Does advertising matter? An application to the Greek wine industry

Abstract

Purpose

The purpose of this paper is to focus on promotional strategies, on which there has been relatively little research. The aim of this paper is twofold: first to review promotional strategies used by Greek wine producers to differentiate their products and second to develop and test a model that evaluates the relative importance of advertising expenses and other promotional expenses in explaining profit rates across Greek wine firms.

Design/methodology/approach

An extensive literature review relative to the question under investigation is presented. A survey among 43 Greek wine firms was carried out to identify the main categories of promotional expenses and their contribution to the total promotional expenditures for 2000. Annual balance sheet and income statements data for these firms were collected for the period 1993‐2000. The fixed effects method is used to estimate the coefficients of the specified empirical model using time series cross‐section panel data for the 43 Greek wine firms over the period 1993‐2000.

Findings

The non advertising promotional expenses were found to be the major part of promotional expenses, in the case of the Greek wine firms. For the Greek wine firms promotional expenses include promotion through the development of new informational labelling referred to origin and specific wine attributes, coupons, free samples, catalogues, new market channels through “wine routes”. These ways of promotion seem to be more effective to create goodwill for the company and to increase consumer loyalty than advertising. The fixed effects results show that total promotional expenses along with market share affect profitability.

Originality/value

This paper provides an outline of promotional strategies (advertising and non advertising) – a topic that has not been widely discussed in the literature.

Citation

Vlachvei, A., Notta, O. and Ananiadis, I. (2009), "Does advertising matter? An application to the Greek wine industry", British Food Journal, Vol. 111 No. 7, pp. 686-698. https://doi.org/10.1108/00070700910972378