Advertisement Cost and Revenue Analysis: Coca Cola and Pepsi Study

This report investigates the relationship between advertisement costs and sales revenue for Coca-Cola and Pepsi, aiming to determine the impact of advertising expenses on sales revenue, the correlation between these variables, and which company demonstrates more effectiveness in advertising spending. The study employs descriptive and correlational research designs, utilizing secondary data from 2005 to 2017. Key findings indicate a positive association between advertisement and sales revenue, suggesting that increased advertising generally leads to higher sales. However, the initial analysis reveals that Coca-Cola's advertising costs exceeded its average sales revenue, indicating potential losses due to inefficient advertising strategies. In contrast, Pepsi's lower advertising costs and higher sales revenue suggest a more effective advertising approach. The report concludes that while advertising is crucial for increasing sales revenue, careful planning and execution are essential to ensure profitability. Desklib provides access to similar solved assignments and study resources for students.

INVESTIGATING THE RELATIONSHIP BETWEEN ADVERTISEMENT COST AND
REVENUE OF COCA COLA AND PEPSI
Name of student:
Name of institution:
Date:

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2
Executive Summary
Advertisement is a form of marketing that is meant to increase the sales revenue.
Therefore, there should be a clear understanding of the dynamics of advertising and sales
revenue. The purpose of the study was to fulfill three main objectives. The three main objects
were: To determining the impact of advertisement expenses on sales revenue between coca cola
and Pepsi, to determine the correlation between advertisement expenses and sales revenue and to
determine the company that is more effectiveness on advertisement expenses on sales revenue.
The study revealed that there is a strong association between advertisement and the sales
revenue. The nature of association is positive. The positive association implies that the more a
product is advertised, the more sales revenue is realized. One of the reasons why advertisement
leads to more sales revenue is the advertisement makes the product to reach out too many
customers and potential customers. Similarly, advertisement makes the product to be more
appealing to the customers and potential customers.
Advertisement should be done with a lot of caution and planning. The initial descriptive
analyses revealed that the cost of advertainment for Cocoa cola was more than the average sales
revenue implying that the product realized a loss. Therefore, inasmuch as advertisement will
increase sales revenue, it is not conducted in proper manner then it might negatively eat into the
final net profit of the product or company.
1 TABLE CONTENTS

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Introduction.................................................................................................................................................4
Objectives of the study............................................................................................................................4
1.b. Research Questions..........................................................................................................................5
Hypothesis...............................................................................................................................................5
Literature Review........................................................................................................................................6
Methods.......................................................................................................................................................7
Data Description......................................................................................................................................7
Findings and Results....................................................................................................................................8
4.a. Descriptive statistics analysis............................................................................................................8
4.b. Hypothesis Testing.........................................................................................................................11
4.b.1RQ1................................................................................................................................................11
What are the Impacts of advertisement expenses on sales revenue between coca cola and Pepsi?....11
4.b.2. RQ2..............................................................................................................................................13
4.b.3. RQ3..............................................................................................................................................14
Discussion.................................................................................................................................................17
Conclusion.................................................................................................................................................18
References.................................................................................................................................................19

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2 INTRODUCTION
Advertainment is an important part of marketing and sales. Some business analysists
describe advertainment as a fertilizer that is used to facilitate the growth of a company’s revenue.
Therefore, is need to establish the correlation between advertisement expenses and sales revenue.
The correlation between advertisement and sales revenue will enable the management of a
company or product to make proper investment decisions that ensures more sales revenue is
realized (Anderson, Simester, & Duncan, 2013).
Establishment of the relationship between the advertisement expense and sales revenue
will enable a company to control their cashflows. Controlling the interaction between sales
revenue is also a form of cash flow management. Moreover, a company must know whether
advertisement has a significant impact on the sales revenue. The company must be aware of
whether the impact is positive or negative and the extent which it contributes to the overall sales
revenue of the firm or the product (Ashley , Christy, Tuten, & Tracy, 2015).
2.1 OBJECTIVES OF THE STUDY
The objectives of the research are outlined below.
1. To determining the impact of advertisement expenses on sales revenue between coca cola
and Pepsi.
2. To determine the correlation between advertisement expenses and sales revenue.
3. To determine the company that is more effectiveness on advertisement expenses on sales
revenue.

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2.2 1.B. RESEARCH QUESTIONS
RQ1. What are the Impacts of advertisement expenses on sales revenue between coca cola and Pepsi?
RQ2. Does the correlation exist between Advertisement expenses and sales revenue?
RQ3. Which company have more effectiveness in advertisement expense over sales revenue?
2.3 HYPOTHESIS
Hypothesis is a statement about a phenomenon or research study whose truth value is not yet
known. Hypothesis revels the viewpoint of the researcher before the research is conducted. A
hypothesis is fully stated when both the null and the alternative hypotheses are stated (Aslam,
Bilal, Karjaluoto, & Heikki, 2017). A null hypothesis is a negative statement stating that there is
no relationship between the variables. On the hand, an alternative hypothesis is a positive
hypothesis stating that there is a relationship between the variables. The following three
hypotheses were tested:
1. H0: Advertisement expenses does not have impact on sales revenue of coca cola and
Pepsi.
H1: Advertisement expenses have impact on sales revenue of coca cola and Pepsi.
2. H0: There is no correlation between advertisement expenses and sales revenue.
H1: There is a correlation between advertisement expenses and sales revenue.

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3. H0: There is no significant difference between effectiveness on advertisement expenses
on sales revenue of Coca cola and effectiveness on advertisement expenses on sales
revenue of Pepsi.
H1: There is a significant difference between effectiveness on advertisement expenses on
sales revenue of Coca cola and effectiveness on advertisement expenses on sales revenue of
Pepsi.
3 LITERATURE REVIEW
The interaction between advertisement expenses and sales revenue is a topic that has
been widely researched. Researchers have proven that advertisement has a very important
relation with the sales revenue (Beth, Andrea, & Tom, 2009).
Establishment of the relationship between the advertainment expense and sales revenue
will enable a company to control their cashflows. Controlling the interaction between sales
revenue is also a form of cash flow management. Moreover, a company must know whether
advertisement has a significant impact on the sales revenue. The company must be aware of
whether the impact is positive or negative and the extent which it contributes to the overall sales
revenue of the firm or the product (Correira, et al., 2015).Therefore, there is a need to establish a
clear relationship[p between advertisement expense and sales revenue.
Researchers have shown that advertisement should be done with a lot of caution and
planning. The initial descriptive analyses revealed that the cost of advertainment for Cocoa cola
was more than the average sales revenue implying that the product realized a loss. Therefore,
inasmuch as advertisement will increase sales revenue, it is not conducted in proper manner then

THE RELATIONSHIP BETWEEN ADVERTISEMENT COST AND REVENUE
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it might negatively eat into the final net profit of the product or company. therefore, is a clear
need to establish the impact of advertainment on sales revenue (Correira, et al., 2015).
4 METHODS
The study adopted descriptive and correlational study designs. A descriptive study design
was used to provide a description of the nature and strength of the impacts of advertisement on
sales revenue. On the other hand, a correlational study design was used to outline the nature and
strength of the impact of advertisement expense on the sales revenue (Coyte & Erianne, 2011).
The research was a quantitative research. A quantitative research a statistical study design
that uses quantifiable numerical variables. all the variables were quantitative and numerical. The
data that was used is a secondary data. A secondary data is data that has been obtained from a
pre-recorded primary source. The data were obtained from the internet. The statistical tests that
were conducted are: descriptive statistics analysis, correlation analysis, T test and regression
analysis (Dodson & Ian, 2016).
4.1 DATA DESCRIPTION
The data that was used for analysis is a secondary data that was obtained from the internet.
The data had five (5) variables. The five variables include: The date, the advertainment expense
of cocoa cola, the sales revenue of coca cola, the advertisement expense of Pepsi and the sales
revenue of Pepsi. The date variable is the timeline between 2005 and 2017. The other variables
were obtained from the following sources:
1. SOURCE OF DATA FOR ADVERTISMENT COST OF COCA COLA
https://notesmatic.com/coca-cola-advertising-expenses/

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2. SOURCE OF DATA FOR ADVERTISMENT COST OF PEPSI
https://notesmatic.com/pepsico-advertising-and-marketing-budget/
3. SOURCE OF DATA FOR SALES REVENUE OF COCA COLA
https://www.macrotrends.net/stocks/charts/KO/coca-cola/revenue
4. SOURCE OF DATA FOR SALES REVENUE OF PEPSI
https://www.macrotrends.net/stocks/charts/PEP/pepsico/revenue
5 FINDINGS AND RESULTS
The section of findings and results outlines the insights from data analysis. The first
section of the analysis is the exploratory analysis. The rest of the parts of findings is consist of
the hypothesis testing. The exploratory data analysis or initial data analysis that were conducted
are the descriptive statistics analysis and the graphical analysis. the results and the explanation of
the results are presented in the sections that follow (Finne, Ake, Gronroose, & Christian, 2017).
5.1 4.A. DESCRIPTIVE STATISTICS ANALYSIS
Descriptive statistics analysis is an initial exploratory data analysis that is conducted to
explore the important features of the variables under study. There are several forms of
descriptive statistics analysis. the common descriptive analyses include: Frequency analysis,
summary statistics analysis and graphical analysis (Fang, et al., 2015).

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A frequency analysis is majorly conducted to explore the frequencies or the counts of
variable features. The frequency analysis majorly gives the number and percentage
representation of the variable features (Shlosser & Rainer, 2016). Summary statistics analysis
gives the summary or basic features of the variables in a study. The summary or basic features
include: The mean, the median, the mode, maximum value, the minimum value, the variance, the
standard deviation, the standard errors, the kurtosis, the skewness and the range. On the other
hand, graphical analysis involves pictorial display of the features. There are numerous graphical
methods. The major graphical methods include: Pie chart, histogram, line graph, bar graph, box
plot, scatter plot and the normal probability plot (Stephen & Andrew, 2016).
The choice of descriptive statistics method depends on the nature of the data. The data
can be numerical or categorical. In our scenario, we have a numerical data. Therefore, the
descriptive analysis methods that we have used are the summary statistics and the graphical
analysis. The results of the descriptive analysis are shown in the following table and figure.
Table 1 below represents the summary statistics costs of advertisement and the sales
revenue for both Coca cola and Pepsi. From the table, it is demonstrated that the mean
advertisement cost of coca cola is $ 3277.8333 while the mean advertisement cost of Pepsi is $
2.0833. The mean advertisement costs demonstrate that the cost of advertising Coca cola is
relatively higher than the cost of advertising Pepsi. In other words, Coco Cola spends more
money in the advertisement than the amount spent in advertising Pepsi (Uddin, Fatah, Khan,
Mohammed, & Naved, 2018).
The results also indicate that the average sales revenue of Cocoa cola is $ 38331.3333 while
the average sales revenue of Pepsi is $ 58577.50. The result suggests that Pepsi gains more

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revenue from sales than the amount of revenue that coca cola gains from sales. The results are
not surprising since the previous revelation demonstrate that Pepsi spends very little in the
advertisement. Therefore, we could say that much of the profits that coco cola could gain are
being consumed in the advertisement activities (Wiles, Michael, Danielova, & Anna, 2009).
The minimum advertisement cost of coco cola is $ 2553.00 while the maximum is $ 4004.
The minimum and the maximum values of advertisement cost of coco cola suggests that
advertisements have a wide range of values. Similarly, the wide range could mean that the
advertisement cost is not constant and constantly changes depending on other underlying factors
(Yoon, et al., 2017).
The maximum advertisement cost of Pepsi is $ 2.50 while the minimum advertisement
cost is $ 1.70. The advertisement costs suggest that Pepsi has a small range of advertisement
costs. Therefore, we can argue that the small range of advertisement costs enables the
management to plan effectively hence leading to relatively higher sales revenue (Correira, et al.,
2015).
Table 1: Descriptive Statistics
N Range Minimum Maximum Mean Std.
Deviation
Variance
Cocacola
Advert Cost
12 1451.00 2553.00 4004.00 3277.8333 500.52479 250525.061
Pepsi Advert
Cost
12 .80 1.70 2.50 2.0833 .32983 .109
Cocacola
Revenue
12 23929.0
0
24088.00 48017.00 38331.3333 8239.86367 67895353.333
Pepsi
Revenue
12 27209 39474 66683 58577.50 10326.517 106636958.818
Valid N
(listwise)
12

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5.2 4.B. HYPOTHESIS TESTING
5.3 4.B.1RQ1
5.4 WHAT ARE THE IMPACTS OF ADVERTISEMENT EXPENSES ON SALES
REVENUE BETWEEN COCA COLA AND PEPSI?
The first step in hypothesis testing involves statement of hypothesis. Statement of hypothesis is
given by outlining both the null and the alternative hypothesis (Fjell & Kenneth, 2009). The first
hypothesis of the study is outlined below:
H0: Advertisement expenses does not have impact on sales revenue of coca cola and Pepsi.
H1: Advertisement expenses have impact on sales revenue of coca cola and Pepsi
The second step in hypothesis testing involves the determination of the test method or procedure.
In our scenario, the test procedure was correlation analysis. the main aim of hypothesis one is to
determine the impact of advertisement expenses on sales revenue between coca cola and Pepsi.
The impact of advertisement on sales revenue can only be determined through correlation
analysis.
Correlation analysis between the sales revenue and the cost of advertisement will provide the
nature and strength of the relationship between sales revenue and advertisement expenses. The

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nature of the relationship will reveal the change of one variable in relation to the other variable
(Kwon & Changyun, 2011).
The next step in hypothesis testing involves defining the critical region which is
commonly known as the rejection region.
The final step in hypothesis testing is conducting the test and making decisions. The test for
hypothesis one is the correlation analysis test. The decision was made based on the outcome of
the significance value (MacDonanld, Leo, Rasmussen, & Henning, 2010).
Table 2 below shows the output of the results. From the results, it is clear that the
correlation coefficient between coca cola advertisement expenses and the sales revenue of cocoa
coal is 0.626. The correlation coefficient is a strong positive correlation. The correlation is
significant at 0.05 level of significance since the significance value is 0.00. The correlation
coefficient reveals that an increase in the value of advertisement by 1 unit will cause a
corresponding increase in the value of sales revenue by 0.626 and vice versa. Therefore, we reject
the null hypothesis that advertisement expenses do not have impact on sales revenue of coca cola
(Morris & Neil, 2009).
Table 2: Correlation between sales revenue and advertisement costs
Correlations
Cocacola
Advert Cost
Pepsi Advert
Cost
Cocacola
Revenue
Pepsi
Revenue
Cocacola Advert
Cost
Pearson
Correlation
1 .867** .626* .621*
Sig. (2-tailed) .000 .029 .031
N 12 12 12 12
Pepsi Advert Cost Pearson
Correlation
.867** 1 .711** .686*
Sig. (2-tailed) .000 .009 .014
N 12 12 12 12