Measuring the Effects of Firm Promotion Expenditures on Green Industry Sales

Abstract

This paper measures the effectiveness of green industry firms' promotion and advertising expenditures in enhancing sales. Specifically the paper addresses the following three questions: 1) Are promotion and advertising expenditures effective in increasing sales of green industry firms? 2) What are the types of promotion and advertising efforts that have the highest returns for their investment? 3) How does the answer to these two questions change depending on the size of the firm? In order to answer these questions, a model was specified to measure the increase in sales for green industry firms as a result of promotion activities and the associated elasticities of promotion were used to calculate a benefit cost ratio. The returns to promotion expenditures differed depending on media used and also by firm size with ranges from not significant to $7.5 returns per every $1 allocated to promotion and advertising.