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  • Development of econometric models of interconnections between ATL-advertising costs and indicators of effectiveness of public companies business in Russia

Development of econometric models of interconnections between ATL-advertising costs and indicators of effectiveness of public companies business in Russia

Student: Katkova Yana

Supervisor: Sergey P. Kazakov

Faculty: Faculty of Management

Educational Programme: Master

Year of Graduation: 2014

<p>One of the most important problems of modern business is definition of the optimal structure and budget of ATL-advertising costs. As a successful entrepreneur John Wanamaker said: &quot;Half the money I spend on advertising is wasted; the trouble is I don&#39;t know which half&quot;. Large companies annually spend billions of dollars on various media, and in this study examines the financial efficiency and the optimal structure of such costs.</p><p>The purpose of this paper is the analysis of the influence of ATL marketing costs and their structure on financial success of the business of biggest (on the media budgets and revenue), operating in Russia, Russian and foreign public companies from various industries.&nbsp;&nbsp;&nbsp;&nbsp;</p><p>The main task - the search significant dependencies financial performance of the business (revenue, profit before tax, net profit, market capitalization) from companies costs on ATL marketing (on national TV, regional TV, cable and satellite TV, electronic sponsorship, central press, radio, outdoor advertising and Internet media advertising) in different sectors, in various periods of time.</p><p>Based on open sources of information database of 93 largest public companies working in Russia was collected: about their ATL-costs, financial performance, industry and types of sold goods and services.</p><p>The linear econometric model was chosen as a method of research: y<sub>t </sub>= const + a<sub>1</sub>*x<sub>1t</sub> + ... + а<sub>n</sub>*x<sub>nt</sub> + ɛ, where as the dependent variable y<sub>t</sub> used financial indicator of business, and as the independent variables x<sub>1t</sub>,...,x<sub>nt </sub>- various media costs of companies and dummy variables for industry and type of the proposed goods and services.</p><p>In the study were built 8 linear regression equations and the following conclusions were drawn:</p><p>1. There is a significant positive dependence of financial business results from ATL marketing costs.</p><p>2. The explanatory power of the model and the impact of media costs decreases by financial indicators in the statement of comprehensive income (greatest influence of media spending on revenue, the average &ndash; on profit before tax, the lowest &ndash; on net profit).</p><p>3. Some sectors (telecommunications, retail trade) significantly affect on the returns of media costs.</p><p>4. The type of goods and services sold by the company significantly influence on the optimal structure of the ATL expenses: in sale of fast moving consumer goods (FMCG) the most significant outdoor advertising and advertising on TV (and radio advertising for retail), in sale of consumer durables (CD) - press and outdoor advertising (and advertising on TV for retail), in services - only outdoor advertising.</p><p>5. Over time (in each subsequent year) the impact of ATL-costs on the financial performance of companies&rsquo; changes, but the direction of changes should be verified by subsequent data.</p><p>The results of this research may be useful for large companies to forming the optimal structure of ATL-budget, media agencies for writing advertising strategies to clients, state authorities to amend the advertising legislation, as well as future researchers to continue the study of this theme.</p>

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