An Application of Consumer Price Index in Marketing and Sales Management
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Date
2014
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Publisher
Redeemer's University Journal of Management and Social Sciences
Abstract
Index number is a special type of average which helps to measure economic fluctuations on
price level and it is an indispensable tool of economics and business analysis. It is very useful
in measuring relative changes in the value of money and for deflating nominal data to real
data. This paper examined the various methods of constructing index number and the index
number theories that generated the methods. In addition. the paper demonstrated the
usefulness of index number in marketing especially in sales management using secondary
sources of data which include the annual turnover of 7-UP Bottling Company Plc from 2001
to 2012 and Consumer Price Index (CPI) for the same period. The analysis indicated that
real sales give a more realistic trend than nominal sales. By adjusting for inflation, managers
can uncover the real growth in sales because it stabilizes the variance of random or seasonal
fluctuations and highlight cyclical patterns in the sales data. Therefore, it was recommended
that business managers in general and marketing managers in particular should index sales
values whenever there is need to analyze sales trend.
Description
Keywords
Index number, Real sales, Turnover, Consumer Price index, Nominal sales