Published by MBA Skool Team, Last Updated: June 27, 2015
What is Sale Response Function?
The sale response function describes the relationship between the increase in expenses due to advertising and its corresponding effect on the sales of the product. Two different types of models have been formulated to describe this relation.
The two models are:
a. The downward concave curve
As seen from the above curve, the advertising expenditures increase with sales. That is, the value of advertising expenses is decreased. When a customer is first exposed to an ad, the customer who is willing to purchase the product does it at the earliest. While, it is useless to keep repeating the ad, if the customer is least interested in the product. He is anyway not going to buy it. So, repeating the ad is not really useful in this condition.
Thus, the curve is downward sloping. And in the long run, thus, low advertising expenses are needed to influence the sales.
b. The S-shaped curve
As shown in the above curve, in the initial stages, the advertising expenses do not really have that influence on the sales. Therefore, region A is almost flat shaped. Then, when the product is a bit popular, the advertising expenditure has a positive and visible influence on the sales. Then, finally in the region C, the increase in advertising expenditure has almost nil effect on the sales. Thus, the curve is almost flat in the region C.
While developing these curves, the following assumptions were made:
i) There will be no sales without advertisement.
ii) Factors like culture and competition were not considered while designing these curves.
Rarely do the business firms refer to these types of theoretical models for decoding on their advertising budgets or other such sales-related activities. They use their experience to adopt the best practices suitable for their company. So, these curves are generally used by newly found organizations
Hence, this concludes the definition of Sale Response Function along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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