Borden(1942) put forward the dominant argument of advertising on behalf of the economics circle through the research on advertising promotion effect from 1919 to 1940, that is, the commodities and market information spread by advertising are conducive to the correct consumption of consumers and the sales of enterprise products. Subsequently, many economists took part in it one after another. From the perspective of consumers’ rights and interests, utility, and rational and optimal allocation of social and economic resources, they discussed and studied the welfare economy nature of advertising in large quantities.
Borden’s conclusion was based on the assumption that the total demand would increase, but with the gradual saturation of the market, the total demand for goods would maintain at a certain level. Kaldor (1945) first questioned the traditional view on the role of advertising and promotion “Proposed by Marshall as early as the beginning of the 20th century AD, especially persuasive advertisement is just the people to the demand for a product from one brand to another brand” point of view (that is, the brand advertising demand transfer function) is correct, and by establishing the model, the method of the AD is not yet fully developed in the economic life period is excessive point of view, and boldly put forward the number of ads for the welfare of the advertising economics thesis sets a preliminary economic analysis. Palda (1965) tested a series of advertising consumption models by multiple regression, and the results showed that advertising is an amortized asset.
On this basis, Palda proposed that advertising has a cumulative effect, providing a unique analytical perspective for the study of the relationship between advertising and sales. Economist Galbraith (1967) believed that advertising stimulates total demand and adapts to economic development by changing consumers’ behaviors. Since the development of economic system requires a long period, there is a long-term equilibrium relationship between advertising expenditure and overall sales (consumption). In accordance with such logic,Galbraith proposed the hypothesis that advertising stimulates sales. In the following research, the researcher used the data of enterprise level, industry level or national level to establish the model of advertising and sales (or consumption) for empirical test.
In terms of the correlation between advertising and sales, Aaker et al. (1982) conducted an empirical test on the monthly data of food brands and found that there was no significant relationship between advertising expenditure and sales. Chowdhury(1994) also found no stable relationship between advertising expenditure and sales through co-integration analysis and causal test of British data. Duffy (1996) used data from multiple sources to examine the relationship between advertising and sales from the industrial level and found that tobacco advertising did not stimulate the overall sales of tobacco. Based on this, Duffy believed that food advertising did not change the household consumption budget to stimulate the overall sales of food. Dekimpe et al. (1995) argued that advertising is only one of many tactical means to influence sales, and other factors have a greater stimulating effect on sales than advertising.
The co-integration relationship between advertising and sales only appears in specific circumstances, and it is difficult for them to have a long-term co-integration relationship due to the more unstable data at the industrial level. Elliott (2001) from the industry level, the relationship between advertising and sales experience analyses, “he thought, advertising and marketing industry level data can reflect the relationship between intra-industry competition relations, to test whether there is a stable equilibrium between advertising and sales relationship for a long time, he used the food industry and the soft drink industry, 1983-1992 quarterly data to examine the relationship between advertising and sales, the results showed that the food industry in the market is not saturated state advertising and consumption there is a cointegration relationship, advertising sales have important significant stimulation effect; For the soft drinks market, and its competitive advertising and consumption to long-term stable cointegration relationship exists, which suggests that in the oligopoly market, the market share of the expenses of advertising is to industry redistribution, or advertising spending just to offset or hinder the competitor’s advertising budget, so advertising and sales are not there is a cointegration relationship. Similar to Elliott’s conclusion, Cavaliere et al. (2001)’s study on the Italian beverage industry also found the same conclusion, that there is no significant stimulation effect of alcohol advertising on sales.
However, most empirical studies have come to the opposite conclusion. Numerous studies have found that advertising has a significant impact on sales, which can be long-term or short-term (Landes&Rosenfield,1994; Pa ton, 20 02). Yiannaka et al. (2002) examined the surface data of 34 meat enterprises in Greece from 1983 to 1997 and found that the total advertising expenditure had a significant impact on meat sales. Studies on non-durable goods industry by Franses(1994) and Donovan et al. (2000) also found a long-term stable relationship between advertising and sales. Esteve, etc. (2006) extends the previous studies, they use the British car industry in 1971-2001 annual time series data, adopting multiple structure mutation testing method for car segment of cointegration test, the results show that the six segments in the advertising and sales, there is a long-term equilibrium relationship, but there