cost over a larger output, so that the unit cost of advertising is less for larger firms than smaller firms. As a result, smaller firms including most entrants are placed at a strong disadvantage.
Advertisement is the element of the marketing communication mix that is non-personal paid for by an identified sponsor and disseminated through mass channels of communication to promote the adoption of goods, services or ideas (Bearden, Ingram & Laforge, 1998). It can also be defined as an informative or persuasive message carried by anon-personal medium and paid for by an identified sponsor, whose organization or product/service is identified in some way (Zikmund & d’amico, 1999). Advertisement is the impersonal, one way communication about a product/service or organization that is paid by a marketer (Lamb, Hair & Mc.Danniel, 2000).
2.2.1 Forms of advertisement
Koutsoyiannis (2002) presents two forms of advertising, which are; informative and persuasive advertising. Informative advertising aims at giving factual information to potential and existing consumers about the specific attributes (price, quality, conditions of sales and product locations). While persuasive advertising aims at manipulating the tastes of consumers and making them believe that some products are superior in some sense to others.
Advertising consists of media messages paid for and signed by the form of business institutions that wish to increase the probability that those to whom this message reaches, will behave or believe as the advertisers wishes them behave or believe (Garry Armstrong, 1996).
Philip Kotler and Garry Armstrong (1996) suggested four significant decisions. They include;
What media should be involved?
What message should be conveyed?
What should be the company’s overall advertising budget?
How does the firm know that advertising is achieving its objective?
According to David w et, al (1988), effective advertising decisions are aimed at supporting the marketing strategy for a company’s services/products and also influence the buyer’s purchase decisions.
Many companies use such straight forward methods in determining advertising appropriations as percentage of sales, standard expenditure per unit, the task method or advertisement/market share relations between advertisement and sales revenue. Advertising may not necessarily increase sales revenue since there are many other factors that determine the sales revenue of a Company, such as price, perception towards the product or even the advertising campaign itself may not be good enough. (Kotler & Armstrong, 1996).
Advertising can take a number of forms, including advocacy, comparative, cooperative, directmail, informational, institutional, outdoor, persuasive, product, reminder, point-of-purchase, and specialty advertising. (www. google .com)
2.3 SALES PERFORMANCE
According to Oxford English Dictionary, performance is “accomplishment, execution, carrying out, working out of anything ordered or undertaken.” This refers to outputs/outcomes (accomplishments) but also states that performance is about doing the work as well as being about the results achieved.
Bates and Holton (1995) defined performance as a multi-dimensional construct and the measurement which varies depending on a variety of factors. There are different views of what performance is as it may be simply regarded as a result of outcomes achieved by an organization and on an individual basis it is a record of the person’s accomplishments.
Performance is also defined as the outcomes of work because it provides the strongest linkages to the strategic goals of the organization, customer satisfaction and economic contribution. This definition is enforced by Campbell (2008) who believed that performance is behavior and should be distinguished from the outcomes because they can be contaminated by the system factor. However, a more comprehensive view of performance was achieved by Brumbach (1988) who defined sales performance to mean both behaviors and results.
Huselid (1995) finally concluded that the simple adoption of high performance practices is more important than the efforts to ensure that these are internally consistent with a firm’s competitive strategy.
And Sales, in business terms are actual sales in money value a company receives after necessary collections are made from different sales channels of the original total production put on the market (Mc Cathy et al, 1994). It is sales that stimulate production in a company and consequently profits and they areaffected by various factors some of which are controllable like quality and others are non-controllable like competition and general price changes.
According to Tickler (2002) sales performance refers to consistent and satisfactory turnover of goods/services produced and put on market by an organization or company. It’s the sole economic goal of companies to have as much goods/services sold on the market. This facilitates the rate of goods/services turnover and consequently sales performance.
Sales Performance has to increase demand of the product/service, which in turn stimulates further production.Michael Baker emphasizes that advertisement leads to increased demand of the product/service and hence increased sales. Tickler (2002) observed that aggressive companieshave sales representatives in place to promote and introduce products/services to various segments of the population.
2.4 RELATIONSHIP BETWEEN ADVERTISEMENT AND SALES PERFORMANCE
Pride F. (2005) observed that advertising often stimulates revenue. For advertising to have adirect relationship with the sales revenue, the entire marketing mix must be viewed by the consumer as the right one. (Engel et al, 1991, McCathy and perreault, 1987).
Penchman (1992) found out that advertising has agreater potential for building awareness to people hence obtaining a high preference in the market share because a big percentage of the population has access to one or more of the mass media such as radios and televisions. This fact introduces the advertised company to many people. If the advertisement is satisfying, it would lead to an increase in the volume of sales. However there are authors who have shown that advertising can fail to have a positive effect on the sales of the company.