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.
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Keywords
Index number, Real sales, Turnover, Consumer Price index, Nominal sales
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