the contribution of direct mail advertising to average weekly unit sales

Marla Royne Stafford
University of Memphis
Eric M. Lippold
Department of the Interior
C. Todd Sherron

Both academics and practitioners generally concur that advertising is linked strongly to sales and, ultimately, profits. Previous advertising research suggests that companies that invest heavily in advertising relative to sales will not experience low profits; at the same time, companies making a minimal investment in advertising should not expect high profits (Callahan, 1982). Other research, however, suggests that companies should experiment with reducing advertising expenditures (Aaker and Carman, 1982) to the most efficient level. Basic economic theories imply a limit to the benefits of advertising, suggesting that companies should increase advertising expenditures to the point where marginal revenue equals marginal cost; diminishing returns occur at a point where the additional gain in sales does not offset the marginal cost of the advertising.