The 2011 ASHS Annual Conference

The objective of this paper is to look at producers’ gains from advertising expenditures by firm size in the Green Industry. This paper uses data from the 2009 National Nursery Survey with a representative sample of all 50 states with a total of 3,044 usable observations. Most of the literature focuses on evaluating the returns of checkoff programs or generic promotion programs. This paper focused on looking at the producer gains. Early efforts to measure the effects of promotion programs relied largely on anecdotal evidence and simple comparisons of gross investments in promotion and gross changes in sales. Over the years, increasingly sophisticated statistical methods have been developed to isolate and measure the unique contribution of promotion programs to the performance of the sales of the commodity being promoted. Most common has been the use of econometric regression techniques and models to statistically disentangle the effects of promotion program activities on commodity sales and demand from those of other market forces.  Even if the statistical analysis indicates that a promotion program has had a positive and statistically significant effect on market sales, however, the question remains as to whether the increase has been large enough to cover the cost of the program.  For that reason, the next step in the measurement process is to use the statistical results to calculate some aggregate measure of the effectiveness of the promotion expenditures.  We have calculated the benefit-cost ratio (BCR), or the dollar increase in sales for every one dollar invested in promotions by firm size. Total promotion BCRs were calculated by firm size, including very small (less than $250,000), small ($250,000 to $1 Million), medium ($1 - $5 Million), large ($5 - $10 Million), and very large (more than $10 Million). In order to assess which promotion methods are more effective, total promotional efforts were also broken down by promotion type, including internet promotions, printed materials, and mass media promotions.