Research On The Impact Of Advertising Expenditure On OTC Corporate Performance

In recent years, the pharmaceutical industry grew dramatically fast, due to the over-the-counter products are homogeneity seriously, patients are generally difficult to identify the quality of medicines. Coupled with only advertising to over-the-counter are legally, every drug company tend to release advertising publicity. Advertisement can highlight new product, help to recognize drugs by introducing the characteristics of pharmaceutical brands, quality and price to consumers, guide consumers to buy products. Advertisement can increase sales of products, but also can improve the brand awareness, Increase competition among enterprises. The result is the pharmaceutical company are releasing advertising seriously. Today, the level of advertising spending in China's pharmaceutical enterprises are generally higher, But ad spending is a cost, whether too much ad spending can useful to business performance or promote long-term development of the enterprise is worthy of study.This paper chooses two companies to compare the impact of advertising spending to over-the-counter business performance. These two companies produce OTC drugs while have different advertising spending- Harbin medicine and Tasly company. Harbin medicine company has higher advertising spending in recent years, while Tasly has lower levels. On the corporate performance evaluation, this paper selects sales performance indicators(the main business income, sales growth, advertising marginal revenue and sales of advertising elasticity),financial performance indicators for medicine corporate(per unit of capital EVA profitability) with market performance indicators(return on equity) for analysis. By analyzing the two companies advertising spending,financial performance and market performance data over six years, the results are as follows: when advertising spending is just right, it could bring greater profits to increase or reach a specified target which could promote financial performance; when ad spending reached a certain stage, the advertising market is already saturated, over advertising spending will cause low or even no effect, at this stage, high-strength ad spending will drag on corporate financial performance. At the same time, advertising on market performance is substantially similar to it on the financial performance in spite of different in some years. Probably because the market performance is also affected by macroeconomic factors, etc., and the China's capital market has not reached an effective level.