1.

Theoretical
According to Erdem et al. (2006)'s research, there is a link between advertising
and price elasticity of demand, and advertising can alter the PED in a variety of
ways. According to the findings of the study, 18 brands were studied, and 17 of
them exhibited the impact of advertising on demand by shifting it. As a result,
there was an increase in the desire to pay, demonstrating how advertising reduced
customer sensitivity and boosted willingness to pay. In comparison to that
research, this research will represent the importance of current research on
demonstrating the likely effect of advertising on price elasticity by establishing the
relationship between advertising and price fluctuations in industries and
comparing it to advertising expenditures.

This study sheds light on how price elasticity relates to price-related decisions
made by businesses. Businesses always base their decisions on the business
environment. For example, a corporate organization decides to cut the price of a
certain item based on the low demand of the group among the majority of the
company's clients, as a competitor organization sells the goods at a cheaper price,
giving it a competitive advantage. As a result, it may be claimed that this piece of
knowledge influenced an organization's decision-making. As a result, an
organization induced by the business environment is putting the laws of price
elasticity of demand into function or application. According to Kendall and
Arellano (2019), while making decisions, business enterprises consider the price
elasticity of demand. However, if the product is inelastic, that is, there will be no
change in the product's demand with an increase or drop in price, the increase in
the price of such items will increase the organization's income.
A key goal of a business is to generate money through the sale of its products or
services to a certain market area. On the other hand, the sale of items from clients
is influenced by a variety of circumstances. Some of these characteristics include
their purchasing capacity, expectations or requirements, willingness to acquire a
product, and, of course, the price of the item. As a result, as stated by Labandeira,
Labeaga, and López-Otero (2017), an elastic product is likely to result in higher
client spending. As a consequence of increased spending, the sale of these items
may decrease, which in turn will be responsible for a decrease in the sale of these
products, and one such promotional activity is 'advertising up' (Guitart et al.,2018).
Advertising up is a method of mimicking a premium company's commercial by
broadcasting an ad from a non-premium brand. It is done to achieve immediate
effectiveness for product exposure while mimicking the brand equity of a well-
known premium brand. Although there are varied assessments about the efficiency
of advertising up, recent research demonstrates that it can have favorable results in
some circumstances. For example, if one looks at the branding of the Apple IPad,
a specialty item that is also quite costly, he can see the influence of the 'advertising
up' campaign performed by other firms in the same field.

People with lower incomes are less likely to purchase an Apple IPad for personal
use if it is not necessary for a professional job. However, in the years after the
release of the Apple IPad, there has been an array of android OS pads in a
comparatively lower price range, largely by other reputable American, South
Korean, and Chinese firms, and there has been a high demand for these devices as
well. In certain circumstances, the costs become comparable, and buyers have a
variety of options to suit the market's total expectations. This inspired Apple's
plans, in which it refreshed its goods with high-end finishing and design through
the release of next-generation IPad models to preserve both the exclusivity that it
desires to convey as well as its selected customer. This is a sound circumstance
that will have an impact on the income of the company that is raising the price of
its items. Raising the price of such a product is likely to result in decreased
revenue for the company. As a result of the preceding argument, it is clear that a
business organization should be able to examine the nature of the items it sells
before adjusting the price of a product. There is a clear link between a customer's
response to a buying choice and the price of the sort of goods they select.
However, a link between customer behavior and that of an organization's rivals
has been seen.

1.1. Introduction of advertising

 What Is Advertising?
Advertising means the information about existing goods and services or about a
particular issue being made to the public.
 Types of advertising
Informational: price or existence or quality of the product
Persuasive ( changing tastes): satisfies some unfulfilled want/ need ( often not
apparently related to the product).
Competitive Advertising: In competitive advertising, the advertiser tries to
convince the people that his product is better than the other same product but of a
different brand name.
Mass Advertising: This is a type of advertising whereby producers or distributors
of the same type of products jointly organize an advertisement of the product Eg;
Distributors of milk may do an advertisement on milk which may read “This milk
is good for you”.
Direct Advertising: This advertising is meant for the target audience. The people
that are likely to use the product, For example: Doing the current and lastest
sportswear is better advertising in a sports magazine.
 Functions
1. Advertising creates awareness of new and existing products and services.

2. It educates the people on how to use the advertised product.

3. It trains the masses on certain behaviour and culture.

4. It reduces cost of production.

5. Effective advertising may drive other competitors out of the line and brings
about monopoly
Advertising Media

 Here are the various types of advertising medias:

1. Newspaper: Daily and weekly newspaper carry numerous advertisements for

goods and services
2. Radio: The radio is a very effective means of advertising. Radio advertising has
the advantages of reaching the people both in urban and rural areas.

3. Window Display: This is a means of advertising whereby goods are carefully

and attractively displayed on a window in such a way that people are attracted to
it.

4. Magazine And Journal: Newpaper magazines and journals carry advertisments

of various kinds.

5. Outdoor Advertising: If you walk along the roads especially highways, you will
see sign post mounted by the sides of the road carrying various forms of
advertisement.

1.2. Introduction to the relationship of price elasticity and advertising

According to Prateek (2020), price elasticity is the process by which customers

react to a change in price, which alters the amount requested. Elasticity is defined
as either elastic or inelastic based on how quickly a rate reacts to a change in price.

1. Demand is inelastic when the change made in price does not play an important
role in

the demand for the product

2. Demand can be elastic when the demand is much sensitive to changes in price
Erdem et al. (2007) discovered that advertising can influence customers who
choose to buy brands. According to them, if advertising attracted a large number
of price-sensitive consumers who make purchases based on brand, the price
elasticity of demand would grow.
Wittink (1977) did another research in which he demonstrated the probable link
between advertising and price elasticity of demand. He stated that PED being
greater in any territory is related to the advertising intensity being higher in such
regions. In contrast to Wittink, research done in the food sector by Vanhonacker
(1989) found that by using lower levels of intensity, a rise in advertising intensity
led to an increase in price elasticity of demand and a drop in price elasticity of
demand with higher levels of intensity.

1.2 Impact of advertising on the price elasticity of demand

In general, it is understood that when the price of an item rises, so does the amount
requested for that commodity. According to Kumar and Rachana (1998),
advertising is vital for developing and boosting demand for a certain good since it
seeks to enhance demand for a product and hence lower its elasticity.
Advertising impacts ideal consumers by communicating its message and
convincing them to purchase products and services. According to Managerial
Economics, advertising may alter the number of items sold regardless of the link
that an increase in price leads to a drop in quantity required (Kumar & Rachana,
1998).
The advertising elasticity of demand measures the influence of advertising on
demand, which may also be described by the responsiveness of demand to changes
in advertising spending. Advertising elasticity of demand, according to Kumar and
Rachana (1998), may be expressed as follows:
Proportionate change ∈demand
Advertising Elasticity of Demand =
Proportionate change∈advertising outlay
Or
Q2−Q1 A 2− A 1
Advertising elasticity of demand= ÷
Q 2+ Q1 A 2+ A 1
It is possible to analyze and quantify the true influence of advertising on quantity
demanded and the price elasticity of demand for a certain product using this
formula. This formula may be written as follows:
 E a = Advertising elasticity of demand
 Q1 = Quantity demanded before a change in advertising expense
 Q2 = Quantity demanded after a change in advertising expense
 A1 = First amount of advertising used to advertise the certain good
 A2 = Second amount of advertising used to advertise the certain good

According to the findings of a study done by Erdem et al. (2007), advertising

reduces customers' price sensitivity while boosting their willingness to spend.
They discovered that advertising boosts the WTP of marginal customers on an
individual basis more than infra-marginal consumers, hence raising the PED. In
contrast to this argument, they made an exception for Heinz, whose PED reduces
with more advertising due to product differentiation and market share. The
differentiation strategy of Heinz is to distinguish the brand horizontally, which
raises the WTP for infra-marginal consumers.

Price elasticity of demand is an economic term that refers to the price sensitivity of
items. These basic challenges, which are connected to the shift in consumer
persistence of products based on pricing elasticity, must be understood in terms of
the measures done by businesses to enable customers to invest in the product
owing to the sheer worth of the product itself. In this context, the primary focus of
this research is on determining the relationship between promotional activities and
price elasticity. As a result, it may be claimed that effective advertising allows
people to feel emotionally attached to the brand. This link can reach a point where
buyers are prepared to pay even greater costs for particular things because the
name of their chosen brands is connected with the products.

On the other hand, in terms of branding, the main principle behind advertising is to
assist customers in making purchasing decisions. However, it may be claimed that
a firm's effective advertising strategy has a major positive impact on numerous
functional aspects of corporate operation.

Empirical research on the link between advertisements and branding has focused
on measuring the influence of advertising on the overall image as well as brand
management. According to Casteran et al. (2019), advertising may be viewed as a
componential part of marketing that impacts brand management techniques. The
most important area in which advertising influences branding is the establishment
of control.

Advertisements allow businesses to send a specifically framed message that is

intended to establish the brand's image in front of customers exactly how the
business has interpreted it. According to Datta et al. (2017), one of the most
popular methods used by brands to build this control is to highlight why the
products or services given by that are superior to those of its rivals. The goal of
this strategy is to persuade customers to pick this brand over competitors. It is
crucial to establish individuality for the brand here, and ensuring that the brand is
recognized by its prospective clients looks to be one of the pivotal strategic goals
for companies that may be reached through advertising. In marketing, this is
referred to as brand top-of-mind awareness. According to Ngan and Yang (2019),
brand awareness guarantees that potential clients consider purchasing choices from
the brand as soon as the necessity for the items given by it is realized. When it
comes to building a strong relationship with the market, consistency in
communicating messages and keeping consistency in brand communication
through advertising is viable.

Furthermore, advertising aids in the definition of the brand's image. Defining the
brand is primarily concerned with connecting the essential product features with
the brand while distinguishing those attributes from the opponent. In other words,
as noted by Casteran et al. (2019), good advertising allows firms to differentiate
not just the product but also the brand itself from competitors. Furthermore,
advertising plays an important role in creating brand loyalty among existing
customers. According to Al-Zyoud (2018), the issue of brand loyalty may be the
motivation driving corporate advertising or marketing initiatives. In light of the
emotional tie that develops from brand loyalty, buyers will probably consider just
the specific brands to whom they are loyal. Expecting people to pick one brand
again and over again, on the other hand, necessitates a significant amount of work
on the part of the businesses. Loyalty programs and other programs that reward
customers are useful in developing brand loyalty and maybe promoted through
advertising. Furthermore, studying commercials, creating appropriate product
enhancements, and communicating effective messaging that may address the
concerns of the core customers are all important components in building brand
loyalty through advertising. In general, a price rise may cause customers to be
hesitant to make a purchase choice; nevertheless, vigorous promotional activity is
likely to have some considerable influence on price elasticity. The core idea of
price elasticity, according to Guitart et al. (2018), is the link that exists between
changes in the price of a product and changes in the deemed quantity in which the
product is supplied.
1.3 Consumer Behavior: Influences and Responses

The psychological, motivational, and behavioral components of consumer

behavior that are typically connected to client purchasing decision-making provide
a substantial portion of the theoretical side of customer behavior. Apart from these
essential characteristics, according to Alsaggaf and Althonayan (2018), there are
many dimensions of customer behavior that have been included in scientific
studies to understand the important variables in customer behavior as well as
consumer replies. Some of the major ones may include customer persistence in the
face of available alternatives (retailers, brands, services, and products), the
reasoning process used to choose between various options, their behavioral
inclination while researching or shopping, the impact of external stimuli on
customer behavior, etc. It is important to note that studies focusing on customer
behavior have aimed to establish effective alignment strategies of advertising or
other promotional campaigns with customer attitude, as this factor deeply refers to
the positioning of products or brands in a favorable light to generate customer
attraction.

Additionally, in terms of the significant elements that influence consumer

behavior, Li (2019) has classified these aspects into three groups, which are as
follows:

Personal Factors: These are the personal preferences and interests of individual
clients. According to Wu and Li (2019), one of the most important qualities of
personal variables is that they are inevitably related to demographics. Individual
clients' gender, age, country, ethnicity, professional background, and culture may
all be relevant factors.

Social factor: These elements refer to the secondary groups' effect on individual
consumers' interests and attitudes. Secondary groupings include peer groups,
friends, and colleagues. Furthermore, key social elements impacting consumer
behavior include the effect of social media, customer income, social standing,
educational level, etc.

Psychological Factors: Customers' opinions and attitudes shape their responses to

a promotional effort. The capacity to comprehend information, perception of
requirements, and fundamental attitude toward certain brands are all essential
components that compose the total psychological effect on customer behavior
(Abdullah et al. 2016).

Customers' sales proposal replies must be mapped out by firms, and the modes of
consumer reactions must be calculated based on this information. Customer replies
may be classified into four main groups, which are as follows:

Growth: This stage is simple to understand since purchasers see the need for
expansion and invest in the products and services provided by enterprises,
resulting in great business consequences for the organization. Vendors must
recognize this need and try to create a favorable brand image that is worthy of
growing in consumer perception (Abdullah et al. 2016).

Trouble: In this situation, the buyer's point of view is formed by the realization
that the firm's performance is deteriorating, which is followed by a desire to affect
effective change in the company. In the trouble mode, purchasers are more likely
to embrace drastic measures to rescue the company's business, and this aspect is
more prevalent than in the development mode.

Even keel: Buyers in this mode are less likely to recognize that there is a
continuous gap between their existing position and their goal of bringing about
change. In other words, this stage is distinguished by stability, since customers
perceive no need for change. Buyers are so closed off to vendor offerings as a
result of this.

Overconfident: This style is distinguished by the customers' frequently delusory

belief that they are succeeding. According to Li (2019), it is possible that
purchasers would find the proposal for adjustments to be demeaning because they
appear to be doing well without any such demand for change. According to Becker
and Jaakkola (2020), problem mode may be on the horizon if purchasers do not
see the need for change. As a result, it is more probable that the overconfident
mode will result in buyer incompatibility while dealing with the needs of the
difficulty mode.

Following the discovery of influencing variables and consumer responses, it is

possible to argue that both ideas may be better understood when viewed through
the lens of a combined conceptual framework. This framework is known as the
stimulus-response model, and it seeks to predict the evolution of consumer
behavior.

Picture 1. Stimulus-Response Model of Buyer Behavior

As can be seen in Picture 1, many stimuli are capable of reaching the customer's
brain and leaving a profound effect on the purchase decision-making. According
to Becker and Jaakkola (2020), the image of the black box is crucial in the context
of the framework because it shows the entrance of stimulus into the buyer's head,
and therefore marketers must be more vigilant about what type of stimuli is
impacting the consumers. The study undertaken thus far has already provided data
demonstrating how price increases or decreases are extremely successful in
regulating or controlling the purchase decisions or purchasing behavior of
customers in a typical market.

Although there are exceptions to this rule, a direct relationship has been shown
between price increases and product sales. When the price of a product rises, there
is a gradual or rapid fall in demand for the product and vice versa. The qualities of
the purchasers determine how the stimuli are perceived by the consumers.