CPU COLLEGE OF BUSSINESS

AND INFORMATION
TECHNOLOGY
THE EFFECT OF ADVERTISEMENT ON CONSUMERS
BEHAVIOR: A CASE OF SELECTED FINANCIAL SERVICE
COMPANIES IN ADDIS ABABA

BY: ROMAN MULUGETA

A RESEARCH PROPOSAL FOR THE PARTIAL

FULFILMENT OF THE REQUIREMENT FOR THE DEGREE
OF MASTER OF BUSSINESS ADMINISTRATION

ADVISOR: Dr.Fantaye Kassa

FEBRUARY 2020

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 ADDIS ABABA, ETHIOPIA

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 CONTENTS
Chapter 1. INTRODUCTION...............................................................................................................1
1.1 Background of the study..............................................................................................................1
1.2 Statement of the problem.............................................................................................................1
1.3 Objective of the study..................................................................................................................2
1.4 Research question........................................................................................................................2
1.5 Significance of the study..............................................................................................................2
1.6 Scope of the study........................................................................................................................3
Chapter 2. REVIEW OF RELATED LITERATURE............................................................................4
2.1 Advertisement and Consumer Behavior......................................................................................4
2.1.1 Awareness............................................................................................................................4
2.1.2 Interest.................................................................................................................................4
2.1.3 Desire...................................................................................................................................4
2.1.4 Action..................................................................................................................................5
2.2 Financial service Companies in Ethiopia.....................................................................................5
Chapter 3. RESEARCH DESIGN AND METHOD..............................................................................6
Chapter 4. RESEARCH SCHEDULE...................................................................................................8
Chapter 5. REFERENCE......................................................................................................................9

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 CHAPTER 1. INTRODUCTION
As elicited in the title this study is going to focus on the role advertisement plays in persuading customers
to use the services provided by financial service companies in Addis Ababa. It is going to also emphasize
on consumer’s reaction on their buying decision of the product and services these companies are
providing. In this chapter we will see the proposed background, observed research problem, objective,
scope and the research question the study will aim to answer.

1.1 Background of the study

Advertising is a way of communication to encourage an audience for making purchase decision about a
product or service and conveying information to viewers. It is considered as a vital and essential element
for the economic growth of the marketers and businesses [ CITATION Rya96 \l 1033 ]. Advertising is
usually a paid form of exposure or promotion by some sponsor that reaches through various traditional
media such as television, newspaper, commercial radio advertisement, magazine mail, outdoor
advertising or modern media such as blogs, websites and text messages.[ CITATION Ahm13 \l 1033 ]
Most of the time consumers buying behavior depends on liking or disliking of consumer towards the
advertisement of the product advertised [ CITATION Smi06 \l 1033 ]. A good quality advertisement is
likely to influence consumers into buying that product while a poor quality advertisement will do the
opposite.
Banks and insurance companies provide financial services for the users and contribute to the country
service sector development. Accordingly, many banks and insurance companies already been established
and their number and type of services they provide is increasing from time to time. Due to this fact, a
fierce competition among them come to exist. However, these service providers do not seem to be in
position to understand proper management of their advertisement.
Banks and insurance companies in Ethiopia are employing different advertising strategies. These
companies have been disseminating messages about their services using almost all sorts of the advertising
media such as broadcast (Television adv., Radio announcement), print (posters and bulletin boards,
yellow pages, newspapers, magazines, brochures/flyers), web pages, sales promotion in order to
communicate with their customers and to achieve their overall marketing and communication objectives
Previous studies have been conducted on effectiveness of advertisement and on advertisement’s impact
on consumer buying behavior which depicted positive relationships. However, this study intends to
explore the importance of various media advertisements on consumer behavior characteristics such as
awareness, interest, conviction, purchase and post-purchase. This paper aims to determine which of
these variables carries the most importance in terms of effecting consumer behavior and which of these
variables carries less significant impact. This will help marketers to focus on the right factors and achieve
maximum benefit from their advertisement.
I believe that the study will offer useful insights for both advertising scholars and executives to
understand the ins and outs of advertising and to assist marketers in introducing better approaches to
advertising.

1.2 Statement of the problem

The financial service companies, like banks and insurance companies offer multiple types of services that
significantly benefit the users. Many people in Addis Ababa are seen to move from place to place

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carrying cash. These people are susceptible to theft and are more likely to endanger their safety. People
can avoid these problems either using ATM machines or electronic cards. This is just one instance of the
many opportunities that these companies could have made these people users of their services for mutual
benefit. There are so many services these companies advertise to offer for the public yet we observe the
advertisement they make lack effectiveness to address the right person for the right service.
So the main problems observed in this studyis that many of the financial service companies specifically
banks and insurance companies offer services that could significantly ease the life of customers. These
companies advertise their service offers but yet miss one or more components of an advertisement that
failed these companies from creating and reaching demands of many potential customers who could have
used their services.

1.3 Objective of the study

The main objective of this study is to observe and determine the effect of advertising on consumer
buying/using behavior specifically the financial services offered by commercial bank of Ethiopia and
Ethiopian Insurance Company in Addis Ababa. Moreover, this study focuses on the following specific
objectives.
1. To evaluate awareness creation power of the company’s advertisement.
2. To evaluate the advertisements capability in raising customers interest in buying the services
3. To examine the effect of advertisement in convincing consumers to use the companies’ services
4. To find out which advertisement media has more influence on purchasing and post-purchasing
behavior of consumers.

1.4 Research question

Does advertisement affect consumer’s decision to use services of Commercial Bank of Ethiopia and
Ethiopian Insurance companies?
Sub research questions
1. Does the advertisement create consumer’s awareness?
2. Does the advertisement raise consumer’s interest?
3. Does the advertisement convinced consumer’s?
4. Which advertising media has more influence on consumers buying/using/ behavior?

1.5 Significance of the study

This study would describe the effect of advertisement variables that influence the buying decision of
consumers. Understanding of variables such as whether the advertisement is Impressive, Simple to
Understand, Attention Grabbing, Memorable, Creative, Honest by the target customers would help
marketing department to better reposition its advertising strategy, to capture the target market and to
boost their service provision over time. The study is expected to improve the advertising and promotional
strategies of the Commercial Bank of Ethiopia and Ethiopian Insurance companies by providing practical
information about core advertisement issues. Since other private and public banks and insurance
companies are engaged in providing similar financial services the findings of this study will benefit them
in similar manner. In addition to the aforementioned financial companies the public who is pulled in to
these company’s service systems will benefit in saving money, time and energy west. The findings of this
study will contribute and complement the already existing knowledge and literature on the relationship
between advertisement and consumers buying behavior in the financial service companies.

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1.6 Scope of the study
Many literatures have showed that consumers buying behavior is to be affected for so many reasons such
as service quality, Personal selling practices, brand selection, partial service provision against full
financial service and more others, but this study will focus only on the impact of advertisement.
Besides advertisement this study focuses specifically on the financial services the Commercial Bank of
Ethiopia and Ethiopian Insurance Company provides for individual consumers. These two companies
provide their service over the entire country with so many branches they have but the researcher will be
limited with one branch from each companies found in Addis Ababa. The reason why it is limited only
these two branches is explained in the methodology part explained in chapter 4.

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CHAPTER 2. REVIEW OF RELATED LITERATURE
2.1 Advertisement and Consumer Behavior
Advertising is a form of communication intended to convince an audience (viewers, readers, or listeners)
to purchase or take some action upon products, information or services[ CITATION Asn18 \l 1033 ]. Out
of the total cost of a product, 34 per cent is attributed to advertising expenses. This is important because
through advertisements, marketers aim to achieve high top of the mind recall [ CITATION Sin12 \l
1033 ]. Hence, advertisements are a critical part of the marketing strategy, especially in business-to-
consumer contexts.
Consumer Behavior is the processes involved when individuals or groups select, purchase, use or
dispose of products, services, ideas or experiences to satisfy needs and desires[ CITATION Asn18 \l 1033
]. Consumer passes through different stages before making a final purchase. This was explained with the
help of different models like attention, interest, desire& action (AIDA), attention, interest, desire,
conviction& action (AIDCA), hierarchy of effects model, innovation adoption model and information
processing model. These models posit that an advertisement first creates awareness and interest resulting
in product or service purchasing[ CITATION Raz19 \l 1033 ]. In this research, the AIDA model will be
used to measure the effects of advertisements on various stages of consumer’s behavior such as
awareness, interest, desire and action.

2.1.1 Awareness
Quoting [ CITATION Sin12 \l 1033 ] explained AWR as the consumers’ knowledge about the particular
brand he also indicated that customers should be made familiar with the product during this stage besides
at this stage, the goal of advertisers should be to communicate about the product’s/service characteristics
and advantages. Brand awareness is the prerequisite for generating product/service interest. Various
researchers have established a strong linkage between buyer’s behaviors and brand thus, to create more
awareness in the market; advertisers should give a constant update of existing products /services and
information about new products/services to consumers [ CITATION Sin12 \l 1033 ].

2.1.2 Interest
Creatively showcasing product benefits and characteristics can generate interest of consumers in the
advertisement. Relevant advertisements as per the viewer’s interest affect the level of interest in
advertisements. [ CITATION Sin12 \l 1033 ] in his study quoted many studies to establish interest linkage
with different medias such as TV advertisement, online advertisement and radio. They concluded that the
generation Y pays more attention to those advertisements which are in line with their interest as compared
to the need for a product/service [ CITATION Sin12 \l 1033 ]. Also[ CITATION Raz19 \l 1033 ]
indicated that entertaining radio advertisements are more potent in generating consumers’ interest.
Companies invest in varied marketing activities to generate consumers’ product/service interest. This can
be further explained by a classic example of creating interest through advertisement by Fanta (a soft drink
brand). This advertisement portrayed the mood change in a girl and boy due to a sip of Fanta, displaying
the impact of the product on consumers’ mood.

2.1.3 Desire
It is the third step of hierarchy of AIDA model that deals with the aspiration of target customers to buy a
product or service. From advertising view point, desire is said to be the intense level of wanting a product.
Creating desire is the precedence of advertisers, where they explain the features and benefits of their

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products that how much value you have here. At this level, advertisers try to give greater exposure of a
product to the customers [ CITATION Asn18 \l 1033 ].

2.1.4 Action
At the fourth level of hierarchy of AIDA model action on the part of a customer is taken action is the
behavior stage involving actual purchasing a product or service. Effective advertising creates positive
feelings that lead to actual purchase of advertised product/service . At this stage, customers are ready to
pay for the products to fulfill their intense desire for a particular product or services [ CITATION
Raz19 \l 1033 ]. A number of incentives offered may persuade a customer to take action (purchase). For
example, discounted prices often entice customers to take action i.e. buy product/service.

2.2 Financial service Companies in Ethiopia

The financial sector currently operating in Ethiopia composed of formal, semiformal and informal
institutions. The formal financial system is a regulated sector which comprises of financial institutions
such as banks, insurance companies and microfinance institutions. The saving and credit cooperative are
considered as semiformal financial institutions, which are not regulated and supervised by National Bank
of Ethiopia (NBE). The informal financial sector in the country consists of unregistered traditional
institutions such as Iqub (Rotating Savings and Credit Associations) Idir (Death Benefit Association) and
money lenders[ CITATION Mes19 \l 1033 ].
Banks, insurance companies and micro-finance institutions are the major financial institutions operating
in Ethiopia. These three financial companies account for the major country’s financial economic
sector[ CITATION Mes19 \l 1033 ]. Of all these financial service companies this study will concentrate
only on the Commercial Bank of Ethiopia (CBE) and Ethiopian Insurance company (EIC) because
primarily for the aim of this study accomplishment these two company’s services complete the need for
all the information needed. Secondly, these institutions/companies comprise the major part of the
financial service provision in the country.
Finally, as mentioned in the Ethiopians National Bank governor’s note “The Ethiopian financial sector
has been broadly safe, sound, well capitalized and profitable. Commercial banks opened 807 new
branches in 2018/19 alone which increased the total number of branches to 5,564 from 4,757 a year ago ”
and the annual report summary table depicted below [ CITATION Nat19 \l 1033 ] indicates these two
companies play the number one role in the country’s financial sector.

Financial institution No. of branches Population : branch

Commercial Banks 5,564 1:17,732.20
Insurance 568 1: 173,848
Development Banks 107 -
Micro-finance Institutions 38 -

Source: NBE Annual report 2018/19

Total capital of the banking industry increased by 18.4 percent and reached Birr 101.5 billion by the end
of June 2019 Insurance companies increased their total capital by 49.5 percent to Birr 8.2 billion, by end
2018/19, the number of microfinance institutions (MFIs) reached 38 their total capital and total asset
increased significantly by 20.3 and 24.1 percent and reached Birr 16.6 billion and Birr 83.5 billion,
respectively.

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 CHAPTER 3. RESEARCH DESIGN AND METHOD
The research will be conducted to assess effectiveness of the advertising program of Commercial Bank
of Ethiopia (CBE) and Ethiopian Insurance company’s (EIC) and their consumer’s behavior in terms
of the five main objectives of advertisement which include the ability to create awareness, interest,
conviction, purchase and post-purchase behavior the researcher will attempt to find the
synchronization between these elements. The researcher will use more related literature on the description
of how advertisement affects consumer’s behavior.
This research will undertake to evaluate the effectiveness of financial service companies’ advertising by
collecting data from customers about company’s already broadcasted advertising. It will be the
researchers believe that the collected data will show how advertising affects customers behavior in terms
of its objectives. In this respect a quantitative/explanatory approach in research will be applied to assess
the effect of the independent variables (objectives of advertisement) on the dependent variable
consumer’s behavior.
Therefore, this research will follow both qualitative and quantitative approaches.
Source of Data
The type of data employed in this study will be cross-sectional in the sense that relevant data will be
collected from Commercial Bank of Ethiopia (CBE) and Ethiopian Insurance company’s (EIC). The
researcher will use both primary and secondary source of data to undertake the study. The primary source
will consist information gathered through structured questionnaires from a sample chosen from each
companies. The secondary source of data includes; books, annual reports, published materials and
resources from the internet.
Size and Sampling Technique
The total population of the study will be customers of Commercial Bank of Ethiopia and Ethiopian
Insurance Company. The main reason of selection of the study area centers is that they are the pioneers of
the financial services found in the country and they provide almost all the different financial services the
rest of banks and insurance companies found in the entire country. The services these two companies
provide suffices all the necessary input this study requires to accomplish its goal.
In this study since the number of customers per branch of these companies is found in the NBE annual
report shown in chapter 2 above we have finite size population the sample size of the total number of
consumers will be determined by using simple formula which was developed by [ CITATION Taw67 \l
1033 ]. In this calculation of sample determination, 95% confidence interval will be used. It will be
calculated as follows:
N
n= 2
1+ N (e )
Where: n is the sample size N
N is the population size
e: level of precision or sampling error = 0.5

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As the number of people in each companies is not the same then, samples for each companies will be
calculated with the following formula:
n N1
N 1=
N
Where n= total number of samples
N= total number of population
N1= total number of population in each company
n1= number of samples in each company
Consequently, the researcher will use convenience sampling technique because the questionnaires will
merely be distributed for those customers who are conveniently available at the counter of these selected
companies.
Data Gathering Techniques and Analysis
The researcher will use survey method (questionnaire) to gather the primary data from the consumers of
the two companies. After the data collection and coding, the appropriate data analytic techniques will be
included both the descriptive and inferential statistical method. Inferential statistical method will be used
to view the objective of the study by using latest version of Statistical Package for Social Scientists
(SPSS).

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 CHAPTER 4. RESEARCH SCHEDULE
TIME:

N LIST OF ACTIVITIES DEADLINES REMARK

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1 Thesis title Submission Nov 23- Dec.10, 2019 Done
2 Thesis title selection, approval and assigning advisor Dec 11- Jan 24, 2020 Done
3 Submission of final draft of research proposal to the Jan 24 – Feb 29, 2020
department
4 Instrument Development & Data Collection March 1 – April 15, 2020
5 Data Processing & Analysis April 16- June 28, 2020
6 Submission of final draft to the department June 29& 30, 2020
7 Thesis Defense July 3- 15, 2020

CHAPTER 5. REFERENCE

[1] Ryans.c, "Consumer Resource," Journal of Small Bussiness Management, pp. 34, 63-65, 1996.

[2] S. Ahmed and A. Ashfaq, "Impact of Advertising on Consumer buying behavoiur through
persuasiveness,band image and celebrity endorsement," Global Media Jornal, vol. 2, p. 6 , 2013.

[3] E. M. Smith and P. Neijens, "Effects of advertising likeability : A 10 - year Perspective," Journal of
Advertising Research, vol. 46(1), no. 1, pp. 73-83, 2006.

[4] A. Meshesha, "The Effect of Advertising on Consumer buying behavior," Masters program
Marketing Management, no. Marketing Managment, pp. 1-4, 2018.

[5] B. Singh, "Impact of advertisement on the brand preference of aerated drinks.," Asia Pacific Journal
of Marketing & Management Review, vol. 2, no. 2, pp. 147-160, 2012.

[6] R. Sama, "Impact of Media Advertisements on Consumer Behaviour," Journal of Creative

Communications, vol. 14(1), pp. 54 - 68, 2019.

[7] K. Mesele Shiferaw, "Financial Sector Development and Economic Growth in Ethiopia: Literatrure
Review," Research Journal of Finance and Accounting, vol. 10, no. 5, pp. 1- 4, 2019.

[8] National Bank of Ethiopia, "Annual Report 2018/2019," National Bank of Ethiopia, Addis Ababa,
2019.

[9] T. Y., Statistics, an introductory Analysis 2nd Edition, NewYork: Harper and Row, 1967.